Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of
November 15, 1999, by and between XXXX.XXX, INC., a Georgia corporation, (the
"COMPANY"), and FUSION CAPITAL FUND I, LLC (together with its assigns, the
"BUYER").
WHEREAS:
A. The Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D ("REGULATION D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 ACT");
B. Subject to the terms and conditions set forth herein, the Company
has authorized the issuance and sale to the Buyer of up to two 0% Senior Secured
Convertible Debentures (each a "DEBENTURE" and collectively the "DEBENTURES"),
substantially in the form attached hereto as EXHIBIT A, with each Debenture
having an aggregate principal amount of Six Million Dollars ($6,000,000) and
each Debenture shall be convertible into shares of the Company's Common Stock,
par value $.01 per share (the "COMMON STOCK") (as converted, the "CONVERSION
SHARES"), in accordance with the terms of each Debenture; and
C. The Buyer wishes to purchase from the Company, upon the terms and
conditions stated in this Agreement, the Debentures.
NOW THEREFORE, the Company and the Buyer hereby agree as follows:
1. PURCHASE AND SALE OF DEBENTURES.
a. PURCHASE OF DEBENTURES. Subject to the satisfaction (or
waiver) of the conditions set forth in Sections 6 and 7 below: (i) the sale and
purchase of the first Debenture to be sold and purchased under this Agreement
(the "FIRST DEBENTURE") shall take place within five (5) Trading Days (as
defined in the last sentence of this Section 1(a)) of the date that the
Registration Statement on Form S-3 referred to in the first sentence of Section
4(a) hereof is declared effective under the 1933 Act by the SEC (the "FIRST
CLOSING"); and (ii) the sale and purchase of the second Debenture to be sold and
purchased under this Agreement (the "SECOND DEBENTURE") shall take place within
five (5) Trading Days of the date that the Registration Statement on Form S-3
referred to in the second sentence of Section 4(a) hereof is declared effective
under the 1933 Act by the SEC (the "SECOND CLOSING"), in each case, the Company
shall issue and sell to the Buyer and the Buyer agrees to purchase from the
Company the respective Debenture (each such purchase and sale of a Debenture, a
"CLOSING"). The purchase price (the "PURCHASE PRICE") of each Debenture at the
Closing shall be Six Million Dollars ($6,000,000), its original aggregate
principal amount. It is agreed and acknowledged by the parties hereto that the
sale and purchase of the Second Debenture shall be at the option of the Company
in its sole discretion until such time has the Company shall have delivered an
irrevocable written notice (the "SECOND CLOSING NOTICE") to the Buyer stating
that the Company
elects to sell to the Buyer the Second Debenture under the terms and conditions
provided herein. The Company agrees that without the consent of the Buyer, the
Company shall deliver a Second Closing Notice to the Buyer no earlier than the
sooner to occur of: (i) 30 days prior to the Maturity Date (as defined in the
First Debenture) or (ii) such time as the First Debenture has been issued
pursuant to this Agreement and the First Debenture is no longer outstanding.
Upon delivery of the Second Closing Notice to the Buyer, subject to the
satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below,
the Company shall be obligated to issue and to sell to the Buyer, and the Buyer
shall be obligated to purchase from the Company for the Purchase Price, the
Second Debenture. For purposes of this Agreement, "TRADING DAY" shall mean any
day on which the Principal Market (as defined in Section 4(d) hereof) is open
for customary trading.
b. CLOSING DATES. The date of each Closing (each a "CLOSING
DATE") shall be within five (5) Trading Days following the date of satisfaction
(or waiver) of the conditions to the Closing set forth in Sections 6 and 7 below
(or such later date as is mutually agreed to by the Company and the Buyer) with
respect to the Closing of each Debenture.
c. FORM OF PAYMENT. On each Closing Date, (i) the Buyer shall
pay the Purchase Price for the respective Debenture to be issued and sold to the
Buyer at such Closing to the Collateral Agent pursuant to a Pledge and Security
Agreement substantially in the form attached hereto as EXHIBIT B, and (ii) the
Company shall deliver to the Buyer the Debenture which the Buyer is then
purchasing hereunder, duly executed on behalf of the Company and registered in
the name of the Buyer or its designee.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
The Buyer represents and warrants to the Company that:
a. INVESTMENT PURPOSE. The Buyer (i) is acquiring the
Debentures and the Commitment Shares (as defined in Section 7(b)) (collectively
referred to herein as the "SECURITIES"), for its own account for investment only
and not with a view towards, or for resale in connection with, the public sale
or distribution thereof; provided however, by making the representations herein,
the Buyer does not agree to hold any of the Securities for any minimum or other
specific term.
b. ACCREDITED INVESTOR STATUS. The Buyer is an "accredited
investor" as that term is defined in Rule 501(a)(3) of Regulation D.
c. RELIANCE ON EXEMPTIONS. The Buyer 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 in part upon the truth and accuracy of, and
the Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Securities.
d. INFORMATION. The Buyer has been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Securities which have been
requested by the Buyer. The Buyer understands that its investment in the
Securities involves a high degree of risk. The Buyer (i) is able to bear the
economic risk of an investment in the Securities including a total loss, (ii)
has such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of the proposed investment in the
Securities, and (iii) has had an opportunity to ask questions of and receive
answers from the officers of the Company concerning the financial condition and
business of the Company and others matters related to an investment in the
Securities. Neither such inquiries nor any other due diligence investigations
conducted by the Buyer or its representatives shall modify, amend or affect the
Buyer's right to rely on the Company's representations and warranties contained
in Section 3 below. The Buyer has sought such accounting, legal and tax advice
as it has considered necessary to make an informed investment decision with
respect to its acquisition of the Securities.
e. NO GOVERNMENTAL REVIEW. The Buyer understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Securities
or the fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
f. TRANSFER OR RESALE. The Buyer understands that except as
provided in the Registration Rights Agreement (as defined in Section 6(a)
hereof): (i) the Securities have not been and are not being registered under the
1933 Act or any state securities laws, and may not be offered for sale, sold,
assigned or transferred unless (A) subsequently registered thereunder or (B) an
exemption exists permitting such Securities to be sold, assigned or transferred
without such registration; (ii) any sale of the Securities made in reliance on
Rule 144 may be made only in accordance with the terms of Rule 144 and further,
if Rule 144 is not applicable, any resale of the Securities under circumstances
in which the seller (or the person through whom the sale is made) may be deemed
to be an underwriter (as that term is defined in the 0000 Xxx) may require
compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder.
g. VALIDITY; ENFORCEMENT. This Agreement has been duly and
validly authorized, executed and delivered on behalf of the Buyer and is a valid
and binding agreement of the Buyer enforceable against the Buyer in accordance
with its terms, subject as to enforceability to general principles of equity and
to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
and other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
h. RESIDENCY. The Buyer is a resident of the State of
Illinois.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Buyer that:
a. ORGANIZATION AND QUALIFICATION. The Company and its
"SUBSIDIARIES" (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns 50% or more of the voting stock or
capital stock or other similar equity interests) are corporations duly organized
and validly existing in good standing under the laws of the jurisdiction in
which they are incorporated, and have the requisite corporate power and
authorization to own their properties and to carry on their business as now
being conducted. Each of the Company and its Subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which its ownership of property or the nature of the business conducted by it
makes such qualification necessary, except to the extent that the failure to be
so qualified or be in good standing could not reasonably be expected to have a
Material Adverse Effect. As used in this Agreement, "MATERIAL ADVERSE EFFECT"
means any material adverse effect on any of: (i) the business, properties,
assets, operations, results or operations or financial condition of the Company
and its Subsidiaries, if any, taken as a whole, (ii) the value of the Common
Stock or the value of, or security for, any Debenture, (iii) on the transactions
contemplated hereby or by the agreements and instruments to be entered into in
connection herewith or (iv) on the authority or ability of the Company to
perform its obligations under the Transaction Documents (as defined in Section
2(b) hereof). The Company has no Subsidiaries except as set forth on SCHEDULE
3(a).
b. AUTHORIZATION; ENFORCEMENT; VALIDITY. (i) The Company has
the requisite corporate power and authority to enter into and perform this
Agreement, the Debentures, the Registration Rights Agreements, the Pledge and
Security Agreements (each as defined in Section 6(a) hereof) and each of the
other agreements entered into by the parties hereto in connection with the
transactions contemplated by this Agreement (collectively, the "TRANSACTION
DOCUMENTS"), and to issue the Securities in accordance with the terms hereof and
thereof, (ii) the execution and delivery of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated hereby and
thereby, including without limitation the issuance of the Debentures and the
Commitment Shares and the reservation for issuance and the issuance of the
Conversion Shares issuable upon conversion of the Debentures, have been duly
authorized by the Company's Board of Directors and no further consent or
authorization is required by the Company, its Board of Directors or its
shareholders, (iii) this Agreement has been, and each other Transaction Document
shall be at its respective Closing, duly executed and delivered by the Company,
and (iv) this Agreement constitutes, and each other Transaction Document shall
constitute as of its respective Closing, the valid and binding obligations of
the Company enforceable against the Company in accordance with their terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of creditors'
rights and remedies.
c. CAPITALIZATION. As of the date hereof, the authorized
capital stock of the Company consists of (i) 20,000,000 shares of Common Stock,
of which as of the date hereof, 4,825,736 shares are issued and outstanding,
574,845 are held as treasury shares, 3,000,000 shares are reserved for issuance
pursuant to the Company's stock option plan and 75,000 shares are issuable and
reserved for issuance pursuant to securities (other than the Debentures or stock
options issued pursuant to the Company's stock option plan) exercisable or
exchangeable for, or
convertible into, shares of Common Stock, and (ii) 10,000,000 shares of
preferred stock of which as of the date hereof no shares are issued and
outstanding. All of such outstanding shares have been, or upon issuance will be,
validly issued and are fully paid and nonassessable. Except as disclosed in
SCHEDULE 3(c), (i) no shares of the Company's capital stock are subject to
preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company, (ii) there are no outstanding debt
securities, (iii) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries, (iv) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any of
their securities under the 1933 Act (except the Registration Rights Agreement),
(v) there are no outstanding securities or instruments of the Company or any of
its Subsidiaries which contain any redemption or similar provisions, and there
are no contracts, commitments, understandings or arrangements by which the
Company or any of its Subsidiaries is or may become bound to redeem a security
of the Company or any of its Subsidiaries, (vi) there are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the Securities as described in this Agreement, and
(vii) the Company does not have any stock appreciation rights or "phantom stock"
plans or agreements or any similar plan or agreement. The Company has furnished
to the Buyer true and correct copies of the Company's Articles of Incorporation,
as amended and as in effect on the date hereof (the "ARTICLES OF
INCORPORATION"), and the Company's By-laws, as amended and as in effect on the
date hereof (the "BY-LAWS"), and the terms of all securities convertible into or
exercisable for Common Stock, if any, and the material rights of the holders
thereof in respect thereto.
d. ISSUANCE OF SECURITIES. The Securities have been duly
authorized and, upon issuance in accordance with the terms hereof, shall be (i)
validly issued, fully paid and non-assessable, and (ii) free from all taxes,
liens and charges with respect to the issue thereof. 750,000 shares of Common
Stock have been duly authorized and reserved for issuance upon conversion of
each Debenture. Upon conversion in accordance with the terms and conditions of
the Debentures, the Conversion Shares will be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, with the holders being entitled to all rights accorded to a
holder of Common Stock. The issuance by the Company of the Securities is exempt
from registration under the 1933 Act pursuant to Regulation D.
e. NO CONFLICTS. Except as disclosed in SCHEDULE 3(e), the
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby and
thereby (including, without limitation, the reservation for issuance and
issuance of the Conversion Shares) will not (i) result in a violation of the
Articles of Incorporation, any Certificate of Designations, Preferences and
Rights of any outstanding series of preferred stock of the Company or the
By-laws or (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or
cancellation of, any material agreement, indenture or instrument to which the
Company or any of its Subsidiaries is a party, or result in a violation of any
law, rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations and the rules and regulations of the Principal
Market applicable to the Company or any of its Subsidiaries or by which any
property or asset of the Company or any of its Subsidiaries is bound or
affected. Except as disclosed in SCHEDULE 3(e), neither the Company nor its
Subsidiaries is in violation of any term of or in default under its Articles of
Incorporation, any Certificate of Designation, Preferences and Rights of any
outstanding series of preferred stock of the Company or By-laws or their
organizational charter or by-laws, respectively. Except as disclosed in SCHEDULE
3(e), neither the Company or any of its Subsidiaries is in violation of any term
of or in default under any material contract, agreement, mortgage, indebtedness,
indenture, instrument, judgment, decree or order or any statute, rule or
regulation applicable to the Company or its Subsidiaries, except for possible
conflicts, defaults, terminations, amendments which could not reasonably be
expected to have a Material Adverse Effect. The business of the Company and its
Subsidiaries is not being conducted, and shall not be conducted, in violation of
any law, ordinance, regulation of any governmental entity, except for possible
violations the sanctions for which either individually or in the aggregate could
not reasonably be expected to have a Material Adverse Effect. Except as
specifically contemplated by this Agreement and as required under the 1933 Act,
the Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency or any
regulatory or self-regulatory agency in order for it to execute, deliver or
perform any of its obligations under or contemplated by the Transaction
Documents in accordance with the terms hereof or thereof. Except as disclosed in
SCHEDULE 3(e), all consents, authorizations, orders, filings and registrations
which the Company is required to obtain pursuant to the preceding sentence have
been obtained or effected on or prior to the date hereof. The Company is not and
has not been since January 1, 1998, in violation of the listing requirements of
the Principal Market.
f. SEC DOCUMENTS; FINANCIAL STATEMENTS. Since January 1, 1998,
the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 ACT")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the "SEC
DOCUMENTS"). As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
g. ABSENCE OF CERTAIN CHANGES. Except as disclosed in SCHEDULE
3(g), since April 1, 1999, there has been no material adverse change in the
business, properties, operations, financial condition or results of operations
of the Company or its Subsidiaries. The Company has not taken any steps, and
does not currently expect to take any steps, to seek protection pursuant to any
bankruptcy law nor does the Company or any of its Subsidiaries have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings.
h. ABSENCE OF LITIGATION. There is no action, suit,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened against or
affecting the Company, the Common Stock or any of the Company's Subsidiaries or
any of the Company's or the Company's Subsidiaries' officers or directors in
their capacities as such, which could reasonably be expected to have a Material
Adverse Effect. A description of each action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body which, as of the date of this Agreement, is
pending or threatened in writing against or affecting the Company, the Common
Stock or any of the Company's Subsidiaries or any of the Company's or the
Company's Subsidiaries' officers or directors in their capacities as such, is
set forth in SCHEDULE 3(h).
i. ACKNOWLEDGMENT REGARDING BUYER'S PURCHASE OF THE
SECURITIES. The Company acknowledges and agrees that the Buyer is acting solely
in the capacity of arm's length purchaser with respect to the Transaction
Documents and the transactions contemplated hereby and thereby. The Company
further acknowledges that the Buyer is not acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated hereby and thereby and
any advice given by the Buyer or any of its representatives or agents in
connection with the Transaction Documents and the transactions contemplated
hereby and thereby is merely incidental to the Buyer's purchase of the
Securities. The Company further represents to the Buyer that the Company's
decision to enter into the Transaction Documents has been based solely on the
independent evaluation by the Company and its representatives and advisors.
j. NO GENERAL SOLICITATION. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 0000 Xxx) in connection with the offer or sale of the
Securities.
k. NO INTEGRATED OFFERING. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of the Securities to be
integrated with prior offerings by the Company for purposes of the 1933 Act or
any applicable shareholder approval provisions, including, without limitation,
under the rules and regulations of
any exchange or automated quotation system on which any of the securities of the
Company are listed or designated, nor will the Company or any of its
Subsidiaries take any action or steps that would require registration of any of
the Securities under the 1933 Act or cause the offering of the Securities to be
integrated with other offerings.
l. DILUTIVE EFFECT. The Company understands and acknowledges
that the number of Conversion Shares issuable upon conversion of the Debentures
will increase in certain circumstances. The Company further acknowledges that
its obligation to issue Conversion Shares upon conversion of the Debentures in
accordance with this Agreement and the Debentures is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interests of other shareholders of the Company.
m. INTELLECTUAL PROPERTY RIGHTS. The Company and its
Subsidiaries own or possess adequate rights or licenses to use all material
trademarks, trade names, service marks, service xxxx registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and rights necessary to conduct their
respective businesses as now conducted. Except as set forth on SCHEDULE 3(m),
none of the Company's material trademarks, trade names, service marks, service
xxxx registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, government authorizations, trade secrets or
other intellectual property rights have expired or terminated, or, by the terms
and conditions thereof, could expire or terminate within two years from the date
of this Agreement. The Company and its Subsidiaries do not have any knowledge of
any infringement by the Company or its Subsidiaries of any material trademark,
trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service xxxx registrations, trade secret or other
similar rights of others, or of any such development of similar or identical
trade secrets or technical information by others and, except as set forth on
SCHEDULE 3(M), there is no material claim, action or proceeding being made or
brought against, or to the Company's knowledge, being threatened against, the
Company or its Subsidiaries regarding trademark, trade name, patents, patent
rights, invention, copyright, license, service names, service marks, service
xxxx registrations, trade secret or other infringement.
n. ENVIRONMENTAL LAWS. The Company and its Subsidiaries (i)
are in compliance with any and all applicable foreign, federal, state and local
laws and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where, in each of the
three foregoing clauses, the failure to so comply could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
o. TITLE. The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in SCHEDULE 3(o) or such
as do not materially affect the value of such property and do not interfere with
the use made and proposed to be made of such property by the Company and any of
its Subsidiaries. Any real
property and facilities held under lease by the Company and any of its
Subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
Subsidiaries.
p. INSURANCE. The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary has been
refused any insurance coverage sought or applied for and neither the Company nor
any such Subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the Company
and its Subsidiaries, taken as a whole.
q. REGULATORY PERMITS. The Company and its Subsidiaries
possess all material certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities necessary to
conduct their respective businesses, and neither the Company nor any such
Subsidiary has received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit.
r. TAX STATUS. The Company and each of its Subsidiaries has
made or filed all federal and state income and all other material tax returns,
reports and declarations required by any jurisdiction to which it is subject
(unless and only to the extent that the Company and each of its Subsidiaries has
set aside on its books provisions reasonably adequate for the payment of all
unpaid and unreported taxes) and has paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith and has set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company know of no basis for any such claim.
s. TRANSACTIONS WITH AFFILIATES. Except as set forth on
SCHEDULE 3(s) and other than the grant or exercise of stock options disclosed on
SCHEDULE 3(c), none of the officers, directors, or employees of the Company is
presently a party to any transaction with the Company or any of its Subsidiaries
(other than for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any corporation, partnership,
trust or other entity in which any officer, director, or any such employee has
an interest or is an officer, director, trustee or partner.
t. APPLICATION OF TAKEOVER PROTECTIONS. The Company and its
board of directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights
agreement) or other similar anti-takeover provision under the Articles of
Incorporation or the laws of the state of its incorporation which is or could
become applicable to the Buyer as a result of the transactions contemplated by
this Agreement, including, without limitation, the Company's issuance of the
Securities and the Buyer's ownership of the Securities.
u. RIGHTS AGREEMENT. The Company has not adopted a shareholder
rights plan or similar arrangement relating to accumulations of beneficial
ownership of Common Stock or a change in control of the Company.
v. FOREIGN CORRUPT PRACTICES. Neither the Company, nor any of
its Subsidiaries, nor any director, officer, agent, employee or other person
acting on behalf of the Company or any of its Subsidiaries has, in the course of
its actions for, or on behalf of, the Company, used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or made any unlawful bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
4. COVENANTS.
a. FILING REGISTRATION STATEMENTS. The Company shall within
seven (7) Trading Days from the date hereof file a Registration Statement on
Form S-3 covering only the resale of at least 750,000 Conversion Shares
underlying the First Debenture and the resale of 78,000 First Closing Commitment
Shares (as defined in Section 7(b)). The Company shall also within ten (10)
Trading Days from the date of the delivery to the Buyer of the Second Closing
Notice file a Registration Statement on Form S-3 covering only the resale of a
reasonable estimate of the number of Conversion Shares underlying the Second
Debenture and a reasonable estimate of the number of Second Closing Commitment
Shares (as defined in Section 7(b)). For each such Registration Statement, the
Company shall also include an indeterminate number of registrable securities
pursuant to Rule 416 under the 1933 Act so as to cover any and all securities
which may become issuable to prevent dilution resulting from stock splits, stock
dividends or similar transactions. The Buyer and its counsel shall have a
reasonable opportunity to review and comment upon each such registration
statement and any related prospectus prior to its filing with the SEC. The
Company shall use its reasonable best efforts to have such registration
statements declared effective by the SEC at the earliest possible date.
b. FORM D AND BLUE SKY. The Company agrees to file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof to the Buyer promptly after such filing. The Company shall, on or
before each Closing Date, take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for or to qualify the
Securities for sale to the Buyer at each Closing pursuant to this Agreement
under applicable securities or "Blue Sky" laws of the states of the United
States, and shall provide evidence of any such action so taken to the Buyer on
or prior to each Closing Date. The Company shall make all filings and reports
relating the offer and sale of the Securities required under applicable
securities or "Blue Sky" laws of the states of the United States following each
Closing Date.
c. NO VARIABLE PRICED FINANCING. Other than pursuant to this
Agreement, the Company agrees that beginning on the date of this Agreement and
ending on the date of termination of this Agreement as provided in Section 9(k),
and so long as any Debenture is outstanding, neither the Company nor any of its
Subsidiaries shall, without the prior written consent of the Buyer, contract for
any equity financing (including any debt financing with an equity component) or
issue any equity securities of the Company or any Subsidiary or securities
convertible or exchangeable into or for equity securities of the Company or any
Subsidiary (including debt securities with an equity component) which (i) are
convertible into or exchangeable for an indeterminate number of shares of common
stock, (ii) are convertible into or exchangeable for Common Stock at a price
which varies with the market price of the Common Stock, (iii) directly or
indirectly provide for any "re-set" or adjustment of the purchase price,
conversion rate or exercise price or (iv) contain any "make- whole" provision
based upon, directly or indirectly, the market price of the Common Stock, in
each case, other than reasonable and customary anti-dilution adjustments for
issuance of shares of Common Stock at a price which is below the market price of
the Common Stock.
d. LISTING. The Company shall promptly secure the listing of
all of the Conversion Shares and Commitment Shares upon each national securities
exchange and automated quotation system, if any, upon which shares of Common
Stock are then listed (subject to official notice of issuance) and shall
maintain, so long as any other shares of Common Stock shall be so listed, such
listing of all such securities from time to time issuable under the terms of the
Transaction Documents. The Company shall maintain the Common Stock's
authorization for quotation on the Nasdaq National Market (the "PRINCIPAL
MARKET"). Neither the Company nor any of its Subsidiaries shall take any action
which would be reasonably expected to result in the delisting or suspension of
the Common Stock on the Principal Market. The Company shall promptly, and in no
event later than the following Trading Day, provide to the Buyer copies of any
notices it receives from the Principal Market regarding the continued
eligibility of the Common Stock for listing on such automated quotation system
or securities exchange. The Company shall pay all fees and expenses in
connection with satisfying its obligations under this Section.
e. LIMITATION ON SHORT SALES AND HEDGING TRANSACTIONS. The
Buyer agrees that beginning on the date of this Agreement and ending on the date
of termination of this Agreement as provided in Section 9(k), the Buyer and its
affiliates shall not in any manner whatsoever enter into or effect, directly or
indirectly, any (i) "short sale" (as such term is defined in Rule 3b-3 of the
0000 Xxx) of the Common Stock or (ii) hedging transaction, which establishes a
net short position with respect to the Common Stock; provided, however, that
such restrictions shall not apply if (A) with respect to the restrictions on
short sales, the Buyer submits within five (5) Trading Days of a sale a
Conversion Notice (as defined in the Debenture) entitling the Buyer to receive a
number of shares of Common Stock at least equal to the number of shares so sold,
or (B) an Event of Default (as defined the Debenture) has occurred, or any event
which, after notice and/or lapse of time, would become an Event of Default has
occurred, under any Debenture including any failure by the Company to timely
effect any conversion properly submitted pursuant to a Debenture.
f. LIMITATION ON SALES OF COMMITMENT SHARES. The Buyer agrees
that beginning on the date of this Agreement and ending on the date of
termination of this Agreement as provided in Section 9(k), the Buyer shall not
transfer or sell (i) the First Closing Commitment Shares (as defined in Section
7(b) hereof) until such date as the First Debenture is no longer outstanding and
(ii) the Second Closing Commitment Shares (as defined in Section 7(b) hereof)
until such date as the Second Debenture is no longer outstanding; provided,
however, that such restrictions shall not apply: (A) to any transfers to or
among affiliates, (B) to any pledge in connection with a bona fide loan or
margin account, (C) if an Event of Default has occurred, or any event which,
after notice and/or lapse of time, would become an Event of Default, under any
Debenture including any failure by the Company to timely effect any conversion
properly submitted pursuant to a Debenture, or (E) if Xxxxxx X. Xxxxxx, Xx.
ceases for any reason to be Chief Executive Officer of the Company engaged on a
full-time basis as his or her principal business activity.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its
transfer agent, and any subsequent transfer agent, to issue certificates,
registered in the name of the Buyer or its respective nominee(s), for the
Conversion Shares from time to time upon conversion of a Debenture (the
"IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"). The Company warrants to the Buyer
that no instruction other than the Irrevocable Transfer Agent Instructions
referred to in this Section 5, will be given by the Company to its transfer
agent with respect to the Securities and that the Securities shall otherwise be
freely transferable on the books and records of the Company as and to the extent
provided in this Agreement and the Registration Rights Agreement subject to the
provisions of Section 4(f) in the case of the Commitment Shares. Nothing in this
Section 5 shall affect in any way the Buyer's obligations to comply with all
applicable prospectus delivery requirements, if any, upon resale of the
Securities. If a Buyer provides the Company with an opinion of counsel, in a
generally acceptable form, to the effect that a public sale, assignment or
transfer of the Securities may be made without registration under the 1933 Act
or the Buyer provides the Company with reasonable assurances that the Securities
can be sold pursuant to Rule 144, the Company shall permit the transfer, and, in
the case of the Conversion Shares, promptly instruct its transfer agent to issue
one or more certificates in such name and in such denominations as specified by
the Buyer and without any restrictive legend. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to the
Buyer by vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 5 will be inadequate and agrees, in
the event of a breach or threatened breach by the Company of the provisions of
this Section 5, that the Buyer shall be entitled, in addition to all other
available remedies, to an order and/or injunction restraining any breach and
requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell each
Debenture to the Buyer at each Closing is subject to the satisfaction, at or
before the respective Closing Date, of each of the following conditions,
provided that these conditions are for the Company's sole
benefit and may be waived by the Company at any time in its sole discretion by
providing the Buyer with prior written notice thereof:
a. The Buyer shall have executed each of the Transaction
Documents to which it is a party and delivered the same to the Company
applicable to the respective Closing including for each Closing: (i) a Pledge
and Security Agreement substantially in the form of EXHIBIT B hereto
(individually, a "PLEDGE AND SECURITY AGREEMENT" and collectively, the "PLEDGE
AND SECURITY AGREEMENTS"), and (ii) a Registration Rights Agreement
substantially in the form of EXHIBIT C hereto (individually, a "REGISTRATION
RIGHTS AGREEMENT" and collectively, the "REGISTRATION RIGHTS AGREEMENTS").
b. Subject to the Company's compliance with Section 4(a), a
Registration Statement on Form S-3 covering the resale of the respective
Commitment Shares and the Conversion Shares underlying the Debenture to be sold
at such Closing shall have been declared effective under the 1933 Act by the SEC
and no stop order with respect to the Registration Statement shall be pending or
threatened by the SEC.
c. The Buyer shall have paid the Purchase Price for such
Debenture being purchased by the Buyer at such Closing in the manner as set
forth in the respective Pledge and Security Agreement.
d. The representations and warranties of the Buyer shall be
true and correct in all material respects as of the date when made and as of
such Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and the Buyer shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Buyer at or prior to the Closing Date.
It is agreed and acknowledged by the parties hereto, that until such time has
the Company shall have delivered the Second Closing Notice to the Buyer with
respect to the Closing of the Second Debenture, the Company shall not be
obligated to issue and sell to the Buyer the Second Debenture.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The obligation of the Buyer hereunder to purchase each
Debenture at the respective Closing is subject to the satisfaction, at or before
the respective Closing Date, of each of the following conditions, provided that
these conditions are for the Buyer's sole benefit and may be waived by the Buyer
at any time in its sole discretion by providing the Company with prior written
notice thereof:
a. The Company shall have executed each of the Transaction
Documents and delivered the same to the Buyer applicable to the respective
Closing including for each Closing: (i) the respective Debenture, (ii) a Pledge
and Security Agreement substantially in the form of EXHIBIT B hereto and an
unconditional, fully valid, first priority, perfected security interest in favor
of the Buyer shall attach to the Collateral (as defined in the respective Pledge
and Security
Agreement) as of the Closing, and (iii) a Registration Rights Agreement
substantially in the form of EXHIBIT C hereto.
b. On the Closing Date for the First Closing the Company shall
have delivered to the Buyer a number of shares of Common Stock (the "FIRST
CLOSING COMMITMENT SHARES") equal to: (x) 10% of the Purchase Price of the First
Debenture divided by the arithmetic average of the Closing Bid Prices of the
Common Stock for the ten (10) consecutive Trading Days immediately preceding the
Trading Day which is two (2) Trading Days prior to the Closing Date for the
First Closing, PLUS (y) 3% of the Purchase Price of the Second Debenture divided
by the arithmetic average of the Closing Bid Prices of the Common Stock for the
ten (10) consecutive Trading Days immediately preceding the Trading Day which is
two (2) Trading Days prior to the Closing Date for the First Closing. On the
Closing Date for the Second Closing the Company shall have delivered to the
Buyer a number of shares of Common Stock (the "SECOND CLOSING COMMITMENT SHARES"
and together with the First Closing Commitment Shares, the "COMMITMENT SHARES")
equal to 7% of the Purchase Price of the Second Debenture divided by the
arithmetic average of the Closing Bid Prices of the Common Stock for the ten
(10) consecutive Trading Days immediately preceding the Trading Day which is two
(2) Trading Days prior to the Closing Date for the Second Closing. (To be
appropriately adjusted for any reorganization, recapitalization, non-cash
dividend, stock split or other similar transaction during such ten (10) Trading
Day period.)
c. The Common Stock shall be authorized for quotation on the
Principal Market, trading in the Common Stock shall not have been within the
last 365 days suspended by the SEC or the Principal Market and the Conversion
Shares and the Commitment Shares shall be listed upon the Principal Market.
d. The Buyer shall have received the opinion of the Company's
legal counsel dated as of the respective Closing Date, in the form of EXHIBIT D
attached hereto.
e. The representations and warranties of the Company shall be
true and correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality in Section
3 above, in which case, such representations and warranties shall be true and
correct without further qualification) as of the date when made and as of the
respective Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied with the covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by the Company at or prior to the respective Closing Date. The Buyer shall
have received a certificate, executed by the Chief Executive Officer of the
Company, dated as of the respective Closing Date, to the foregoing effect in the
form attached hereto as EXHIBIT E.
f. The Board of Directors of the Company shall have adopted
resolutions in the form attached hereto as EXHIBIT F which shall be in full
force and effect without any amendment or supplement thereto as of the
respective Closing Date.
g. As of the respective Closing Date, the Company shall have
reserved out of
its authorized and unissued Common Stock, solely for the purpose of effecting
the conversion of the respective Debenture, at least 750,000 shares of Common
Stock.
h. The Irrevocable Transfer Agent Instructions, in the form of
EXHIBIT G attached hereto, shall have been delivered to and acknowledged in
writing by the Company's transfer agent.
i. The Company shall have delivered to the Buyer a certificate
evidencing the incorporation and good standing of the Company in the State of
Georgia issued by the Secretary of State of the State of Georgia as of a date
within ten (10) Trading Days of the respective Closing Date.
j. The Company shall have delivered to the Buyer a certified
copy of the Articles of Incorporation as certified by the Secretary of State of
the State of Georgia within ten (10) Trading Days of the respective Closing
Date.
k. The Company shall have delivered to the Buyer a secretary's
certificate executed by the Secretary of the Company, dated as of the respective
Closing Date, in the form attached hereto as EXHIBIT H.
l. A Registration Statement on Form S-3 covering the resale of
all of the respective Commitment Shares and the Conversion Shares (assuming the
Closing Date is the Conversion Date) underlying the Debenture to be sold at such
Closing shall have been declared effective under the 1933 Act by the SEC and no
stop order with respect to the Registration Statement shall be pending or
threatened by the SEC. The Company shall have made all filings under all
applicable federal and state securities laws necessary to consummate the
issuance of the Securities pursuant to this Agreement in compliance with such
laws.
m. No Event of Default (as defined the Debenture) has
occurred, or any event which, after notice and/or lapse of time, would become an
Event of Default under the Debenture has occurred.
8. INDEMNIFICATION. In consideration of the Buyer's execution and
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's other obligations under the
Transaction Documents, the Company shall defend, protect, indemnify and hold
harmless the Buyer and each other holder of the Securities and all of their
shareholders, officers, directors, employees and direct or indirect investors
and any of the foregoing person's agents or other representatives (including,
without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the "INDEMNITEES") from and
against any and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities anddamages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for
which indemnification hereunder is sought), and including reasonable
attorneys' fees and disbursements (the "INDEMNIFIED LIABILITIES"), incurred
by any Indemnitee as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or
thereby, (b) any breach of any covenant, agreement or obligation of the Company
contained in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (c) any cause of action, suit or claim
brought or made against such Indemnitee and arising out of or resulting from the
execution, delivery, performance or enforcement of the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby or
(d) the status of the Buyer as the purchaser of a Debenture. To the extent that
the foregoing undertaking by the Company may be unenforceable for any reason,
the Company shall make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities which is permissible under applicable
law.
9. GOVERNING LAW; MISCELLANEOUS.
a. GOVERNING LAW; JURISDICTION; JURY TRIAL. The corporate laws
of the State of Georgia shall govern all issues concerning the relative rights
of the Company and its shareholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Agreement and the
other Transaction Documents shall be governed by the internal laws of the State
of Illinois, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Illinois or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of Illinois. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of Chicago, for
the adjudication of any dispute hereunder or under the other Transaction
Documents or in connection herewith or therewith, or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
b. COUNTERPARTS. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
c. HEADINGS. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. SEVERABILITY. If any provision of this Agreement shall be
invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
e. ENTIRE AGREEMENT; AMENDMENTS. This Agreement supersedes all
other prior oral or written agreements between the Buyer, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement, the Other Transaction Documents and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be amended other than by an
instrument in writing signed by the Company and the Buyer, and no provision
hereof may be waived other than by an instrument in writing signed by the party
against whom enforcement is sought.
f. NOTICES. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered: (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) one Trading Day after
deposit with a nationally recognized overnight delivery service, in each case
properly addressed to the party to receive the same. The addresses and facsimile
numbers for such communications shall be:
If to the Company:
xxxx.xxx, Inc.
0000 XxxxxXxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxxx X. Xxxxxx, Xx.
With a copy to:
King & Spalding
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 404-572-5100
Attention: Xxxxxx X. Xxxx
If to the Buyer:
Fusion Capital Fund I, LLC
000 Xxxx Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx
with a copy to:
Ungaretti & Xxxxxx
0000 Xxxxx Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xx Xxxxxx
If to the Transfer Agent:
SunTrust Bank, Atlanta
00 Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxx Xxxxx
or at such other address and/or facsimile number and/or to the
attention of such other person as the recipient party has specified by
written notice given to each other party three (3) Trading Days prior
to the effectiveness of such change. Written confirmation of receipt
(A) given by the recipient of such notice, consent, waiver or other
communication, (B) mechanically or electronically generated by the
sender's facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or
(C) provided by a nationally recognized overnight delivery service
shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above, respectively.
g. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Debentures. The Company shall not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the Buyer, including by merger or consolidation, except
pursuant to an Organic Change (as defined in the Debentures) with respect to
which the Company is in compliance with Section 6 of the Debentures. The Buyer
may assign some or all of its rights hereunder without the consent of the
Company, provided, however, that any such assignment shall not release the Buyer
from its obligations hereunder unless such obligations are assumed by such
assignee and the Company has consented in writing to such assignment and
assumption. Notwithstanding anything to the contrary contained in the
Transaction Documents, the Buyer shall be entitled to pledge the Securities in
connection with a bona fide loan or margin account.
h. NO THIRD PARTY BENEFICIARIES. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
i. PUBLICITY. The Company and the Buyer shall have the right
to approve before issuance any press releases or any other public statements
with respect to the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without the prior approval of any Buyer, to make
any press release or other public disclosure with respect to such transactions
as is required by applicable law and regulations (although the Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a copy
thereof).
j. FURTHER ASSURANCES. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
k. TERMINATION; SURVIVAL. This Agreement may be terminated
only as follows:
(i) By the Buyer any time after an Event of Default (as
defined in the Debentures) has occurred.
(ii) In the event that the First Closing shall not have
occurred, the Company shall have the option to terminate this Agreement
without liability of any party to any other party. If this Agreement is
terminated pursuant to this Section 9(k)(ii), the Company shall issue
to the Buyer the First Closing Commitment Shares immediately prior to
the termination hereof. In the such case, the number of First Closing
Commitment Shares shall be equal to: (x) 10% of the Purchase Price of
the First Debenture divided by the arithmetic average of the Closing
Bid Prices of the Common Stock for the ten (10) consecutive Trading
Days immediately preceding the Trading Day which is two (2) Trading
Days prior to the date of termination of this Agreement, plus (y) 3% of
the Purchase Price of the Second Debenture divided by the arithmetic
average of the Closing Bid Prices of the Common Stock for the ten (10)
consecutive Trading Days immediately preceding the Trading Day which is
two (2) Trading Days prior to the date of termination of this
Agreement.
(iii) In the event that the First Closing shall not have
occurred on or before February 28, 2000, due to the failure to satisfy
the conditions set forth in Sections 6 and 7 above with respect to the
First Closing (and the nonbreaching party's failure to waive such
unsatisfied condition(s)), the nonbreaching party shall have the option
to terminate this Agreement at the close of business on such date
without liability of any party to any other party; provided, however,
that any such termination shall not release any breaching party from
liability hereunder. If this Agreement is terminated pursuant to this
Section 9(k)(iii) prior to the First Closing other than solely as a
result of the failure of a registration statement to be declared
effective by the SEC with respect to the First Closing or any material
breach of the Buyer's obligation hereunder, the Company shall issue to
the Buyer the First Closing Commitment Shares immediately upon the
termination hereof. In the
such case, the number of First Closing Commitment Shares shall be equal
to: (x) 10% of the Purchase Price of the First Debenture divided by the
arithmetic average of the Closing Bid Prices of the Common Stock for
the ten (10) consecutive Trading Days immediately preceding the Trading
Day which is two (2) Trading Days prior to the date of termination of
this Agreement, plus (y) 3% of the Purchase Price of the Second
Debenture divided by the arithmetic average of the Closing Bid Prices
of the Common Stock for the ten (10) consecutive Trading Days
immediately preceding the Trading Day which is two (2) Trading Days
prior to the date of termination of this Agreement.
(iv) If the First Debenture has been issued as provided
herein, by the Company any time after the date the First Debenture is
no longer outstanding but prior to the delivery to the Buyer of the
Second Closing Notice.
(v) If the First Debenture has been issued as provided herein,
by either the Company or the Buyer if the First Debenture is no longer
outstanding and the Company has not delivered a Second Closing Notice
to the Buyer on or prior to the tenth (10th) Trading Day after the
earlier of (A) the stated Maturity Date of the First Debenture or (B)
fifty (50) Trading Days after the date the First Debenture is no longer
outstanding.
(vi) If the First Debenture has been issued as provided
herein, the First Debenture is no longer outstanding and the Company
has delivered a Second Closing Notice to the Buyer, in the event that
the Second Closing shall not have occurred on or before forty (40)
Trading Days from the date of the Second Closing Notice due to the
failure to satisfy the conditions set forth in Sections 6 and 7 above
with respect to the Second Closing (and the nonbreaching party's
failure to waive such unsatisfied condition(s)), the nonbreaching party
shall have the option to terminate this Agreement at the close of
business on such date without liability of any party to any other
party; provided, however, that any such termination shall not release
any breaching party from liability hereunder. If this Agreement is
terminated pursuant to this Section 9(k)(vi) prior to the Second
Closing other than solely as a result of the failure of a registration
statement to be declared effective by the SEC with respect to the
Second Closing or any material breach of the Buyer's obligation
hereunder, the Company shall issue to the Buyer the Second Closing
Commitment Shares immediately upon the termination hereof. In the such
case, the number of Second Closing Commitment Shares shall be equal to
7% of the Purchase Price of the Second Debenture divided by the
arithmetic average of the Closing Bid Prices of the Common Stock for
the ten (10) consecutive Trading Days immediately preceding the Trading
Day which is two (2) Trading Days prior to the date of termination of
this Agreement.
(vii) If the Second Debenture has been issued as provided
herein, this Agreement shall automatically terminate on the date the
Second Debenture is no longer outstanding.
Except for termination of this Agreement under Section 9(k)(vii), any
termination of this Agreement pursuant to this Section 9(k) shall be effected by
written notice from the Company to the Buyer, or the Buyer to the Company, as
the case may be, setting forth the basis for the
termination hereof. A termination of this Agreement under Section 9(k)(vii)
shall automatically occur on such date as the Second Debenture is no longer
outstanding without any action or notice on the part of any party. Except as
expressly set forth in this Agreement, the representations and warranties of the
Company and the Buyer contained in Sections 2 and 3 hereof, the indemnification
provisions set forth in Section 8 hereof and the agreements and covenants set
forth in Section 9, shall survive each Closing and any termination hereof.
l. PLACEMENT AGENT. The Company acknowledges that it has
engaged SunTrust Equitable Securities Corporation as placement agent in
connection with the sale of the Securities, which placement agent may have
formally or informally engaged other agents on its behalf. The Company shall be
responsible for the payment of any placement agent's fees or broker's
commissions relating to or arising out of the transactions contemplated hereby.
The Company shall pay, and hold the Buyer harmless against, any liability, loss
or expense (including, without limitation, attorneys' fees and out of pocket
expenses) arising in connection with any such claim.
m. NO STRICT CONSTRUCTION. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
n. REMEDIES. The Buyer and each holder of the Securities shall
have all rights and remedies set forth in the Transaction Documents and all
rights and remedies which such holders have been granted at any time under any
other agreement or contract and all of the rights which such holders have under
any law. Any person having any rights under any provision of the Transaction
Documents shall be entitled to enforce such rights specifically (without posting
a bond or other security), to recover damages by reason of any breach of any
provision of the Transaction Documents and to exercise all other rights granted
by law.
o. PAYMENT SET ASIDE. To the extent that the Buyer receives a
payment or payments hereunder or pursuant to the other Transaction Documents or
the Buyer enforces or exercises its rights hereunder or thereunder, and such
payment or payments or the proceeds of such enforcement or exercise or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside, recovered from, disgorged by or are required to be refunded, repaid
or otherwise restored to the Company, a trustee, receiver or any other Person
under any law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the extent of any
such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
* * * * * *
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY:
XXXX.XXX, INC.
By: /s/ Xxxxxx X. Xxxxxx, Xx.
---------------------------
Name: Xxxxxx X. Xxxxxx, Xx.
Title: Chief Executive Officer
BUYER:
FUSION CAPITAL FUND I, LLC
BY: FUSION CAPITAL PARTNERS, LLC
BY: AUTARKY SYSTEMS, INC.
By: /s/ Xxx Xxxxx
----------------------
Name: Xxx Xxxxx
Title: President
