TEMTEX INDUSTRIES, INC.
NOTE PURCHASE AGREEMENT
This Note Purchase Agreement (this "Agreement") is made and
entered into as of the 19th day of July, 2002 by and among Temtex
Industries, Inc., a Delaware corporation (the "Company"), and the
persons identified on Exhibit A attached hereto (individually, an
"Investor" and collectively, the "Investors").
Recitals
WHEREAS, the Company desires to sell and issue to the
Investors, and the Investors desire to purchase and acquire from
the Company, Subordinated Convertible Notes (in the form attached
as Exhibit B hereto, the "Convertible Notes") in the aggregate
principal amount of $750,000; and
WHEREAS, the terms of the Convertible Notes will permit the
Investors to convert the Convertible Notes, in whole or in part,
into shares of the Company's $0.20 par value common stock (the
"Common Stock"), subject to the terms and conditions of the
Convertible Notes; and
WHEREAS, in connection with the execution of this Agreement,
certain of the Investors are being issued Warrants to purchase an
aggregate of 250,000 shares of Common Stock of this Corporation
(the "Warrants");
WHEREAS, in connection with the Investors' execution of this
Agreement and their purchase of the Convertible Notes, the
Company is entering into an Investors' Rights Agreement (the
"Investors' Rights Agreement") and an existing significant
stockholder is entering into a Voting Agreement (the "Voting
Agreement");
NOW, THEREFORE, in consideration of the mutual promises and
covenants set forth herein, the parties hereto agree as follow:
1. PURCHASE AND SALE OF STOCK.
1.1 Sale and Issuance of Convertible Notes.
Subject to the terms and conditions of this Agreement, each
Investor agrees, severally and not jointly, to purchase at the
Closing, and the Company agrees to sell and issue to each
Investor, severally and not jointly, at the Closing, a
Convertible Note in the original principal amount set forth
opposite such Investor's name on Exhibit A attached hereto.
1.2 Closing.
(a) The purchase and sale of the Convertible Notes shall take
place at the offices of Xxxxx & Xxxxxx LLP, Dallas, Texas, at
9:00 a.m., on July 19, 2002, or at such other time and place as
the Company and Investors acquiring more than half of the face
amount of the Convertible Notes in the aggregate being sold
pursuant hereto (a "Majority") shall mutually agree, either
orally or in writing (which time and place are designated as the
"Closing").
(b) At the Closing, the Company shall deliver to each Investor
the appropriate Convertible Note originally executed by a duly
authorized representative of the Company against a wire transfer
to the Company in immediately available funds in an amount equal
to the face amount of each such Convertible Note.
1.3 No Collateral; Subordination.
The Company's obligation to repay the principal of and
interest on the Convertible Notes shall be made without the grant
of collateral or security of any kind. The Investors acknowledge
and agree that the Convertible Notes represent general unsecured
obligations of the Company only. Further, each of the Investors
acknowledges and agrees that the Convertible Notes are
subordinated to certain other indebtedness of the Company as
provided expressly therein.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to each Investor
that as of the date of this Agreement, except as set forth on the
Disclosure Letter furnished to each Investor hereunder:
2.1 Organization; Good Standing; Qualification.
The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of
Delaware, has all requisite corporate power and authority to own
and operate its properties and assets and to carry on its
business as now conducted, to execute and deliver this Agreement
and the agreements, instruments and certificates to be executed
in connection herewith, including, without limitation, the
Convertible Notes, the Warrants, the Investors' Rights Agreement
and the Voting Agreement (collectively, the "Ancillary
Agreements"), to issue and sell the Convertible Notes, the
Warrants and the shares of Common Stock issuable upon conversion
of the Notes and/or the Warrants (the "Conversion Shares")
(collectively, the "Securities"), and to carry out the provisions
of this Agreement and the Ancillary Agreements. The Company is
duly qualified and is authorized to transact business and is in
good standing as a foreign corporation in each jurisdiction in
which the failure to so qualify would have a material adverse
effect on its business, properties, prospects, or financial
condition.
2.2 Authorization.
All corporate action on the part of the Company, its
officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement and the
Ancillary Agreements, the performance of all obligations of the
Company hereunder and thereunder and the authorization, issuance
(or reservation for issuance), sale, and delivery of the
Convertible Notes and Warrants being sold hereunder and the
Conversion Shares issuable upon conversion thereof has been taken
or will be taken prior to the Closing, and this Agreement and the
Ancillary Agreements, when executed and delivered, will
constitute valid and legally binding obligations of the Company,
enforceable in accordance with their respective terms except (i)
as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by
laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies, and (iii) to the
extent that the indemnification provisions contained in the
Investors' Rights Agreement may be limited by applicable laws
(collectively, the "Enforceability Exceptions").
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2.3 Capitalization.
As of the date hereof, the authorized, issued and
outstanding capital stock of the Company is as set forth in
Section 2.3 of the Disclosure Letter and no other shares of
capital stock of the Company will be outstanding as of the
Closing Date. All of such outstanding shares of capital stock
are, or upon issuance will be, duly authorized, validly issued,
fully paid and non-assessable. No shares of capital stock of the
Company are subject to preemptive rights or similar rights of the
stockholders of the Company or any liens or encumbrances imposed
through the actions or failure to act of the Company. Other than
as set forth in Section 2.3 of the Disclosure Letter, as of the
date hereof, (i) there are no outstanding options, warrants,
scrip, rights to subscribe for, puts, calls, rights of first
refusal, agreements, understandings, claims or other commitments
or rights of any character whatsoever relating to, or securities
or rights convertible into or exchangeable for any shares of
capital stock of the Company or any of its subsidiaries, or
arrangements by which the Company or any of its subsidiaries is
or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries, (ii) there are no
agreements or arrangements under which the Company or any of its
subsidiaries are obligated to register the sale of any of its or
their securities under the Securities Act of 1933, as amended
(the "Securities Act") (except pursuant to the Investors' Rights
Agreement) and (iii) there are no anti-dilution or price
adjustment provisions contained in any security issued by the
Company (or in any agreement providing rights to security
holders) that will be triggered by the issuance of the Conversion
Shares. The Company has furnished to the Investors true and
correct copies of the Company's Certificate of Incorporation and
Bylaws, and of all securities convertible into or exercisable for
Common Stock.
2.4 Governmental Authorization.
The execution and delivery by the Company of this Agreement
and the Ancillary Agreements does not and will not, the issuance
and sale by the Company of the Convertible Notes and the Warrants
does not and will not, and the consummation of the transactions
contemplated hereby and by the other Ancillary Agreements will
not, require any action by or in respect of, or filing with, any
governmental body, agency or governmental official except (a)
such actions or filings that have been undertaken or made prior
to the date hereof and that will be in full force and effect (or
as to which all applicable waiting periods have expired) on and
as of the date hereof or which are not required to be filed on or
prior to the Closing Date, (b) such actions or filings that, if
not obtained, would not result in a material adverse effect on
the Company's business, properties, prospects or financial
condition, and (c) the filing of a "Form D" as necessary.
2.5 Issuance of Securities.
(a) Convertible Note. Upon payment by the Investors of the
original principal amount of the Convertible Notes, such
Convertible Notes will represent valid and binding obligations of
the Company, enforceable in accordance with their terms.
(b) Warrants. Upon payment by Xxxxx Xxxxxx and the Xxxxxxx Xxx
Living Trust of the original principal amount of Convertible
Notes being purchased by them hereunder, each shall be entitled
to receive the Warrants issuable to them as provided in
Section 4.11 below without further cost or consideration and upon
the issuance thereof to them, such Warrants will represent valid
and binding obligations of the Company, enforceable in accordance
with their terms.
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(c) Conversion Shares. Upon exercise in accordance with the
terms of the Convertible Notes, the issuance of the Conversion
Shares shall be duly and validly issued and outstanding, fully
paid and nonassessable, free and clear of any taxes, liens,
claims, encumbrances and charges with respect to issuance and
shall not be subject to preemptive rights or similar rights of
any other stockholders of the Company.
(d) Compliance with Laws. Assuming the representations and
warranties of the Investors herein are true and correct, each of
the Convertible Notes and Warrants will have been issued in
material compliance with all applicable U.S. federal and state
securities laws.
2.6 No Conflicts.
The execution and delivery by the Company of this Agreement
and the Ancillary Agreements to which it is a party did not and
will not, the issuance and sale by the Company of the Convertible
Notes and the Conversion Shares did not and will not and the
consummation of the transactions contemplated hereby and by the
other Ancillary Agreements will not, contravene or constitute a
default under or violation of (i) any provision of applicable law
or regulation, (ii) the Company's Certificate of Incorporation or
Bylaws, (iii) any agreement, judgment, injunction, order, decree
or other instrument binding upon the Company or any subsidiary or
any of their respective assets, or result in the creation or
imposition of any lien on any asset of the Company or any
subsidiary.
2.7 Financial Information and SEC Reports.
During the fiscal year ended August 31, 2001 and for the
current fiscal year ending August 31, 2002, the Company has
timely filed all forms, reports and documents with the Securities
and Exchange Commission (the "Commission") required to be filed
by it under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements
and schedules thereto and documents (other than exhibits)
incorporated by reference therein, being referred to herein
collectively as the "SEC Reports"). Such SEC Reports, at the
time filed, complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of
the Commission thereunder applicable to such SEC Reports. None
of the SEC Reports, including without limitation, any financial
statements or schedules included therein, contains any untrue
statement of a material fact or omits to state a material fact
necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading. The
audited and unaudited consolidated balance sheets of the Company
and its subsidiaries contained in the SEC Reports and the related
consolidated statements of income, changes in stockholders'
equity and changes in cash flows for the periods then ended,
including the footnotes thereto, except as indicated therein, (i)
complied in all material respects with applicable accounting
requirements and the published rules and regulations of the
Commission with respect thereto and (ii) have been prepared in
accordance with GAAP consistently applied throughout the periods
indicated, except that (A) the unaudited financial statements do
not contain notes and may be subject to normal audit adjustments
and normal annual adjustments and (B) as set forth on Section 2.7
of the Disclosure Letter. Such financial statements fairly
present the financial condition of the Company and its
subsidiaries at the dates indicated and the consolidated results
of their operations and cash flows for the periods then ended.
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2.8 Litigation.
Except as set forth in the SEC Reports or on Section 2.8 of
the Disclosure Letter, there is no action, suit or proceeding
pending or, to the knowledge of the Company, threatened against
the Company or any subsidiary, before any court or arbitrator or
any governmental body, agency or official in which there is a
reasonable possibility of an adverse decision which could
materially adversely affect the business, properties, prospects
or financial condition of the Company or which challenges the
validity of this Agreement or any Ancillary Agreements.
2.9 Environmental Matters.
As of the Closing Date, the costs and liabilities associated
with Environmental Laws (as hereinafter defined), if any,
including the cost of compliance therewith, are unlikely to have
a material adverse effect on the business, prospects, properties
or financial condition of the Company. Each of the Company and
its subsidiaries conducts its businesses in compliance in all
material respects with all applicable Environmental Laws. As used
herein, "Environmental Laws" means any and all federal, state,
local and foreign statutes, laws, regulations, ordinances, rules,
judgments, orders, decrees, permits, concessions, grants,
franchises, licenses, agreements or other governmental
restrictions relating to the environment or to emissions,
discharges or releases of pollutants, contaminants, petroleum or
petroleum products, chemicals or industrial, toxic or hazardous
substances or wastes into the environment, including, without
limitation, ambient air, surface water, ground water, or land, or
otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, petroleum or petroleum products,
chemicals or industrial, toxic or hazardous substances or wastes
or the cleanup or other remediation thereof.
2.10 Taxes.
All United States federal, state, county, municipality local
or foreign income tax returns and all other material tax returns
which are required to be filed by or on behalf of the Company and
each subsidiary have been filed and all material taxes due
pursuant to such returns or pursuant to any assessment received
by the Company and each subsidiary have been paid except those
being disputed in good faith and for which adequate reserves have
been established. The charges, accruals and reserves on the books
of the Company and each subsidiary in respect of taxes or other
governmental charges have been established in accordance with
GAAP.
2.11 Subsidiaries.
Other than as set forth in Section 2.11 of the Disclosure
Letter, the Company has no subsidiaries.
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2.12 Not an Investment Company.
Neither the Company nor any subsidiary is an "investment
company" within the meaning of the Investment Company Act of
1940, as amended.
2.13 No Solicitation; No Integration with Other Offerings.
No form of general solicitation or general advertising was
used by the Company or, to the best of its actual knowledge, any
other person acting on behalf of the Company, in connection with
the offer and sale of the Convertible Notes or the Warrants. The
issuance of the Convertible Notes and the Warrants to the
Investors will not be integrated with any other issuance of the
Company's securities (past, current or future).
2.14 Permits.
(a) Each of the Company and its subsidiaries has all
material Permits (as hereinafter defined); (b) all such Permits
are in full force and effect, and each of the Company and its
subsidiaries has fulfilled and performed all material obligations
with respect to such Permits; (c) no event has occurred which
allows, or after notice or lapse of time would allow, revocation
or termination by the issuer thereof or which results in any
other material impairment of the rights of the holder of any such
Permit; and (d) the Company has no reason to believe that any
governmental body or agency is considering limiting, suspending
or revoking any such Permit. As used herein, "Permit" shall mean
all domestic and foreign licenses, franchises, grants,
authorizations, permits, easements, variances, exemptions,
consents, certificates, orders and approvals necessary to own,
lease and operate the properties of, and to carry on the business
of the Company and its subsidiaries.
2.15 Intellectual Property Rights.
Each of the Company and its subsidiaries owns, or is
licensed under, and has the rights to use, all material patents,
trademarks, trade names, copyrights, technology, know-how and
processes (collectively, "Intellectual Property") used in, or
necessary for the conduct of its business; no claims have been
asserted by any person to the use of any such Intellectual
Property or challenging or questioning the validity or
effectiveness of any license or agreement related thereto.
2.16 Insurance.
The Company and its subsidiaries maintain, with financially
sound and reputable insurance companies, insurance in at least
such amounts and against such risks as is considered reasonable
by the Board of Directors thereof. Except as included in
Section 2.16 of the Disclosure Letter, all insurance coverages of
the Company and its subsidiaries are in full force and effect and
there are no past due premiums in respect of any such insurance.
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2.17 Registration Rights; Voting Rights.
Except as provided in the Investors' Rights Agreement, the
Company is presently not under any obligation and has not granted
any rights to register under the Securities Act any of its
presently outstanding securities or any of its securities that
may subsequently be issued. To the Company's knowledge, except as
contemplated in the Voting Agreement, no stockholder of the
Company has entered into any agreement with respect to the voting
of equity securities of the Company.
2.18 Offering.
Assuming the truth and accuracy of each Investors'
representations set forth in this Agreement, the offer, sale and
issuance of the Convertible Notes, the Warrants and Conversion
Shares as contemplated by this Agreement are exempt from the
registration requirements of the Securities Act, and neither the
Company nor any authorized agent acting on its behalf will take
any action hereafter that would cause the loss of such exemption.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS.
Each Investor hereby represents and warrants to the Company
as follows:
3.1 Authorization.
Such Investor has full power and authority to enter into
this Agreement, and that this Agreement, when executed and
delivered, will constitute a valid and legally binding obligation
of such Investor, except for the Enforceability Exceptions.
3.2 Purchase Entirely for Own Account.
This Agreement is made with each Investor in reliance upon
such Investor's representation to the Company, which by such
Investor's execution of this Agreement such Investor hereby
confirms, that the Securities will be acquired for investment for
such Investor's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof,
and that such Investor has no present intention of selling,
granting any participation in, or otherwise distributing the
same. By executing this Agreement, each Investor further
represents that such Investor does not have any contract,
undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third
person, with respect to any of the Securities.
3.3 Reliance upon Investors' Representations.
Each Investor understands that the Convertible Notes and
Warrants are not, and any Conversion Shares acquired on
conversion thereof at the time of issuance will not be,
registered under the Securities Act because the sale provided for
in this Agreement and the issuance of securities hereunder is
exempt from registration under the Securities Act pursuant to
Section 4(2) thereof and/or regulations promulgated thereunder,
and that the Company's reliance on such exemption is predicated
on the Investors' representations set forth herein. Each Investor
realizes that the basis for the exemption may not be present if,
notwithstanding such representations, the Investor has in mind
merely acquiring the Securities for a fixed or determinable
period in the future, or for a market rise, or for sale if the
market does not rise. No Investor has any such intention.
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3.4 Receipt of Information.
Each Investor warrants that such Investor has received all
the information such Investor considers necessary or appropriate
for deciding whether to purchase the Securities. Each Investor
further represents that such Investor has had an opportunity to
ask questions and receive answers from the Company regarding the
terms and conditions of the offering of the Securities and the
business, properties, prospects, and financial condition of the
Company and to obtain additional information (to the extent the
Company possessed such information or could acquire it without
unreasonable effort or expense) necessary to verify the accuracy
of any information furnished to such Investor or to which such
Investor had access. Each Investor acknowledges and agrees that,
while the information provided in the Disclosure Letter forms a
part of the information received by the Investor in deciding
whether to purchase the Securities, it does not represent all of
such information.
3.5 Investment Experience.
Each Investor represents that such Investor is experienced
in evaluating and investing in private placement transactions of
securities of companies in a similar stage of development and
acknowledges that such Investor is able to fend for himself,
herself or itself, can bear the economic risk of such Investor's
investment, and has such knowledge and experience in financial
and business matters that such Investor is capable of evaluating
the merits and risks of the investment in the Securities. If
other than an individual, Investor also represents that such
Investor has not been organized for the purpose of acquiring the
Securities.
3.6 Accredited Investor.
(a) The term "Accredited Investor" as used herein refers to:
(i) A person or entity who is a director or executive officer of
the Company;
(ii) Any bank as defined in Section 3(a)(2) of the Securities
Act, or any savings and loan association or other institution as
defined in Section 3(a)(5)(A) of the Securities Act whether
acting in its individual or fiduciary capacity; any broker or
dealer registered pursuant to Section 15 of the Exchange Act; any
insurance company as defined in Section 2(13) of the Securities
Act; any investment company registered under the Investment
Company Act of 1940 or a business development company as defined
in Section 2(a)(48) of that Act; any Small Business Investment
Company licensed by the U.S. Small Business Administration under
Section 301(c) or (d) of the Small Business Investment Act of
1958; any plan established and maintained by a state, its
political subdivisions, or any agency or instrumentality of a
state or its political subdivisions, for the benefit of its
employees, if such plan has total assets in excess of $5,000,000;
any employee benefit plan within the meaning of Title I of the
Employee Retirement Income Security Act of 1974, if the
investment decision is made by a plan fiduciary, as defined in
Section 3(21) of such Act, which is either a bank, savings and
loan association, insurance company, or registered investment
adviser, or if the employee benefit plan has total as-sets in
excess of $5,000,000 or, if a self-directed plan, with investment
decisions made solely by persons that are accredited investors;
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(iii) Any private business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940;
(iv) Any organization described in Section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or similar
business trust, or partnership, not formed for the specific
purpose of acquiring the securities offered, with total assets in
excess of $5,000,000;
(v) Any natural person whose individual net worth, or joint
net worth with that person's spouse, at the time of the purchase
exceeds $1,000,000;
(vi) Any natural person who had an individual income in excess
of $200,000 in each of the two most recent years or joint income
with that person's spouse in excess of $300,000 in each of those
years and has a reasonable expectation of reaching the same
income level in the current year;
(vii) Any trust, with total assets in excess of $5,000,000,
not formed for the specific purpose of acquiring the securities
offered, whose purchase is directed by a person who has such
knowledge and experience in financial and business matters that
he or she is capable of evaluating the merits and risks of the
prospective investment; or
(viii) Any entity in which all of the equity owners are
accredited investors.
As used in this Paragraph 3.6(a), the term "net worth"
means the excess of total assets over total liabilities. For
the purpose of determining a person's net worth, the
principal residence owned by an individual should be valued
at fair market value, including the cost of improvements,
net of current encumbrances. As used in this Paragraph
3.6(a), "income" means actual economic income, which may
differ from adjusted gross income for income tax purposes.
Accordingly, each Investor should consider whether such
Investor should add any or all of the following items to
such Investor's adjusted gross income for income tax
purposes in order to reflect more accurately such Investor's
actual economic income: any amounts attributable to tax-
exempt income received, losses claimed as a limited partner
in any limited partnership, deductions claimed for
depletion, contributions to an XXX or Xxxxx retirement plan,
and alimony payments.
(b) Each Investor, as to such Investor severally and not
jointly, further represents to the Company that, prior to such
Investor's execution hereof, such Investor is an Accredited
Investor.
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3.7 Restricted Securities.
Each Investor understands that the Securities may not be
sold, transferred, or otherwise disposed of without registration
under the Securities Act or an exemption therefrom, and that in
the absence of an effective registration statement covering the
Securities or an available exemption from registration under the
Securities Act, the Securities must be held indefinitely. In
particular, each Investor is aware that the Securities may not be
sold pursuant to Rule 144 promulgated under the Securities Act
unless all of the conditions of that Rule are met.
3.8 Legends.
To the extent applicable, each certificate or other document
evidencing any of the Securities shall be endorsed with the
legends substantially in the form set forth below:
(a) The following legend under the Securities Act:
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED, OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER SUCH ACT, OR UNLESS
THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL OR OTHER EVIDENCE, SATISFACTORY TO
THE COMPANY AND ITS COUNSEL, THAT SUCH
REGISTRATION IS NOT REQUIRED."
(b) Any legend imposed or required by the Company's Bylaws or
applicable state securities laws.
3.9 Context.
Each Investor acknowledges and is aware of the following:
(a) An investment in the Company involves a high degree of risk.
(b) The Company has disclosed a number of important matters on
the Disclosure Letter (and elsewhere), all of which have been
read and understood by the Investor prior to making a decision to
invest in the Securities.
(c) Neither the Company, its officers, directors, agents or
employees, nor any other person, has represented, guaranteed or
warranted to Investor, expressly or by implication, any of the
following:
* The amount of any profit or loss to be realized as
a result of an investment in the Company;
* The likelihood that the Company can achieve
improved operating performance;
* The likelihood that there will be a public market
for the Conversion Shares at any point in the
future;
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* Whether or not the Company will need to obtain
additional financing after the Closing (and if it
does, whether or not such additional financing
will be available to the Company); or
* Whether or not the Company can continue as a going
concern after the Closing.
4. CONDITIONS OF INVESTORS' OBLIGATIONS AT CLOSING.
The obligations of each Investor under this Agreement are
subject to the fulfillment on or before the Closing of each of
the following conditions, the waiver of which shall not be
effective against any Investor who does not consent in writing
thereto:
4.1 Representations and Warranties.
The representations and warranties of the Company contained
in Section 2 shall be true on and as of the Closing with the same
effect as though such representations and warranties had been
made on and as of the date of the Closing.
4.2 Performance.
The Company shall have performed and complied with all
agreements, obligations, and conditions contained in this
Agreement that are required to be performed or complied with by
it on or before the Closing.
4.3 Qualifications.
All authorizations, approvals, or permits, if any, of any
governmental authority or regulatory body of the United States or
of any state that are required in connection with the lawful
issuance and sale of the Convertible Notes and Warrants pursuant
to this Agreement shall be duly obtained and effective as of the
Closing.
4.4 Proceedings and Documents.
All corporate and other proceedings in connection with the
transactions contemplated at the Closing shall be completed, and
all documents incident thereto shall be reasonably satisfactory
in form and substance to the Investors, which shall have received
all such counterpart original and certified or other copies of
such documents as they may reasonably request.
4.5 Board of Directors.
Effective as of the Closing, the directors of the Company
shall be Xxxxxxx X. Xxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxx Xxxxxx,
Xxxxx Upfield, Xxxxx Upfield and Xxxxxxx X. Xxxxxx.
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4.6 Investors' Rights Agreement.
The Company and each Investor shall have entered into the
Investors' Rights Agreement in the form attached hereto as
Exhibit C.
4.7 Voting Agreement.
The Company, each Investor and Xxxxx Upfield shall have
entered into the Voting Agreement in the form attached hereto as
Exhibit D.
4.8 Options.
The Company and Xxxxxxx Xxxxxxxx shall have entered into
that Stock Option Agreement attached as Exhibit E hereto (the
"Xxxxxxxx Option") which such Xxxxxxxx Option shall grant to
Xxxxxxx Xxxxxxxx the right and option to acquire up to 500,000
shares of Common Stock of the Company on the terms and conditions
noted therein.
4.9 Xxxxxxxx Services Agreement
The Company and Xxxxxxx X. Xxxxxxxx shall have entered into
that Services Agreement attached as Exhibit F hereto (the
"Xxxxxxxx Agreement") which such Xxxxxxxx Agreement shall provide
that Xxxxxxx X. Xxxxxxxx shall be engaged by the Company as
Chairman of the Board of the Company immediately after the
Closing at an annual base salary of $120,000 and such other terms
and conditions as contained therein.
4.10 Xxxxxxxx Employment Agreement
The Company and Xxxxxxx Xxxxxxxx shall have entered into
that Employment Contract attached as Exhibit H hereto (the
"Xxxxxxxx Agreement") which such Xxxxxxxx Agreement shall provide
that Xxxxxxx Xxxxxxxx shall be employed by the Company as
President and Chief Executive Officer of the Company immediately
after the Closing at an annual base salary of $240,000 and such
other terms and conditions as contained therein.
4.11 Warrants
The Company shall have issued to each of Xxxxx Xxxxxx and
the Xxxxxxx Xxx Living Trust a Warrant to purchase 51,370 shares
of Common Stock of the Company and a Warrant to Xxxxxxx X.
Xxxxxxxx to purchase 147,260 shares of Common Stock of the
Company (a form of such Warrant being attached hereto as
Exhibit H), on the terms and conditions specified therein.
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5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING.
The obligations of the Company to each Investor under this
Agreement are subject to the fulfillment on or before the Closing
of each of the following conditions by that Investor:
5.1 Representations and Warranties.
The representations and warranties of each Investor
contained in Section 3 shall be true on and as of the Closing
with the same effect as though such representations and
warranties had been made on and as of the date of the Closing.
5.2 Qualifications.
All authorizations, approvals, or permits, if any, of any
governmental authority or regulatory body of the United States or
of any state that are required in connection with the lawful
issuance and sale of the Convertible Notes and the Warrants
pursuant to this Agreement shall be duly obtained and effective
as of the Closing.
5.3 Subordination Agreement.
The Investors shall have entered into a Subordination
Agreement in form and substance satisfactory to the Company's
senior lenders.
6. COVENANTS.
Until such time as the Convertible Notes have been
completely repaid or converted:
6.1 Reserved 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 conversion in full of the
Convertible Notes and the issuance of the Conversion Shares
thereunder.
6.2 Restrictions on Certain Amendments.
The Company will not, without the prior written consent of a
Majority of the Investors, amend the rights and privileges
granted under the Convertible Notes, to adversely affect the
rights or privileges granted under the Convertible Notes.
6.3 Restricted Payment.
The Company shall not make any Restricted Payment. As used
herein "Restricted Payments" means (a) any direct or indirect
payment of any distribution or dividend (other than a stock
dividend) or (b) any management, consulting or other similar
fees, or any interest thereon payable to any person other than an
unrelated third party; provided, however, that Restricted
Payments shall not include any arms length consulting agreements
with consultants of the Company which are approved by the Board
of Directors of the Company.
-13-
6.4 Amendment of Organizational Documents.
The Company shall not permit any amendment to its
Certificate of Incorporation so as to adversely affect the rights
or privileges granted under the Convertible Notes.
6.5 Stock Option Plan
The Company agrees that, as soon as practicable following
the Closing, it will use its best efforts to effect an increase
in the number of shares of Common Stock issuable under the
Company's 1999 Omnibus Securities Plan (the "Plan") by 250,000
shares, such number of shares to be used to support additional
stock option grants to be made to key employees of the Company
and other eligible optionees specified in the Plan. Further, the
Company agrees to take all action necessary or advisable to amend
the Company's Registration Statement on Form S-8 relating to the
Plan (the "Amendment to the S-8") to add such additional 250,000
shares of Common Stock.
6.6 Inclusion of Management Options in Amendment to the S-8.
The Company agrees that, at the time it files the Amendment
to the S-8, it shall use its best efforts to include in such
Amendment, registration of the shares issuable under the Xxxxxxxx
Option and the Xxxxxxxx Option.
7. MISCELLANEOUS.
7.1 Entire Agreement.
This Agreement and the Ancillary Agreements constitute the
entire agreement among the parties and no party shall be liable
or bound to any other party in any manner by any warranties,
representations, or covenants, except as specifically set forth
herein or therein.
7.2 Survival of Warranties.
The warranties, representations, and covenants of the
Company and the Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this
Agreement and the Closing.
7.3 Successors and Assigns.
Except as otherwise provided herein, the terms and
conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties
(including permitted transferees of any Convertible Note and
Warrants sold hereunder or any Conversion Shares issued upon
conversion thereof). Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the
parties hereto or their respective successors and assigns any
rights, remedies, obligations, or liabilities under or by reason
of this Agreement, except as expressly provided in this
Agreement.
7.4 Governing Law.
This Agreement shall be governed by and construed under the
laws of the State of Delaware except for the conflicts of laws
provisions thereof.
-14-
7.5 Counterparts.
This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.6 Titles and Subtitles.
The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or
interpreting this Agreement.
7.7 Notices.
Unless otherwise provided, all notices and other
communications required or permitted under this Agreement shall
be in writing and shall be mailed by United States first-class
mail, postage prepaid, sent by facsimile or delivered personally
by hand or by a nationally recognized courier addressed to the
party to be notified at the address or facsimile number indicated
for such person on the signature page hereof, or at such other
address or facsimile number as such party may designate by ten
(10) days' advance written notice to the other parties hereto.
All such notices and other written communications shall be
effective on the date of mailing, confirmed facsimile transfer or
delivery.
7.8 Finder's Fees.
Each of the parties hereto represents that it neither is nor
will be obligated for any finder's fee or commission in
connection with this transaction, except to the extent set forth
in the Disclosure Letter. Each Investor agrees to indemnify and
to hold harmless the Company from any liability for any
commission or compensation in the nature of a finder's fee (and
the cost and expenses of defending against such liability or
asserted liability) for which the Investor or any of its
officers, partners, employees, or representatives is responsible.
The Company agrees to indemnify and hold harmless each Investor
from any liability for any commission or compensation in the
nature of a finder's fee (and the costs and expenses of defending
against such liability or asserted liability) for which the
Company or any of its officers, employees, or representatives is
responsible, other than for any finder's fee referenced in the
Disclosure Letter.
7.9 Expenses.
Irrespective of whether the Closing is effected, the Company
shall pay all its costs and expenses incurred with respect to the
negotiation, execution, delivery, and performance of this
Agreement and the Ancillary Agreements and the Investors shall
pay all their costs and expenses incurred with respect to the
negotiation, execution, delivery, and performance of this
Agreement and the Ancillary Agreements.
7.10 Attorneys' Fees.
If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the Investors' Rights
Agreement, the Voting Agreement, any Ancillary Agreement or the
Convertible Notes, the prevailing party shall be entitled to
reasonable attorneys' fees, costs, and disbursements in addition
to any other relief to which such party may be entitled.
-15-
7.11 Amendments and Waivers.
Any term of this Agreement may be amended and the observance
of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and
a Majority of the Investors. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder
of any securities purchased under this Agreement at the time
outstanding (including securities into which such securities have
been converted), each future holder of all such securities, and
the Company.
7.12 Severability.
If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement
shall be interpreted as if such provision were so excluded and
shall be enforceable in accordance with its terms.
7.13 Exculpation Among Investors.
Each Investor acknowledges that such Investor is not relying
upon any person, firm, or corporation, other than the Company, in
making its investment or decision to invest in the Company. Each
Investor agrees that no Investor nor the respective controlling
persons, officers, directors, partners, agents, or employees of
any Investor shall be liable for any action heretofore or
hereafter taken or omitted to be taken by any of them in
connection with the Securities.
7.14 Tax Advice and Related Matters
Notwithstanding any provision to the contrary contained
herein or any agreements, understandings or negotiations prior to
the date hereof, each Investor acknowledges and agrees that no
representation or warranty has been made to any Investor by the
Company, or any of its officers, employees, agents, accountants
or attorneys with respect to any Federal, state or other tax
consequences, or any usury laws, with respect to the transactions
contemplated by this Agreement and that each Investor has relied
exclusively on his independent counsel and tax advisors for all
tax advice in connection herewith and therewith, and each
Investor assumes all risks with respect thereto.
-16-
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
TEMTEX INDUSTRIES, INC.
By:_____________________________
Name:___________________________
Title:__________________________
Address: 0000 XXX Xxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000-0000
INVESTORS:
XXXXXXX X. XXXXXXXX
-----------------------------------
Address: 000 Xxxxxx Xxxxxxxxx
Xxxxx Xxx Xxxxxxxxx, XX 00000-
2019
XXXXXXX XXX LIVING TRUST
By: Xxxxxxx Xxx, as Sole Trustee
-----------------------------------
Address: 000 Xxxxxx Xxxxxxxxx
Xxxxx Xxx Xxxxxxxxx, XX
00000-0000
XXXXXXX XXXXXXXX
-----------------------------------
Address: 00 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
XXXXX XXXXXX
-----------------------------------
Address: 0000 Xxxxxxx Xxxxx
Xxxxxx Xxx Xxx, Xxxxxxxxxx 00000
-17-
Exhibit Index
-------------
Exhibit A - Investor List
Exhibit B - Form of Convertible Note
Exhibit C - Form of Investors' Rights Agreement
Exhibit D - Form of Voting Agreement
Exhibit E - Form of Xxxxxxxx Option
Exhibit F - Form of Xxxxxxxx Services Agreement
Exhibit G - Form of Xxxxxxxx Employment Agreement
Exhibit H - Form of Warrant
-18-
EXHIBIT A
to
Note Purchase Agreement
==============================================================
Investor Name Principal Amount
of Note
-------------------------------- ----------------
1. Xxxxxxx X. Xxxxxxxx $430,000
2. The Xxxxxxx Xxx Living Trust $150,000
3. Xxxxxxx Xxxxxxxx $ 20,000
4. Xxxxx Xxxxxx $150,000
----------------
TOTAL $750,000
