EXHIBIT 10.32
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") dated
as of December 13, 2004 by and among DCI USA, INC., a Delaware
corporation (the "Company") and the Buyers listed on Schedule I
attached hereto (individually, a "Buyer" or collectively
"Buyers").
WITNESSETH:
WHEREAS, the Company and the Buyer(s) are executing and
delivering this Agreement in reliance upon an exemption from
securities registration pursuant to Section 4(2) and/or Rule 506
of Regulation D ("Regulation D") as promulgated by the U.S.
Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "1933 Act");
WHEREAS, the parties desire that, upon the terms and subject
to the conditions contained herein, the Company shall issue and
sell to the Buyer(s), as provided herein, and the Buyer(s) shall
purchase Five Hundred Thousand Dollars ($500,000) (the "Purchase
Price") of secured convertible debentures (the "Convertible
Debentures"), which shall be convertible into shares of the
Company's common stock, par value $0.001 (the "Common Stock") (as
converted, the "Conversion Shares"), which shall be funded in two
tranches. The first tranche for a total purchase price of two
hundred and fifty thousand dollars ($250,000) shall be funded
within five (5) business days hereof (the "First Closing"). The
second tranche for a total purchase price of two hundred and
fifty thousand dollars ($250,000) shall be funded within five (5)
business days after the filing of the Registration Statement,
pursuant to the Investor Registration Rights Agreement of even
date herewith, with the SEC covering the registration of the
Common Stocks underlying this agreement (the "Second
Closing"). The Purchase Price is in the respective amounts set
forth opposite each Buyer(s) name on Schedule I (the
"Subscription Amount"); and
WHEREAS, contemporaneously with the execution and delivery
of this Agreement, the parties hereto are executing and
delivering a Registration Rights Agreement (the "Investor
Registration Rights Agreement") pursuant to which the Company has
agreed to provide certain registration rights under the 1933 Act
and the rules and regulations promulgated there under, and
applicable state securities laws; and
WHEREAS, the aggregate proceeds of the sale of the
Convertible Debentures contemplated hereby shall be held in
escrow pursuant to the terms of an Escrow Agreement (the "Escrow
Agreement") of even date herewith, and shall be funded by the
Escrow Agent to the Company within the time frames set forth
herein upon satisfaction of all applicable conditions.
WHEREAS, contemporaneously with the execution and delivery
of this Agreement, the parties hereto are executing and
delivering Irrevocable Transfer Agent Instructions (the
"Irrevocable Transfer Agent Instructions").
WHEREAS, contemporaneously with the execution and delivery
of this Agreement, the parties hereto are executing and
delivering a Security Agreement (the "Security Agreement")
pursuant to which the Company has agreed to provide the Buyer a
security interest in Pledged Collateral (as this term is defined
in the Security Agreement) to secure Company's obligations under
this Agreement, the Convertible Debenture, the Investor
Registration Rights Agreement, the Irrevocable Transfer Agent
Instructions, or any other obligations of the Company to the
Investor.
NOW, THEREFORE, in consideration of the mutual covenants and
other agreements contained in this Agreement the Company and the
Buyer(s) hereby agree as follows:
1. PURCHASE AND SALE OF CONVERTIBLE DEBENTURES.
(a) Purchase of Convertible Debentures. Subject to
the satisfaction (or waiver) of the terms and conditions of this
Agreement, each Buyer agrees, severally and not jointly, to
purchase at the Closing and the Company agrees to sell and issue
to each Buyer, severally and not jointly, at the Closing,
Convertible Debentures in amounts corresponding with the
Subscription Amount set forth opposite each Buyer's name on
Schedule I hereto. Upon execution hereof by a Buyer, the Buyer
shall wire transfer the Subscription Amount set forth opposite
his name on Schedule I in same-day funds or a check payable to
"Xxxxx Xxxxxxxx, as Escrow Agent for DCI USA, Inc./Cornell
Capital Partners, LP", which Subscription Amount shall be held in
escrow pursuant to the terms of the Escrow Agreement (as
hereinafter defined) and disbursed in accordance therewith.
(b) Closing Date. The First Closing of the purchase
and sale of the Convertible Debentures shall take place on or
before the fifth (5th) business day following the date hereof,
subject to notification by the Company of satisfaction of the
conditions to the Closing set forth herein and in Sections 6 and
7 below (or such later date as is agreed to by the Company and
the Buyer(s)) (the "First Closing Date"). The Second Closing of
the purchase and sale of the Convertible Debentures shall take
place on or before the fifth (5th) business day following the
filing of the Registration Statement with the SEC, subject to
notification of satisfaction of the conditions to the Closing set
forth herein and in Sections 6 and 7 below (or such later date as
is agreed to by the Company and the Buyer(s)) (the "Second
Closing Date"). The Closing shall occur on the respective
Closing Date at the offices of the Buyer, 000 Xxxxxx Xx., Xxxxx
0000, Xxxxxx Xxxx, XX 00000 (or such other place as is agreed to
by the Company and the Buyer(s)).
(c) Escrow Arrangements; Form of Payment. Subject to
the satisfaction of the terms and conditions of this Agreement,
on the First Closing Date, (i) the Escrow Agent shall deliver to
the Company in accordance with the terms of the Escrow Agreement
such aggregate proceeds for the Convertible Debentures to be
issued and sold to such Buyer(s), minus a structuring fee of
$10,000 to the Buyer pursuant to Section 4(g) hereof, which shall
be paid directly from the gross proceeds of the Closing held in
escrow, the 12% discount pursuant to Section 4(g) hereof and the
structuring fee of $15,000 referenced in Section 12.4 of the
Standby Equity Distribution Agreement of even date herewith
directly from the gross proceeds of the Closing held in escrow,
each by wire transfer of immediately available funds in
accordance with the Company's written wire instructions, and
(ii) the Company shall deliver to each Buyer, Convertible
Debentures which such Buyer(s) is purchasing in amounts indicated
opposite such Buyer's name on Schedule I, duly executed on behalf
of the Company. Subject to the satisfaction of the terms and
conditions of this Agreement, on the Second Closing Date, (i) the
Escrow Agent shall deliver to the Company in accordance with the
terms of the Escrow Agreement such aggregate proceeds for the
Convertible Debentures to be issued and sold to such Buyer(s),
minus the 12% discount pursuant to Section 4(g) hereof directly
from the gross proceeds of the Closing held in escrow, each by
wire transfer of immediately available funds in accordance with
the Company's written wire instructions, and (ii) the Company
shall deliver to each Buyer, Convertible Debentures which such
Buyer(s) is purchasing in amounts indicated opposite such Buyer's
name on Schedule I, duly executed on behalf of the Company.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants, severally and not
jointly, that:
(a) Investment Purpose. Each Buyer is acquiring
the Convertible Debentures and, upon conversion of Convertible
Debentures, the Buyer will acquire the Conversion Shares then
issuable, 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, except pursuant to sales registered or
exempted under the 1933 Act; provided, however, that by making
the representations herein, such Buyer reserves the right to
dispose of the Conversion Shares at any time in accordance with
or pursuant to an effective registration statement covering such
Conversion Shares or an available exemption under the 1933 Act.
(b) Accredited Investor Status. Each Buyer is an
SAccredited Investor" as that term is defined in Rule 501(a)(3)
of Regulation D.
(c) Reliance on Exemptions. Each Buyer
understands that the Convertible Debentures 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 such Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and
understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility
of such Buyer to acquire such securities.
(d) Information. Each Buyer and its advisors (and his
or, its counsel), if any, have been furnished with all materials
relating to the business, finances and operations of the Company
and information he deemed material to making an informed
investment decision regarding his purchase of the Convertible
Debentures and the Conversion Shares, which have been requested
by such Buyer. Each Buyer and its advisors, if any, have been
afforded the opportunity to ask questions of the Company and its
management. Neither such inquiries nor any other due diligence
investigations conducted by such Buyer or its advisors, if any,
or its representatives shall modify, amend or affect such Buyer's
right to rely on the Company's representations and warranties
contained in Section 3 below. Each Buyer understands that its
investment in the Convertible Debentures and the Conversion
Shares involves a high degree of risk. Each Buyer is in a
position regarding the Company, which, based upon employment,
family relationship or economic bargaining power, enabled and
enables such Buyer to obtain information from the Company in
order to evaluate the merits and risks of this investment. Each
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 Convertible Debentures and the
Conversion Shares.
(e) No Governmental Review. Each 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 Convertible Debentures or
the Conversion Shares, or the fairness or suitability of the
investment in the Convertible Debentures or the Conversion
Shares, nor have such authorities passed upon or endorsed the
merits of the offering of the Convertible Debentures or the
Conversion Shares.
(f) Transfer or Resale. Each Buyer understands that
except as provided in the Investor Registration Rights Agreement:
(i) the Convertible Debentures and the Conversion Shares 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) such Buyer shall have delivered to the Company an opinion of
counsel, in a generally acceptable form, to the effect that such
securities to be sold, assigned or transferred may be sold,
assigned or transferred pursuant to an exemption from such
registration requirements; (ii) any sale of such securities made
in reliance on Rule 144 under the 1933 Act (or a successor rule
thereto) ("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 such securities under circumstances in which the
seller (or the person through whom the sale is made) may be
deemed to be an underwriter (as that term is 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. The Company reserves the right to
place stop transfer instructions against the shares and
certificates for the Conversion Shares.
(g) Legends. Each Buyer understands that the
certificates or other instruments representing the Convertible
Debentures and or the Conversion Shares shall bear a restrictive
legend in substantially the following form (and a stop transfer
order may be placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED SOLELY FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW
TOWARD RESALE AND MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, OR AN
OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE
FORM, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR APPLICABLE STATE SECURITIES LAWS.
The legend set forth above shall be removed and the Company
within two (2) business days shall issue a certificate without
such legend to the holder of the Conversion Shares upon which it
is stamped, if, unless otherwise required by state securities
laws, (i) in connection with a sale transaction, provided the
Conversion Shares are registered under the 1933 Act, or (ii) in
connection with a sale transaction, after such holder provides
the Company with an opinion of counsel, which opinion shall be in
form, substance and scope customary for opinions of counsel in
comparable transactions, to the effect that a public sale,
assignment or transfer of the Conversion Shares may be made
without registration under the 1933 Act.
(h) Authorization, Enforcement. This Agreement has
been duly and validly authorized, executed and delivered on
behalf of such Buyer and is a valid and binding agreement of such
Buyer enforceable in accordance with its terms, except as such
enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting
generally, the enforcement of applicable creditors' rights and
remedies.
(i) Receipt of Documents. Each Buyer and his or its
counsel has received and read in their entirety: (i) this
Agreement and each representation, warranty and covenant set
forth herein, the Security Agreement, the Investor Registration
Rights Agreement, the Escrow Agreement, and the Irrevocable
transfer Agent Instructions; (ii) all due diligence and other
information necessary to verify the accuracy and completeness of
such representations, warranties and covenants; (iii) answers to
all questions each Buyer submitted to the Company regarding an
investment in the Company; and each Buyer has relied on the
information contained therein and has not been furnished any
other documents, literature, memorandum or prospectus.
(j) Due Formation of Corporate and Other Buyers. If
the Buyer(s) is a corporation, trust, partnership or other entity
that is not an individual person, it has been formed and validly
exists and has not been organized for the specific purpose of
purchasing the Convertible Debentures and is not prohibited from
doing so.
(k) No Legal Advice From the Company. Each Buyer
acknowledges that it had the opportunity to review this Agreement
and the transactions contemplated by this Agreement with his or
its own legal counsel and investment and tax advisors. Each
Buyer is relying solely on such counsel and advisors and not on
any statements or representations of the Company or any of its
representatives or agents for legal, tax or investment advice
with respect to this investment, the transactions contemplated by
this Agreement or the securities laws of any jurisdiction.
(l) 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
Securities Act) in connection with the offer or sale of the
shares of Common Stock offered hereby.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers
that, except as set forth in the Disclosure Schedule attached as
Exhibit "A" hereto:
(a) Organization and Qualification. The Company and
its subsidiaries 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 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 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 would not have a material adverse effect on the
Company and its subsidiaries taken as a whole.
(b) Authorization, Enforcement, Compliance with Other
Instruments. (i) The Company has the requisite corporate power
and authority to enter into and perform this Agreement, the
Security Agreement, the Investor Registration Rights Agreement,
the Escrow Agreement, the Irrevocable Transfer Agent
Instructions, and any related agreements, and to issue the
Convertible Debentures and the Conversion Shares in accordance
with the terms hereof and thereof, (ii) the execution and
delivery of this Agreement, the Security Agreement, the Investor
Registration Rights Agreement, the Escrow Agreement, the
Irrevocable Transfer Agent Instructions (as defined herein) and
any related agreements by the Company and the consummation by it
of the transactions contemplated hereby and thereby, including,
without limitation, the issuance of the Convertible Debentures
the Conversion Shares and the reservation for issuance and the
issuance of the Conversion Shares issuable upon conversion or
exercise thereof, 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
stockholders, (iii) this Agreement, the Security Agreement, the
Investor Registration Rights Agreement, the Escrow Agreement, the
Irrevocable Transfer Agent Instructions and any related
agreements have been duly executed and delivered by the Company,
(iv) this Agreement, the Security Agreement, the Investor
Registration Rights Agreement, the Escrow Agreement, the
Irrevocable Transfer Agent Instructions and any related
agreements constitute 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. The authorized officer of the Company executing
this Agreement, the Security Agreement, the Investor Registration
Rights Agreement, the Escrow Agreement, the Irrevocable Transfer
Agent Instructions and any related agreements knows of no reason
why the Company cannot file the registration statement as
required under the Investor Registration Rights Agreement or
perform any of the Company's other obligations under such
documents.
(c) Capitalization. As of the date hereof, the
authorized capital stock of the Company consists of 101,000,000
shares of stock, of which 100,000,000 shares are designated as
Common Stock, of which 35,000,000 shares are outstanding, and
1,000,000 shares, which are designated as preferred shares, of
which 200,000 are designated as Series A Preferred. All of such
outstanding shares have been validly issued and are fully paid
and nonassessable. Except as disclosed in the Disclosure
Schedule, no shares of Common Stock are subject to preemptive
rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company. Except as disclosed in the
Disclosure Schedule, as of the date of this Agreement, (i) there
are no outstanding options, warrants, scrip, rights to subscribe
to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into, any shares of capital
stock of the Company or any of its subsidiaries, or 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, (ii) there are
no outstanding debt securities and (iii) there are no agreements
or arrangements under which the Company or any of its
subsidiaries is obligated to register the sale of any of their
securities under the 1933 Act (except pursuant to the
Registration Rights Agreement) and (iv) there are no outstanding
registration statements and there are no outstanding comment
letters from the SEC or any other regulatory agency. There are
no securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the
Convertible Debentures as described in this Agreement. The
Company has furnished to the Buyer true and correct copies of the
Company's Certificate of Incorporation, as amended and as in
effect on the date hereof (the "Certificate of Incorporation"),
and the Company's By-laws, as in effect on the date hereof (the
"By-laws"), and the terms of all securities convertible into or
exercisable for Common Stock and the material rights of the
holders thereof in respect thereto other than stock options
issued to employees and consultants.
(d) Issuance of Securities. The Conversion Shares
issuable upon conversion of the Convertible Debentures have been
duly authorized and reserved for issuance. Upon conversion or
exercise in accordance with the Convertible Debentures the
Conversion Shares will be duly issued, fully paid and
nonassessable.
(e) No Conflicts. Except as disclosed in the
Disclosure Schedule, the execution, delivery and performance of
this Agreement, the Security Agreement, the Investors
Registration Rights Agreement, the Escrow Agreement and the
Irrevocable Transfer Agent Instructions by the Company and the
consummation by the Company of the transactions contemplated
hereby will not (i) result in a violation of the Certificate of
Incorporation, any certificate of designations 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 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 National
Association of Securities Dealers Inc.'s OTC Bulletin Board on
which the Common Stock is quoted) 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 the Disclosure Schedule, neither the Company nor
its subsidiaries is in violation of any term of or in default
under its Certificate of Incorporation or By-laws or their
organizational charter or by-laws, respectively, or 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. The
business of the Company and its subsidiaries is not being
conducted, and shall not be conducted in violation of any
material law, ordinance, or regulation of any governmental
entity. Except as specifically contemplated by this Agreement
and as required under the 1933 Act and any applicable state
securities laws, 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 in order for
it to execute, deliver or perform any of its obligations under or
contemplated by this Agreement or the Registration Rights
Agreement in accordance with the terms hereof or thereof. Except
as disclosed in the Disclosure Schedule, 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 and its subsidiaries are unaware of any facts or
circumstance, which might give rise to any of the foregoing.
(f) Financial Statements. As of their respective
dates, the financial statements of the Company (the "Financial
Statements") for the two most recently completed fiscal years and
any subsequent interim period 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). No other information provided by or
on behalf of the Company to the Buyer, including, without
limitation, information referred to in this Agreement, contains
any untrue statement of a material fact or omits to state any
material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading.
(g) Absence of Litigation. Except as disclosed in the
Disclosure Schedule, there is no action, suit, proceeding,
inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending
against or affecting the Company, the Common Stock or any of the
Company's subsidiaries, wherein an unfavorable decision, ruling
or finding would (i) have a material adverse effect on the
transactions contemplated hereby (ii) adversely affect the
validity or enforceability of, or the authority or ability of the
Company to perform its obligations under, this Agreement or any
of the documents contemplated herein, or (iii) except as
expressly disclosed in the Disclosure Schedule, have a material
adverse effect on the business, operations, properties, financial
condition or results of operations of the Company and its
subsidiaries taken as a whole.
(h) Acknowledgment Regarding Buyer's Purchase of the
Convertible Debentures. The Company acknowledges and agrees that
the Buyer(s) is acting solely in the capacity of an arm's length
purchaser with respect to this Agreement and the transactions
contemplated hereby. The Company further acknowledges that the
Buyer(s) is not acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to this
Agreement and the transactions contemplated hereby and any advice
given by the Buyer(s) or any of their respective representatives
or agents in connection with this Agreement and the transactions
contemplated hereby is merely incidental to such Buyer's purchase
of the Convertible Debentures or the Conversion Shares. The
Company further represents to the Buyer that the Company's
decision to enter into this Agreement has been based solely on
the independent evaluation by the Company and its
representatives.
(i) 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 Convertible
Debentures or the Conversion Shares.
(j) 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 the Convertible
Debentures or the Conversion Shares under the 1933 Act or cause
this offering of the Convertible Debentures or the Conversion
Shares to be integrated with prior offerings by the Company for
purposes of the 1933 Act.
(k) Employee Relations. Neither the Company nor any of
its subsidiaries is involved in any labor dispute nor, to the
knowledge of the Company or any of its subsidiaries, is any such
dispute threatened. None of the Company's or its subsidiaries'
employees is a member of a union and the Company and its
subsidiaries believe that their relations with their employees
are good.
(l) Intellectual Property Rights. The Company and its
subsidiaries own or possess adequate rights or licenses to use
all 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. The Company and its subsidiaries do
not have any knowledge of any infringement by the Company or its
subsidiaries of 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, and, to the knowledge of the Company there is
no 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; and the Company and its subsidiaries are unaware of
any facts or circumstances which might give rise to any of the
foregoing.
(m) Environmental Laws. The Company and its
subsidiaries are (i) 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.
(n) Title. Any real property and facilities held under
lease by the Company and 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.
(o) 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.
(p) 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.
(q) Internal Accounting Controls. The Company and each
of its subsidiaries maintain a system of internal accounting
controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general
or specific authorizations, (ii) transactions are recorded as
necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain asset accountability, and (iii) the recorded amounts for
assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences.
(r) No Material Adverse Breaches, etc. Except as set
forth in the Disclosure Schedule, neither the Company nor any of
its subsidiaries is subject to any charter, corporate or other
legal restriction, or any judgment, decree, order, rule or
regulation which in the judgment of the Company's officers has or
is expected in the future to have a material adverse effect on
the business, properties, operations, financial condition,
results of operations or prospects of the Company or its
subsidiaries. Except as set forth in the Disclosure Schedule,
neither the Company nor any of its subsidiaries is in breach of
any contract or agreement which breach, in the judgment of the
Company's officers, has or is expected to have a material adverse
effect on the business, properties, operations, financial
condition, results of operations or prospects of the Company or
its subsidiaries.
(s) Tax Status. Except as set forth in the Disclosure
Schedule, the Company and each of its subsidiaries has made and
filed all federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it
is subject and (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) 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.
(t) Certain Transactions. Except as set forth in the
Disclosure Schedule, and except for arm's length transactions
pursuant to which the Company makes payments in the ordinary
course of business upon terms no less favorable than the Company
could obtain from third parties and other than the grant of stock
options disclosed in the Disclosure Schedule, none of the
officers, directors, or employees of the Company is presently a
party to any transaction with the Company (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 a substantial interest or is an officer, director, trustee or
partner.
(u) Fees and Rights of First Refusal. The Company is
not obligated to offer the securities offered hereunder on a
right of first refusal basis or otherwise to any third parties
including, but not limited to, current or former shareholders of
the Company, underwriters, brokers, agents or other third
parties. During the Commitment Period, (as such term is defined
in the Standby Equity Distribution Agreement of even date hereof
between the Company and the Buyer) the Company hereby grants to
Buyer the right of first refusal (the "Right of First Refusal")
to purchase New Securities (as defined in the next paragraph)
that the Company may, from time to time and in one or more
transactions, propose to sell and issue. In connection with such
right, the Company covenants and agrees to give Investor written
notice (an "Offering Notice") specifying, in detail, the terms
and conditions of any bona fide proposed sale of New Securities
and the names and addresses of such persons and entities prepared
to purchase such New Securities, and any representatives, brokers
or dealers proposing to effectuate such sale, together with all
compensation terms. The Buyer shall have the right, for a period
expiring at 11:59 PM (Eastern Time) on the twenty first (21st)
business day after the giving of the Offering Notice (the
"Exercise Period"), to purchase the New Securities for the price
and on the general terms and conditions specified in the Offering
Notice. The Buyer's failure to exercise such right shall not
result in the cancellation of Buyer's right of first refusal on
any other proposed financing by the Company thereafter. The
Company and the Buyer agree to negotiate in good faith and
finalize the documentation with respect to the purchase of New
Securities within such time period.
The term "New Securities" as used in the preceding paragraph
shall mean any offering and issuance by the Company of Common
Stock or securities convertible into, and/or other rights
exercisable for the issuance of, Common Stock to or with any
third party without consideration or for a consideration per
share less than the Bid Price on the date of issuance of the New
Securities with the exception of New Securities issued in
conjunction with the closing of a contract, sub-contract, teaming
arrangement, joint venture or strategic partnership but only to
the extent that such New Securities do not exceed 10% of the
Company's outstanding Common Stock on the date of issuance.
Except as may otherwise be permitted pursuant to the forgoing,
during the Commitment Period, the Company shall not issue or sell
any warrant, option, right, contract, call, or other security or
instrument granting the holder thereof the right to acquire
Common Stock without consideration or for a consideration per
share less than the Bid Price on the date of issuance.
Notwithstanding anything contained herein to the contrary, Buyer
agrees that the Company has the right to (i) file a Form S-8 for
a stock option plan with respect to 3,750,000 shares of common
stock; the issuance of shares thereunder shall require the
stockholder to execute a lock-up restricting such holder's shares
to no more than 25% of such shares within each 4 month period,
and (ii) issue restricted shares of common stock pursuant to rule
144 as follows: Xxxxx Xxxxxxxxxx - 850,000 shares; Xxxx Xxxx-
360,000 shares; Xxx Xxxxxxxx-360,000 shares and DCI Management,
LLC-1,500,000 shares.
(v) The Company has not received any comments from the
SEC relating to any reports filed with the SEC by the Company,
including any Form 10-QSBs, 10-KSBs, 8-Ks or any other reports.
(w) The Company has sufficient means to continue its
operations for at least 6 months (after taking into consideration
the proceeds received hereunder).
(x) SEC Documents; Financial Statements. Since January
1, 2003, the Company has filed all reports, schedules, forms,
statements and other documents required to be filed by it with
the SEC under of the Exchange Act (collectively, the "SEC
Documents"). The Company has delivered to the Investor or its
representatives, or made available through the SEC's website at
xxxx://xxx.xxx.xxx, true and complete copies of the SEC
Documents. As of their respective dates, the financial
statements of the Company disclosed in the SEC Documents (the
"Financial Statements") 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). No other information provided by or
on behalf of the Company to the Investor which is not included in
the SEC Documents contains any untrue statement of a material
fact or omits to state any material fact necessary in order to
make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(y) 10b-5. The SEC Documents do not include any untrue
statements of material fact, nor do they omit to state any
material fact required to be stated therein necessary to make the
statements made, in light of the circumstances under which they
were made, not misleading.
(z) The Company acknowledges that the Buyer is relying
on the representations and warranties made by the Company
hereunder and that such representations and warranties are a
material inducement to the Buyer purchasing the Convertible
Debentures. The Company further acknowledges that without such
representations and warranties of the Company made hereunder, the
Buyer would not enter into this Agreement.
(aa) The Company represents to the Buyer that the
exercise of the option (the "Option", terms are detailed in
Exhibit B) to convert the outstanding debenture (the "Debenture")
given by 000 Xxxxxx Xxxxxx LLC to Direct Capital Investments,
Ltd, a company incorporated in the State of Israel, into a 35%
membership ("the Membership Interest") in 000 Xxxxxx Xxxxxx
Property Development LLC, which own 100% of the real estate
property located at 000 Xxxxxx Xxxxxx (xxx "Xxxxxxxx"), Xxxxxxxx,
XX, will not violate any provision of, or be prohibited by, any
loan agreement related to the Building, other than the current
mortgage loan due to Intervest National Bank. The Membership
Interest may be subject to dilution by the sale of membership
interests for a price equal to the fair market value of such
interests in an arms length transaction to a new bona fide member
or members, but in no event shall such dilution reduce the
capital account of the Membership Interest
4. COVENANTS.
(a) Best Efforts. Each party shall use its best
efforts timely to satisfy each of the conditions to be satisfied
by it as provided in Sections 6 and 7 of this Agreement.
(b) Form D. The Company agrees to file a Form D with
respect to the Conversion Shares as required under Regulation D
and to provide a copy thereof to each Buyer promptly after such
filing. The Company shall, on or before the Closing Date, take
such action as the Company shall reasonably determine is
necessary to qualify the Conversion Shares, or obtain an
exemption for the Conversion Shares for sale to the Buyers at the
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 Buyers on or
prior to the Closing Date.
(c) Reporting Status. Commencing on the effectiveness
of the registration statement filed with the SEC pursuant to the
Investor Registration Rights Agreement and until the earlier of
(i) the date as of which the Buyer(s) may sell all of the
Conversion Shares without restriction pursuant to Rule 144(k)
promulgated under the 1933 Act (or successor thereto), or
(ii) the date on which (A) the Buyer(s) shall have sold all the
Conversion Shares and (B) none of the Convertible Debentures are
outstanding (the "Registration Period"), the Company shall file
in a timely manner all reports required to be filed with the SEC
pursuant to the 1934 Act and the regulations of the SEC
thereunder, and the Company shall not terminate its status as an
issuer required to file reports under the 1934 Act even if the
1934 Act or the rules and regulations thereunder would otherwise
permit such termination.
(d) Use of Proceeds. The Company will use the proceeds
from the sale of the Convertible Debentures for general corporate
and working capital purposes.
(e) Reservation of Shares. The Company shall take all
action reasonably necessary to at all times have authorized, and
reserved for the purpose of issuance, such number of shares of
Common Stock as shall be necessary to effect the issuance of the
Conversion Shares. If at any time the Company does not have
available such shares of Common Stock as shall from time to time
be sufficient to effect the conversion of all of the Conversion
Shares of the Company shall call and hold a special meeting of
the shareholders within thirty (30) days of such occurrence, for
the sole purpose of increasing the number of shares authorized.
The Company's management shall recommend to the shareholders to
vote in favor of increasing the number of shares of Common Stock
authorized. Management shall also vote all of its shares in
favor of increasing the number of authorized shares of Common
Stock.
(f) Listings or Quotation. The Company shall maintain
the listing or quotation of the Common Stock for so long as the
Investor is the beneficial owner of any Common Stock or
Conversion Shares (whether obtained or to be obtained under this
Agreement), the Convertible Debentures or any other agreement
between the Company and the Buyer. The Company shall maintain
the Common Stock's authorization for quotation on the OTCBB. It
shall be an event of default hereunder if the Company fails to
strictly comply with its obligations under this Section 4(f).
(g) Fees and Expenses. Except as set forth below, each
of the Company and the Buyer(s) shall pay all costs and expenses
incurred by such party in connection with the negotiation,
investigation, preparation, execution and delivery of this
Agreement, the Escrow Agreement, the Investor Registration Rights
Agreement, the Security Agreement and the Irrevocable Transfer
Agent Instructions. The Buyer(s) shall be entitled to a
commitment fee of twelve percent (12%) on the Purchase Price.
The Company shall pay to the Buyer a structuring fee of
$10,000 (the "Structuring Fee") in connection with this
transaction, which shall be paid on the Closing Date directly
from the gross proceeds payable to the Company hereunder. The
structuring fee shall be deemed fully earned on the date hereof.
The Company shall be solely responsible for the contents of
any such registration statement, prospectus or other filing made
with the SEC or otherwise used in the offering of the Company's
securities (except as such disclosure relates solely to the
Buyer(s) and then only to the extent that such disclosure
conforms with information furnished in writing by the Investor to
the Company), even if the Buyer or its agents as an accommodation
to the Company participate or assist in the preparation of such
registration statement, prospectus or other SEC filing. The
Company shall retain its own legal counsel to review, edit,
confirm and do all things such counsel deems necessary or
desirable to such registration statement, prospectus or other SEC
filing to ensure that it does not contain an untrue statement or
alleged untrue statement of material fact or omit or alleged to
omit a material fact necessary to make the statements made
therein, in light of the circumstances under which the statements
were made, not misleading.
(h) Corporate Existence. So long as any of the
Convertible Debentures remain outstanding, the Company shall not
directly or indirectly consummate any merger, reorganization,
restructuring, reverse stock split consolidation, sale of all or
substantially all of the Company's assets or any similar
transaction or related transactions (each such transaction, an
"Organizational Change") unless, prior to the consummation an
Organizational Change, the Company obtains the written consent of
each Buyer. In any such case, the Company will make appropriate
provision with respect to such holders' rights and interests to
insure that the provisions of this Section 4(h) will thereafter
be applicable to the Convertible Debentures.
(i) Transactions With Affiliates. So long as any
Convertible Debentures are outstanding, the Company shall not,
and shall cause each of its subsidiaries not to, enter into,
amend, modify or supplement, or permit any subsidiary to enter
into, amend, modify or supplement any agreement, transaction,
commitment, or arrangement with any of its or any subsidiary's
officers, directors, person who were officers or directors at any
time during the previous two (2) years, stockholders who
beneficially own five percent (5%) or more of the Common Stock,
or Affiliates (as defined below) or with any individual related
by blood, marriage, or adoption to any such individual or with
any entity in which any such entity or individual owns a five
percent (5%) or more beneficial interest (each a "Related
Party"), except for (a) customary employment arrangements and
benefit programs on reasonable terms, (b) any investment in an
Affiliate of the Company, (c) any agreement, transaction,
commitment, or arrangement on an arms-length basis on terms no
less favorable than terms which would have been obtainable from a
person other than such Related Party, or (d) any agreement
transaction, commitment, or arrangement which is approved by a
majority of the disinterested directors of the Company, for
purposes hereof, any director who is also an officer of the
Company or any subsidiary of the Company shall not be a
disinterested director with respect to any such agreement,
transaction, commitment, or arrangement. "Affiliate" for
purposes hereof means, with respect to any person or entity,
another person or entity that, directly or indirectly, (i) has a
ten percent (10%) or more equity interest in that person or
entity, (ii) has ten percent (10%) or more common ownership with
that person or entity, (iii) controls that person or entity, or
(iv) shares common control with that person or entity. "Control"
or "controls" for purposes hereof means that a person or entity
has the power, direct or indirect, to conduct or govern the
policies of another person or entity. Notwithstanding anything to
the contrary above, the Company may increase its legal or
beneficial interest in the Building.
(j) Transfer Agent. The Company covenants and agrees
that, in the event that the Company's agency relationship with
the transfer agent should be terminated for any reason prior to a
date which is two (2) years after the Closing Date, the Company
shall immediately appoint a new transfer agent and shall require
that the new transfer agent execute and agree to be bound by the
terms of the Irrevocable Transfer Agent Instructions (as defined
herein).
(k) Restriction on Issuance of the Capital Stock. So
long as any Convertible Debentures are outstanding, the Company
shall not, without first complying with the provisions of Section
3(u) of this Agreement, and the prior written consent of the
Buyer(s), issue or sell shares of Common Stock or Preferred Stock
(i) without consideration or for a consideration per share less
than the Bid Price of the Common Stock determined immediately
prior to its issuance, (ii) any warrant, option, right, contract,
call, or other security instrument granting the holder thereof,
the right to acquire Common Stock without consideration or for a
consideration less than such Common Stock's Bid Price value
determined immediately prior to it's issuance, (iii) enter into
any security instrument granting the holder a security interest
in any and all assets of the Company, or (iv) file any
registration statement until at least twelve12 months after the
Registration Statement is declared effective. Moreover, after the
one year anniversary hereof, upon a minimum of ten (10) days'
prior written notice, the Company may at its discretion grant
Common Stock, warrants or options to its employees, officers,
directors, agents and representatives, in an amount not to exceed
10% of the Company's outstanding Common Stock. In concurrence
with Schedule 2.6 of the Standby Equity Distribution Agreement of
even date hereof, the Company's directors, officers and employees
can sell securities only in compliance with the limitation of
Rule 144 promulgated by the SEC.
Notwithstanding anything contained herein to the contrary, Buyer
agrees that the Company has the right to (i) file a Form S-8 for
a stock option plan with respect to 3,750,000 shares of common
stock; the issuance of shares thereunder shall require the
stockholder to execute a lock-up restricting such holder's shares
to no more than 25% of such shares within each 4 month period,
and (ii) issue restricted shares of common stock pursuant to rule
144 as follows: Xxxxx Xxxxxxxxxx - 850,000 shares; Xxxx Xxxx-
360,000 shares; Xxx Xxxxxxxx-360,000 shares and DCI Management,
LLC-1,500,000 shares.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue the Irrevocable Transfer Agent
Instructions to its transfer agent irrevocably appointing Xxxxx
Xxxxxxxx as its agent for purpose of having certificates issued,
registered in the name of the Buyer(s) or its respective
nominee(s), for the Conversion Shares representing such amounts
of Convertible Debentures as specified from time to time by the
Buyer(s) to the Company upon conversion of the Convertible
Debentures, for interest owed pursuant to the Convertible
Debenture, and for any and all Liquidated Damages (as this term
is defined in the Investor Registration Rights Agreement). Xxxxx
Xxxxxxxx shall be paid a cash fee of Fifty Dollars ($50) for
every occasion they act pursuant to the Irrevocable Transfer
Agent Instructions. The Company shall not change its transfer
agent without the express written consent of the Buyer(s), which
may be withheld by the Buyer(s) in its sole discretion. Prior to
registration of the Conversion Shares under the 1933 Act, all
such certificates shall bear the restrictive legend specified in
Section 2(g) of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5, and stop transfer
instructions to give effect to Section 2(g) hereof (in the case
of the Conversion Shares prior to registration of such shares
under the 0000 Xxx) will be given by the Company to its transfer
agent and that the Conversion Shares shall otherwise be freely
transferable on the books and records of the Company as and to
the extent provided in this Agreement and the Investor
Registration Rights Agreement. Nothing in this Section 5 shall
affect in any way the Buyer's obligations and agreement to comply
with all applicable securities laws upon resale of Conversion
Shares. If the Buyer(s) provides the Company with an opinion of
counsel, in form, scope and substance customary for opinions of
counsel in comparable transactions to the effect that
registration of a resale by the Buyer(s) of any of the Conversion
Shares is not required under the 1933 Act, the Company shall
within two (2) business days instruct its transfer agent to issue
one or more certificates in such name and in such denominations
as specified by the Buyer. 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(s) shall be
entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate
issuance and transfer, without the necessity of showing economic
loss and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell
the Convertible Debentures to the Buyer(s) at the Closing is
subject to the satisfaction, at or before the First Closing Date,
of each of the following conditions, provided that these
conditions are for the Company's sole benefit and may be waived
by the Company at any time in its sole discretion:
(a) Each Buyer shall have executed this Agreement, the
Security Agreement, the Escrow Agreement and the Investor
Registration Rights Agreement and the Irrevocable Transfer Agent
Instructions and delivered the same to the Company.
(b) The Buyer(s) shall have delivered to the Escrow
Agent the Purchase Price for Convertible Debentures in respective
amounts as set forth next to each Buyer as outlined on Schedule I
attached hereto and the Escrow Agent shall have delivered the net
proceeds to the Company by wire transfer of immediately available
U.S. funds pursuant to the wire instructions provided by the
Company.
(c) The representations and warranties of the Buyer(s)
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 speak as of a
specific date), and the Buyer(s) 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(s) at or prior
to the Closing Date.
(d) The Company shall have filed a form UCC -1 with
regard to the Pledged Property and Pledged Collateral as detailed
in the Security Agreement dated the date hereof and provided
proof of such filing to the Buyer(s).
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The obligation of the Buyer(s) hereunder to purchase the
Convertible Debentures at the Closing is subject to the
satisfaction, at or before the First 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(s) at any
time in its sole discretion:
(a) The Company shall have executed this Agreement,
the Security Agreement, the Convertible Debenture, the Escrow
Agreement, the Irrevocable Transfer Instructions and the Investor
Registration Rights Agreement, and delivered the same to the
Buyer(s).
(b) 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 First Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date)
and the Company shall have performed, satisfied and complied in
all material respects with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the First Closing
Date. If requested by the Buyer, the Buyer shall have received a
certificate, executed by the President of the Company, dated as
of the First Closing Date, to the foregoing effect and as to such
other matters as may be reasonably requested by the Buyer
including, without limitation an update as of the First Closing
Date regarding the representation contained in Section 3(c)
above.
(c) The Company shall have executed and delivered to
the Buyer(s) the Convertible Debentures in the respective amounts
set forth opposite each Buyer(s) name on Schedule I attached
hereto.
(d) The Buyer(s) shall have received an opinion of
counsel in a form satisfactory to the Buyer(s).
(e) The Company shall have provided to the Buyer(s) a
certificate of good standing from the Secretary of State of
Delaware.
(f) As of the First 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
Convertible Debentures, shares of Common Stock to effect the
conversion of all of the Conversion Shares then outstanding.
(g) The Irrevocable Transfer Agent Instructions, in
form and substance satisfactory to the Buyer, shall have been
delivered to and acknowledged in writing by the Company's
transfer agent.
(h) The Company shall have provided to the Investor an
acknowledgement, to the satisfaction of the Investor, from
Xxxxxxx Xxxxxxxx, the Company's independent certified public
accountants, as to its ability to provide all consents required
in order to file a registration statement in connection with this
transaction.
(i) Early Repayment or Redemption of the Debenture.
The Company and 000 Xxxxxx Xxxxxx LLC (the "Xxxxxx LLC") have
reached a written agreement that Xxxxxx LLC shall not prepay or
redeem the Debenture without prior written consent of the Buyer.
Both the Company and Xxxxxx LLC shall make any required change in
the Debenture agreement to reflect this restriction on Xxxxxx
LLC. This agreement is attached hereto as Exhibit C.
(j) Exercise of the Option. The Company and Xxxxxx
LLC represent and warrant that they will exercise the Option no
later than June 15, 2005. The Buyer shall not unreasonably
withhold its waiver of this provision if it triggers an
acceleration or event of default under the terms of the
construction mortgage of the Building. This waiver shall be
presented to the Company no later than three (3) business days
after obtaining such construction mortgage. In no event shall
such waiver be effective once the construction of the Building
has been completed.
(k) Anti Dilution. The Company represents and warrants
that it shall not grant to any party other than a bona fide
purchaser for value the first option to participate in any equity
and/or capital raise that 000 Xxxxxx Xxxxxx Property Development
LLC will conduct for the purposes of reconstruction and/or
renovation of the Building.
(l) The Company shall have filed a form UCC -1 with
regard to the Pledged Property and Pledged Collateral as detailed
in the Security Agreement and provided proof of such filing to
the Buyer(s).
(m) Apros & Chay MB Ltd., shall have pledged as
collateral 48,500,000 shares of Technoprises Ltd. Such pledge
will terminate upon the effectiveness of the Registration
Statement covering the registration of the Common Stock
underlying this agreement.
(n) With respect to the Second Closing, the Company
shall have filled a Registration Statement on the appropriate
form with the SEC pursuant to the Investor's Registration
Agreement of even date herewith, which such Registration
Statement shall comply with the rules and regulations promulgated
by the SEC and include audited and interim financial statements
for the appropriate periods.
8. INDEMNIFICATION.
(a) In consideration of the Buyer's execution and
delivery of this Agreement and acquiring the Convertible
Debentures and the Conversion Shares hereunder, and in addition
to all of the Company's other obligations under this Agreement,
the Company shall defend, protect, indemnify and hold harmless
the Buyer(s) and each other holder of the Convertible Debentures
and the Conversion Shares, and all of their officers, directors,
employees and agents (including, without limitation, those
retained in connection with the transactions contemplated by this
Agreement) (collectively, the "Buyer Indemnitees") from and
against any and all actions, causes of action, suits, claims,
losses, costs, penalties, fees, liabilities and damages, and
expenses in connection therewith (irrespective of whether any
such Buyer 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 the Buyer Indemnitees or any of them
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 this Agreement, the Convertible Debentures
or the Investor Registration Rights Agreement 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 this Agreement, or the Investor
Registration Rights Agreement or any other certificate,
instrument or document contemplated hereby or thereby, or (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 this Agreement or any
other instrument, document or agreement executed pursuant hereto
by any of the Indemnities, any transaction financed or to be
financed in whole or in part, directly or indirectly, with the
proceeds of the issuance of the Convertible Debentures or the
status of the Buyer or holder of the Convertible Debentures the
Conversion Shares, as a Buyer of Convertible Debentures in the
Company. 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.
(b) In consideration of the Company's execution and
delivery of this Agreement, and in addition to all of the Buyer's
other obligations under this Agreement, the Buyer shall defend,
protect, indemnify and hold harmless the Company and all of its
officers, directors, employees and agents (including, without
limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the "Company
Indemnitees") from and against any and all Indemnified
Liabilities incurred by the Indemnitees or any of them as a
result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty
made by the Buyer(s) in this Agreement, , instrument or document
contemplated hereby or thereby executed by the Buyer, (b) any
breach of any covenant, agreement or obligation of the Buyer(s)
contained in this Agreement, the Investor Registration Rights
Agreement or any other certificate, instrument or document
contemplated hereby or thereby executed by the Buyer, or (c) any
cause of action, suit or claim brought or made against such
Company Indemnitee based on material misrepresentations or due to
a material breach and arising out of or resulting from the
execution, delivery, performance or enforcement of this
Agreement, the Investor Registration Rights Agreement or any
other instrument, document or agreement executed pursuant hereto
by any of the Company Indemnities. To the extent that the
foregoing undertaking by each Buyer may be unenforceable for any
reason, each Buyer 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. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of New
Jersey without regard to the principles of conflict of laws. The
parties further agree that any action between them shall be heard
exclusively in Xxxxxx County, New Jersey, and expressly consent
to the jurisdiction and venue of the Superior Court of New
Jersey, sitting in Xxxxxx County and the United States District
Court for the District of New Jersey sitting in Newark, New
Jersey for the adjudication of any civil action asserted pursuant
to this Paragraph.
(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. In the event any signature page is delivered by
facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages
to be physically delivered to the other party within five (5)
days of the execution and delivery hereof.
(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(s), the Company, their affiliates and persons acting on
their behalf with respect to the matters discussed herein, and
this Agreement and the instruments referenced herein contain the
entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor any Buyer 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 an instrument in writing signed by the
party to be charged with enforcement.
(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 confirmation of receipt, when sent by facsimile; (iii) three
(3) days after being sent by U.S. certified mail, return receipt
requested, or (iv) one (1) 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, to: DCI USA, Inc.
000 Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to: Xxxxx Xxxxx & Associates
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Transfer
Agent, to:
Telephone:
Facsimile:
If to the Buyer(s), to its address and facsimile number on
Schedule I, with copies to the Buyer's counsel as set forth on
Schedule I. Each party shall provide five (5) days' prior
written notice to the other party of any change in address or
facsimile number.
(g) Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their
respective successors and assigns. Neither the Company nor any
Buyer shall assign this Agreement or any rights or obligations
hereunder without the prior written consent of the other party
hereto.
(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) Survival. Unless this Agreement is terminated
under Section 9(l), the representations and warranties of the
Company and the Buyer(s) contained in Sections 2 and 3, the
agreements and covenants set forth in Sections 4, 5 and 9, and
the indemnification provisions set forth in Section 8, shall
survive the Closing for a period of two (2) years following the
date on which the Convertible Debentures are converted in full.
The Buyer(s) shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
(j) Publicity. The Company and the Buyer(s) shall have
the right to approve, before issuance any press release or any
other public statement with respect to the transactions
contemplated hereby made by any party; provided, however, that
the Company shall be entitled, without the prior approval of the
Buyer(s), to issue any press release or other public disclosure
with respect to such transactions required under applicable
securities or other laws or regulations (the Company shall use
its best efforts to consult the Buyer(s) in connection with any
such press release or other public disclosure prior to its
release and Buyer(s) shall be provided with a copy thereof upon
release thereof).
(k) 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.
(l) Termination. In the event that the Closing shall
not have occurred with respect to the Buyers on or before five
(5) business days from the date hereof due to the Company's or
the Buyer's failure to satisfy the conditions set forth in
Sections 6 and 7 above (and the non-breaching party's failure to
waive such unsatisfied condition(s)), the non-breaching party
shall have the option to terminate this Agreement with respect to
such breaching party at the close of business on such date
without liability of any party to any other party.
(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.
[REMAINDER PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Buyers and the Company have caused
this Securities Purchase Agreement to be duly executed as of the
date first written above.
COMPANY:
DCI USA, INC.
By: /s/ Xxxxx Xxxxxxxxxx
Name Xxxxx Xxxxxxxxxx
Title: Chairman
THE BUYER'S(S') SIGNATURES ARE
CONTAINED ON SCHEDULE I HERETO
SCHEDULE I
SCHEDULE OF BUYERS
Name Signature Address/Facsimile Amount of
Number of Buyer Subscript
ion
Cornell Capital By: Yorkville 000 Xxxxxx Xxxxxx - $500,000
Partners, LP Advisors, LLC Suite 3700
Its: General Jersey City, NJ
Partner 07303
Facsimile:
(000) 000-0000
By: /s/ Xxxx X. With a copy to:
Xxxxxx
Name: Xxxx X. Xxxxxxx Capital
Xxxxxx Partners, LP
Its: Portfolio 000 Xxxxxx Xxxxxx,
Xxxxxxx Xxxxx 0000
Xxxxxx Xxxx, XX
00000
Attention: Xxxx
X. Xxxxx, Esq.
Facsimile:
(000) 000-0000
