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Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of the date of
acceptance set forth below, is entered into by and between TITAN MOTORCYCLE CO.
OF AMERICA, a Nevada corporation, with headquarters located at 0000 Xxxx Xxxxxx
Xxxxxx, Xxxxxxx, XX 00000 (the "Company"), and each entity named on a signature
page hereto (each, a "Lender") (each agreement with a Lender being deemed a
separate and independent agreement between the Company and such Lender, except
that each Lender acknowledges and consents to the rights granted to each other
Lender under such agreement and the Transaction Agreements, as defined below,
referred to therein).
W I T N E S S E T H:
WHEREAS, the Company and the Lender are executing and
delivering this Agreement in accordance with and in reliance upon the exemption
from securities registration afforded, inter alia, by Rule 506 under 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/or Section 4(2) of the 1933 Act; and
WHEREAS, the Lender wishes to lend funds to the Company,
subject to and upon the terms and conditions of this Agreement , the repayment
of which will be represented by 12% Secured Convertible Debentures of the
Company (the "Debentures"), which Debentures will be convertible into shares of
Common Stock, $.001 par value per share of the Company (the "Common Stock"),
upon the terms and subject to the conditions of such Debentures, together with
the Warrants (as defined below) exercisable for the purchase of shares of Common
Stock (the "Warrant Shares"), and subject to acceptance of this Agreement by the
Company;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. PURCHASE. The undersigned hereby agrees to loan to the
Company the principal amount set forth on the Lender's signature page of this
Agreement (the "Purchase Price"), out of the aggregate amount being loaned by
all Lenders of $750,000. The obligation to repay the loan shall be evidenced by
the Company's issuance of one or more Debentures to the Lender in such principal
amount. Each Debenture shall have the terms and conditions of, and be
substantially in the form attached hereto as, ANNEX I. The loan to be made by
the Lender and the issuance of the Debentures to the Lender are sometimes
referred to herein and in the other Transaction Agreements as the purchase and
sale of the Debentures.
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b. CERTAIN DEFINITIONS. As used herein, each of the following
terms has the meaning set forth below, unless the context otherwise requires:
(i) "Affiliate" means, with respect to a specific Person
referred to in the relevant provision, another Person who or which controls or
is controlled by or is under common control with such specified Person.
(ii) "Lender's Allocable Share" means the fraction of which
the numerator is the principal amount of the Lender's Debentures specified on
the Lender's signature page of this Agreement and the denominator is $750,000.
(iii) "Cap Amount" means the number of shares equal to 19.99%
of the number of outstanding shares of Common Stock on the date hereof (the
number of such outstanding shares is specified in Section 3(c) hereof).
(iv) "Cap Regulations" means the maximum number of shares that
may be issued in compliance with the applicable rules and regulations of its
Principal Trading Market, including, but not necessarily limited to, Nasdaq Rule
4310(c)(25)(H)(i) or Rule 4460(i)(1), as may be applicable, which would limit
the issuance of Common Stock on conversion of the all the Debentures in this
series to the Cap Amount.
(v) "Certificates" means (x) the Debentures, duly executed by
the Company and issued on the Closing Date in the name of the Lender,
representing the Company's obligation to repay the Purchase Price to the Lender,
and (y) the Warrants, duly executed on behalf of the Company and issued in the
name of the Lender on the Closing Date.
(vi) "Closing Bid Price" means the closing bid price of the
Common Stock (in U.S. Dollars) on the Principal Trading Market as reported by
the Reporting Service. If the Closing Bid Price cannot be calculated for such
security on the relevant date on the foregoing basis, the Closing Bid Price of
such security on such date shall be the fair market value as reasonably
determined by an investment banking firm selected by the Holders of a majority
of the then outstanding Debentures and reasonably acceptable to the Company,
with the costs of such appraisal to be borne by the Company. The manner of
determining the Closing Bid Price of the Common Stock set forth in the foregoing
definition shall apply with respect to any other security in respect of which a
determination as to closing bid price must be made under any of the Transaction
Agreements.
(vii) "Closing Date" means the date of the closing of the
purchase and sale of the Debentures, as provided herein.
(viii) "Conversion Price" and "Fixed Conversion Price" have
the meanings ascribed to them in the Debentures.
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(ix) "Converted Shares" means the shares of Common Stock
issuable upon conversion of the Debentures (including, if relevant, accrued
interest on the Debentures so converted).
(x) "Effective Date" means the effective date of the
Registration Statement covering the Registrable Securities (as those terms are
defined in the Registration Rights Agreement defined below).
(xi) "Escrow Agent" means the escrow agent identified in the
Joint Escrow Instructions attached hereto as ANNEX II (the "Joint Escrow
Instructions").
(xii) "Escrow Funds" means the Purchase Price delivered to the
Escrow Agent as contemplated by Sections 1(c) and (d) hereof.
(xiii) "Escrow Property" means the Escrow Funds and the
Certificates delivered to the Escrow Agent as contemplated by Section 1(c)
hereof.
(xiv) "Holder" means the Person holding the relevant Debenture
or Debentures or Warrants, as the case may be.
(xv) "Initial Senior Lender" means Xxxxx Fargo Credit, Inc.
(xvi) "Xxxxx Principal" means each of Xxxxx Xxxxx, Xxxxxxx
Xxxxx and Xxxxxxx Xxxxx, or any entity, including, without limitation, for
profit or non-profit corporations, partnerships and trusts, whose voting rights
regarding Common Stock of the Company is subject to the direction, control or
other influence of any of them, and "Xxxxx Principals" means any two or more of
them.
(xvii) "Last Audited Date" means January 1, 2000.
(xviii) "Market Price of the Common Stock" means the average
Closing Bid Price of the Common Stock for the five (5) trading days ending on
the trading day immediately before the date indicated in the relevant provision
hereof, as reported by Bloomberg, LP or, if not so reported, as reported on the
over-the-counter market.
(xix) "New Senior Lender" means a bank or other financing
institution which enters into a long term loan agreement (with the loan subject
to such agreement having a term of at least one year) or a revolving credit
agreement with the Company; provided that, in connection with the consummation
of the agreement with such bank or other financing institution, (x) the Initial
Senior Lender releases in writing all of its claims, whether accrued, matured or
unmatured, against the Company and all of its security interests in any assets
of the Company, and (y) the Lender has consented to the terms of such agreement
(and the Lender agrees that it will not request any consideration for the
issuance of such consent).
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(xx) "Person" means any living person or any entity, such as,
but not necessarily limited to, a corporation, partnership or trust.
(xxi) " Preferred Holders" means the Series A Preferred
Holders, the Series B Preferred Holders and the Series C Preferred Holders (as
those terms are defined below).
(xix) "Principal Trading Market" means The Nasdaq/SmallCap
Market, or if the Common Stock is no longer listed on that market, the principal
securities exchange or trading market on which the Common Stock is listed or
traded, including the OTCBB or the pink sheets.
(xxii) "Reporting Service" means Bloomberg LP or if that
service is not then reporting the relevant information regarding the Common
Stock, a comparable reporting service of national reputation selected by the
Holders of the Debentures and reasonably acceptable to the Company.
(xxiii) "Securities" means the Debentures, the Warrants , the
Converted Shares and the Warrant Shares.
(xxiv) "Senior Lender" means the Initial Senior Lender or a
New Senior Lender.
(xxiii) "Shares" means the shares of Common Stock representing
any or all of the Converted Shares and the Warrant Shares.
(xxv) "Specified Period" means the period from the date hereof
through and including the earlier of (x) the date which is the first annual
anniversary of the Closing Date or (y) the date as of which the Lender owns no
Debentures.
(xvi) "Transaction Agreements" means the Securities Purchase
Agreement, the Debentures, the Registration Rights Agreement, the Warrants, the
Joint Escrow Instructions, the Security Interest Agreement (as defined below)
and includes all ancillary documents referred to in those agreements.
c. FORM OF PAYMENT; DELIVERY OF CERTIFICATES.
(i) On or before the date prior to the Closing Date, the
Lender shall pay the Purchase Price for the Debentures by delivering immediately
available good funds in United States Dollars to the Escrow Agent.
(ii) No later than the Closing Date, but in any event promptly
following payment by the Lender to the Escrow Agent of the Purchase Price, the
Company shall deliver the Certificates to the Escrow Agent.
(iii) By signing this Agreement, each of the Lender and the
Company, subject to acceptance by the Escrow Agent, agrees to all of the terms
and conditions of, and becomes a party to, the Joint Escrow Instructions, all of
the provisions of which are incorporated herein by this reference as if set
forth in full.
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d. METHOD OF PAYMENT. Payment into escrow of the Purchase
Price shall be made by wire transfer of funds to:
Bank of New York
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
ABA# 000000000
For credit to the account of Xxxxxxx & Xxxxxx LLP
Account No.: [To be provided to the Lender by
Xxxxxxx & Prager LLP]
Re: Titan Motorcycle Debenture Transaction
Not later than 5:00 p.m., New York time, on the date that is one (1)
Nasdaq/SmallCap Market trading day after the Company shall have accepted this
Agreement and returned a signed counterpart of this Agreement to the Escrow
Agent by facsimile, the Lender shall deposit with the Escrow Agent the Purchase
Price for the Debentures in immediately available funds. Time is of the essence
with respect to such payment, and failure by the Lender to make such payment
shall allow the Company to cancel this Agreement.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION.
The Lender represents and warrants to, and covenants and
agrees with, the Company as follows:
a. Without limiting Lender's right to sell the Common Stock
pursuant to the Registration Statement, the Lender is purchasing the Debentures
and the Warrants and will be acquiring the Shares for its own account for
investment only and not with a view towards the public sale or distribution
thereof and not with a view to or for sale in connection with any distribution
thereof.
b. The Lender is (i) an "accredited investor" as that term is
defined in Rule 501 of the General Rules and Regulations under the 1933 Act by
reason of Rule 501(a)(3), (ii) experienced in making investments of the kind
described in this Agreement and the related documents, (iii) able, by reason of
the business and financial experience of its officers (if an entity) and
professional advisors (who are not affiliated with or compensated in any way by
the Company or any of its Affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement, and
the related documents, and (iv) able to afford the entire loss of its investment
in the Securities.
c. All subsequent offers and sales of the Debentures and the
Shares by the Lender shall be made pursuant to registration of the Shares under
the 1933 Act or pursuant to an exemption from registration.
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d. The Lender understands that the Securities are being
offered and sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying upon the truth and accuracy of, and the Lender's compliance
with, the representations, warranties, agreements, acknowledgments and
understandings of the Lender set forth herein in order to determine the
availability of such exemptions and the eligibility of the Lender to acquire the
Securities.
e. The Lender 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 Debentures and the
offer of the Shares which have been requested by the Lender, including those set
forth on ANNEX V hereto. The Lender and its advisors, if any, have been afforded
the opportunity to ask questions of the Company and have received complete and
satisfactory answers to any such inquiries. Without limiting the generality of
the foregoing, the Lender has also had the opportunity to obtain and to review
the Company's (1) Annual Report on Form 10-K, as amended, for the fiscal year
ended January 1, 2000, (2) Quarterly Report on Form 10-Q for the fiscal quarter
ended April 1, 2000, (3) Current Reports on Form 8-K filed on May 24, 2000, June
22, 2000 and July 20, 2000, (4) Definitive Proxy Statement filed on June 23,
2000 and (5) Registration Statement on Form S-3 filed on July 20, 2000
(collectively, the "Company's SEC Documents").
f. The Lender understands that its investment in the
Securities involves a high degree of risk.
g. The Lender understands that no United States federal or
state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities.
h. This Agreement and the other Transaction Agreements to
which the Lender is a party have been duly and validly authorized, executed and
delivered on behalf of the Lender and are valid and binding agreements of the
Lender enforceable in accordance with their respective 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. COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants to the Lender as of the
date hereof and as of the Closing Date that, except as provided in ANNEX V
hereto:
a. CONCERNING THE DEBENTURES AND THE SHARES. There are no
preemptive rights of any stockholder of the Company, as such, to acquire the
Debentures, the Warrants or the Shares. No party other than a Lender has a
currently exercisable right of first refusal which would be applicable to any or
all of the transactions contemplated by the Transaction Agreements.
b. REPORTING COMPANY STATUS. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada and has
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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 each jurisdiction where the nature of
the business conducted or property owned by it makes such qualification
necessary, other than those jurisdictions in which the failure to so qualify
would not have a material adverse effect on the business, operations, financial
condition or results of operations of the Company and its subsidiaries taken as
a whole,. The Company has registered its Common Stock and is obligated to file
reports pursuant to Section 12 of the 1934 Act. The Common Stock is listed and
traded on The Nasdaq/SmallCap Market. The Company has received no notice, either
oral or written, 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.
c. AUTHORIZED SHARES. The authorized capital stock of the
Company consists of (i) 90,000,000 shares of Common Stock, $.001 par value per
share, of which 17,501,187 are outstanding as of the date hereof. All issued and
outstanding shares of Common Stock have been duly authorized and validly issued
and are fully paid and nonassessable. The Company has sufficient authorized and
unissued shares of Common Stock as may be reasonably necessary to effect the
issuance of the Shares. The Converted Shares and the Warrant Shares have been
duly authorized and, when issued upon conversion of, or as interest on, the
Debentures or upon exercise of the Warrants, each in accordance with its
respective terms, will be duly and validly issued, fully paid and non-assessable
and will not subject the Holder thereof to personal liability by reason of being
such holder.
d. SECURITIES PURCHASE AGREEMENT AND REGISTRATION RIGHTS
AGREEMENT. This Agreement , the Registration Rights Agreement, the form of which
is attached hereto as ANNEX IV (the "Registration Rights Agreement") and the
other Transaction Agreements, and the transactions contemplated thereby, have
been duly and validly authorized by the Company. This Agreement has been duly
executed and delivered by the Company and this Agreement is, and each of the
other Transaction Agreements, when executed and delivered by the Company, will
be, a valid and binding agreement of the Company enforceable in accordance with
their respective 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.
e. NON-CONTRAVENTION. The execution and delivery of this
Agreement and the other Transaction Agreements by the Company, the issuance of
the Securities, and the consummation by the Company of the other transactions
contemplated by the Transaction Agreements do not and will not conflict with or
result in a breach by the Company of any of the terms or provisions of, or
constitute a default under (i) the articles of incorporation or by-laws of the
Company, each as currently in effect, (ii) any indenture, mortgage, deed of
trust, or other material agreement or instrument to which the Company is a party
or by which it or any of its properties or assets are bound, including any
listing agreement for the Common Stock except as herein set forth, (iii) to its
knowledge, any existing applicable law, rule, or regulation or any applicable
decree, judgment, or order of any court, United States federal or state
regulatory body, administrative agency, or other governmental body having
jurisdiction over the Company or any of its properties or assets, or (iv) the
Company's listing agreement for its Common Stock, except
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such conflict, breach or default which would not have a material adverse effect
on the business, operations, financial condition or results of operations of the
Company and its subsidiaries taken as a whole, or on the transactions
contemplated herein.
f. APPROVALS. No authorization, approval or consent of any
court, governmental body, regulatory agency, self-regulatory organization, or
stock exchange or market or the stockholders of the Company is required to be
obtained by the Company for the issuance and sale of the Securities to the
Lender as contemplated by this Agreement, except such authorizations, approvals
and consents that have been obtained.
g. SEC FILINGS. None of the Company's SEC Documents contained,
at the time they were filed, any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or necessary to make
the statements made therein in light of the circumstances under which they were
made, not misleading. The Company has since June 1, 1999 timely filed all
requisite forms, reports and exhibits thereto with the SEC.
h. ABSENCE OF CERTAIN CHANGES. Since the Last Audited Date,
there has been no material adverse change and no material adverse development in
the business, operations, financial condition or results of operations of the
Company and its subsidiaries taken as a whole, except as disclosed in the
Company's SEC Documents. Since the Last Audited Date, except as provided in the
Company's SEC Documents, the Company has not (i) incurred or become subject to
any material liabilities (absolute or contingent) except liabilities incurred in
the ordinary course of business consistent with past practices; (ii) discharged
or satisfied any material lien or encumbrance or paid any material obligation or
liability (absolute or contingent), other than current liabilities paid in the
ordinary course of business consistent with past practices; (iii) declared or
made any payment or distribution of cash or other property to stockholders with
respect to its capital stock, or purchased or redeemed, or made any agreements
to purchase or redeem, any shares of its capital stock; (iv) sold, assigned or
transferred any other tangible assets, or canceled any debts or claims, except
in the ordinary course of business consistent with past practices; (v) suffered
any substantial losses or waived any rights of material value, whether or not in
the ordinary course of business, or suffered the loss of any material amount of
existing business; (vi) made any changes in employee compensation, except in the
ordinary course of business consistent with past practices; or (vii) experienced
any material problems with labor or management in connection with the terms and
conditions of their employment.
i. FULL DISCLOSURE. There is no fact known to the Company
(other than general economic conditions known to the public generally or as
disclosed in the Company's SEC Documents) that has not been disclosed in writing
to the Lender that (i) would reasonably be expected to have a material adverse
effect on the business, operations, financial condition or results of operations
of the Company and its subsidiaries taken as a whole, (ii) would reasonably be
expected to materially and adversely affect the ability of the Company to
perform its obligations pursuant to this Agreement or any of the Transaction
Agreements, or (iii) would reasonably be expected to materially and adversely
affect the value of the rights granted to the Lender in the Transaction
Agreements.
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j. ABSENCE OF LITIGATION. Except as set forth in the Company's
SEC Documents, there is no action, suit, proceeding, inquiry or investigation
before or by any court, public board or body pending or, to the knowledge of the
Company, threatened against or affecting the Company, wherein an unfavorable
decision, ruling or finding would have a material adverse effect on the
business, operations, financial condition or results of operations of the
Company and its subsidiaries taken as a whole, or the transactions contemplated
by any of the Transaction Agreements or which would adversely affect the
validity or enforceability of, or the authority or ability of the Company to
perform its obligations under, any of the Transaction Agreements.
k. ABSENCE OF EVENTS OF DEFAULT. Except as set forth in the
Company's SEC Documents, no Event of Default (or its equivalent term), as
defined in the respective agreement to which the Company is a party, and no
event which, with the giving of notice or the passage of time or both, would
become an Event of Default (or its equivalent term) (as so defined in such
agreement), has occurred and is continuing, which would have a material adverse
effect on the business, operations, financial condition or results of operations
of the Company and its subsidiaries taken as a whole.
l. PRIOR ISSUES. Except as set forth in the Company's SEC
Documents, during the twelve (12) months preceding the date hereof, the Company
has not issued any convertible securities. As of the date hereof, the
outstanding unconverted principal amount of each convertible security issued by
the Company is as set forth in ANNEX V hereto.
m. NO UNDISCLOSED LIABILITIES OR EVENTS. The Company has no
liabilities or obligations other than those disclosed in the Company's SEC
Documents or those incurred in the ordinary course of the Company's business
since the Last Audited Date, or which individually or in the aggregate, do not
or would not have a material adverse effect on the business, operations,
financial condition or results of operations of the Company and its subsidiaries
taken as a whole. No event or circumstance has occurred or exists with respect
to the Company or its properties, business, operations, financial condition or
results of operations of the Company and its subsidiaries taken as a whole,
which, under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed. There are no proposals currently under
consideration or currently anticipated to be under consideration by the Board of
Directors or the executive officers of the Company (other than the transactions
contemplated by the Transaction Agreements) which proposal would (x) change the
certificate of incorporation or other charter document or by-laws of the
Company, each as currently in effect, with or without stockholder approval,
which change would reduce or otherwise adversely affect the rights and powers of
the stockholders of the Common Stock or (y) materially or substantially change
the business, assets or capital of the Company, including its interests in
subsidiaries.
n. NO DEFAULT. Except as provided in the Company's SEC
Documents, the Company is not in default in the performance or observance of any
material obligation, agreement, covenant or condition contained in any
indenture, mortgage, deed of trust or other material instrument or agreement to
which it is a party or by which it or its property is bound.
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o. NO INTEGRATED OFFERING. Neither the Company nor any of its
Affiliates nor any person acting on its or their behalf has, directly or
indirectly, at any time since January 1, 2000, made any offer or sales of any
security or solicited any offers to buy any security under circumstances that
would eliminate the availability of the exemption from registration under Rule
506 of Regulation D in connection with the offer and sale of the Securities as
contemplated hereby.
p. DILUTION. The number of Shares issuable upon conversion of
the Debentures and the exercise of the Warrants may increase substantially in
certain circumstances, including, but not necessarily limited to, the
circumstance wherein the trading price of the Common Stock declines prior to the
conversion of the Debentures. The Company's executive officers and directors
have studied and fully understand the nature of the Securities being sold hereby
and recognize that they have a potential dilutive effect. The Board of Directors
of the Company has concluded, in its good faith business judgment, that such
issuance is in the best interests of the Company. The Company specifically
acknowledges that its obligation to issue the Shares upon conversion of the
Debentures and upon exercise of the Warrants is binding upon the Company and
enforceable regardless of the dilution such issuance may have on the ownership
interests of other stockholders of the Company.
q. BROKERS, FINDERS. The Company has taken no action which
would give rise to any claim by any person for brokerage commission, finder's
fees or similar payments by Lender relating to this Agreement or the
transactions contemplated hereby. Lender shall have no obligation with respect
to such fees or with respect to any claims made by or on behalf of other persons
for fees of a type contemplated in this Section 3(q) that may be due in
connection with the transactions contemplated hereby. The Company shall
indemnify and hold harmless each of Lender, its employees, officers, directors,
agents, and partners, and their respective Affiliates, from and against all
claims, losses, damages, costs (including the costs of preparation and
attorney's fees) and expenses suffered in respect of any such claimed or
existing fees, as and when incurred.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. TRANSFER RESTRICTIONS. The Lender acknowledges that (1) the
Securities have not been and are not being registered under the provisions of
the 1933 Act and, except as provided in the Registration Rights Agreement, the
Shares have not been and are not being registered under the 1933 Act, and may
not be transferred unless (A) subsequently registered thereunder or (B) the
Lender shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration; (2) any sale of the Securities made in
reliance on Rule 144 promulgated under the 1933 Act may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Securities under circumstances in which the
seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the SEC
thereunder; and (3) neither the Company nor any other person is under any
obligation to register the Securities (other than pursuant to the Registration
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Rights Agreement) under the 1933 Act or to comply with the terms and conditions
of any exemption thereunder.
b. RESTRICTIVE LEGEND. The Lender acknowledges and agrees that
the Debentures and the Warrants, and, until such time as the Common Stock has
been registered under the 1933 Act as contemplated by the Registration Rights
Agreement and sold in accordance with an effective Registration Statement,
certificates and other instruments representing any of the Securities shall bear
a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of any such Securities):
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED
FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE
ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED.
c. REGISTRATION RIGHTS AGREEMENT. The parties hereto agree to
enter into the Registration Rights Agreement on or before the Closing Date.
d. FILINGS.
(i) The Company undertakes and agrees to make all necessary
filings in connection with the sale of the Securities to the Lender under any
United States laws and regulations applicable to the Company, or by any domestic
securities exchange or trading market, and to provide a copy thereof to the
Lender promptly after such filing.
(ii) Subject to the conditions of the immediately following
sentence, the Company undertakes and agrees to take all steps necessary to have
a meeting and vote of the stockholders of the Company no later than the Meeting
Date (as defined below) regarding authorization of the Company's issuance to the
Holders of the Debentures of shares of Common Stock in excess of twenty percent
(20%) of the outstanding shares of Common Stock on the date of this Agreement in
accordance with Nasdaq Rule 4310(c)(25)(H)(i) or Rule 4460(i)(1), as may be
applicable, or to increase the authorized shares of Common Stock of the Company
if and as may be necessary to enable the Company to meet its obligations
regarding the reservation of shares and the conversion of the Debentures and
exercise of the Warrants as contemplated by the Transaction Agreements. The term
"Meeting Date" means the earlier of (i) ninety (90) days after the Closing Date
or (ii) the date on which the Company holds its next regular or special
stockholders meeting after the stockholders meeting held on or about July 26,
2000. The Company will recommend to the stockholders that such authorization be
granted and will seek proxies from stockholders not attending the meeting naming
a director or officer of the Company as such stockholder's proxy and directing
the proxy to vote, or giving the proxy the authority to vote, in favor of such
authorization. Upon determination that the stockholders have voted in favor of
such authorization, the Company shall cause its counsel to issue to the Lender
an
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unqualified opinion (the "Authorization Opinion") that such authorization has
been duly adopted by all necessary corporate action of the Company and that the
Company will be able to issue, without restriction as to the number of such
shares, all shares of Common Stock as may be issuable upon conversion of the
Debentures and exercise of the Warrants and without any limits imposed by the
Cap Regulations. The Authorization Opinion shall state that the Lender may rely
thereon in connection with the transactions contemplated by this Agreement and
the other Transaction Agreements. If, for any reason, (x) the Authorization
Opinion is not issued within five (5) business days after such meeting, (y) the
meeting is not held within thirty (30) days after the Meeting Date or (z) the
requisite stockholder approval is not obtained at the meeting, then in lieu of
issuing any shares in violation of the Cap Regulations or any of the Issuance
Limitations (as defined in the Debenture), the Company shall redeem all
outstanding Unconverted Debentures (as defined in the Debenture) as provided in
the Debentures within sixty (60) days after the Meeting Date; provided, however,
that at any time prior to the payment of the Redemption Amount (as defined in
the Debentures), the Lender may request the Company to, and the Company will,
voluntarily delist the Common Stock from The Nasdaq/SmallCap Market and cause
its shares to be listed on The Nasdaq/Bulletin Board Market and upon such
listing on the Nasdaq/Bulletin Board Market the obligation to redeem all
Unconverted Debentures will terminate.
e. REPORTING STATUS. So long as the Lender beneficially owns
any of the Securities, the Company shall file all reports required to be filed
with the SEC pursuant to Section 13 or 15(d) of the 1934 Act, and the Company
shall not terminate its status as an issuer required to file reports under the
1934 Act even if the 1934 Act or the rules and regulations thereunder would
permit such termination. The Company will take all reasonable action under its
control to obtain, if necessary, and to continue the listing and trading of its
Common Stock (including, without limitation, all Registrable Securities) on The
Nasdaq/SmallCap Market and will comply in all material respects with the
Company's reporting, filing and other obligations under the by-laws or rules of
the National Association of Securities Dealers, Inc. ("NASD") or The
Nasdaq/SmallCap Market.
13
f. USE OF PROCEEDS. The Company will use the proceeds from the
Purchase Price (excluding amounts paid by the Company for legal fees, finder's
fees and escrow fees in connection with the sale of the Debentures) for internal
working capital purposes, and, except as expressly provided herein or with the
express written consent of the Lender in each instance, shall not, directly or
indirectly, use such proceeds for research and development expenses or for any
loan to or investment in any other corporation, partnership, enterprise or other
person, including any of its Affiliates, or to repay any debt to any of its
Affiliates.
g. CERTAIN AGREEMENTS. On or before the Closing Date, the
Company shall obtain the agreement (each, a "Principal's Agreement") of each of
the Xxxxx Principals that, without the prior written consent of the Lender in
each instance, such Xxxxx Principal, individually and jointly with the other
Xxxxx Principals, will not sell or otherwise transfer or offer to sell or
otherwise transfer (except in a private transaction in which the transferee
agrees in writing for the benefit of Lender and enforceable by Lender, a copy of
which written agreement is provided to Lender, to be bound by the provisions of
the Principal's Agreement as if such transferee were a Xxxxx Principal; a
"Permitted Xxxxx Transfer")
(A) prior to the Effective Date, any shares of Common Stock directly or
indirectly held by such Xxxxx Principal, and
(B) thereafter, not more than three and one-half percent (3.5%) of any
shares of Common Stock directly or indirectly held by such Xxxxx
Principal during any calendar quarter prior to the expiration of the
Specified Period; provided, further, that any such sale or other
transfer of any shares of Common Stock shall be made only after the
Xxxxx Principal shall have given the Lender at least thirty (30) days'
advance written notice thereof .
Each such Principal's Agreement shall (w) specify that it is entered into as an
inducement to the Lender's execution, delivery and performance of this
Agreement, (x) name the Lender as a third party beneficiary thereof, (y)
acknowledge that the Company's transfer agent will be provided with instructions
that, except for Permitted Xxxxx Transfers (where the transferee is then deemed
to be a Xxxxx Principal), transfers by a Xxxxx Principal require the consent of
the Company and the Lender, and (z) contemplate that, in addition to any other
damages or remedies that may be appropriate, the Principal's Agreement shall be
enforceable by injunction sought by the Company and the Lender or any one or
more of them.
h. AVAILABLE SHARES. (i) Upon the initial issuance of the
Debentures, the Company shall reserve out of the authorized but unissued shares
of Common Stock for issuance upon conversion of the Debentures such number of
shares equal to 200% of the number of shares which would be issuable if all of
the Debentures issued to all Lenders were converted in their entirety on the
Closing Date based on the Conversion Price in effect on that date and thereafter
the number of authorized but unissued shares of Common Stock so reserved (the
"Reserved Amount") shall not be decreased, but may be increased pursuant to
subparagraph (ii) of this Section 4(h), and shall at all times be sufficient to
provide for the conversion of all of the Debentures then outstanding at the then
current Conversion Price thereof. The Reserved Amount shall be allocated to the
Holders of Debentures as provided in Section 4(k) hereof.
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(ii) If the Reserved Amount for any ten (10) consecutive
trading days (the last of such 10 trading days being the "Authorization Trigger
Date") shall be less than 150% of the number of shares of Common Stock issuable
upon potential conversion of the then outstanding Debentures of all Holders, the
Company shall immediately notify the Holders of the Debentures of such
occurrence and shall take immediate action (including, if necessary, seeking
stockholder approval to authorize the issuance of additional shares of Common
Stock) to increase the Reserved Amount to 200% of the number of shares of Common
Stock then issuable upon conversion of the outstanding Debentures of all
Holders. In the event the Company fails to so increase the Reserved Amount
within ninety (90) days after an Authorization Trigger Date (such event being
the "Reserved Amount Trigger Date"), each Holder of Debentures shall thereafter
have the option, exercisable in whole or in part at any time and from time to
time after the Reserved Amount Trigger Date, by delivery of a Redemption Notice
(as defined in the Debentures) to the Company, to require the Company to
purchase for cash, at an amount equal to the Redemption Amount, a portion of the
Holder's Debentures such that, after giving effect to such purchase, the
Holder's allocated portion of the Reserved Amount equals or exceeds 200% of the
total number of shares of Common Stock issuable to such Holder upon conversion
of its Debentures. If the Company fails to redeem such portion of the Holder's
Debentures within five (5) business days after its receipt of such Redemption
Notice, then such Holder shall be entitled to the remedies provided in the
Debentures.
(iii) Notwithstanding the provisions of Section 4(h)(ii)
hereof, a Holder of Debentures shall have no right to require the Company to
effect a redemption of such Holder's outstanding Debentures as provided in the
immediately preceding subparagraph (ii) so long as (i) the Company has not, at
any time, decreased the Reserved Amount below that number of shares of Common
Stock computed as set forth in subparagraphs (i) and (ii) of this Section 4(h);
(ii) the Company shall have taken immediate action following the applicable
Authorization Trigger Date (including, if necessary, seeking stockholder
approval to authorize the issuance of additional shares of Common Stock) to
increase the Reserved Amount to 200% of the number of shares of Common Stock
then issuable upon conversion of the outstanding Debentures of all Holders; and
(iii) the Company continues to use its commercially reasonable good faith best
efforts (including the resolicitation of stockholder approval, if necessary, to
authorize the issuance of additional shares of Common Stock) to increase the
Reserved Amount to 200% of the number of shares of Common Stock then issuable
upon conversion of the outstanding Debentures of all Holders. The Company will
be deemed to be using "its commercially reasonable good faith best efforts" to
increase the Reserved Amount so long as it solicits stockholder approval to
authorize the issuance of additional shares of Common Stock not less than two
(2) times during each twelve month period following the applicable Authorization
Trigger Date during which any Debentures remain outstanding; provided that no
such limitation on the redemption rights set out in subparagraph (ii) of this
Section 4(h) shall be effective if the Company fails to obtain stockholder
approval after two (2) attempts.
i. WARRANTS. The Company agrees to issue to the Lender on the
Closing Date a transferable, divisible warrant (collectively, the "Warrants")
for the purchase of 1,025,000 shares
15
of Common Stock. The Warrants shall bear an exercise price equal to one hundred
five percent (105%) of the Market Price of the Common Stock as of the Closing
Date. The Warrant will expire on the last calendar day of the month in which the
fifth anniversary of the Closing Date occurs. The Warrants shall be in the form
annexed hereto as ANNEX VI together with registration rights as provided in the
Registration Rights Agreement.
j. LIMITATION ON CONVERSIONS. Anything in the other provisions
of this Agreement or any of the other Transaction Agreements to the contrary
notwithstanding, the following provisions are applicable to conversion effected
under the Debentures:
(i) If and for so long as the Cap Regulations are applicable
to limit the issuance of shares on conversion of the Debentures (but not
thereafter), the number of shares that the Company will issue to all Holders of
the Debentures on conversion of the Debentures shall not, in the aggregate,
exceed the Cap Amount. The Cap Amount shall be allocated among Holders of
Debentures as provided in Section 4(k) hereof.
(ii) Nothing in this Section 4(j) shall be deemed to (A)
permit a transfer or assignment of the Debenture unless otherwise permitted by
other provisions of this Agreement or the Debenture or (B) limit or otherwise
modify the obligations of the Company to take certain actions or to make certain
payments to the Lender or other parties (such as but not necessarily limited to,
actions with respect to the meeting contemplated by Section 4(d)(ii) hereof or
payments on redemption of the Debentures), or adversely affect the rights of the
Lender or such other parties with respect thereto, as provided elsewhere in this
Agreement, the Debentures or any of the other Transaction Agreements.
k. ALLOCATION OF CAP AMOUNT AND RESERVED AMOUNT. The initial
Cap Amount and Reserved Amount shall be allocated pro rata among the Holders of
all Debentures based on the initial principal amount of the Debentures issued to
each such Holder. Each increase to the Cap Amount and the Reserved Amount shall
be allocated pro rata among the Holders of Debentures based on the principal
amount of the Debentures held by each Holder at the time of the increase in the
Cap Amount or Reserved Amount. In the event a Holder shall sell or otherwise
transfer any of such Holder's Debentures, each transferee shall be allocated a
pro rata portion of such transferor's Cap Amount and Reserved Amount. Any
portion of the Cap Amount or Reserved Amount which remains allocated to any
person or entity which does not hold any Debentures shall be allocated to the
remaining Holders of Debentures, pro rata based on the outstanding principal
balance of the Debentures then held by such Holders.
l. INTENTIONALLY OMITTED.
m. RIGHT OF FIRST REFUSAL, SPECIAL DILUTION PROTECTION.
(i) The Company covenants and agrees that, if during the
period commencing on the date of this Agreement and continuing through the date
which is one hundred eighty (180) days after the Effective Date, the Company
offers to enter into any transaction (a "New Transaction") for the sale of
Common Stock or securities convertible into Common Stock (collectively, "New
Common Stock"), the Company shall notify the Lender in writing of all of
16
the terms of such offer (a "New Transaction Offer"). The Lender shall have the
right (the "Right of First Refusal"), exercisable by written notice given to the
Company by the close of business on the third business day after the Lender's
receipt of the New Transaction Offer (the "Right of First Refusal Expiration
Date"), to participate, pro rata with the holders of the shares of the Series A
Convertible Preferred Stock (the "Series A Preferred Holders"), the Series B
Convertible Preferred Stock (the "Series B Preferred Holders") and the Series C
Convertible Preferred Stock (the "Series C Preferred Holders"), in all or any
part of the New Transaction Offer on the terms so specified. To the extent that
any Preferred Holders do not elect to participate in the New Transaction, the
Right of First Refusal offered to them shall be offered pro rata to the Lenders
and the Preferred Holders who have elected to exercise their own Right of First
Refusal in full.
(ii) If, and only if, the Lender does not exercise the Right
of First Refusal in full, the Company may consummate the remaining portion of
the New Transaction with any third party (a "New Investor") on the terms
specified in the New Transaction Offer within thirty (30) days of the Right of
First Refusal Expiration Date. If the New Transaction is not so consummated by
such thirtieth day, the provisions of Section 4(m)(i) shall apply again before
the Company can consummate a New Transaction with any New Investor.
(iii) If the terms of the New Transaction to be consummated
with such other party differ in a material respect from the terms specified in
the New Transaction Offer so that the terms are more beneficial in any respect
to the New Investor, the Company shall give the Lender a New Transaction Offer
relating to the terms of the New Transaction, as so changed, and the Lender's
Right of First Refusal and the preceding terms of this Section 4(m) shall apply
with respect to such changed terms.
(iv) If there is more than one Lender signatory to this
Agreement, the preceding provisions of this Section 4(m) shall apply pro rata
among them (based on their relative Lender's Allocable Shares), except that, to
the extent any such Lender does not exercise its Right of First Refusal in full
(a "Declining Lender"), the remaining Lender or Lenders who or which have
exercised their own Right of First Refusal in full, shall have the right (pro
rata among them based on their relative Lender's Allocable Shares, if more than
one) to exercise all or a portion of such Declining Lender's unexercised Right
of Refusal.
(v) In the event the New Transaction is offered for the sale
of New Common Stock or the issuance of warrants or other rights to purchase New
Common Stock with such third party at any time prior to the expiration of the
Specified Period on terms providing for (x) either a sale price equal to or
computed based on, or a determination of a conversion price based on, a lower
percentage of the then current market price (howsoever defined or computed) than
provided in the Debentures for determining the Conversion Price or a lower Fixed
Conversion Price (howsoever defined or computed in the New Transaction
documents) and/or (y) the issuance of warrants at an exercise price lower than
that provided in the Warrants and/or for a greater number of shares per dollar
paid or invested by such third party to or in the Company, the terms of the
Debentures (or
17
other documentation affecting the terms of the Debentures) and the Warrants
(whether previously issued and/or converted or not) shall be modified to (i)
reduce the relevant Conversion Price, Fixed Conversion Price or Warrant exercise
price and/or (ii) increase the number of shares covered by the Warrants, in each
instance to be equal to that provided in the New Transaction as so consummated
(provided, however, that such increased Warrants shall have the same exercise
price formula as the New Transaction warrants).
(vi) Except and subject to the extent provided in this
subparagraph (vi), the Right of First Refusal provided herein does not apply to
warrants issued to a New Senior Lender. Notwithstanding the foregoing, the
provisions of subparagraph (v) of this Section 4(m) shall apply as if such
issuance were a New Transaction for which the Right of First Refusal had not
been exercised. This subparagraph (vi) does not apply if any of the Series A
Preferred Holders and the Series B Preferred Holders (each such holder, an
"Other Preferred Holder") has a right of first refusal, which right has not been
waived by such Other Preferred Holder, with respect to the warrants issued to a
New Senior Lender.
x. XXXXX OF SECURITY INTEREST TO LENDERS.
(i) To secure its obligations to the Lenders and to all direct
and indirect permitted transferees and assignees of their interests in this
Agreement and the other Transaction Agreements, including, but not necessarily
limited to, the Debentures (any one or more of the Lenders and such transferees
and assignees individually and collectively sometimes referred to as the
"Secured Party"), the Company (sometimes referred to as the "Debtor") hereby
grants, conveys, transfers and assigns to the Secured Party a security interest
in and to the Collateral (as defined in ANNEX VII hereto) to the fullest extent
permissible under the Uniform Commercial Code or other governing security
interests granted by debtors or obligors to creditors or obligees as in effect
in each jurisdiction in which the Debtor's property may be found or deemed
situate. The Debtor intends such security interest to be senior to the security
interest, if any, of all parties other than the Senior Lender. In furtherance of
the foregoing, and not in limitation thereof, on or before the Closing Date the
Company shall obtain the written consent and acknowledgment of all parties
(other than (x) the Senior Lender, and (y) Xxxxxx and Coast, as defined in the
Security Interest Agreement, defined below) currently having a security interest
in any of the Collateral to the priority interest of the Secured Party (the
"Other Secured Parties' Consents").
(ii) Solely for administrative convenience and not for any
other purpose, each Secured Party has designated Xxxxxxx & Prager LLP as agent
for the Secured Party for purposes of execution of and identification on any
financing statement or similar instrument referring to or describing the
Collateral. Such designation shall remain in effect until canceled by such
Secured Party; provided, however, that such cancellation shall not affect the
validity of any action theretofore taken by such agent pursuant to this
provision. The Debtor acknowledges and agrees to honor such designation.
18
(iii) Additional terms relating to the grant of this security
interest are specified in the Security Interest and Pledge Provisions annexed
hereto as ANNEX VII , the terms of which are
19
incorporated herein by reference as if set forth herein in full. The terms of
this Section 4(n) and the Security Interest and Pledge Provisions are
collectively referred to as the "Security Interest Agreement."
5. TRANSFER AGENT INSTRUCTIONS.
a. The Company warrants that, with respect to the Securities,
other than the stop transfer instructions to give effect to Section 4(a) hereof,
it will give its transfer agent no instructions inconsistent with instructions
to issue Common Stock from time to time upon conversion of the Debentures in
such amounts as specified from time to time by the Company to the transfer
agent, bearing the restrictive legend specified in Section 4(b) of this
Agreement prior to registration of the Shares under the 1933 Act, registered in
the name of the Lender or its nominee and in such denominations to be specified
by the Lender in connection with each conversion of the Debentures. Except as so
provided, the Shares shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement, the
Debentures, the Registration Rights Agreement, and applicable law. Nothing in
this Section shall affect in any way the Lender's obligations and agreement to
comply with all applicable securities laws upon resale of the Securities.
20
If the Lender provides the Company with an opinion of counsel reasonably
satisfactory to the Company that registration of a resale by the Lender of any
of the Securities in accordance with clause (1)(B) of Section 4(a) of this
Agreement is not required under the 1933 Act, the Company shall (except as
provided in clause (2) of Section 4(a) of this Agreement) permit the transfer of
the Securities and, in the case of the Converted Shares or the Warrant Shares,
as the case may be, promptly instruct the Company's transfer agent to issue one
or more certificates for Common Stock without legend in such name and in such
denominations as specified by the Lender.
21
b. Subject to the provisions of this Agreement and the
Debentures, the Company will permit the Lender to exercise its right to convert
the Debentures in the manner contemplated by the Debentures.
c. The Company understands that a delay in the issuance of the
certificates represented the Converted Shares (the "Conversion Certificates")
beyond the Delivery Date (as defined in the Debentures) could result in economic
loss to the Lender. As compensation to a Holder for such loss, the Company
agrees that the Conversion Price will be adjusted to equal seventy-nine percent
(79%) of the Conversion Price applicable immediately before the application of
this provision, and the Company will then be obligated to issue Converted Shares
based on the Conversion Price as so adjusted. In addition, and not in lieu of
the foregoing, the Company agrees, if there is a further delay in the delivery
of the Conversion Certificates (as adjusted in accordance with this provision)
so that such Conversion Certificates are not received within five (5) business
days after the Delivery Date, at the option of such Holder either (i) to pay the
Redemption Amount as provided in Section 5 of the Debentures or (ii) to pay late
payments to such Holder for late delivery of Conversion Certificates in
accordance with the following schedule (where "No. Business Days Late" is
defined as the number of business days beyond five (5) business days after the
Delivery Date):
Late Payment For Each $10,000
of Debenture Principal or Interest
No. Business Days Late Amount Being Converted
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 +$200 for each Business
Day Late beyond 10 days
22
The Company shall pay any payments incurred under this Section in immediately
available funds upon demand. Nothing herein shall limit the right of a Holder of
the Debentures being converted (a "Converting Holder") to pursue actual damages
for the Company's failure to issue and deliver the Common Stock to the
Converting Holder. Furthermore, in addition to any other remedies which may be
available to a Converting Holder, in the event that the Company fails for any
reason to effect delivery of such Conversion Certificates within five (5)
business days after the Delivery Date, the Converting Holder will be entitled to
revoke the relevant Notice of Conversion by delivering a notice to such effect
to the Company whereupon the Company and the Converting Holder shall each be
restored to their respective positions immediately prior to delivery of such
Notice of Conversion; provided, however, that any payments contemplated by this
Section 5(c) which have accrued through the date of such revocation notice shall
remain due and owing to the Converting Holder notwithstanding such revocation.
d. If, by the relevant Delivery Date, the Company fails for
any reason to deliver the Conversion Certificates to be issued upon conversion
of a Debenture and after such Delivery Date, the Converting Holder purchases, in
an open market transaction or otherwise, shares of Common Stock (the "Covering
Shares") in order to make delivery in satisfaction of a sale of Common Stock by
the Converting Holder (the "Sold Shares"), which delivery such Converting Holder
anticipated to make using the Conversion Certificates to be issued upon such
conversion (a "Buy-In"), the Company shall pay to the Converting Holder, in
addition to and not in lieu of the amounts due under Section 5(c) hereof (and in
addition to all other amounts contemplated in other provisions of the
Transaction Agreements, and not in lieu of any such other amounts), the Buy-In
Adjustment Amount (as defined below). The "Buy-In Adjustment Amount" is the
amount equal to the excess, if any, of (x) the Converting Holder's total
purchase price (including brokerage commissions, if any) for the Covering Shares
over (y) the net proceeds (after brokerage commissions, if any) received by the
Converting Holder from the sale of the Sold Shares. The Company shall pay the
Buy-In Adjustment Amount to the Company in immediately available funds
immediately upon demand by the Converting Holder. By way of illustration and not
in limitation of the foregoing, if the Converting Holder purchases shares of
Common Stock having a total purchase price (including brokerage commissions) of
$11,000 to cover a Buy-In with respect to shares of Common Stock it sold for net
proceeds of $10,000, the Buy-In Adjustment Amount which Company will be required
to pay to the Converting Holder will be $1,000.
e. In lieu of delivering physical certificates representing
the Common Stock issuable upon conversion, provided the Company's transfer agent
is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer program, upon request of a Converting Holder and such
Converting Holder's compliance with the provisions contained in this paragraph,
so long as the certificates therefor do not bear a legend and the Converting
Holder thereof is not obligated to return such certificate for the placement of
a legend thereon, the Company shall use its best efforts to cause its transfer
agent to electronically transmit the Common Stock issuable upon
23
conversion to the Converting Holder by crediting the account of Converting
Holder's prime broker with DTC through its Deposit Withdrawal Agent Commission
system.
f. (i) Until such time as a court of competent jurisdiction
shall have issued a binding injunction (which injunction was not sought by the
Company or any of its Affiliates) prohibiting the Company from issuing shares of
Common Stock to the Converting Holder on the Converting Holder's conversion of
the Debentures or to the holder of a Warrant exercising such holder's rights
thereunder (an "Exercising Holder"), the Company will timely honor all such
conversions and exercises effected by the Converting Holder or Exercising Holder
in accordance with the terms of the Debentures and the Warrants, as the case may
be, this Agreement and the other Transaction Agreements, subject only to the
limitations as to manner of exercise provided therein and to the provisions of
Section 4(j) hereof and Sections 4(C) and (D) of the Debentures and Section 2.2
of the Warrant. In furtherance of the foregoing, and not in limitation thereof,
if at any time, a Holder of the Debentures shall elect to convert any portion of
the Debentures or to exercise any portion of the Warrants, the Company may not
refuse to effect such conversion or exercise based on any claim that such Holder
(or anyone associated with such Holder) has been engaged in any violation of law
or otherwise, unless a binding injunction from a court of competent
jurisdiction, issued on notice to that Holder of the hearing, with respect to
the issuance of such injunction, restraining or enjoining conversion of all of
the Debentures or exercise of all Warrants shall have been sought and obtained
and the Company shall have posted a bond in favor of such Holder in the amount
of one hundred thirty percent (130%) of the outstanding principal amount of the
Debentures held by such Holder or the market value of the Common Stock subject
to exercise of the Warrants held by such Holder which are subject to such
injunction. The bond referred to in the immediately preceding sentence shall
remain in effect at least until thirty (30) days after the completion of the
proceedings relating to the dispute between such Holder and the Company with
respect to such conversion or right to effectuate conversions. The proceeds of
such bond shall be payable to such Holder to offset any amounts owed to the
Holder as reflected in any judgment obtained by the Holder in its favor in
connection with such dispute.
(ii) If, at any time:
(x) the Company challenges, disputes or denies the right of a Holder of
the Debentures to effect a conversion of the Debentures into Common
Stock or otherwise dishonors or rejects any Notice of Conversion
delivered in accordance with the terms of any of the Transaction
Agreements (subject to the provisions of Section 4(B)(v) of the
Debentures with respect to certain disputes relating to calculations of
the number of shares to be issued and subject to the provisions of
Sections 4(C) and (D) of the Debentures with respect to certain
limitations on conversions) or any exercise of any Warrant in
accordance with its terms ("Warrant Exercise"), or
(y) any third party who is not and has never been an Affiliate of such
Holder commences any lawsuit or proceeding or otherwise asserts any
claim before any court or public or governmental authority, which
lawsuit, proceeding or claim seeks to challenge, deny, enjoin, limit,
modify, delay or dispute the right of such
24
Holder to effect the conversion of the Debentures into Common Stock,
and the Company refuses to honor any such Notice of Conversion or
Warrant Exercise,
then such Holder shall have the right, by written notice to the Company, to
require the Company to redeem all or any part of the outstanding Debentures for
which a Notice of Conversion has been refused pursuant to Sections 5(f)(i) or
(ii) hereof for cash, at an amount equal to the Redemption Amount, pursuant to
the provisions of Section 5 of the Debentures.
g. The Company will authorize its transfer agent to give
information relating to the Company directly to the Lender or the Lender's
representatives upon the request of the Lender or any such representative, to
the extent such information relates to (i) the status of shares of Common Stock
issued or claimed to be issued to the Lender in connection with a Notice of
Conversion, or (ii) the number of outstanding shares of Common Stock of all
stockholders as of a current or other specified date. The Company will provide
the Lender with a copy of the authorization so given to the transfer agent.
6. CLOSING DATE.
a. The Closing Date shall occur no later than the date which
is the first Nasdaq/SmallCap Market trading day after each of the conditions
contemplated by Sections 7 and 8 hereof shall have either been satisfied or been
waived by the party in whose favor such conditions run.
b. The closing of the purchase and issuance of Debentures
shall occur on the Closing Date at the offices of the Escrow Agent and shall
take place no later than 3:00 P.M., New York time, on such day or such other
time as is mutually agreed upon by the Company and the Lender.
c. Notwithstanding anything to the contrary contained herein,
the Escrow Agent will be authorized to release the Escrow Funds to the Company
and to others and to release the other Escrow Property on the Closing Date upon
satisfaction of the conditions set forth in Sections 7 and 8 hereof and as
provided in the Joint Escrow Instructions.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Lender understands that the Company's obligation to sell
the Debentures to the Lender pursuant to this Agreement on the Closing Date is
conditioned upon:
25
a. The execution and delivery of this Agreement and the other
Transaction Agreements contemplated to be signed by the Lender and, if
necessary, other Lenders reflecting the purchase of Debentures in the aggregate
principal amount of $750,000;
b. Delivery by the Lender to the Escrow Agent of good funds as
payment in full of an amount equal to the Purchase Price for the Debentures in
accordance with this Agreement;
c. The accuracy on the Closing Date of the representations and
warranties of the Lender contained in this Agreement, each as if made on such
date, and the performance by the Lender on or before such date of all covenants
and agreements of the Lender required to be performed on or before such date;
d. Except to the extent contemplated by specific provisions of
the Transaction Agreements, there shall not be in effect any law, rule or
regulation prohibiting or restricting the transactions contemplated hereby to an
extent materially greater than contemplated herein, or requiring any consent or
approval which shall not have been obtained; and
e. From and after the date hereof to and including the Closing
Date, the trading of the Common Stock shall not have been suspended by the SEC
or the NASD and trading in securities generally on The Nasdaq/SmallCap Market
shall not have been suspended or limited, nor shall minimum prices been
established for securities traded on The Nasdaq/SmallCap Market, nor shall there
be any outbreak or escalation of hostilities involving the United States or any
material adverse change in any financial market that in either case in the
reasonable judgment of the Company makes it impracticable or inadvisable to sell
the Debentures.
8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Lender's obligation to
purchase the Debentures on the Closing Date is conditioned upon:
a. The execution and delivery of this Agreement and the other
Transaction Agreements by the Company;
b. The delivery by the Company to the Escrow Agent of the
Certificates in accordance with this Agreement;
c. The delivery to the Lender of (i) a signed consent from the
Senior Lender to the transactions contemplated by this Agreement and the other
Transaction Agreements, including but not limited to the issuance of the
Debentures and the grant of a security interest to the Lender, (ii) a signed
consent from the Series A Preferred Holders and the Series B Preferred Holders
to the transactions contemplated by this Agreement and the other Transaction
Agreements, including but not limited to the issuance of the Debentures and the
grant of a security interest to the Lender and the priority of the interests of
the Lenders to any interest of such Preferred Holders, and (iii) the
26
Other Secured Parties' Consents, if any (all such consents referred to in this
paragraph (c) from all such parties, collectively, the "Consents");
27
d. The delivery of the Principal's Agreements of each of the
Xxxxx Principals;
e. The accuracy in all material respects on such Closing Date
of the representations and warranties of the Company contained in this
Agreement, each as if made on such date, and the performance by the Company on
or before such date of all covenants and agreements of the Company required to
be performed on or before such date;
f. On the Closing Date, the Registration Rights Agreement
shall be in full force and effect and the Company shall not be in default
thereunder;
g. On the Closing Date, the Lender shall have received an
opinion of counsel for the Company, dated such Closing Date, in form, scope and
substance reasonably satisfactory to the Lender, substantially to the effect set
forth in ANNEX III attached hereto;
h. Except to the extent contemplated by specific provisions of
the Transaction Agreements, there shall not be in effect any law, rule or
regulation prohibiting or restricting the transactions contemplated hereby to an
extent materially greater than contemplated herein, or requiring any consent or
approval which shall not have been obtained (and in particular the Consents
shall have been obtained and copies thereof provided to the Lender); and
i. From and after the date hereof to and including the Closing
Date, the trading of the Common Stock shall not have been suspended by the SEC
or the NASD and trading in securities generally on The Nasdaq/SmallCap Market
shall not have been suspended or limited, nor shall minimum prices been
established for securities traded on The Nasdaq/SmallCap Market, nor shall there
be any outbreak or escalation of hostilities involving the United States or any
material adverse change in any financial market that in either case in the
reasonable judgment of the Lender makes it impracticable or inadvisable to
purchase the Debentures.
9. GOVERNING LAW: MISCELLANEOUS.
a. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws. Each of the parties consents to the exclusive
jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions. To the extent determined by such court, the
Company shall reimburse the Lender for any reasonable legal fees and
disbursements incurred by the Lender in enforcement of or protection of any of
its rights under any of the Transaction Agreements.
28
b. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
c. This Agreement shall inure to the benefit of and be binding
upon the successors and assigns of each of the parties hereto.
d. All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
e. A facsimile transmission of this signed Agreement shall be
legal and binding on all parties hereto.
f. This Agreement may be signed in one or more counterparts,
each of which shall be deemed an original.
g. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
h. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
i. This Agreement may be amended only by an instrument in
writing signed by the party to be charged with enforcement thereof.
j. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
10. NOTICES. Any notice required or permitted hereunder shall
be given in writing (unless otherwise specified herein) and shall be deemed
effectively given on the earliest of
(a) the date delivered, if delivered by personal delivery as
against written receipt therefor or by confirmed facsimile
transmission,
(b) the seventh business day after deposit, postage prepaid,
in the United States Postal Service by registered or certified
mail, or
(c) the third business day after mailing by domestic or
international express courier, with delivery costs and fees
prepaid,
in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate by
ten (10) days' advance written notice similarly given to each of the other
parties hereto):
29
COMPANY: Titan Motorcycle Co. Of America
At its address at the head of this Agreement
Attn: Xxxxx Xxxxx
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
with a copy to:
Xxxxx & Xxxxxx LLP
Xxx Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
BUYER: At the address set forth on the signature page of this Agreement.
with a copy to:
Xxxxxxx & Xxxxxx LLP
00 Xxxxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopier No. (000) 000-0000
ESCROW AGENT: Xxxxxxx & Xxxxxx LLP
00 Xxxxxxxx
Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxxx, Xxx.
Xxx Xxxx, Xxx Xxxx 00000
Telephone No.: (000) 000-0000
Telecopier No. (000) 000-0000
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's
and the Lender's representations and warranties herein shall survive the
execution and delivery of this Agreement and the delivery of the Certificates
and the Warrants and the payment of the Purchase Price, and shall inure to the
benefit of the Lender and the Company and their respective successors and
assigns.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK.]
30
IN WITNESS WHEREOF, this Agreement has been duly executed by
the Lender by one of its officers thereunto duly authorized as of the date set
forth below.
AMOUNT AND PURCHASE PRICE OF DEBENTURES: $
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed on its behalf this day , 2000.
________________________________
Address Printed Name of Subscriber
________________________________
By:
Telecopier No. _________________ (Signature of Authorized Person)
________________________________
________________________________ Printed Name and Title
Jurisdiction of Incorporation
or Organization
As of the date set forth below, the undersigned hereby accepts this Agreement
and represents that the foregoing statements are true and correct and that it
has caused this Securities Purchase Agreement to be duly executed on its behalf.
TITAN MOTORCYCLE CO. OF AMERICA
By:
Title:
Date:_______________,2000
31
ANNEX I DEBENTURE
ANNEX II JOINT ESCROW INSTRUCTIONS
ANNEX III OPINION OF COUNSEL
ANNEX IV REGISTRATION RIGHTS AGREEMENT
ANNEX V COMPANY DISCLOSURE MATERIALS
ANNEX VI FORM OF WARRANT
ANNEX VII SECURITY INTEREST AND PLEDGE PROVISIONS
32
ANNEX V
TO
SECURITIES PURCHASE AGREEMENT
COMPANY DISCLOSURE MATERIALS
[TO BE PREPARED BY COMPANY]
