EXHIBIT 10(ii)
NOTE PURCHASE AGREEMENT
AIMRITE HOLDINGS CORPORATION
THE SECURITIES WHICH ARE THE SUBJECT OF THIS NOTE PURCHASE AGREEMENT (AS IT MAY
BE AMENDED FROM TIME TO TIME, THE "AGREEMENT") HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT") OR UNDER THE APPLICABLE
SECURITIES LAWS OF ANY STATE AND WILL BE OFFERED AND SOLD IN RELIANCE ON
EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THESE LAWS BY VIRTUE OF THE
INTENDED COMPLIANCE OF AIMRITE HOLDINGS CORPORATION, WITH SECTION 3(b) OF THE
SECURITIES ACT, THE PROVISIONS OF RULE 504 REGULATION d ("REGULATION D") UNDER
SUCH ACT AND SIMILAR EXEMPTIONS UNDER STATE LAW. THESE SECURITIES HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE U.S. SECURITIES AND EXCHANGE COMMISSION ("SEC"),
ANY STATE SECURITIES COMMISSION OR ANOTHER REGULATORY AUTHORITY. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS DOCUMENTATION IS DISTRIBUTED PURSUANT TO AN EXEMPTION FOR SMALL OFFERINGS
UNDER THE RULES OF THE COLORADO SECURITIES DIVISION. THE SECURITIES DIVISION HAS
NEITHER REVIEWED OR APPROVED ITS FORM OR CONTENT. THE SECURITIES DESCRIBED
HEREIN MAY ONLY BE PURCHASED BY "ACCREDITED INVESTORS" AS DEFINED BY RULE 501 OF
REGULATION D AND THE RULES OF THE COLORADO SECURITIES DIVISION.
This Agreement has been executed by the undersigned purchaser
(hereafter, the "Purchase") in connection with the private placement of that
certain 8% Convertible Promissory Note (referred to herein as the "Note"), of
AimRite Holdings Corporation (the "Company"), a publicly-held and traded
corporation formed under the laws of the State of Nevada. The Note is being
offered and sold in reliance upon, and the parties hereto each intend to comply
with, the exemption from securities registration afforded by the provision of
Rule 504 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" or the "Securities Act"), and applicable provisions
of the Colorado Revised Statutes (1998) and the regulations promulgated
thereunder, including without limitation Section 11-51-308(1)(p), Regulation
51-3.13B and/or Regulation 51-3.19, as applicable. This Note Purchase Agreement
(this "Agreement") is made as of September 7, 2000.
Section 1.1 PURCHASE AND SALE OF THE NOTE. Upon the following terms and
conditions, the Company shall issue and sell the Note to the Purchase, and the
Purchaser shall purchase the Note from the Company. The Note shall be
represented in the form of EXHIBIT A attached hereto and incorporated herein by
reference. The Note is convertible in accordance with its terms into
non-legended common stock of the Company, no par value per share ("Common
Stock"). The Note shall be in the aggregate principle amount of US$1,000,000.00
and shall be sold at the Purchase Price (defined below), at the Closing (defined
below). Interest on the Note shall be paid in accordance with the terms of the
Note.
Section 1.2 PURCHASE PRICE. The total aggregate purchase price for the
Note (the "Purchase Price") shall be One Hundred Thousand Dollars
(US$100,000.00), which shall be paid in full at the Closing.
Section 1.3 CLOSING.
(a) The closing of the purchase and sale of the Note (the
"Closing"), shall take place at the law offices of H. Xxxxx
Xxxxxxx, Xx. (the "Escrow Agent"), 0000 Xxxxxxxx Xxxxx, Xxxxx
000, Xxxxxxx, X.X., XXX 00000 (telephone: 000.000.0000,
telecopier 919.785.3116), on the later of the following (the
"Closing Date"): (i) the date on which the last to be
fulfilled or waived of the conditions set forth in Sections
4.1 and 4.2 hereof and applicable to the Closing shall be
fulfilled or waived in accordance herewith, or (ii) such other
time and place and/or on such other date as the Purchaser and
the Company may agree.
(b) On the Closing Date, the Company shall, through the Escrow
Agent, deliver to the Purchaser the Note issued in the name of
the Purchaser, and the Escrowed Shares (defined below). The
Purchaser shall on the Closing Date deliver to the Escrow
Agent on behalf of the Company the Purchase Price for the Note
by wire transfer in immediately available funds to such
account as shall be designated in writing by the Escrow Agent.
Upon receipt of the Note and the Escrowed Shares, the Escrow
Agent shall immediately deliver via wire transfer the Purchase
Price (less any fees agreed to be paid by the Company) to the
Company, and the Note to the Purchaser. The Escrowed Shares
shall be held by the Escrow Agent in accordance with the terms
of the Escrow Agreement (defined below), pending conversion of
the Note in accordance with tits terms. In addition to the
above, each party shall deliver to the Escrow Agent on behalf
of the other all documents, instruments and writing required
to be delivered by such party pursuant to this Agreement at or
prior to the Closing.
Section 1.4 REPORTING STATUS; COMPLIANCE WITH RULE 504. The Company
represents and warrants that, as of the date of this Agreement, the Company is
NOT subject to the reporting requirements of Section 13 or 15(d) of the
Securities 1934 Act of 1934, as amended (the "1934 Act"), the Company is not an
investment company or a developmental stage company that either has no specific
business plan or purpose, and the Company is otherwise in compliance with the
requirements of Rule 504 of Regulation D with respect to the offerings
contemplated hereby, and is able to and does hereby offer and sell the Note and
the underlying Common Stock (collectively the "Securities") in accordance with
the provision of Rule 504 and with the applicable rules and regulations of the
Colorado Revised Statutes (1998). The Company is able to issue the Note and the
Escrowed Shares in accordance with such laws and regulations.
Section 2.1 REGULATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
makes the following representations and warranties to the Company.
(a) ACCREDITED INVESTOR; COLORADO CORPORATION. The Purchaser is an
"accredited investor" under the definition set forth in Rule 501(a) of
Regulation D, promulgated under the Securities Act. The Purchaser is a
corporation or limited liability company duly authorized and validly existing
under the laws of the State of Colorado. The Purchaser has the requisite
corporate power to own its properties and to carry on its business as now being
conducted, and to execute this Agreement and carry out its obligations with
respect thereto.
(b) SPECULATIVE INVESTMENT. The Purchaser is aware that an investment
in the Securities is highly speculative and subject to substantial risks. The
Purchaser is capable of bearing the high degree of economic risk and the burden
of this venture, including, but not limited to, the possibility of complete loss
of the Purchaser's investment in the Securities which make liquidation of this
investment impossible for the indefinite future.
(c) PRIVATELY OFFERED. The offer to acquire the Note was directly
communicated to the Purchaser in such manner that the Purchaser was able to ask
questions of and receive answers concerning the terms and conditions of this
transaction. At no time was the Purchaser presented with or solicited by or
through any leaflet, public promotional meeting, television advertisement, or
any other form of general advertising or general solicitation, though the
Purchaser acknowledges that such solicitation or advertising is permitted under
federal and Colorado state law, so long as the Purchaser is an accredited
investor.
(d) PURCHASE OF NOTE. The Note is being acquired solely for the
Purchaser's own account, and is not being purchased with a view to the resale,
distribution, subdivision or fractionalization of the Note without proper
registration with applicable securities administrators or an applicable
exemption from such registration. The Purchaser is aware of any restrictions
imposed on the transferability and resale of the Securities, including without
limitation those imposed by the Colorado Revised Statutes (1998) and applicable
regulations thereunder.
(e) ACCESS TO INFORMATION. Purchaser or Purchaser's professional
advisor has been granted the opportunity to ask question or and receive answers
from representatives of the Company, its officers, directors, employees and
agents concerning the terms and conditions of the offering of Securities, the
Company, its business and prospects, and to obtain any additional information
which Purchaser or Purchaser's professional advisor deems necessary to verify
the accuracy and completeness of the information received.
(f) RELIANCE ON OWN ADVISORS. Purchaser has relied on the advice of, or
has consulted with, Purchaser's own tax, investment, legal or other advisors and
has not relied on the Company or any of its affiliates, officers, directors,
attorneys, accountants or any affiliates of any thereof and each other person,
if any, who controls any thereof, within the meaning of Section 15 of the
Securities Act for any tax of legal advice, The foregoing, however, does not
limit or modify Purchaser's right to rely upon representations and warranties of
the Company in Section 2.2 of this Agreement and elsewhere herein, and any
representations of any third parties acting as agents for or on the Company's
behalf.
(g) CAPABILITY TO EVALUATE. Purchaser has such knowledge and
experience in financial and business matters so as to enable
the Purchaser to utilize the information made available to it
in connection with the offer of the Securities in order to
evaluate the merits and risks of the prospective investment.
(h) AUTHORITY. Purchaser has full power and authority to execute
and deliver this Agreement and each other document included
herein for which a signature is required in such capacity and
on behalf of the subscribing individual, partnership, trust,
estate, corporation or other entity for whom or which
Purchaser is executing this Agreement.
Section 2.2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby makes the following representations and warranties to the Purchaser:
(a) ORGANIZATION AND QUALIFICATION. The Company (and each of its
subsidiaries, if applicable) is a corporation duly incorporated and existing in
good standing under the laws of the state in which it is incorporated and has
the requisite corporate power to own its properties and to carry on its business
as now being conducted. The Company and each subsidiary, if any, is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary other than those in which the
failure so to qualify would not have a Material Adverse Effect. "Material
Adverse Effect", for purposes of this Agreement, means any adverse effect on the
business, operation, properties, prospects, or financial condition of the entity
with respect to which such term is used and which is material to such entity and
other entities controlled by such entity taken as a whole.
(c) AUTHORIZATION; ENFORCEMENT. (i) The Company has the requisite
corporate power and authority to enter into and perform this
Agreement and to issue Securities and the Escrowed Shares in
accordance with the terms hereof, (ii) the execution and
delivery of this Agreement by the Company and the consummation
by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate action, and not further
consent or authorization of the Company or its Board of
Directors or stockholders is required, (iii) this Agreement
has been duly executed and delivered by the Company, (iv) this
Agreement constitutes a valid and binding obligation of the
Company enforceable against the Company in accordance with its
terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting
generally the enforcement of creditors' rights and remedies or
by other equitable principles of general application) and (v)
prior to the Closing Date, any necessary amendments to the
Company's Articles of Incorporation authorizing Company to
issue all of the Securities and the Escrowed Shares will have
been filed with the Secretary of State of the state in which
the Company is incorporated and will be in full force and
effect, enforceable against the Company in accordance with the
terms of such amended Articles of Incorporation.
(c) AUTHORIZED CAPITAL; RIGHTS OF COMMITMENTS TO STOCK. As of August 1,
2000, the authorized capital stock of the Company consisted of 100,000,000
shares of Common Stock, of which approximately 31,000,000 shares were issued and
outstanding as of such date, as well as shares of preferred stock, of which
there were a number of Series B shares issued and outstanding as of such date.
All of the outstanding shares of the Company's Common Stock and
preferred stock have been validly issued and are fully paid and non-assessable.
Except as stated above or as described in EXHIBIT C (attached only if
applicable), no shares of Common Stock are entitled to registration rights or
preemptive rights, and there are no (I) outstanding options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities (not including the Note) or rights convertible into,
any shares of capital stock of the Company, (II) contracts, commitments,
understandings, or arrangements by which the Company is or may become bound to
issue additional shares of capital stock of the Company or (III) options,
warrants, scrip, rights to subscribe to, or commitments to purchase or acquire,
any shares, or securities (whether the Note or other notes, debentures,
preferred stock or otherwise) or rights convertible into shares of capital stock
of the Company. EXHIBIT C shall specifically indicate registration rights
associated with any such securities and whether the Company intends to register
such securities or capital stock underlying such securities within one (1) year
after the Closing Date.
(d) ISSUANCE OF SECURITIES. The issuance of the Securities, including
without limitation the Escrowed Shares, has been duly authorized and, when paid
for and issued in accordance with the terms hereof, the Note shall be validly
issued, fully paid and non-assessable and entitled to the rights described in
EXHIBIT A hereto. The Common Stock issuable upon conversion of the Note and the
Escrowed Shares will be duly authorized and reserved for issuance and, upon
conversion, will be validly issued, fully paid and non-assessable, and the
holders shall be entitled to all rights and preferences accorded to a holder of
Common Stock.
(e) NO CONFLICTS. The Company has furnished or made available to
the Purchaser true and correct copies of the Company's
Articles of Incorporation as in effect on the date hereof (the
"Articles"), and the Company's Bylaws, as in effect on the
date hereof (the "By-Laws"). The execution, delivery and
performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated
hereby do not and will not (i) result in a violation of the
Company's Articles or 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 others
any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to
which the Company or any of its subsidiaries is a party, or
result in a violation of any federal, state, local or foreign
law, rule, regulation, order, judgment or decree (including
Federal and state securities laws and regulations) applicable
to the Company or any of its subsidiaries or by which any
property or assets of the Company or any of its subsidiaries
is bound or affected (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate,
have a Material Adverse Effect); provided that, for purposes
of such representation as to federal, state, local or foreign
law, rule or regulation, no representation is made herein with
respect to any of the same applicable solely to the Purchaser
and not to the Company. The business of the Company is not
being conducted in violation of any law, ordinance or
regulations of any governmental entity, except for violations
that either singly or in the aggregate does not and will not
have a Material Adverse Effect. The Company is not required
under federal, state or local law, rule or regulation in the
United States to obtain any consent, authorization or order
of, or make any filing (other than any filing of a vote
establishing a class or series of stock with the Secretary of
State or similar authority of the state in which the Company
is incorporated) or registration with any court or
governmental agency in order for it to execute, deliver or
perform any of its obligations under this Agreement or issue
and sell the Note in accordance with the terms hereof, except
the filing of Form D with the SEC and, if required by Colorado
law, with the Colorado Securities Division; provided that, for
purposes of the representation made in this sentence, the
Company is assuming and relying upon the accuracy of the
relevant representations and agreements of the Purchaser
herein. The Company will send a copy of the Form D to the
Escrow Agent once filed with the SEC and, if necessary, to the
Colorado Securities Division, along with any other necessary
fees or documentation.
(f) REPORTING STATUS; FINANCIAL STATEMENTS. The Company is not as
of the date hereof subject to the reporting requirements of
Sections 13 or 15(d) of the 0000 Xxx. The Company is not an
investment company or a developmental stage company that has
no specific business plan or purpose.
Except as set forth in EXHIBIT C, no information or documentation
provided to the Purchaser as of the date hereof has contained any untrue
statement of a material fact or has 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. Except as set
forth in EXHIBIT C, the financial statements of the Company provided to the
Purchaser, if any, comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC or
other applicable rules and regulations with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except (i)
as may be otherwise indicated in such financial statements or the Note thereto
of (ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed of summary statements) and fairly present
in all material respects the financial position of the Company as of the dates
thereof and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(g) NO MATERIAL ADVERSE CHANGE. Since at least July 31, 1999, no
Material Adverse Effect has occurred or exists with respect to
the Company or any of its subsidiaries.
(h) NO UNDISCLOSED LIABILITIES. The Company and its subsidiaries
have no material liabilities or obligations not disclosed to
the Purchaser in writing, other than those incurred in the
ordinary course of the Company's or any of its subsidiaries'
respective businesses since July 31, 1999, which, individually
or in the aggregate, do not or would not have a Material
Adverse Effect on the Company or any of its subsidiaries.
(i) NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. No event or
circumstances has occurred or exists with respect to the
Company or any of its subsidiaries or their respective
businesses, properties, prospects, operations or financial
condition which, under applicable law, rule or regulation,
requires public disclosure or announcement by the Company but
which has not been so publicly announced or disclosed.
(j) No General Solicitation. Neither the Company, nor any of its
affiliates, or, to the best of its knowledge, 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 Act) in connection with the
offer or sale of the Securities, though the parties
acknowledge that such general solicitation and general
advertising is permitted under federal and Colorado state
securities law, so long as sales are made only to accredited
investors.
(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 of the
Company's securities or solicited any offers to buy any of
such securities, under circumstances that would prevent the
Company from offering the Securities and delivering the
Escrowed Shares pursuant to Rules 504.
(l) ADDITIONAL REPRESENTATIONS. Neither the Company, its
predecessors, any affiliated person or entity, any of the
Company's officers, directors or beneficial owners of 10% or
more of any class of the Company's equity securities, nor any
underwriter (if any) of the Securities, nor any partner,
director or officer of such underwriter:
(i) within the ten (10) year period prior to the date
hereof, has filed a registration statement which is
the subject of a currently effective registration
stop order entered by any state securities
administrator or the SEC;
(ii) within the ten (1) year period prior to the date
hereof, has been convicted of any criminal offense in
connection with the offer, purchase or sale of any
security, or involving fraud or deceit;
(iii) is currently subject to any state or federal
administrative enforcement order or judgment, entered
within the last ten (10) years, finding fraud or
deceit in connection with the purchase or sale of any
security; or
(iv) is currently subject to any order, judgment or decree
of any court of competent jurisdiction, entered
within the last ten (10) years, temporarily,
preliminarily or permanently restraining or enjoining
such party from engaging or continuing to engage in
any conduct or practice involving fraud or deceit in
connection with the purchase or sale of any security.
Section 3.1 SECURITIES COMPLIANCE. The Company shall to the extent
required notify the SEC, the NASD and the NASDAQ OTC Bulletin Board Market and
the National Quotation Bureau, Inc. as applicable, in accordance with their
requirements, of the transaction contemplated by this Agreement, and shall take
all other necessary action and proceedings as may be required by applicable law,
rule and regulation, for the legal and valid issuance of the Note, the Common
Stock issuable upon conversion thereof, to the Purchaser.
Section 3.2 REGISTRATION AND LISTING. Until at least one (1) year after
all of the principal of the Note has been converted into Common Stock, the
Company will take all action within its power to continue the listing or trading
of its Common Stock on the National Quotation Bureau, Inc. "Pink Sheets" Market,
or the OTC Bulletin Board Market (or other national exchange or market) and will
comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the National Quotation Bureau, Inc. the
NASD and NASDAQ, as applicable. The covenants set forth in this Section 3.2
shall not be deemed to prohibit a merger, sale of all assets or other corporate
reorganization if the entity surviving or succeeding to the Company is bound by
this Agreement with respect to its securities issued in exchange for or in
replacement of the Note or Common Stock or the consideration received for or in
replacement of the Note or Common Stock is cash.
Section 3.3 TRANSFER AGENT INSTRUCTIONS.
a. THE NOTE. Except as noted in Section 3.4 below, upon
conversion of the Note, the Purchaser shall give a
notice of conversion to the Company and the Company
shall instruct its transfer agent to issue, and
deliver to Purchaser within three business (3) days
after the date of such notice of conversion, one or
more certificates representing that number of shares
of Common Stock into which the Note is convertible in
accordance with the provision regarding conversion
set forth in EXHIBIT A. The Company shall act as Note
Registrar and shall maintain an appropriate ledger
containing the necessary information with respect to
the Note.
b. COMMON STOCK TO BE ISSUED WITHOUT RESTRICTIVE LEGEND.
Upon the conversion of all or any portion of the
Note, the Company shall instruct its transfer agent
to issue certificates equivalent to the number of
shares of Common Stock to be received upon such
conversion, along with any shares issued as interest
in accordance with the terms of the Note, without
restrictive legend in the name of the Purchaser (or
its nominee) and in such denominations to be
specified at conversion by the Purchaser. The Common
Stock shall be immediately freely transferable on the
books and records of the Company.
c. REGISTRATION. If upon conversion of the Note effected
by Purchaser pursuant to the terms of this Agreement
the Company fails to issue certificates for shares of
Common Stock issuable upon such conversion (the
"Underlying Shares") to Purchaser bearing no
restrictive legend of any kind for any reason, then
the Company shall be required , at the request of
Purchaser and at the Company's expense, to effect the
registration of the Underlying Shares under the 1933
Act and all relevant "blue sky" laws as promptly as
is practicable but in any event within the time
limits specified in this Paragraph 3.3(C). The
Company and Purchaser shall cooperate in good faith
in connection with the furnishing of information
required for such registration and the taking of such
other actions as may be legally or commercially
necessary in order to effect such registration. The
Company shall file a registration statement within
thirty (30) days after Purchaser's demand therefore
and shall use its best efforts to cause such
registration statement to become effective as soon as
practicable thereafter and in any event within one
hundred twenty (120) days from the initial filing
thereof. Such best efforts shall include, without
limitation, promptly responding to all comments
received from the SEC and providing Purchaser's
counsel with a contemporaneous copy of all written
correspondence with the SEC. Once declared effective
by the SEC, the Company shall cause such registration
statement to remain effective until the earlier of:
(i) the sale by Purchaser of all Underlying Shares
registered; or (ii) one hundred eighty (180) days
after the effective date of such registration
statement. In the event the Company undertakes to
file a registration statement on Form S-3 in
connection with the Common Stock, upon the
effectiveness of such registration, Purchaser shall
have the option to sell the Underlying Shares
pursuant thereto. The foregoing shall not in any way
limit Purchaser's rights in connection with the
Common Stock or the Underlying Shares pursuant to
Regulation D or otherwise. If the registration
statement required hereunder is not declared
effective by the SEC within the time limits stated in
the Paragraph 3.3(c ), the Company will be liable to
Purchaser for liquidated damages. Such liquidated
damages shall be in the amount of three percent (3%)
of the Purchase Price for each thirty (30) day period
beginning on the date effectiveness was called for
under this Paragraph 3.3( c) and ending on the date
on which such registration statement is declare
effective by the SEC. Said liquidated damages shall
be pro-rated for the partial thirty (30) day period
in which the registration statement is declared
effective. Said liquidated damages shall be due and
payable at the end of each such thirty (30) day
period, and shall be paid in cash at the place
specified in writing by Purchaser. After one (1) year
from the Closing Date, such liquidated damages will
cease to accrue and Purchaser may rely upon Rule 144
for conversion of the Note into Common Stock and for
all sales of Common Stock received upon conversion.
Section 3.4 ESCROW OF COMMON STOCK. As additional security for the
transactions contemplated herein (and in the Note purchase agreements executed
by the Company and third parties with respect to this offering(, the Company has
agreed to place in escrow with the Escrow Agent 1,000,000 shares of
non-restricted Common Stock ("Escrowed Shares"), in accordance with the terms of
that escrow agreement attached to this Agreement as EXHIBIT B (the "Escrow
Agreement"). With respect to the conversion of the Note, in addition to the
provisions of Section 3.3 above, upon conversion of the Note into Common Stock
in accordance with their terms, so long as a sufficient number of Escrowed
Shares are held by the Escrow Agent to effect such a conversion, the Purchaser
shall submit via facsimile a copy of each notice of conversion to the Escrow
Agent, and the Escrow Agent shall transmit to the Purchaser via electronic
transfer, or via delivery of one or more non-legended stock certificates (along
with duly executed and Medallion guaranteed stock powers) representing, such
number of Escrowed Shares as are specified in such notice of conversion. Such
transfer, so long as in accordance with the terms of this Agreement, the Escrow
Agreement and the notice of conversion delivered to the Escrow Agent, shall
satisfy the conversion requirement of any portion of the Note so converted. If
all (or such number that no further portion of the Note may be converted in full
based upon the then-prevailing conversion price) of the Escrowed Shares are
delivered to the Purchaser pursuant to conversion of the Note, but there is any
portion of the Note still outstanding, the Purchaser may require the Company to
place additional non-restricted Common Stock in escrow, which the Company shall
place in escrow within three (3) business days after written request from the
Purchaser to do so. The number of additional shares shall be equal to two and
one-half times [(the outstanding principal of that portion of the Note not
previously converted) divided by {(the then current bid price of the Common
Stock, determined by taking the lowest closing bid price for the ten (10)
trading days prior to such written request by Purchaser) multiplied by the ten
applicable conversion rate as stated in the Notes}].
Likewise, the Company agrees, and does hereby reaffirm and covenant,
that, should the Purchaser, in good faith, reasonably deem itself insecure upon
examination and consideration of the outstanding principal amount due under the
Note and the number of Escrowed Shares remaining with the Escrow Agent, then the
Purchaser may give the Company written notice of such fact via facsimile, and
the Company will immediately (but in any event within three (3) business days
after such facsimile notice) place with the Escrow Agent sufficient additional
Shares to provide reasonable security for the Purchaser. For purposes of this
paragraph, "reasonable security" on any given date shall mean a sufficient
number of Escrowed Shares that, if all of the then-remaining outstanding
principal of the Note were converted on that date at the applicable discount
rate, then there would be at least two hundred fifty percent (250%) of the
required number of Escrow Shares to effect such conversion in full. Thus, FOR
EXAMPLE, if there were a $50,000 balance remaining on the Note, and the closing
bid price were $4.25 per share, and the conversion price were $3.40 per share,
then the Purchaser would be "reasonably secure" so long as there were 36,765
Escrowed Shares on deposit with the Escrow Agent [50,000/3.40 X 2.5 = 36,765].
Upon conversion of all the outstanding principal amount of the Note,
any and all remaining Escrow Shares shall be returned to the Company by the
Escrow Agent in accordance with the terms of the Escrow Agreement or in
accordance with the instructions of the Company.
Section 3.5 USE OF PROCEEDS. The Company shall use the proceeds from
the sale of the Securities for general working capital purposes. If specifically
requested by the Purchaser, the Company will provide the Purchaser a schedule of
the exact use of proceeds prior to Closing.
Section 4.1 GENERAL CONDITIONS PRECEDENT TO THE OBLIGATION OF THE
COMPANY TO SELL THE NOTE. The obligation hereunder of the Company to issue
and/or sell the Securities to the Purchaser is subject to the satisfaction, at
the Closing, of each of the conditions set forth below. These conditions may be
waived by the Company at any time in its sole discretion.
(a) ACCURACY OF THE PURCHASER'S REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Purchaser shall be
true and correct in all material respects as of the date when
made and as of the Closing Date as though made at that time
(except for any representations and warranties that are
effective as of a particular, specified date).
(b) PERFORMANCE BY THE PURCHASER. The Purchaser shall have
performed all agreements and satisfied all conditions required
to be performed or satisfied by the Purchaser at or prior to
the Closing
(c) NO INJUNCTION, NO LEGAL ACTION. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions
contemplated by this Agreement. No legal action, suit or
proceeding shall be pending or threatened which seeks to
restrain or prohibit the transactions contemplated by the
Agreement.
(d) [Intentionally left blank.]
(e) EXECUTION. The Purchaser shall have executed this Agreement
and the Escrow Agreement, and delivered said documents to the
Escrow Agent on behalf of the Company.
(f) PURCHASE PRICE. The Purchaser shall have delivered the applicable
Purchase Price for the Note, in accordance with Sections 1.2 and 1.3 above.
Section 4.2 GENERAL CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE
PURCHASER TO PURCHASE THE NOTE. The obligation hereunder of the Purchaser to
acquire and pay for the Securities is subject to the satisfaction, at the
Closing, of each of the conditions set forth below. These conditions may be
waived by the Purchaser at any time in its sole discretion.
(a) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties that are effective
as of a particular, specified date).
(b) PERFORMANCE BY THE COMPANY. The Company shall have performed all
agreements and satisfied all conditions required to be performed or satisfied by
the Company pursuant to this Agreement and the Escrow Agreement at or prior to
the Closing, unless any such agreement or condition is waived by the Purchaser
in writing at or prior to Closing.
(c) TRADING AND LISTING. The Company shall not have received notice of,
and trading in the Company's Common Stock shall not have been, suspended by the
SEC or a national securities exchange or market (currently the National
Quotation Bureau, Inc., "Pink Sheets" Market) (except for any suspension of
trading of limited duration agreed to between the Company and the principal
exchange on which the Common Stock is traded solely to permit dissemination of
material information regarding the Company) or delisted by such exchange or
market, and trading in securities generally as reported by such exchange shall
not have any prior time been suspended or limited, or minimum prices shall not
have been established on securities whose trades are reported by such exchange.
(d) NO INJUNCTION. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(e) EXECUTION. The Company shall have executed this Agreement, the
Escrow Agreement and the Note, and delivered such documents and the Note, along
with the Escrowed Shares, to the Escrow Agent on behalf of the Purchaser.
Section 5.1 NO LEGEND ON STOCK. No certificate representing the Common
Stock issued upon conversion of the Note shall contain any restrictive legend of
any kind.
Section 6.1 TERMINATION. This Agreement may be terminated at any time
prior to the Closing by the mutual written consent of the Company and the
Purchaser. This Agreement may be terminated by action of the respective Board of
Directors or other governing body of the Purchaser or the Company at any time if
the Closing shall not have been consummated by the tenth (10th) business day
following the date of this Agreement, provided that the party seeking to
terminate the Agreement is not in breach of the Agreement. This Agreement shall
automatically terminate without any further action of either party hereto if the
Closing shall not have occurred by the twentieth (20th) business day following
the date of this Agreement, PROVIDED, HOWEVER, that any such termination shall
not terminate the liability of any party which is then in breach of the
Agreement.
Section 7.1 FEES AND EXPENSES. The Company shall pay the fees,
commissions and expenses of its advisers, brokers, finders, counsel, accountants
and other experts, if any, and all other expenses associated therewith, in
accordance with their respective agreements. The Company shall pay all stamp and
other taxes and duties levied in connection with the issuance of the Note and
all Common Stock pursuant thereto and hereto.
Section 7.2 SPECIFIC ENFORCEMENT, CONSENT TO JURISDICTION;
INDEMNIFICATION.
(a) The Company and the Purchaser acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction to prevent or cure breaches of the provisions of this Agreement
and to enforce specifically the terms and provisions hereof, this being in
addition to any other remedy to which either of them may be entitled by law or
equity. No provision of this Agreement providing for any specific remedy to a
party shall be construed to limit such party to the specific remedy described,
and any other remedy that would otherwise be available to such party at law or
in equity shall be so available. Nothing in this Agreement shall limit any
rights a party may have with any applicable federal or state securities laws
with respect to the transactions contemplated hereby.
(b) The Company and the Purchaser each (i) hereby irrevocably submits
to the jurisdiction of the United States District Court and other courts of the
United States sitting in the city of Denver, state of Colorado for the purposes
of any suit, action or proceeding arising out of or relating to this Agreement
and (ii) hereby waives, and agrees not to assert in any such suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
such court, that the suit, action or proceeding is brought in an inconvenient
forum or that the venue of the suit, action or proceeding is improper. The
Company and the Purchaser each consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing in this paragraph shall affect or limit any right to serve
process in any other manner permitted by law.
(c) To the extent permitted by law, the Company will indemnify, hold
harmless and defend the Purchaser, the directors, officers and each person who
controls the Purchaser within the meaning of the 1933 Act or the 1934 Act, if
any (each, an "Indemnified Person"), against any losses, claims, damages,
liabilities or expenses (joint or several) (collectively, together with actions,
proceedings or inquiries by any regulatory or self regulatory organization,
whether commenced or threatened, in respect thereof, "Claims") to which any of
them may become subject insofar as such Claims arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of a material fact in this
Agreement or the omission or alleged omission to state a material fact therein
required to be stated or necessary to make the statements herein not misleading,
(ii) any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus or other documentation provided by the
Company to the Purchaser or the omission or alleged omission to state therein
any material fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading, or
(iii) any violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any other law, including, without limitation, any state securities
law, or any rule or regulation thereunder relating to the offer or sale of the
Securities to the Purchaser.
Section 7.3 ENTIRE AGREEMENT: AMENDMENT. This Agreement contains the
entire understanding of the parties with respect to the matters covered hereby
and, except as specifically set forth herein, neither the Company nor the
Purchaser makes any representation, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be waived or amended
other than by a written instrument signed by the party against whom enforcement
of any such amendment or waiver is sought.
Section 7.4 NOTICES. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be effective (a)
upon hand delivery or delivery by telex (with correct answer back received),
telecopy or facsimile at the address or number designated below (if delivered on
a business day during normal business hours where such notice is to be
received), or the first business day following such delivery (if delivered other
than on a business day during normal business hours where such notice is to be
received) or (b) on the second (2nd) business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be:
to the Company: Xx. Xxxxxxx Xxxxxxxx, Chief Financial Officer
AimRite Holdings Corporation
000 Xxxxxxx Xxxxxx Xxxx
Xxxxxx Xxxxx, Xxxxxxxxxx 00000
FAX: 000-000-0000
TEL: 000-000-0000
to the Purchaser: At the address set forth on the signature page of
this Agreement or as specified hereafter in writing
by Purchaser.
Any party hereto may from time to time change its address for notices by giving
at least ten (10) days' written notice of such changed address to the other
party hereto.
Section 7.5 WAIVERS. No waiver by either party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter.
Section 7.6 HEADINGS. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
Section 7.7 GOVERNING LAW; SECURITIES PURCHASED IN COLORADO. This
Agreement shall be governed by and construed and enforced in accordance with the
internal laws of the State of Delaware without regard to such state's principles
of conflict of laws. This transaction is deemed made in the state of Colorado,
and the Securities shall be deemed to have been purchased and sold in the state
of Colorado.
Section 7.8 SURVIVAL. The representations and warranties of the Company
and the Purchaser contained in herein and the agreements and covenants set forth
in Sections 1.1 through 1.4, 3.1 through 3.5 and 7.1 through 7.16 shall survive
for a period of three (3) years after the Closing Date.
Section 7.9 PUBLICITY. The Company agrees that it will not disclose,
and will not include in any public announcement, the name of the Purchaser
without its consent, unless and until such disclosure is required by law or
applicable regulation, and then only to the extent of such requirement.
Section 7.10 [INTENTIONALLY OMITTED.]
Section 7.11 ACCEPTANCE. Execution and delivery of this Agreement by
the Purchaser shall constitute an offer to purchase the Note, which offer,
unless previously revoked by the Purchaser, may be accepted or rejected by the
Company, in its sole discretion for any cause or for no cause and without
liability to the Purchaser. The Company shall indicate acceptance of this
Agreement by signing as indicated on the signature page hereof.
Section 7.12 BINDING AGREEMENT. Upon acceptance of this Agreement by
the Company, the Purchaser agrees that it may not cancel, terminate or revoke
any agreement of the Purchaser made hereunder, and that this Agreement shall
survive the death or disability of the Purchaser and shall be binding upon
heirs, successors, assigns, executors, administrators, guardians, conservators
or personal representatives of the Purchaser.
Section 7.13 INCORPORATION BY REFERENCE. All information set forth on
the signature page is incorporated as integral terms of this Agreement.
Section 7.14 COUNTERPARTS. This Agreement may be signed in multiple
counterparts, which counterparts shall constitute one and the same original
instrument.
Section 7.15 SEVERABILITY. If any portion of this Agreement shall be
held illegal, unenforceable, void or voidable by any court, each of the
remaining terms hereof shall nevertheless remain in full force and effect as a
separate contract.
Section 7.16 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
IN WITNESS WHEREOF, the Purchaser has executed this Agreement on the
date set forth below.
[SIGNATURE PAGE FOLLOWS]
[SIGNATURE PAGE TO NOTE PURCHASE AGREEMENT DATED SEPTEMBER 7, 2000]
COMPANY:
AIMRITE HOLDINGS CORPORATION
By:______________________________________________
Xx. Xxxxxxx Xxxxxxxx, Chief Financial Officer
PURCHASER:
SALKSANNA, INC.
By:_______________________________________________
(Duly Authorized Officer)
Purchaser's Address:
Salksanna, Inc.
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attn: X.X. Xxxxxxxx
Required Copy to: Mr. H. Xxxxx Xxxxxxx, Xx., Esq.
0000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Telecopier: 919.785.3116
