Exhibit 4.8
SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
among
the Investors listed on Schedule A
and
Settondown Capital International Ltd.
and
Global Maintech Corporation
March 24, 1999
THE ▇▇▇▇▇▇▇▇▇ LAW GROUP, P.C.
▇▇ ▇▇▇▇▇▇▇▇, ▇▇/▇▇/ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
-------------------------------------------------------
THIS SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT, dated as of
March 24, 1999 (the "Agreement"), among the entities listed on Schedule A
attached hereto (collectively referred to as the "Investors"), SETTONDOWN
CAPITAL INTERNATIONAL LTD. a corporation organized under the laws of Bahamas,
located at Charlotte House, Charlotte Street, P.O. Box N. 9204, Nassau, Bahamas,
(the "Placement Agent"), and GLOBAL MAINTECH CORPORATION, a corporation
organized and existing under the laws of the State of Minnesota (NASD OTC
Electronic Bulletin Board symbol "GLBM", the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Investors,
and the Investors shall purchase up to (a) 1,600 shares of Preferred Stock (as
defined below), and (b) Warrants to purchase up to 100,000 Warrant Shares; and
WHEREAS, the Company shall issue to the Placement Agent (in addition to the
fees set forth in Section 12.7 below), in return for services rendered, an
aggregate of 75 shares of Preferred Stock, and a Warrant to purchase an
aggregate of 100,000 Warrant Shares; and
WHEREAS, such investments will be made in reliance upon the provisions of
Section 4(2) ("Section 4(2)") and Regulation D ("Regulation D") of the United
States Securities Act of 1933, as amended, and the regulations promulgated
thereunder (the "Securities Act"), and/or upon such other exemption from the
registration requirements of the Securities Act as may be available with respect
to any or all of the investments in Common Stock to be made hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
---------
Certain Definitions
-------------------
Section 1.1 "Additional Shares" shall have that meaning set forth in
Section 2.5 below.
Section 1.2 "Bid Price" shall mean the closing bid price (as reported by
Bloomberg L.P.) of the Common Stock on the Principal Market.
Section 1.3 "Business Day" means any day except Saturday, Sunday and any
day which shall be a Federal legal holiday or a day on which banking
institutions in the State of New York are authorized or required by law or other
government actions to close.
Section 1.4 "Capital Shares" shall mean the Common Stock and any shares
of any other class of common stock whether now or hereafter authorized, having
the right to participate in the distribution of earnings and assets of the
Company.
Section 1.5 "Capital Shares Equivalents" shall mean any securities,
rights, or obligations that are convertible into or exchangeable for, or giving
any right to subscribe for, any Capital Shares of the Company or any warrants,
options or other rights to subscribe for or purchase Capital Shares or any such
convertible or exchangeable securities.
Section 1.6 "Certificate of Designation" shall mean the Company's
Certificate of Designation setting forth all of the rights, privileges and
preferences of the Preferred Stock, as annexed hereto as Exhibit A and made a
part hereof.
Section 1.7 "Closing" shall mean the closing of a purchase and sale of
the Preferred Stock and Warrants pursuant to Article II below.
Section 1.8 "Closing Date" shall mean the Subscription Date.
Section 1.9 "Common Stock" shall mean the Company's common stock, no par
value per share.
Section 1.10 "Damages" shall mean any loss, claim, damage, liability,
costs and expenses which shall include, but not be limited to, reasonable
attorney's fees, disbursements, costs and expenses of expert witnesses and
investigation.
Section 1.11 "Effective Date" shall mean the date on which the SEC first
declares effective a Registration Statement registering the resale of the
following: (i) 200% of the Underlying Shares (as of the date the Registration
Statement is filed) and 100% of the Warrant Shares, and (ii) 200% of that number
of Underlying Shares (as of the date the Registration Statement is filed), and
100% of that number of Warrant Shares issued to the Placement Agent as set forth
in Section 12.7 below.
Section 1.12 "Escrow Agent" shall mean the law firm of The ▇▇▇▇▇▇▇▇▇ Law
Group, P.C., pursuant to the terms of the Escrow Agreement attached as Exhibit
B.
Section 1.13 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
Section 1.14 "Legend" shall have the meaning set forth in Article VIII
below.
Section 1.15 "Material Adverse Effect" shall mean any effect on the
business, operations, properties, Bid Price, trading volume of the Common Stock,
prospects, or financial condition of the Company that is material and adverse to
the Company and its subsidiaries and affiliates, taken as a whole, and/or any
condition, circumstance, or situation that would prohibit or otherwise in any
material respect interfere with the ability of the Company to enter into and
perform any of its obligations under this Agreement, the Registration Rights
Agreement, the Escrow Agreement, the Certificate of Designation or the Warrants
in any material respect.
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Section 1.16 "NASD" shall mean the National Association of Securities
Dealers, Inc.
Section 1.17 "Outstanding" when used with reference to shares of Common
Stock, Preferred Stock, or Capital Shares (collectively the "Shares"), shall
mean, at any date as of which the number of such Shares is to be determined, all
issued and outstanding Shares, and shall include all such Shares issuable in
respect of outstanding scrip or any certificates representing fractional
interests in such Shares; provided, however, that Outstanding shall not mean any
such Shares then directly or indirectly owned or held by or for the account of
the Company.
Section 1.18 "Person" shall mean an individual, a corporation, a
partnership, an association, a limited liability company, a trust or other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
Section 1.19 "Preferred Stock" shall mean the Company's Series C
Preferred Stock with the rights, privileges and preferences, as set forth in the
Certificate of Designation.
Section 1.20 "Prime Rate" shall mean the rate of interest per annum
publicly announced from time to time by the principal New York City office of
the Chase Manhattan bank, or its successor, as its prime rate (which rate shall
change when and as such prime rate changes).
Section 1.21 "Principal Market" shall mean the NASD OTC Electronic
Bulletin Board, the Nasdaq National Market, the Nasdaq Small Cap Market, the
American Stock Exchange, or the New York Stock Exchange, whichever is at the
time the principal trading exchange or market for the Common Stock.
Section 1.22 "Purchase Price" shall mean $1,600,000.
Section 1.23 "Registrable Securities" shall mean the Underlying Shares,
the Additional Shares, the Warrant Shares (i) in respect of which the
Registration Statement (covering these securities) has not been declared
effective by the SEC, (ii) which have not been sold under circumstances under
which all of the applicable conditions of Rule 144 (or any similar provision
then in force) under the Securities Act ("Rule 144") are met, (iii) which have
not been otherwise transferred to holders who may trade such shares without
restriction under the Securities Act, or (iv) the sales of which, in the opinion
of counsel to the Company, are subject to any time, volume or manner limitations
pursuant to Rule 144(k) (or any similar provision then in effect) under the
Securities Act.
3
Section 1.24 "Registration Rights Agreement" shall mean the agreement
regarding the filing of the Registration Statement for the resale of the
Registrable Securities, entered into between the Company, the Placement Agent,
and the Investors on the Subscription Date annexed hereto as Exhibit C.
Section 1.25 "Registration Statement" shall mean a registration statement
on Form S-3 or such other appropriate registration statement, for the
registration of the resale by the Investors and the Placement Agent of the
Registrable Securities under the Securities Act.
Section 1.26 "Regulation D" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.27 "SEC" shall mean the Securities and Exchange Commission.
Section 1.28 "Section 4(2)" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.29 "Securities" shall mean the Underlying Shares, the
Additional Shares, the Warrant Shares.
Section 1.30 "Securities Act" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.31 "SEC Documents" shall mean the Company's latest Form 10-KSB
(and all amendments thereto) as of the time in question, all Form 10-QSBs and
Form 8-Ks filed thereafter, and the Proxy Statement for its latest fiscal year
as of the time in question until such time as the Company no longer has an
obligation to maintain the effectiveness of a Registration Statement as set
forth in the Registration Rights Agreement.
Section 1.32 "Subscription Date" shall mean the date on which this
Agreement and all Exhibits and attachments hereto are executed and delivered by
the parties hereto and all of the conditions relating to the issuance of the
Preferred Stock and Warrants shall have been fulfilled.
Section 1.33 "Trading Day" shall mean any day during which the Principal
Market shall be open for business.
Section 1.34 "Underlying Shares" shall mean all shares of Common Stock or
other securities issued or issuable pursuant to conversion of the Preferred
Stock.
Section 1.35 "Warrants" shall mean Common Stock Purchase Warrant annexed
hereto as Exhibit D.
Section 1.36 "Warrant Shares" shall mean all shares of Common Stock or
other securities issued or issuable pursuant to the exercise of the Warrants.
4
ARTICLE II
----------
Purchase and Sale of the Preferred Stock and Warrants
-----------------------------------------------------
Section 2.1 Closing. On the Closing Date, the Company will sell, and
the Investors will buy, and pursuant to the terms and conditions of this
Agreement (including the satisfaction or waiver in writing of the conditions set
forth in Section 2.6 below) an aggregate of up to 1,600 shares of Preferred
Stock based on U.S.$1,000 per share, and Warrants to purchase that number of
Warrant Shares as set forth in Section 2.4 below for the Purchase Price.
Section 2.2 Form of Payment. The Investors shall pay the Purchase Price
by delivering good funds in United States Dollars by wire transfer to the Escrow
Agent, against delivery of the original Preferred Stock and Warrants. The
parties have entered into an Escrow Agreement annexed hereto as Exhibit B.
Section 2.3 [Intentionally Omitted]
Section 2.4 Warrants. The Company will issue to the Investors (pro rata
in proportion to the number of shares of Preferred Stock purchased) on the
Closing Date Warrants exercisable beginning on the Closing Date and then
exercisable any time over the five year period there following, to purchase an
aggregate of up to 100,000 Warrant Shares per $1,600,000 funded to the Company
pursuant to the terms hereunder (pro rata amongst the Investors based upon each
Investor's portion of the Purchase Price). On the Subscription Date the Company
shall issue to the Placement Agent a Warrant to purchase up to 100,000 Warrant
Shares exercisable beginning on the Closing Date and then exercisable any time
over the five year period there following. The Warrants shall be delivered by
the Company to the Escrow Agent, and delivered to the Investors and Placement
Agent pursuant to the terms of this Agreement and the Escrow Agreement. All of
the aforementioned Warrant Shares shall be registered for resale pursuant to the
Registration Rights Agreement.
Section 2.5 Additional Shares. In the event that a "blackout period"
occurs which is defined as any period in which the effectiveness of the
Registration Statement is suspended for a reason other than a suspension of the
registration Statement arising in the event the Company possesses material non-
public information, and the Bid Price on the Trading Day immediately preceding
such "blackout period" (the "Old Bid Price") is greater than the Bid Price on
the first Trading Day following such "blackout period" (the "New Bid Price"),
the Company shall issue to the Investors and/or the Placement Agent the number
of additional shares of Common Stock equal to the difference between (y) the
product of (i) the number of Securities held by the Investors and/or the
Placement Agent during such "blackout period" that are or were not otherwise
freely tradable and (ii) the Old Bid Price, divided by the New Bid Price and (z)
the number of Securities held by the Investors and/or the Placement Agent during
such "blackout period" that were not otherwise freely tradable during such
Blackout Period.
Section 2.6 Liquidated Damages. In addition to any other provisions for
liquidated
5
damages in this Agreement or any Exhibit annexed hereto, in the event
that the Company does not deliver unlegended, freely tradable Common Stock in
connection with the sale of such Common Stock by the Investor(s) and/or the
Placement Agent as set forth in Article VIII below within six (6) Business Days
of surrender by the Investor(s) of the Common Stock certificate in accordance
with the terms and conditions set forth in Article VIII below (such date of
receipt is referred to as the "Receipt Date"), the Company shall pay to the
Investor(s), in immediately available funds, upon demand, as liquidated damages
for such failure and not as a penalty, for every day thereafter for the first
ten days, one percent of the product of (i) the number of shares of Common Stock
undelivered and (ii) the Bid Price on the Receipt Date, and two percent of the
product of (i) the number of shares of Common Stock undelivered and (ii) the Bid
Price on the Receipt Date, for every day thereafter that the unlegended shares
of Common Stock are not delivered, which liquidated damages shall accrue from
the fourth Business Day after the Receipt Date. The parties hereto acknowledge
and agree that the sums payable pursuant to the Registration Rights Agreement
and as set forth above, and the obligation to issue Registrable Securities under
Section 2.5 above, shall constitute liquidated damages and not penalties. The
parties further acknowledge that the amount of loss or damages likely to be
incurred in the event of a failure to deliver unlegended, freely tradable shares
of Common Stock cannot be precisely estimated, and the parties are sophisticated
business parties and have been represented by sophisticated and able legal and
financial counsel and negotiated this Agreement at arm's length.
Notwithstanding the above, in the event that the Company does not deliver
unlegended Common Stock in connection with the sale of such Common Stock by the
Investor(s) and/or the Placement Agent as set forth in Article VIII below within
six Business Days of the Receipt Date), the Company shall also pay to the
Investor(s), in immediately available funds, interest (at the then current Prime
Rate), based upon the product of (i) the number of undelivered unlegended freely
tradable shares, and (ii) the Bid Price of the Common Stock on the Receipt
Date, undelivered for every day thereafter that the unlegended shares of Common
Stock are not delivered. Any and all payments required pursuant to this
paragraph shall be payable only in cash, and any payment hereunder shall not
relieve the Company of its delivery obligations under this Section.
Section 2.7 Conditions to Closing.
(a) Conditions to the Company's Obligation to Sell. Each of the
Investors understands that the Company's obligation to sell the Preferred Stock
and Warrants is subject to the satisfaction (or written waiver) on the Closing
Date, of each of the following conditions:
delivery by each Investor of a copy of this Agreement and each
Exhibit annexed hereto to which it is a party (substantially
in the form annexed hereto), in each case executed by a duly
authorized signatory of such Investor;
delivery into escrow by the Investors of clear funds for the
Purchase Price (as more fully set forth in the Escrow
Agreement attached hereto as Exhibit B);
all representations and warranties of the Investors contained
herein shall remain true and correct in all material
respects as of the Closing Date;
(b) Conditions to Investors' Obligation to Purchase. The Company
understands that the Investors' obligation to purchase the Preferred Stock, and
Warrant is subject to the satisfaction
6
(or written waiver) on the Closing Date, of each of the following conditions:
delivery by the Company of a copy of this Agreement and each
Exhibit annexed hereto to which it is a party (substantially
in the form annexed hereto), in each case executed by a duly
authorized officer of the Company;
all representations and warranties of the Company contained
herein shall remain true and correct in all material
respects as of the Closing Date;
the Company shall have obtained all permits and qualifications
required by any state for the offer and sale of the
Preferred Stock and the Warrants, or shall have the
availability of exemptions therefrom;
the sale and issuance of the Preferred Stock, and the proposed
issuance of the Additional Shares, Underlying Shares,
Warrants and Warrant Shares shall be legally permitted by
all laws and regulations to which the Investors and the
Company are subject; and all duly executed Exhibits hereto
for the sale of the Securities;
delivery of the original Preferred Stock and Warrants as
described herein;
(vi) receipt by the Investors of an opinion of counsel of the
Company as set forth in Exhibit E attached hereto;
(vii) receipt by the Investors of executed instructions to the
Transfer Agent as set forth in Exhibit F annexed hereto;
(viii) written proof that the Certificate of Designation has been
filed with the Secretary of State of the State of Minnesota,
and remains in full force and effect as of the Closing Date;
(ix) the Company shall not be in default of any material
covenant, representation, and/or warranty contained in
this Agreement or any Exhibit annexed hereto; and
(x) payment of all fees by the Company as set forth in Section
12.7 below and the Escrow Agreement.
7
ARTICLE III
-----------
Representations and Warranties of the Investors
-----------------------------------------------
Each of the Investors severally (as to itself) and not jointly represents
and warrants to the Company that:
Section 3.1 Intent. Without limiting its ability to resell the
Securities pursuant to an effective registration statement or an exemption from
registration each of the Investors is entering into this Agreement for its own
account and has no present arrangement (whether or not legally binding) at any
time to sell the Securities to or through any person or entity; provided,
however, that by making the representations herein, the Investors do not agree
to hold the Securities for any minimum or other specific term and reserves the
right to dispose of the Securities at any time in accordance with federal and
state securities laws applicable to such disposition.
Section 3.2 Sophisticated Investors. Each of the Investors is a
sophisticated investor (as described in Rule 506(b)(2)(ii) of Regulation D) and
an accredited investor (as defined in Rule 501 of Regulation D), and each of the
Investors has such experience in business and financial matters that it is
capable of evaluating the merits and risks of an investment in the Preferred
Stock and Securities. Each of the Investors acknowledges that an investment in
the Common Stock is speculative and involves a high degree of risk and can
afford the complete loss of their investment.
Section 3.3 Authority. This Agreement has been duly authorized and
validly executed and delivered by each of the Investors and is a valid and
binding agreement of the Investors enforceable against each of them in
accordance with its terms, subject to applicable bankruptcy, insolvency, or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application.
The decision to invest and the execution and delivery of this Agreement by the
Investors, the performance by the Investors of their obligations hereunder and
the consummation by the Investors of the transactions contemplated hereby have
been duly authorized and requires no other proceedings on the part of the
Investors. The undersigned signatory has all right, power and authority to
execute and deliver this Agreement on behalf of each Investor. This Agreement
has been duly executed and delivered by the Investors and, assuming the due
execution and delivery hereof and acceptance thereof by the Company, will
constitute the legal, valid and binding obligations of the Investors,
enforceable against the Investors in accordance with its terms.
Section 3.4 Not an Affiliate. None of the Investors is an officer,
director or "affiliate" (as that term is defined in Rule 405 of the Securities
Act) of the Company.
Section 3.5 Organization and Standing. Each of the Investors is duly
organized, validly existing, and in good standing under the laws of the
countries and/or states of their incorporation or organization and has all
requisite power and authority to purchase the Securities.
Section 3.6 Absence of Conflicts. The execution and delivery of this
Agreement and any
8
other document or instrument executed in connection herewith, and the
consummation of the transactions contemplated hereby and thereby, and compliance
with the requirements thereof, will not violate any law, rule, regulation,
order, writ, judgment, injunction, decree or award binding on Investors, or, to
the Investors knowledge, (a) violate any provision of any indenture, instrument
or agreement to which any of the Investors are a party or are subject, or by
which any of the Investors or any of their assets is bound; (b) conflict with or
constitute a material default thereunder; (c) result in the creation or
imposition of any lien pursuant to the terms of any such indenture, instrument
or agreement, or constitute a breach of any fiduciary duty owed by Investors to
any third party; or (d) require the approval of any third-party (which has not
been obtained) pursuant to any material contract, agreement, instrument,
relationship or legal obligation to which any of the Investors is subject or to
which any of their assets, operations or management may be subject.
Section 3.7 Disclosure; Access to Information. Each of the Investors
has received all documents, records, books and other information pertaining to
Investor's investment in the Company that have been requested by Investors,
including the opportunity to ask questions of, and receive answers from, the
Company. The Company is subject to the periodic reporting requirements of the
Exchange Act, and each of the Investors has reviewed or received copies of any
such reports that have been requested by it. Each of the Investors represents
that it has reviewed the Company's, Form 10-KSB for the year ended December 31,
1997, Form 10-QSB's, and Form 8-K's filed for the twelve months prior to the
Subscription Date.
Section 3.8 Manner of Sale. At no time were any of the Investors
presented with or solicited by or through any leaflet, public promotional
meeting, television advertisement or any other form of general solicitation or
advertising in connection with the offer and sale of the Preferred Stock and
Securities.
Section 3.9 Registration or Exemption Requirements. Each of the
Investors acknowledge and understand that the limited private offering and sale
of Preferred Stock and Securities pursuant to this Agreement has not been
reviewed or approved by the SEC or by any state securities commission, authority
or agency, and is not registered under the Securities Act or under the
securities or "blue sky" laws, rules or regulations of any state. Each of the
Investors acknowledges, understands and agrees that the Preferred Stock and
Securities are being offered and sold hereunder pursuant to (i) a private
placement exemption to the registration provisions of the Securities Act
pursuant to Section 4(2) of such Securities Act and Regulation D promulgated
under such Securities Act, and (ii) a similar exemption from the registration
provisions of applicable state securities laws.
Section 3.10 No Legal, Tax or Investment Advice. Each of the Investors
understands that nothing in this Agreement or any other materials presented to
the Investors in connection with the purchase and sale of the Preferred Stock
and Warrants constitutes legal, tax or investment advice. The Investors have
relied on, and have consulted with, such legal, tax and investment advisors as
they, in their sole discretion, have deemed necessary or appropriate in
connection with their purchase of the Preferred Stock and Warrants.
Section 3.11 No Violation. Each of the Investors, and the Placement
Agent (including all
9
affiliates) agree that it will not enter into any position in the Common Stock
that in any manner would violate any provision of the Exchange Act. Each of the
Investors, and the Placement Agent further agree that as of the Closing Date it
does not maintain a short position in the Common Stock, and does not have any
current intention of entering into any short position in connection with the
Common Stock.
ARTICLE IV
----------
Representations and Warranties of the Company
---------------------------------------------
The Company represents and warrants to the Investors and the Placement
Agent that:
Section 4.1 Organization of the Company. The Company is a corporation
duly incorporated and existing in good standing under the laws of the State of
Minnesota and has all requisite corporate authority to own its properties and to
carry on its business as now being conducted except as described in the SEC
Documents. The Company 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 (individually or in the aggregate) in which the
failure so to qualify would not reasonably be expected to have a Material
Adverse Effect. The Company is not in violation of any material terms of its
Articles of Incorporation (as defined below) or Bylaws (as defined below).
Section 4.2 Authority. (i) The Company has the requisite corporate power
and authority to enter into and perform its obligations under this Agreement,
and all Exhibits annexed hereto, and to issue the Preferred Stock, Warrants,
Underlying Shares, Additional Shares, and the Warrant Shares, (ii) the
execution, issuance and delivery of this Agreement, and all Exhibits annexed
hereto, by the Company and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action and no further consent or authorization of the Company or its
Board of Directors is necessary, and (iii) this Agreement, and all Exhibits
annexed hereto, have been duly executed and delivered by the Company and
constitute valid and binding obligations of the Company enforceable against the
Company in accordance with their terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application. Upon their issuance and
delivery pursuant to this Agreement, the aforementioned securities issuable will
be validly issued, fully paid and nonassessable and will be free of any liens or
encumbrances other than those created hereunder or by the actions of the
Investors and/or the Placement Agent; provided, however, that the aforementioned
securities are subject to restrictions on transfer under state and/or federal
securities laws. The issuance and sale of the securities hereunder will not
give rise to any preemptive right or right of first refusal or right of
participation on behalf of any person.
10
Section 4.3 Capitalization. As of March 8, 1998, the authorized capital
stock of the Company consists of 50,000,000 shares, no par value, of which
887,980 shares are designated as Series A Convertible Preferred Stock (the
"Series A Stock"), 615,385 shares are designated as Series B Convertible
Preferred Stock (the "Series B Stock") and 48,496,635 shares are divisible into
such other classes and series as the Board of Directors may from time to time
designate. As of March 8, 1998, there were 18,542,091 shares of Common Stock
issued and outstanding; 129,176 shares of Series A Stock issued and outstanding;
and 335,961 shares of Series B Stock issued and outstanding. All of the
outstanding shares of the Company's capital stock have been duly and validly
authorized and issued and are fully paid and nonassessable. No shares of Common
Stock are entitled to preemptive or similar rights. Except as specifically
disclosed in the SEC Documents, there are no outstanding options, warrants,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or, except as a result of the purchase and sale of the Preferred
Stock and the Warrants, securities, rights or obligations convertible into or
exchangeable for, or giving any Person any right to subscribe for or acquire,
any shares of Common Stock, or contracts, commitments, understandings, or
arrangements by which the Company or any subsidiary is or may become bound to
issue additional shares of Common Stock or securities or rights convertible or
exchangeable into shares of Common Stock. To the knowledge of the Company, no
Person or group of Persons beneficially owns (as determined pursuant to Rule
13d-3 promulgated under the Exchange Act) or has the right to acquire by
agreement with or by obligation binding upon the Company beneficial ownership of
in excess of five percent of the Common Stock.
Section 4.4 Common Stock. The Company has registered its Common Stock
pursuant to Section 12(g) of the Exchange Act and is in full compliance with all
reporting requirements of the Exchange Act, and such Common Stock is currently
listed or quoted on the NASD OTC Electronic Bulletin Board.
Section 4.5 SEC Documents. The Company has delivered or made available
to the Investors true and complete copies of the SEC Documents filed by the
Company with the SEC during the twelve (12) months immediately preceding the
Subscription Date (including, without limitation, proxy information and
solicitation materials). The Company has not provided to any of the Investors
any information that, according to applicable law, rule or regulation, should
have been disclosed publicly prior to the date hereof by the Company, but which
has not been so disclosed. The SEC Documents comply in all material respects
with the requirements of the Securities Act or the Exchange Act, as the case may
be, and rules and regulations of the SEC promulgated thereunder and none of the
SEC Documents contain any untrue statement of a material fact or omit 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. The financial statements of the Company included in the SEC
Documents 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 notes thereto
or (ii) in the case of unaudited interim statements, to the extent they may not
include
11
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 operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
Section 4.6 Valid Issuances. When issued and paid for in accordance
with the terms hereof, the Preferred Stock, Underlying Shares, Warrants, Warrant
Shares, and Additional Shares, will be duly and validly issued, fully paid, and
nonassessable. Neither the issuance of the Preferred Stock, Underlying Shares,
Warrants, Warrant Shares, or Additional Shares, nor the Company's performance of
its obligations under this Agreement, and all Exhibits annexed hereto, will (i)
result in the creation or imposition by the Company of any liens, charges,
claims or other encumbrances upon the Warrants, Preferred Stock, Warrant Shares,
Additional Shares, or Underlying Shares, issued or issuable hereunder, or any of
the assets of the Company, or (ii) entitle the holders of Outstanding Capital
Shares to preemptive or other rights to subscribe to or acquire any Capital
Shares or other securities of the Company.
Section 4.7 No General Solicitation or Advertising in Regard to this
Transaction. Neither the Company nor any of its affiliates nor any distributor
or any person acting on its or their behalf (i) has conducted or will conduct
any general solicitation (as that term is used in Rule 502(c) of Regulation D)
or general advertising in connection with the offer and sale of the Preferred
Stock, Additional Shares, Underlying Shares, Warrants, or Warrant Shares, or
(ii) has made any offers or sales of any security or solicited any offers to buy
any security under any circumstances that would require registration of the
Preferred Stock, Additional Shares, Underlying Shares, Warrants, or Warrant
Shares under the Securities Act.
Section 4.8 Corporate Documents. The Company has furnished or made
available to each of the Investors true and correct copies of the Company's
articles of incorporation, as amended and in effect on the date hereof (the
"Articles of Incorporation"), and the Company's by-laws, as amended and in
effect on the date hereof (the "By-Laws").
Section 4.9 No Conflicts. The execution, delivery and performance of
this Agreement (including all Exhibits annexed hereto) by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby,
including without limitation the issuance of the Preferred Stock, Underlying
Shares, Warrants, Warrant Shares, and Additional Shares, do not and will not (i)
result in a violation of the Company's Articles of Incorporation or By-Laws or
(ii) conflict with, or constitute a material default (or an event that 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, patent, patent license, indenture, instrument or any "lock-up" or
similar provision of any underwriting or similar agreement to which the Company
is a party, or (iii) result in a violation of any federal, state or local law,
rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations) applicable to the Company or by which any
property or asset of the Company is bound or affected, nor is the Company
otherwise in violation of, in conflict with, or in default under, any of the
foregoing except as would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect. The business of the
12
Company is not being conducted in violation of any law, ordinance or regulation
of any governmental entity, except for possible violations that either singly or
in the aggregate would not reasonably be expected to have a Material Adverse
Effect. Except for the filing of a Form D within 15 days after the Closing Date
(which the Company agrees it will file), the Company is not required under
federal, state or local law, rule or regulation 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 this Agreement or issue and sell the Preferred Stock, or
Warrants, in accordance with the terms hereof; 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
Investors herein.
Section 4.10 No Material Adverse Change. Since January 1, 1998, no
Material Adverse Effect has occurred or exists with respect to the Company,
except as disclosed in the SEC Documents, or as publicly announced.
Section 4.11 No Undisclosed Liabilities. The Company has no liabilities
or obligations, known or unknown, absolute or otherwise, which are not disclosed
in the SEC Documents or otherwise publicly announced, other than those set forth
in the Company's financial statements or as incurred in the ordinary course of
the Company's businesses since January 1, 1998, and which, individually or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect.
Section 4.12 No Undisclosed Events or Circumstances. Since January 1,
1998, no event or circumstance has occurred or exists with respect to the
Company or its businesses, properties, prospects, operations or financial
condition, that, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company, but which
has not been so publicly announced or disclosed in the SEC Documents.
Section 4.13 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, other than pursuant to this Agreement, under circumstances
that would require registration of the Common Stock under the Securities Act, or
cause the offering of the Preferred Stock and Warrants pursuant to this
Agreement to be integrated with future offerings by the Company for purposes of
the Securities Act, the Nasdaq Stock Market, Inc. marketplace rules, or any
applicable stockholder approval provisions, except as set forth in the SEC
Documents, and except for the Company's proposed transaction with ▇▇▇▇▇▇ ▇▇▇▇
Technologies, Inc.
Section 4.14 Litigation and Other Proceedings. Except as may be set
forth in the SEC Documents, there are no lawsuits or proceedings pending or to
the knowledge of the Company threatened, against the Company, nor has the
Company received any written or oral notice of any such action, suit, proceeding
or investigation, which would reasonably be expected to have a Material Adverse
Effect. Except as set forth in the SEC Documents, no judgment, order, writ,
13
injunction or decree or award has been issued by or, so far as is known by the
Company, requested of any court, arbitrator or governmental agency which would
be reasonably expected to result in a Material Adverse Effect.
Section 4.15 Accuracy of Reports and Information. The Company is in
compliance, to the extent applicable, with all reporting obligations under
either Section 12(b), 12(g) or 15(d) of the Exchange Act. The Company has
registered its Common Stock pursuant to Section 12 of the Exchange Act and the
Common Stock is listed and trades on the NASD OTC Electronic Bulletin Board.
The Company has complied in all material respects and to the extent applicable
with all reporting obligations, under either Section 13(a) or 15(d) of the
Exchange Act for a period of at least twelve (12) months immediately preceding
the offer and sale of the Preferred Stock and Warrants.
Section 4.16 Acknowledgment of Dilution. The Company is aware and
acknowledges that issuance of Common Stock upon the conversion of the Preferred
Stock and/or exercise of the Warrants, may result in dilution of the outstanding
shares of Common Stock, which dilution may be substantial under certain market
conditions. The Company further acknowledges that its obligation to issue
Additional Shares in accordance with the terms herein, Underlying Shares in
accordance with the Certificate of Designation, and Warrant Shares in accordance
with the Warrants is unconditional and absolute regardless of the effect of any
such dilution.
Section 4.17 Employee Relations. The Company is not involved in any
labor dispute, nor, to the knowledge of the Company, is any such dispute
threatened which could reasonably be expected to have a Material Adverse Effect.
None of the Company's employees is a member of a union and the Company believes
that its relations with its employees are good.
Section 4.18 Environmental Laws. The Company is (i) in compliance with
any and all 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 and which the Company know is
applicable to them ("Environmental Laws"), (ii) has received all material
permits, licenses or other approvals required under applicable Environmental
Laws to conduct its business, and (iii) is in compliance with all terms and
conditions of any such permit, license or approval.
Section 4.19 Insurance. The Company is 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 is engaged. The Company has no notice to believe that it
will not be able to renew its existing insurance coverage as and when such
coverage expires, or 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 operation, of the Company.
Section 4.20 Board Approval. The board of directors of the Company has
concluded, in its good faith business judgment, that the issuances of the
securities of the Company in connection with this Agreement are in the best
interests of the Company.
14
Section 4.21 Integration. Except in connection with the Company's
transaction with ▇▇▇▇▇▇ Hill Technologies, Inc., the Company shall not and shall
use its best efforts to ensure that no affiliate shall sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security of the
Company that would be integrated with the offer or sale of the Preferred Stock
and Warrants in a manner that would require the registration under the
Securities Act of the issue, offer or sale of the Preferred Stock and Warrants
to the Investors. The Preferred Stock and Warrants are being offered and sold
pursuant to the terms hereunder, are not being offered and sold as part of a
previously commenced private placement of securities.
Section 4.22 Patents and Trademarks. The Company has, or has rights to
use, all patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, licenses, trade secrets and other
intellectual property rights which are necessary for use in connection with its
business or which the failure to so have would have a Material Adverse Effect
(collectively, the "Intellectual Property Rights"). To the best knowledge of
the Company, none of the Intellectual Property Rights infringe on any rights of
any other Person, and the Company either owns or has duly licensed or otherwise
acquired all necessary rights with respect to the Intellectual Property Rights.
The Company has not received any notice from any third party of any claim of
infringement by the Company of any of the Intellectual Property Rights, and has
no reason to believe there is any basis for any such claim. To the best
knowledge of the Company, there is no existing infringement by another Person on
any of the Intellectual Property Rights.
Section 4.23 Use of Proceeds. The net proceeds from this offering will
be used for working capital purposes, and not for the repayment of any judgment.
Section 4.24 Subsidiaries. Except as disclosed in the SEC Documents, the
Company does not presently own or control, directly or indirectly, any interest
in any other corporation, partnership, association or other business entity.
Section 4.25 No Private Placements. Except as set forth on Schedule 4.25
annexed hereto, the Company has not conducted a private placement of its Common
Stock or of any debt or equity instrument convertible into Common Stock within
one year prior to the Closing Date. Except as set forth on Schedule 4.25 there
are no outstanding securities issued by the Company that are entitled to
registration rights under the Securities Act. Except as set forth on Schedule
4.25 there are no outstanding securities issued by the Company that are directly
or indirectly convertible into, exercisable into, or exchangeable for, shares of
Common Stock, that have anti-dilution or similar rights that would be affected
by the issuance of the Preferred Stock, the Underlying Shares, the Additional
Shares, the Warrants, or the Warrant Shares.
Section 4.26 No Brokers. Except for its arrangement with the Placement
Agent, the Company has taken no action which would give rise to any claim by any
person for brokerage commissions, finder's fees or similar payments by the
Company or any Investor relating to this Agreement or the transactions
contemplated hereby.
15
Section 4.27 Permits; Compliance. The Company and each of its
subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its properties and to
carry on its business as it is now being conducted (collectively, the "Company
Permits"), and there is no action pending or, to the knowledge of the Company,
threatened regarding the suspension or cancellation of any of the Company
Permits except for such Company Permits, the failure of which to possess, or the
cancellation, or suspension of which, would not, individually or in the
aggregate, have a Material Adverse Effect. To the Company's knowledge, neither
the Company nor any of its subsidiaries is in material conflict with, or in
material default or material violation of, any of the Company Permits. Since
January 1, 1998 neither the Company nor any of its subsidiaries has received any
notification with respect to possible material conflicts, material defaults or
material violations of applicable laws.
Section 4.28 Taxes. All federal, state, city and other tax returns,
reports and declarations required to be filed by or on behalf of the Company
have been filed and such returns are complete and accurate and disclose all
taxes (whether based upon income, operations, purchases, sales, payroll,
licenses, compensation, business, capital, properties or assets or otherwise)
required to be paid in the periods covered thereby.
ARTICLE V
---------
Covenants of the Investors
--------------------------
Section 5.1 4.99% Limitation. The number of shares of Common Stock
which may be acquired by any of the Investors pursuant to the terms of this
Agreement shall not exceed the number of such shares which, when aggregated with
all other shares of Common Stock then owned by any of the Investors, would
result in any of the Investors owning more than 4.99% of the then issued and
outstanding Common Stock at any one time.
The preceding paragraph shall not interfere with any Investor's right to
convert Preferred Stock over time which in the aggregate totals more than 4.99%
of the then outstanding shares of Common Stock so long as such Investor does not
own more than 4.99% of the then outstanding Common Stock at any given time. The
foregoing limitation shall not apply to the Automatic Conversion provision
contained in the Certificate of Designation.
ARTICLE VI
----------
Covenants of the Company
------------------------
Section 6.1 Registration Rights. The Company shall cause the
Registration Rights Agreement to remain in full force and effect so long as any
Registrable Securities remain outstanding and the Company shall comply in all
material respects with the terms thereof.
Section 6.2 Reservation of Common Stock. As of the date hereof, the
Company has
16
authorized and reserved and the Company shall continue to reserve and keep
available at all times, free of preemptive rights, shares of Common Stock for
the purpose of enabling the Company to satisfy any obligation to issue the
Additional Shares, Underlying Shares, and Warrant Shares; such amount of shares
of Common Stock to be reserved shall be calculated based upon the Purchase Price
therefor under the terms of this Agreement, the Certificate of Designation, and
Warrants. The number of shares so reserved shall be increased or decreased to
reflect potential increases or decreases in the Common Stock that the Company
may thereafter be so obligated to issue by reason of adjustments to the
Preferred Stock and the Warrants.
Section 6.3 Listing of Common Stock. If the Principal Market requires
the Company to file a listing application or an additional shares listing
application for the Common Stock listed on such Principal Market (the date the
Company becomes subject to such requirement is hereinafter referred to as the
"Requirement Date"), the Company shall (a) not later than the fifth Business Day
following the Requirement Date prepare and file with the Principal Market (as
well as any other national securities exchange, market or trading facility on
which the Common Stock is then listed) an additional shares listing application
covering at least the sum of (i) two times the number of Underlying Shares as
would be issuable upon a conversion in full of (and as payment of dividends in
respect of) the shares of Preferred Stock, assuming such conversion occurred on
the Closing Date, and (ii) the Warrant Shares issuable upon exercise in full of
the Warrants, (b) take all steps necessary to cause such shares to be approved
for listing on the Principal Market (as well as on any other national securities
exchange, market or trading facility on which the Common Stock is then listed)
as soon as possible thereafter, and (c) provide to the Investors and the
Placement Agent evidence of such listing, and the Company shall maintain the
listing of its Common Stock on such exchange or market for so long as the
Registrable Securities, Preferred Stock and/or Warrants are owned by the
Investors and/or Placement Agent. In addition, if at any time the number of
shares of Common Stock issuable on conversion of all then outstanding shares of
Preferred Stock, on account of accrued and unpaid dividends thereon and upon
exercise in full of the Warrants is greater than the number of shares of Common
Stock theretofore listed with the Principal Market (and any such other national
securities exchange, market or trading facility), the Company shall promptly
take such action (including the actions described in the preceding sentence), if
required pursuant to the rules and regulations of the Principal Market, to file
an additional shares listing application with the Principal Market(and any such
other national securities exchange, market or trading facility) covering at
least a number of shares equal to the sum of (x) 200% of (A) the number of
Underlying Shares as would then be issuable upon a conversion in full of the
shares of Preferred Stock, and (B) the number of Underlying Shares as would be
issuable as payment of dividends on the Preferred Stock, and (y) the number of
Warrant Shares as would be issuable upon exercise in full of the Warrants. The
Company warrants that it (i) has not received any notice, oral or written,
affecting its continued listing on the NASD OTC Electronic Bulletin Board, and
(ii) is in full compliance with the requirements for continued listing on the
NASD OTC Electronic Bulletin Board. The Company will take no action which would
impact its continued listing or the eligibility of the Company for such listing.
The Company will comply with the listing and trading requirements of its Common
Stock on the NASD OTC Electronic Bulletin Board (and of any then Principal
Market) and will comply in all respects with the Company's reporting, filing and
other obligations under the bylaws or rules of the Principal Market. In the
event the Company receives notification from Nasdaq or any other controlling
entity
17
stating that the Company is not in compliance with the listing qualifications of
such Principal Market, the Company will immediately thereafter give written
notice to each Investor and the Placement Agent and take all action necessary to
bring the Company within compliance with all applicable listing standards of the
Principal Market.
Section 6.4 Exchange Act Registration. The Company will maintain the
registration of its Common Stock under Section 12 of the Exchange Act, will
comply in all respects with its reporting and filing obligations under the
Exchange Act, and will not take any action or file any document (whether or not
permitted by Exchange Act or the rules thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing obligations
under said Act.
Section 6.5 Legends. The securities to be sold by the Company pursuant
to this Agreement shall be free of legends, except as set forth in Article VIII.
Section 6.6 Corporate Existence. The Company will take all steps
necessary to preserve and continue the corporate existence of the Company.
Section 6.7 Notice of Certain Events Affecting Registration. The
Company will immediately notify each of the Investors and the Placement Agent
upon the occurrence of any of the following events in respect of a registration
statement or related prospectus in respect of an offering of Registrable
Securities: (i) receipt of any request for additional information by the SEC or
any other federal or state governmental authority during the period of
effectiveness of the Registration Statement for amendments or supplements to the
Registration Statement or related prospectus; (ii) the issuance by the SEC or
any other federal or state governmental authority of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose; (iii) receipt of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (iv) the happening of any event
that makes any statement made in the Registration Statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in the Registration Statement, related prospectus or documents so that,
in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (v) the Company's
reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate. The Company will promptly make available to the
Investors and the Placement Agent any such supplement or amendment to the
related prospectus.
18
Section 6.8 Consolidation; Merger. For so long as the Preferred Stock,
Warrants, and/or Registrable Securities are owned by any Investor and/or the
Placement Agent, the Company shall not, at any time after the date hereof,
effect any merger or consolidation of the Company with or into, or a transfer of
all or substantially all of the assets of the Company to, another entity (a
"Consolidation Event") unless the resulting successor or acquiring entity (if
not the Company) assumes by written instrument the obligation to deliver to the
Investors and the Placement Agent such shares of stock and/or securities as the
Investors and the Placement Agent are entitled to receive pursuant to this
Agreement.
Section 6.9 Issuance of Underlying Shares and Warrant Shares. The
issuance of the Underlying Shares and the Warrant Shares pursuant to exercise of
the Warrants, and the conversion of the Preferred Stock, shall be made in
accordance with the provisions and requirements of Section 4(2) of the
Securities Act or Regulation D and any applicable state securities law.
Section 6.10 Legal Opinion. The Company's independent counsel shall
deliver to the Investors upon execution of this Agreement, an opinion in the
form of Exhibit E annexed hereto. The Company will obtain for the Investors and
the Placement Agent, at the Company's expense, any and all opinions of counsel
which may be reasonably required in order to convert the Preferred Stock and/or
exercise the Warrants, including, but not limited to, obtaining for the
Investors and the Placement Agent an opinion of counsel, subject only to receipt
of a notice of conversion (the "Notice of Conversion") in the form of Exhibit G,
and/or subject only to a receipt of a notice of exercise in the form annexed to
the Warrant, directing the Transfer Agent to remove the legend from the
certificate.
Section 6.11 20% Rule Limitation. If and when required by Principal
Market or otherwise on the market or exchange on which the Company's Common
Stock is then listed, the Company shall call a meeting of its shareholders, to
be held no later than 60 calendar days after becoming subject to such
requirement, seeking shareholder approval of the below market issuances of
shares of Common Stock (and securities convertible into and exercisable for
Common Stock) to the Investors and the Placement Agent of 20% or more of the
number of shares of Common Stock outstanding as of the Subscription Date. In
the event that the aforementioned proposal is not so approved with such 60
calendar day period, the Company shall seek a waiver from the Principal Market
for such below market issuances. In the event the Company does not receive
such waiver within the earlier of ten calendar days after the aforementioned
shareholders meeting, or 70 calendar days after becoming subject to such
requirement, the Company will pay to the Investors and the Placement Agent the
Redemption Price (as defined in the Certificate of Designation) for that number
of shares of Preferred Stock which would result in the Company issuing, in the
aggregate, 20% or more of the outstanding Common Stock as of the Subscription
Date.
Section 6.12 Restrictions on Future Financings. The Company agrees that
it will not, without the prior written consent of all of the Investors, enter
into any subsequent or further offer or sale of Common Stock, or any securities
or other instruments convertible into shares of Common Stock, with any party
that is not a party to this Agreement, until the Registration Statement has been
effective for 60 calendar days. This restriction shall not apply to: (a) the
issuance of securities (other
19
than for cash) in connection with a merger, consolidation, sale of assets, or
other disposition, (b) the exchange of Capital Shares for assets, stock, or
joint venture interest, (c) an offering of any of the Company's securities at
then current market prices with no repricing or reset provisions, (d) any
employee benefit plan, or (e) one offering of any of the Company's securities
for a total consideration of less than $5,000,000; provided, however, that any
action contemplated under this Section is subject to the condition that
registration rights, if any, in connection with such action shall not require
the filing by the Company of a registration statement of such shares prior to 60
calendar days after the Effective Date.
Section 6.13 Conversion of Preferred Stock. The Company will permit the
Investors and the Placement Agent to exercise their right to convert the
Preferred Stock by telecopying an executed and completed Notice of Conversion to
the Company as is set forth in the Certificate of Designation.
Section 6.14 Exercise of Warrants. The Company will permit the Investors
and the Placement Agent to exercise their right to purchase shares of Common
Stock upon exercise of the Warrants as is set forth in the Warrants.
Section 6.15 Restriction on Future Issuances of Preferred Stock. The
Company agrees that except as provided for in this Agreement, it will not issue
any additional share or shares of the Preferred Stock.
Section 6.16 Increase in Authorized Shares. At such time as the Company
would be, if a notice of conversion or exercise (as the case may be) were to be
delivered on such date, precluded from (a) converting in full all of the shares
of Preferred Stock that remain unconverted at such date (and paying any accrued
but unpaid dividends in respect thereof in shares of Common Stock), or (b)
honoring the exercise in full of the Warrants, due to the unavailability of a
sufficient number of shares of authorized but unissued or re-acquired Common
Stock, the Board of Directors of the Company shall promptly (and in any case
within 60 calendar days from such date) hold a shareholders meeting in which the
shareholders would vote for authorization to amend the Company's Articles of
Incorporation to increase the number of shares of Common Stock which the Company
is authorized to issue to at least a number of shares equal to the sum of (i)
all shares of Common Stock then outstanding, (ii) the number of shares of Common
Stock issuable on account of all outstanding warrants, options and convertible
securities (other than the Preferred Stock and the Warrants) and on account of
all shares reserved under any stock option, stock purchase, warrant or similar
plan, (iii) 200% of the number of Underlying Shares as would then be issuable
upon a conversion in full of the then outstanding shares of Preferred Stock and
as payment of all future dividends thereon in shares of Common Stock in
accordance with the terms of this Agreement and the Certificate of Designation,
and (iv) such number of Warrant Shares as would then be issuable upon the
exercise in full of the Warrants. In connection therewith, the Board of
Directors shall (x) adopt proper resolutions authorizing such increase, (y)
recommend to its shareholders, and otherwise use its best efforts to promptly
and duly obtain shareholder approval to carry out such resolutions and (z)
within five Business Days of obtaining such shareholder authorization, file an
appropriate amendment to the Company's Articles of Incorporation to evidence
such increase.
20
Section 6.17 Notice of Breaches. Each of the Company on the one hand,
and the Investors on the other, shall give prompt written notice to the other of
any breach by it of any representation, covenant, warranty or other agreement
contained in this Agreement or any Exhibit annexed hereto, as well as any events
or occurrences arising after the date hereof, which would reasonably be likely
to cause any representation, covenant, or warranty or other agreement of such
party, as the case may be, contained in this Agreement or any Exhibit annexed
hereto, to be incorrect or breached as of such Closing Date. However, no
disclosure by either party pursuant to this Section shall be deemed to cure any
breach of any representation, warranty or other agreement contained in this
Agreement or any Exhibit annexed hereto. Notwithstanding the generality of the
foregoing, the Company shall promptly notify each Investor and the Placement
Agent of any notice or claim (written or oral) that it receives from any lender
of the Company to the effect that the consummation of the transactions
contemplated by this Agreement or any Exhibit annexed hereto, violates or would
violate any written agreement or understanding between such lender and the
Company, and the Company shall promptly furnish by facsimile to each Investor
and the Placement Agent a copy of any written statement in support of or
relating to such claim or notice.
Section 6.18 Transfer of Intellectual Property Rights. Except in the
ordinary course of the Company's business consistent with past practice or in
connection with the sale of all or substantially all of the assets of the
Company, the Company shall not transfer, sell or otherwise dispose of, any
Intellectual Property Rights, or allow the Intellectual Property Rights to
become subject to any Liens, or fail to renew such Intellectual Property Rights
(if renewable and would otherwise expire).
Section 6.19 Notices. The Company agrees to provide all holders of
Preferred Stock and Warrants with copies of all notices and information,
including without limitation notices and proxy statements in connection with any
meetings, that are provided to the holders of shares of Common Stock,
contemporaneously with the delivery of such notices or information to such
Common Stock holders.
ARTICLE VII
-----------
Due Diligence Review; Non-Disclosure of Non-Public Information
--------------------------------------------------------------
Section 7.1 Due Diligence Review. The Company shall make available for
inspection and review by the Investors, advisors to and representatives of the
Investors (who may or may not be affiliated with the Investors), and any
underwriter participating in any disposition of the Registrable Securities on
behalf of the Investors pursuant to the Registration Statement, any such
registration statement or amendment or supplement thereto or any blue sky, NASD
or other filing, all financial and other records, all SEC Documents and other
filings with the SEC, and all other corporate documents and properties of the
Company as may be reasonably necessary for the purpose of such review, and cause
the Company's officers, directors and employees to supply all such information
reasonably requested by any of the Investors or any such representative, advisor
or underwriter in connection with such Registration Statement (including,
without limitation, in response to all questions and other inquiries reasonably
made or submitted by any of them), prior to and from time to time after the
filing and effectiveness of the Registration Statement for the sole purpose of
21
enabling the Investors and such representatives, advisors and underwriters and
their respective accountants and attorneys to conduct initial and ongoing due
diligence with respect to the Company and the accuracy of the Registration
Statement.
Section 7.2 Non-Disclosure of Non-Public Information.
(a) The Company shall not disclose non-public information to the
Investors, or advisors to or representatives of, the Investors unless prior to
disclosure of such information the Company identifies such information as being
non-public information and provides each Investor, and its advisors and
representatives with the opportunity to accept or refuse to accept such non-
public information for review. The Company may, as a condition to disclosing
any non-public information hereunder, require each of the Investors advisors and
representatives to enter into a confidentiality agreement in form reasonably
satisfactory to the Company and the Investors.
(b) Nothing herein shall require the Company to disclose non-public
information to any of the Investors or their advisors or representatives, and
the Company represents that it does not disseminate non-public information to
any investors who purchase stock in the Company in a public offering, to money
managers or to securities analysts, provided, however, that notwithstanding
anything herein to the contrary, the Company will, as hereinabove provided,
immediately notify the advisors and representatives of the Investors and, if
any, underwriters, of any event or the existence of any circumstance (without
any obligation to disclose the specific event or circumstance) of which it
becomes aware, constituting non-public information (whether or not requested of
the Company specifically or generally during the course of due diligence by such
persons or entities), which, if not disclosed in the prospectus included in the
Registration Statement would cause such prospectus to include a material
misstatement or to omit a material fact required to be stated therein in order
to make the statements, therein, in light of the circumstances in which they
were made, not misleading. Nothing contained in this Section shall be construed
to mean that such persons or entities other than the Investors (without the
written consent of the Investors prior to disclosure of such information) may
not obtain non-public information in the course of conducting due diligence in
accordance with the terms of this Agreement and nothing herein shall prevent any
such persons or entities from notifying the Company of their opinion that based
on such due diligence by such persons or entities, that the Registration
Statement contains an untrue statement of a material fact or omits a material
fact required to be stated in the Registration Statement or necessary to make
the statements contained therein, in light of the circumstances in which they
were made, not misleading.
22
ARTICLE VIII
------------
Legends
-------
Section 8.1 Legends. The Investors and the Placement Agent agree to
the imprinting, so long as is required by this Section, of the following legend
(or such substantially similar legend as is acceptable to the Investors and
their counsel, the parties agreeing that any unacceptable legended securities
shall be replaced promptly by and at the Company's cost) on the securities:
[FOR PREFERRED STOCK AND WARRANTS] NEITHER THESE SECURITIES NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS.
[ONLY FOR UNDERLYING SHARES, ADDITIONAL SHARES AND WARRANT SHARES TO THE
EXTENT THE RESALE THEREOF IS NOT COVERED BY AN EFFECTIVE REGISTRATION
STATEMENT AT THE TIME OF CONVERSION, ISSUANCE OR EXERCISE] THE SHARES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
The Underlying Shares, Additional Shares, and/or Warrant Shares shall not
contain the legend set forth above or any other restrictive legend (other than
as pursuant to the Registration Statement) if the conversion of the Preferred
Stock, exercise of Warrants or other issuances of Underlying Shares, Additional
Shares, and/or Warrant Shares, as the case may be, occurs at any time while a
Registration Statement is effective under the Securities Act or, in the event
there is not an effective Registration Statement at such time, if in the opinion
of counsel to the Company such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the SEC). The Company agrees that it will
23
provide the Investors, upon request, with a certificate or certificates
representing Underlying Shares, Additional Shares, and/or Warrant Shares, free
from such legend at such time as such legend is no longer required hereunder.
The Company may not take any action or make any notation on its records or give
instructions to any transfer agent of the Company which enlarge the restrictions
of transfer set forth in this Section.
Upon the execution and delivery hereof, the Company is issuing to the
transfer agent for its Common Stock (and to any substitute or replacement
transfer agent for its Common Stock upon the Company's appointment of any such
substitute or replacement transfer agent) instructions in substantially the form
of Exhibit F hereto. Such instructions shall be irrevocable by the Company from
and after the date hereof or from and after the issuance thereof to any such
substitute or replacement transfer agent, as the case may be, except as
otherwise expressly provided in the Registration Rights Agreement. It is the
intent and purpose of such instructions, as provided therein, to require the
transfer agent for the Common Stock from time to time upon transfer of
Registrable Securities by the Investors or the Placement Agent to issue
certificates evidencing such Registrable Securities free of the Legend during
the following periods and under the following circumstances and except as
provided below, without consultation by the transfer agent with the Company or
its counsel and without the need for any further advice or instruction or
documentation to the transfer agent by or from the Company or its counsel or the
Investors:
(a) at any time after the Effective Date, upon surrender of one or
more certificates evidencing the Warrants, Preferred Stock, Underlying Shares or
Warrant Shares that bear the aforementioned Legend, to the extent accompanied by
a notice requesting the issuance of new certificates free of the aforementioned
legend to replace those surrendered; provided that (i) the Registration
Statement shall then be effective; (ii) the Investor(s) and/or the Placement
Agent confirm to the transfer agent that it has sold, pledged or otherwise
transferred or agreed to sell, pledge or otherwise transfer such Common Stock in
a bona fide transaction to a third party that is not an affiliate of the
Company; and (iii) the Investor(s) and/or Placement Agent confirm to the
transfer agent that the Investor(s) and/or Placement Agent have complied with
the prospectus delivery requirement; or
(b) at any time upon any surrender of one or more certificates
evidencing Registrable Securities, that bear the aforementioned legend, to the
extent accompanied by a notice requesting the issuance of new certificates free
of such legend to replace those surrendered and containing representations that
(i) the Investor(s) and/or the Placement Agent is permitted to dispose of such
Registrable Securities, without limitation as to amount or manner of sale
pursuant to Rule 144(k) under the Securities Act (or any other similar exemption
as may then be in effect), or (ii) the Investor(s) and/or Placement Agent has
sold, pledged or otherwise transferred or agreed to sell, pledge or otherwise
transfer such Registrable Securities, in a manner other than pursuant to an
effective registration statement, to a transferee who will upon such transfer be
entitled to freely tradable securities. The Company shall have counsel provide
any and all opinions necessary for the sale under Rule 144 (or such other
applicable exemption).
Any of the notices referred to above in this Section may be sent by
facsimile to the Company's transfer agent.
24
Section 8.2 No Other Legend or Stock Transfer Restrictions. No legend
other than the one specified in this Article (or pursuant to the Registration
Statement) has been or shall be placed on the share certificates representing
the Common Stock, and no instructions or "stop transfer orders," so called,
"stock transfer restrictions," or other restrictions have been or shall be given
to the Company's transfer agent with respect thereto other than as expressly set
forth in this Article.
Section 8.3 Investor's Compliance. Nothing in this Article shall affect
in any way any of the Investors' obligations under any agreement to comply with
all applicable securities laws upon resale of the Common Stock.
ARTICLE IX
----------
Choice of Law
-------------
Section 9.1 Choice of Law; Venue; Jurisdiction. This Agreement will
be construed and enforced in accordance with and governed exclusively by the
laws of the State of New York, except for matters arising under the Securities
Act, without reference to principles of conflicts of law. Each of the parties
consents to the exclusive jurisdiction of the U.S. District Court sitting in the
Southern District of the State of New York sitting in Manhattan in connection
with any dispute arising under this Agreement and hereby waives, to the maximum
extent permitted by law, any objection, including any objection based on forum
non conveniens, to the bringing of any such proceeding in such jurisdictions.
Each party hereby agrees that if another party to this Agreement obtains a
judgment against it in such a proceeding, the party which obtained such judgment
may enforce same by summary judgment in the courts of any country having
jurisdiction over the party against whom such judgment was obtained, and each
party hereby waives any defenses available to it under local law and agrees to
the enforcement of such a judgment. Each party to this Agreement irrevocably
consents to the service of process in any such proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to such party
at its address set forth herein. Nothing herein shall affect the right of any
party to serve process in any other manner permitted by law. Each party waives
its right to a trial by jury. In the event that any Investor and/or the
Placement Agent, or any person claimed to be affiliated or associated with such
Investor and/or the Placement Agent becomes involved in any capacity in any
action, proceeding or investigation brought by or against any such person,
including shareholders of the Company, in connection with or as a result of any
matter referred to in this Agreement or any exhibit annexed hereto, the Company
shall reimburse such Investor and/or the Placement Agent and/or those claimed to
be affiliated or associated with such Investor and/or the Placement Agent for
its legal fees and expenses and other expenses (including the cost of any
investigation and preparation) incurred in connection therewith, as those fees
and expenses are incurred, provided, however, that if at the conclusion of such
action, proceeding or investigation it shall be finally judicially determined by
a court of competent jurisdiction that indemnity for such fees and expenses is
contrary to law, or that such Investor and/or the Placement Agent is not the
prevailing party then in that event, such Investor and/or the Placement Agent
and/or any other person having received such advances of fees and/or expenses
shall reimburse the Company in full for the sums advanced.
25
ARTICLE X
---------
Assignment; Entire Agreement, Amendment; Termination
----------------------------------------------------
Section 10.1 Assignment. The Investor's interest in this Agreement and
its ownership of Preferred Stock and Warrants may be assigned or transferred at
any time, in whole or in part, to any other person or entity (including any
affiliate of the Investors) who agrees to, and truthfully can, make the
representations and warranties contained in Article III, and who agrees to be
bound by the covenants of Article V. The provisions of this Agreement shall
inure to the benefit of, and be enforceable by, any transferee of any of the
shares of Preferred Stock and/or Warrants purchased or acquired by the Investors
hereunder with respect to the Common Stock held by such person.
Section 10.2 Termination. This Agreement shall terminate upon the
earliest of (i) the date that all the Registrable Securities have been sold by
the Investors pursuant to the Registration Statement; or (ii) five years after
the Closing Date; provided, however, that the provisions of Articles III, IV, V,
VI, VII, VIII, IX, X, XI, and XII herein, and the registration rights provisions
for the Registrable Securities held by the Investors and the Placement Agent set
forth in this Agreement, and the Registration Rights Agreement, shall survive
the termination of this Agreement.
ARTICLE XI
----------
Notices
-------
Section 11.1 Notices. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, 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 Business
26
Day following the date of mailing by reputable 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:
If to the Company:
Global Maintech Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Investors, at the addresses listed on Schedule A.
If to the Placement Agent, at the address listed on the first page of this
Agreement.
with a copy to:
The ▇▇▇▇▇▇▇▇▇ Law Group, P.C.
▇▇ ▇▇▇▇▇▇▇▇, ▇▇/▇▇/ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Either party hereto may from time to time change its address or facsimile
number for notices under this Section 11.1 by giving at least ten calendar days'
prior written notice of such changed address or facsimile number to the other
party hereto.
Section 11.2 Indemnification. The Company agrees to indemnify and hold
harmless each of the Investors and each officer, director of the Investors or
person, if any, who controls the Investors within the meaning of the Securities
Act against any losses, claims, damages or liabilities, joint or several (which
shall, for all purposes of this Agreement, include, but not be limited to, all
costs of defense and investigation and all attorneys' fees), to which the
Investors may become subject, under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon the breach by the Company of any term of this
Agreement. This indemnity agreement will be in addition to any liability which
the Company may otherwise have.
Each Investor severally (and not jointly) agrees that it will indemnify and
hold harmless the Company, and each officer, director of the Company or person,
if any, who controls the Company within the meaning of the Securities Act,
against any losses, claims, damages or liabilities (which shall, for all
purposes of this Agreement, include, but not be limited to, all costs of defense
and
27
investigation and all attorneys' fees) to which the Company or any such
officer, director or controlling person may become subject under the Securities
Act or otherwise, insofar as such losses claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon the breach by such
Person of any term of this Agreement. This indemnity agreement will be in
addition to any liability which the Investors or any subsequent assignee may
otherwise have.
Promptly after receipt by an indemnified party under this Section of notice
of the commencement of any action, such indemnified party will, if a claim in
respect thereof is to be made against the indemnifying party under this Section,
notify the indemnifying party of the commencement thereof; but the omission so
to notify the indemnifying party will not relieve the indemnifying party from
any liability which it may have to any indemnified party otherwise than as to
the particular item as to which indemnification is then being sought solely
pursuant to this Section. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party similarly
notified, assume the defense thereof, subject to the provisions herein stated
and after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation, unless the
indemnifying party shall not pursue the action to its final conclusion. The
indemnified party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with counsel reasonably
satisfactory to the indemnified party; provided that if the indemnified party is
one of the Investors, the fees and expenses of such counsel shall be at the
expense of the indemnifying party if (i) the employment of such counsel has been
specifically authorized in writing by the indemnifying party, or (ii) the named
parties to any such action (including any impleaded parties) include both the
Investors and the indemnifying party and the Investors shall have been advised
by such counsel that there may be one or more legal defenses available to the
indemnifying party different from or in conflict with any legal defenses which
may be available to the Investors (in which case the indemnifying party shall
not have the right to assume the defense of such action on behalf of the
Investors, it being understood, however, that the indemnifying party shall, in
connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable only for the reasonable fees and
expenses of one separate firm of attorneys for the Investor(s), which firm shall
be designated in writing by the Investor(s)). No settlement of any action
against an indemnified party shall be made without the prior written consent of
the indemnified party, which consent shall not be unreasonably withheld.
Section 11.3 Contribution. In order to provide for just and equitable
contribution under the Securities Act in any case in which (i) the indemnified
party makes a claim for indemnification pursuant to Section 11.2 hereof but is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the
28
fact that the express provisions of Section 11.2 hereof provide for
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of any indemnified party, then the Company and the
applicable Investor shall contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (which shall, for all purposes of this
Agreement, include, but not be limited to, all costs of defense and
investigation and all attorneys' fees), in either such case (after contribution
from others) on the basis of relative fault as well as any other relevant
equitable considerations. The amount paid or payable by an indemnified party as
a result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in Section 11.2 shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contributions from any person who was not
guilty of such fraudulent misrepresentation.
ARTICLE XII
-----------
Miscellaneous
-------------
Section 12.1 Counterparts; Facsimile; Amendments. This Agreement may be
executed in multiple counterparts, each of which may be executed by less than
all of the parties and shall be deemed to be an original instrument which shall
be enforceable against the parties actually executing such counterparts and all
of which together shall constitute one and the same instrument. Except as
otherwise stated herein, in lieu of the original documents, a facsimile
transmission or copy of the original documents shall be as effective and
enforceable as the original. This Agreement may be amended only by a writing
executed by the Company on the one hand, and all of the Investors, and the
Placement Agent, on the other hand.
Section 12.2 Entire Agreement. This Agreement, the Exhibits or
Attachments hereto, which include, but are not limited to the Certificate of
Designation, the Warrant, the Escrow Agreement, and the Registration Rights
Agreement, set forth the entire agreement and understanding of the parties
relating to the subject matter hereof and supersedes all prior and
contemporaneous agreements, negotiations and understandings between the parties,
both oral and written relating to the subject matter hereof. The terms and
conditions of all Exhibits and Attachments to this Agreement are incorporated
herein by this reference and shall constitute part of this Agreement as is fully
set forth herein.
Section 12.3 Survival; Severability. The representations, warranties,
covenants and agreements of the parties hereto shall survive each Closing
hereunder. In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that such severability shall be ineffective if it materially
changes the economic benefit of this Agreement to any party.
29
Section 12.4 Title and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
Section 12.5 Reporting Entity for the Common Stock. The reporting entity
relied upon for the determination of the trading price or trading volume of the
Common Stock on any given Trading Day for the purposes of this Agreement and all
Exhibits shall be Bloomberg, L.P. or any successor thereto. The written mutual
consent of the Investors and the Company shall be required to employ any other
reporting entity.
Section 12.6 Replacement of Certificates. Upon (i) receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of a certificate representing the Preferred Stock, Warrants,
Underlying Shares, Additional Shares, or Warrant Shares, and (ii) in the case of
any such loss, theft or destruction of such certificate, upon delivery of an
indemnity agreement or security reasonably satisfactory in form and amount to
the Company or (iii) in the case of any such mutilation, on surrender and
cancellation of such certificate, the Company at its expense will execute and
deliver, in lieu thereof, a new certificate of like tenor.
Section 12.7 Fees and Expenses. Each of the parties shall pay its own
fees and expenses (including the fees of any attorneys, accountants, appraisers
or others engaged by such party) in connection with this Agreement and the
transactions contemplated hereby, except that the Company shall pay on the
Subscription Date (i) the sum of one percent of the Purchase Price, in cash, out
of escrow, to The ▇▇▇▇▇▇▇▇▇ Law Group, P.C. for legal, administrative, and
escrow fees, and (ii) to the Placement Agent (A) the sum equal to five percent
of the Purchase Price payable in cash out of escrow, (B) 75 shares of Preferred
Stock, and (C) Warrants to purchase 100,000 Warrant Shares, for Placement Agent
fees.
Section 12.8 Noncircumvention. The Company and the Investors agree that
they shall not circumvent this Agreement and the Company's obligation to pay
fees to the Placement Agent, and the Company, the Investors and the Placement
Agent agree that they will not circumvent the provisions of this Agreement or
the Escrow Agreement and the Company's obligation for the payment of fees to the
Escrow Agent.
Section 12.9 Publicity. The Company and the Investors shall consult with
each other in issuing any press releases or otherwise making public statements
with respect to the transactions contemplated hereby and no party shall issue
any such press release or otherwise make any such public statement without the
prior written consent of the other parties, which consent shall not be
unreasonably withheld or delayed, except that no prior consent shall be required
if such disclosure is required by law, in which such case the disclosing party
shall provide the other parties with prior notice of such public statement.
Notwithstanding the foregoing, the Company shall not publicly disclose the name
of the Investors without the prior written consent of the Investors, except to
the extent required by law, in which case the Company shall provide the
Investors with prior written notice of such public disclosure.
Section 12.10 No Group. It is hereby agreed and acknowledged by the
parties hereto that
30
each Investor is acting individually and for its own account in purchasing the
Preferred Stock and Warrants, with no agreement to act together for the purpose
of acquiring, holding, voting or disposing of any equity securities or
otherwise.
SCHEDULES:
---------
A: List of Investors
4.25: Private Placements
EXHIBITS:
--------
A: Certificate of Designation
B: Escrow Agreement
C: Registration Rights Agreement
D: Common Stock Purchase Warrant
E: Opinion of Counsel
F: Instruction Letter to Transfer Agent
G: Notice of Conversion
[Remainder of page intentionally left blank]
[Signature page follows]
31
IN WITNESS WHEREOF, the parties hereto have caused this Series C
Convertible Preferred Stock Purchase Agreement to be executed by the
undersigned, thereunto duly authorized, as of the date first set forth above.
GLOBAL MAINTECH CORPORATION
By: ____________________________
▇▇▇▇▇ ▇▇▇▇▇▇
Chief Financial Officer and
Secretary
ESQUIRE TRADE & FINANCE INC.
By:____________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Director
AUSTINVEST ANSTALT BALZERS
By: ____________________________
▇▇. ▇▇▇▇▇▇ Grill, Director
HEADWATERS CAPITAL, a California General
Partnership
By: ____________________________
NESHER INC.
By: ____________________________
SETTONDOWN CAPITAL INTER-
-NATIONAL LTD., Placement Agent
By: _____________________________
SCHEDULE A
----------
INVESTORS:
----------
1. Esquire Trade & Finance Inc.
Trident ▇▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
Facsimile: 41-41-760-1031
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Director
Initial Investment Amount: $500,000
No. of Shares of Preferred Stock: 500
2. Austinvest Anstalt Balzers
Landstrasse 938
9494 Furstentums
Balzers, Liechtenstein
Attention: ▇▇. ▇▇▇▇▇▇ Grill
Facsimile: 431-534-532-895
Initial Investment Amount: $500,000
No. of Shares of Preferred Stock: 500
3. Nesher, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇ ▇▇▇
▇▇▇-▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Attention: ▇▇▇▇▇ Grin
Facsimile: 01197236050756
Initial Investment Amount: $100,000
No. of Shares of Preferred Stock: 100
4. Headwaters Capital
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Initial Investment Amount: $500,000
No. of Shares of Preferred Stock: 500
EXHIBIT C
FORM OF REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated the 24/th/ day of March,
1999, between the entities listed on Schedule A attached hereto (referred to as
a the "Investors"), SETTONDOWN CAPITAL INTERNATIONAL LTD. ") a corporation
organized under the laws of Bahamas, located at Charlotte House, Charlotte
Street, P.O. Box N. 9204, Nassau, Bahamas, (the "Placement Agent", and together
with the Investors is also hereinafter referred to as the "Holder" or "Holders")
and GLOBAL MAINTECH CORPORATION, a corporation incorporated under the laws of
the State of Minnesota, and having its principle place of business at ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the "Company").
WHEREAS, simultaneously with the execution and delivery of this
Agreement, the Investors are purchasing from the Company, pursuant to the Series
C Convertible Preferred Stock Purchase Agreement dated the date hereof (the
"Purchase Agreement"), shares of Preferred Stock and Warrants (hereinafter
collectively referred to as the "Securities" of the Company); All capitalized
terms not hereinafter defined shall have that meaning assigned to them in the
Purchase Agreement; and
WHEREAS, simultaneously with the execution and delivery of this
Agreement, the Company shall issue Securities to the Placement Agent, in return
for services rendered, as provided in the Purchase Agreement; and
WHEREAS, the Company desires to grant to the Holders the registration
rights set forth herein with respect to the securities set forth in the Purchase
Agreement.
NOW, THEREFORE, the parties hereto mutually agree as follows:
Section 1. Registrable Securities. As used herein the term
"Registrable Security" means the Underlying Shares, the Additional Shares, and
the Warrant Shares; provided, however, that with respect to any particular
Registrable Security, such security shall cease to be a Registrable Security
when, as of the date of determination, (i) it has been effectively registered
under the Securities Act of 1933, as amended (the "1933 Act") and disposed of
pursuant thereto, (ii) registration under the 1933 Act is no longer required for
the immediate public distribution of such security as a result of the provisions
of Rule 144 promulgated under the 1933 Act, or (iii) it has ceased to be
outstanding. The term "Registrable Securities" means any and/or all of the
securities falling within the foregoing definition of a Registrable Security.
In the event of any merger, reorganization, consolidation, recapitalization or
other change in corporate structure affecting the Common Stock, such adjustment
shall be made in the definition of Registrable Security as is appropriate in
order to prevent any dilution or enlargement of the rights granted pursuant to
this Section.
2
Section 2. Restrictions on Transfer. The Holders acknowledge and
understand that prior to the registration of the Registrable Securities as
provided herein, the Registrable Securities and the Securities are "restricted
securities" as defined in Rule 144 promulgated under the Act. The Holders
understand that no disposition or transfer of the Registrable Securities or the
Securities may be made by the Holders in the absence of (i) an opinion of
counsel to the Holders that such transfer may be made without registration under
the 1933 Act or (ii) such registration.
Section 3. Registration Rights.
(a) The Company agrees that it will prepare and file with the
Securities and Exchange Commission ("SEC"), as soon as possible after the
Closing Date but not later than 90 calendar days after the Closing Date, a
registration statement under the 1933 Act (the "Registration Statement"), at the
sole expense of the Company (except as provided in Section 3(c) hereof), in
respect of all holders of Registrable Securities, so as to permit a public
offering and sale of the Registrable Securities under the Act. The Company
shall use its best efforts to cause the Registration Statement to become
effective within 120 calendar days from the Closing Date. The number of shares
of Common Stock designated in the Registration Statement to be registered shall
be (i) 200% of the number of Underlying Shares that would be required if the
Preferred Stock were converted on the Trading Day immediately preceding the
filing of the Registration Statement, plus (ii) 100% of the number of Warrant
Shares.
In the event the number of shares of Common Stock included in the
registration Statement shall be insufficient to cover the number of Registrable
Securities due to the Holders via conversion and/or exercise the Company agrees
that it shall file either a new Registration Statement including such additional
shares or amend the then existing Registration Statement. The Company agrees
that it such event it will file with the SEC either an amendment to the then
existing registration Statement or a new Registration Statement within 60 days
of when required hereunder, and use its best efforts to cause either the
amendment or such Registration Statement to become effective within 90 calendar
days from when required. If such amendment or new Registration Statement is not
filed and/or declared effective in a timely manner as set forth herein, the
Company shall be subject to liquidated damages as pursuant to the provisions of
Section 3(e) below.
(b) The Company will maintain the Registration Statement, or post-
effective amendment filed under this Section 3 hereof current under the 1933 Act
until the earlier of (i) the date that all of the Registrable Securities have
been sold pursuant to the applicable Registration Statement, (ii) the date the
holders thereof receive an opinion of counsel that the Registrable Securities
may be sold under the provisions of Rule 144, or other similar exemption
(without volume limitation) or (iii) five years after the Closing Date.
(c) All fees, disbursements and out-of-pocket expenses and costs
incurred by the Company in connection with the preparation and filing of the
Registration Statement under subparagraph 3(a) and in complying with applicable
securities and blue sky laws (including, without
3
limitation, all attorneys' fees) shall be borne by the Company. The Holders
shall bear the cost, pro rata, of underwriting discounts and commissions, if
any, applicable to the Registrable Securities being registered and the fees and
expenses of its counsel. The Company shall qualify any of the Registrable
Securities for sale in such states as such Holder reasonably designates and
shall furnish indemnification in the manner provided in Section 6 hereof.
However, the Company shall not be required to qualify in any state which will
require an escrow or other restriction relating to the Company and/or the
sellers. The Company at its expense will supply the Holders with copies of the
Registration Statement and the prospectus or offering circular included therein
and other related documents in such quantities as may be reasonably requested by
the Holders.
(d) The Company shall not be required by this Section 3 to include a
Holder's Registrable Securities in any Registration Statement which is to be
filed if, in the opinion of counsel for both the Holder and the Company (or,
should they not agree, in the opinion of another counsel experienced in
securities law matters acceptable to counsel for the Holder and the Company) the
proposed offering or other transfer as to which such registration is requested
is exempt from applicable federal and state securities laws and would result in
all purchasers or transferees obtaining securities which are not "restricted
securities", as defined in Rule 144 under the 1933 Act.
(e) In the event the Registration Statement to be filed by the Company
pursuant to Section 3(a) above is not filed with the SEC on or before the 90/th/
calendar day after the Closing Date and/or the Registration Statement is not
declared effective by the SEC within 120 calendar days from the Closing Date,
then the Company will pay the Holders (pro rated on a daily basis), as
liquidated damages for such failure and not as a penalty, two percent (2%) of
the Purchase Price of the then outstanding shares of Preferred Stock for the
first 30 calendar day period until the Registration Statement has been filed
and/or declared effective and 3% of the Purchase Price of the then outstanding
shares of Preferred Stock for each additional 30 day period thereafter until the
Registration Statement is filed and/or declared effective. Such payment of the
liquidated damages shall be made to the Holders in cash, immediately upon
demand, provided, however, that the payment of such liquidated damages shall not
relieve the Company from its obligations to register the Registrable Securities
pursuant to this Section. Such demand must be made by the Holders within 90
calendar days after the date in which the Company becomes liable for liquidated
damages. If the Company does not remit the damages to the Holders as set forth
above, the Company will pay the Holders' reasonable costs of collection,
including attorneys fees, in addition to the liquidated damages. The
registration of the Registrable Securities pursuant to this provision shall not
affect or limit a Holder's other rights or remedies as set forth in this
Agreement. The aforementioned liquidated damages shall be limited to a maximum
amount of 100% of the Purchase Price (as defined in the Purchase Agreement).
(f) No provision contained herein shall preclude the Company from
selling securities pursuant to any registration statement in which it is
required to include Registrable Securities pursuant to this Section 3.
(g) The Company agrees that within five calendar days after receipt of
a
4
no review letter from the SEC it will take all appropriate measures necessary
to cause the Registration Statement to be declared effective. The Company also
agrees that it shall respond to any questions and/or comments from the SEC which
relate to the Registration Statement within five Business Days of receipt of
such question or comment.
Section 4. Cooperation with Company. Each of the Holders will
cooperate with the Company in all respects in connection with this Agreement,
including timely supplying all information reasonably requested by the Company
and executing and returning all documents reasonably requested in connection
with the registration and sale of the Registrable Securities.
Section 5. Registration Procedures. Whenever the Company is required
by any of the provisions of this Agreement to effect the registration of any of
the Registrable Securities under the Act, the Company shall (except as otherwise
provided in this Agreement), as expeditiously as possible:
(a) prepare and file with the SEC such amendments and supplements to
the registration statements and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective and to comply
with the provisions of the Act with respect to the sale or other disposition of
all securities covered by such registration statement whenever the Holder of
such securities shall desire to sell or otherwise dispose of the same (including
prospectus supplements with respect to the sales of securities from time to time
in connection with a registration statement pursuant to Rule 415 promulgated
under the Act);
(b) furnish to each Holder such numbers of copies of a summary
prospectus or other prospectus, including a preliminary prospectus or any
amendment or supplement to any prospectus, in conformity with the requirements
of the Act, and such other documents, as such Holder may reasonably request in
order to facilitate the public sale or other disposition of the securities owned
by such Holder;
(c) register and qualify the securities covered by the Registration
Statement under such other securities or blue sky laws of such jurisdictions as
the Holders shall reasonably request, and do any and all other acts and things
which may be necessary or advisable to enable each Holder to consummate the
public sale or other disposition in such jurisdiction of the securities owned by
such Holder, except that the Company shall not for any such purpose be required
to qualify to do business as a foreign corporation in any jurisdiction wherein
it is not so qualified or to file therein any general consent to service of
process;
(d) list such securities on the NASD OTC Electronic Bulletin Board or
other national securities exchange on which any securities of the Company are
then listed, if the listing of such securities is then permitted under the rules
of such market or exchange;
(e) enter into and perform its obligations under an underwriting
agreement, if the offering is an underwritten offering, in usual and customary
form, with the
5
managing underwriter or underwriters of such underwritten offering;
(f) notify each Holder of Registrable Securities covered by the
Registration Statement any time when a prospectus relating thereto covered by
the Registration Statement is required to be delivered under the Act, of the
happening of any event of which it has knowledge as a result of which the
prospectus included in the Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.
Section 6. Information by Holder. Each Holder of Registrable
Securities included in any registration statement shall furnished to the Company
such information regarding such Holder and the distribution proposed by such
Holder as the Company may request in writing and as shall be required in
connection with any registration, qualification or compliance referred to in
this Section.
Section 7. Assignment. The rights granted the Holders under this
Agreement shall not be assigned without the written consent of the Company,
which consent shall not be unreasonably withheld. This Agreement is binding
upon and inures to the benefit of the parties hereto and their respective heirs,
successors and permitted assigns.
Section 8. Termination of Registration Rights. The rights granted
pursuant to this Agreement shall terminate as to each Holder (and permitted
transferee under Section 7 above) upon the occurrence of any of the following:
(a) all such Holder's securities subject to this Agreement have
been registered;
(b) all of such Holder's securities subject to this Agreement may be
sold without such registration pursuant to Rule 144 without volume limitation
promulgated by the SEC pursuant to the Securities Act;
(c) all of such Holder's securities subject to this Agreement can be
sold pursuant to Rule 144(k) without volume limitation; or
five years from the issuance of the Registrable Securities.
Section 9. Indemnification.
(a) In the event of the filing of any Registration Statement with
respect to Registrable Securities pursuant to Section 3 hereof, the Company
agrees to indemnify and hold harmless the Holders and each officer, and/or
director of each of the Holders, and each person, if any, who controls the
Holders within the meaning of the Securities Act ("Distributing Holders")
6
against any losses, claims, damages or liabilities, joint or several (which
shall, for all purposes of this Agreement, include, but not be limited to, all
costs of defense and investigation and all attorneys' fees), to which the
Distributing Holders may become subject, under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any such Registration Statement or
any related preliminary prospectus, final prospectus, offering circular,
notification or amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading;
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such Registration Statement, preliminary prospectus, final
prospectus, offering circular, notification or amendment or supplement thereto
in reliance upon, and in conformity with, written information furnished to the
Company by the Distributing Holders, specifically for use in the preparation
thereof. This indemnity agreement will be in addition to any liability which the
Company may otherwise have.
(b) Each Distributing Holder severally (and not jointly) agrees that
it will indemnify and hold harmless the Company, and each officer, director of
the Company, or person, if any, who controls the Company within the meaning of
the Securities Act, against any losses, claims, damages or liabilities (which
shall, for all purposes of this Agreement, include, but not be limited to, all
costs of defense and investigation and all attorneys' fees) to which the Company
or any such officer, director or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses claims, damages or
liabilities (or actions in respect thereof, arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in a
Registration Statement, requested by such Distributing Holder, or any related
preliminary prospectus, final prospectus, offering circular, notification or
amendment or supplement thereto, or arise out of or are based upon the omission
or the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, but in each
case only to the extent that such untrue statement or alleged untrue statement
or omission or alleged omission was made in such Registration Statement,
preliminary prospectus, final prospectus, offering circular, notification or
amendment or supplement thereto in reliance upon, and in conformity with,
written information furnished to the Company by such Distributing Holder,
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability which the Distributing Holders may otherwise
have.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve the indemnifying
party from any liability which it may have to any indemnified party otherwise
than as to the particular item as to which indemnification is then being sought
solely pursuant to this Section. In case any such action is brought against any
indemnified party, and it notifies the indemnifying
7
party of the commencement thereof, the indemnifying party will be entitled to
participate in, and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, assume the defense thereof, subject to
the provisions herein stated and after notice from the indemnifying party to
such indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation, unless the indemnifying party shall not pursue the
action to its final conclusion. The indemnified party shall have the right to
employ separate counsel in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel shall not be at the expense
of the indemnifying party if the indemnifying party has assumed the defense of
the action with counsel reasonably satisfactory to the indemnified party;
provided that if the indemnified party is the Distributing Holder, the fees and
expenses of such counsel shall be at the expense of the indemnifying party if
(i) the employment of such counsel has been specifically authorized in writing
by the indemnifying party, or (ii) the named parties to any such action
(including any impleaded parties) include both the Distributing Holder and the
indemnifying party and the Distributing Holder shall have been advised by such
counsel that there may be one or more legal defenses available to the
indemnifying party different from or in conflict with any legal defenses which
may be available to the Distributing Holder (in which case the indemnifying
party shall not have the right to assume the defense of such action on behalf of
the Distributing Holder, it being understood, however, that the indemnifying
party shall, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable only for the reasonable
fees and expenses of one separate firm of attorneys for the Distributing Holder,
which firm shall be designated in writing by the Distributing Holder). No
settlement of any action against an indemnified party shall be made without the
prior written consent of the indemnified party, which consent shall not be
unreasonably withheld.
Section 10. Contribution. In order to provide for just and equitable
contribution under the Securities Act in any case in which (i) the Distributing
Holder makes a claim for indemnification pursuant to Section 9 hereof but is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that the express provisions of Section 9 hereof provide
for indemnification in such case, or (ii) contribution under the Securities Act
may be required on the part of any Distributing Holder, then the Company and the
applicable Distributing Holder shall contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (which shall, for all
purposes of this Agreement, include, but not be limited to, all costs of defense
and investigation and all attorneys' fees), in either such case (after
contribution from others) on the basis of relative fault as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or the applicable
Distributing Holder, on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Distributing Holder agree that it
would not be just and
8
equitable if contribution pursuant to this Section were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in this Section. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this Section
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
Section 11. Notices. Any notice pursuant to this Agreement by the
Company or by the Holder shall be in writing and shall be deemed to have been
duly given if delivered by (i)
9
hand, (ii) by facsimile and followed by mail delivery or (iii) if mailed by
certified mail, return receipt requested, postage prepaid, addressed as follows:
(a) If to the Company:
Global Maintech Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: CEO
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to the Placement Agent:
Settondown Capital International Ltd.
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
P.O. Box N. 9204
Nassau, Bahamas
Attention: ▇▇▇▇▇▇▇ ▇. ▇. ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(c) If to the Investors, to their address set forth on Schedule A
annexed to the Purchase Agreement.
Notices shall be deemed given at the time they are delivered personally or
five calendar days after they are mailed in the manner set forth above. If
notice is delivered by facsimile to the Company and followed by mail, delivery
shall be deemed given two calendar days after such facsimile is sent.
Section 12. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 13. Headings. The headings in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 14. Choice of Law; Venue; Jurisdiction. This Agreement will
be construed and enforced in accordance with and governed by the laws of the
State of New York, except for matters arising under
10
the Securities Act, without reference to principles of conflicts of law. Each of
the parties consents to the exclusive jurisdiction of the U.S. District Court
sitting in the Southern District of the State of New York sitting in Manhattan
in connection with any dispute arising under this Agreement and hereby waives,
to the maximum extent permitted by law, any objection, including any objection
based on forum non conveniens, to the bringing of any such proceeding in such
jurisdictions. Each party hereby agrees that if another party to this Agreement
obtains a judgment against it in such a proceeding, the party which obtained
such judgment may enforce same by summary judgment in the courts of any country
having jurisdiction over the party against whom such judgment was obtained, and
each party hereby waives any defenses available to it under local law and agrees
to the enforcement of such a judgment. Each party to this Agreement irrevocably
consents to the service of process in any such proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to such party
at its address set forth herein. Nothing herein shall affect the right of any
party to serve process in any other manner permitted by law. Each party waives
its right to a trial by jury.
Section 15. Severability. If any provision of this Agreement shall
for any reason be held invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision hereof and this Agreement
shall be construed as if such invalid or unenforceable provision had never been
contained herein.
11
IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be duly executed, on the day and year first above written.
GLOBAL MAINTECH CORPORATION
By:____________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Financial Officer and Secretary
ESQUIRE TRADE & FINANCE INC.
By:____________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Director
AUSTINVEST ANSTALT BALZERS
By: ____________________________
▇▇. ▇▇▇▇▇▇ Grill, Director
HEADWATERS CAPITAL, a California General
Partnership
By: ____________________________
NESHER INC.
By: ____________________________
SETTONDOWN CAPITAL INTER-
NATIONAL LTD., Placement Agent
By: _____________________________
EXHIBIT D
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). THIS WARRANT SHALL NOT CONSTITUTE AN OFFER
TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE SECURITIES ARE
"RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE
ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
FORM OF COMMON STOCK PURCHASE WARRANT
No. __
To Purchase ______ Shares of Common Stock of
GLOBAL MAINTECH CORPORATION
THIS CERTIFIES that, for value received, ___________________ (the
"Investor"), is entitled, upon the terms and subject to the conditions
hereinafter set forth, at any time on or after the date hereof and on or prior
to ____________ (the "Termination Date") but not thereafter, to subscribe for
and purchase from GLOBAL MAINTECH CORPORATION, a Minnesota corporation (the
"Company"), ( ) shares of Common Stock (the "Warrant Shares").
The purchase price of one share of Common Stock (the "Exercise Price") under
this Warrant shall be _____ (which shall be equal to 110% of the closing bid
price of the Common Stock on the Principal Market, on the Trading Day
immediately preceding the Subscription Date, as defined in the Series C
Convertible Preferred Stock Purchase Agreement). The Exercise Price and the
number of shares for which the Warrant is exercisable shall be subject to
adjustment as provided herein. This Warrant is being issued in connection with
the Series C Convertible Preferred Stock Purchase Agreement dated March , 1999
(the "Agreement") entered into between the Company, the Investor and other
entities not a party to this Warrant. In the event of any conflict between the
terms of this Warrant and the Agreement, the Agreement shall control.
1. Title of Warrant. Prior to the expiration hereof and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by the
holder hereof in person or by duly authorized attorney, upon surrender of this
Warrant together with the Assignment Form annexed hereto properly endorsed.
2. Authorization of Shares. The Company covenants that all shares
of Common Stock which may be issued upon the exercise of rights represented by
this Warrant will, upon exercise of the rights represented by this Warrant, be
duly authorized, validly issued, fully paid and nonassessable and free from all
taxes, liens and charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such issue).
3. Exercise of Warrant. Exercise of the purchase rights represented
by this Warrant may be made at any time or times, in whole or in part, before
the close of business on the Termination Date, or such earlier date on which
this Warrant may terminate as provided in paragraph 11 below, by the surrender
of this Warrant and the Subscription Form annexed hereto duly executed, to the
office of the Company (or such other office or agency of the Company as it may
designate by notice in writing to the registered holder hereof at the address of
such holder appearing on the books of the Company) and upon payment of the
Exercise Price of the shares thereby purchased; whereupon the holder of this
Warrant shall be entitled to receive a certificate for the number of shares of
Common Stock so purchased. Certificates for shares purchased hereunder shall be
delivered to the holder hereof within three Business Days after the date on
which this Warrant shall have been exercised as aforesaid. Payment of the
Exercise Price of the shares may be by certified check or cashier's check or by
wire transfer (of same day funds) to the Company in an amount equal to the
Exercise Price multiplied by the number of shares being purchased.
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. In lieu of issuing fractional shares, the Company shall round up to the
nearest whole share the number of Warrant Shares due upon exercise of this
Warrant.
5. Charges, Taxes and Expenses. Issuance of certificates for shares
of Common Stock upon the exercise of this Warrant shall be made without charge
to the holder hereof for any issue or transfer tax or other incidental expense
in respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the holder of this Warrant or in such name or names as may be directed by the
holder of this Warrant; provided, however, that in the event certificates for
shares of Common Stock are to be issued in a name other than the name of the
holder of this Warrant, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the holder
hereof; and provided further, that upon any transfer involved in the issuance or
delivery of any certificates for shares of Common Stock, the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.
6. Closing of Books. The Company will at no time close its
shareholder books or records in any manner which interferes with the timely
exercise of this Warrant.
7. No Rights as Shareholder until Exercise. This Warrant does not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company prior to the exercise thereof. If, however, at the time of the
surrender of this Warrant and purchase the holder hereof shall be entitled to
exercise this Warrant, the shares so purchased shall be and be deemed to
2
be issued to such holder as the record owner of such shares as of the close of
business on the date on which this Warrant shall have been exercised.
8. Assignment and Transfer of Warrant. This Warrant may be assigned
by the surrender of this Warrant and the Assignment Form annexed hereto duly
executed at the office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the registered holder hereof
at the address of such holder appearing on the books of the Company); provided,
however, that this Warrant may not be resold or otherwise transferred except (i)
in a transaction registered under the Securities Act, or (ii) in a transaction
pursuant to an exemption, if available, from such registration and whereby, if
requested by the Company, an opinion of counsel reasonably satisfactory to the
Company is obtained by the holder of this Warrant to the effect that the
transaction is so exempt.
9. Loss, Theft, Destruction or Mutilation of Warrant. The Company
represents and warrants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any Warrant
or stock certificate, and in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and upon reimbursement to the Company of
all reasonable expenses incidental thereto, and upon surrender and cancellation
of such Warrant or stock certificate, if mutilated, the Company will make and
deliver a new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of this Warrant or stock certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day
for the taking of any action or the expiration of any right required or granted
herein shall be a Saturday, Sunday or a legal holiday, then such action may be
taken or such right may be exercised on the next succeeding day not a legal
holiday.
11. Effect of Certain Events. If at any time the Company proposes
(i) to sell or otherwise convey all or substantially all of its assets or (ii)
to effect a transaction (by merger or otherwise) in which more than 50% of the
voting power of the Company is disposed of (collectively, a "Sale or Merger
Transaction"), in which the consideration to be received by the Company or its
shareholders consists solely of cash, and in case the Company shall at any time
effect a Sale or Merger Transaction in which the consideration to be received by
the Company or its shareholders consists in part of consideration other than
cash, the holder of this Warrant shall have the right thereafter to purchase, by
exercise of this Warrant and payment of the aggregate Exercise Price in effect
immediately prior to such action, the kind and amount of shares and other
securities and property which it would have owned or have been entitled to
receive after the happening of such transaction had this Warrant been exercised
immediately prior thereto.
12. Adjustments of Exercise Price and Number of Warrant Shares. The
number and kind of securities purchasable upon the exercise of this Warrant and
the Exercise Price shall be subject to adjustment from time to time upon the
happening of any of the following.
In case the Company shall (i) declare or pay a dividend in shares of
Common Stock or make a distribution in shares of Common Stock to holders of its
outstanding Common Stock, (ii)
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subdivide its outstanding shares of Common Stock, (iii) combine its outstanding
shares of Common Stock into a smaller number of shares of Common Stock, or (iv)
issue any shares of its capital stock in a reclassification of the Common Stock,
the number of Warrant Shares purchasable upon exercise of this Warrant
immediately prior thereto shall be adjusted so that the holder of this Warrant
shall be entitled to receive the kind and number of Warrant Shares or other
securities of the Company which he would have owned or have been entitled to
receive had such Warrant been exercised in advance thereof. An adjustment made
pursuant to this paragraph shall become effective immediately after the
effective date of such event retroactive to the record date, if any, for such
event.
13. Voluntary Adjustment by the Company. The Company may at its
option, at any time during the term of this Warrant, reduce the then current
Exercise Price to any amount and for any period of time deemed appropriate by
the Board of Directors of the Company.
14. Notice of Adjustment. Whenever the number of Warrant Shares or
number or kind of securities or other property purchasable upon the exercise of
this Warrant or the Exercise Price is adjusted, as herein provided, the Company
shall promptly mail by registered or certified mail, return receipt requested,
to the holder of this Warrant notice of such adjustment or adjustments setting
forth the number of Warrant Shares (and other securities or property)
purchasable upon the exercise of this Warrant and the Exercise Price of such
Warrant Shares after such adjustment, setting forth a brief statement of the
facts requiring such adjustment and setting forth computation by which such
adjustment was made. Such notice, in absence of manifest error, shall be
conclusive evidence of the correctness of such adjustment.
15. Authorized Shares. The Company covenants that during the period
the Warrant is outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of Common
Stock upon the exercise of any purchase rights under this Warrant. The Company
further covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of the
Company's Common Stock upon the exercise of the purchase rights under this
Warrant. The Company will take all such reasonable action as may be necessary
to assure that such shares of Common Stock may be issued as provided herein
without violation of any applicable law or regulation, or of any requirements of
the domestic securities exchange or market upon which the Common Stock may be
listed.
16. 4.99% Limitation. The number of shares of Common Stock which may
be acquired by the Investor pursuant to the terms herein shall not exceed the
number of such shares which, when aggregated with all other shares of Common
Stock then owned by the Investor, would result in the Investor owning more than
4.99% of the then issued and outstanding Common Stock at any one time. The
preceding shall not interfere with the Investor's right to this Warrant over
time which in the aggregate totals more than 4.99% of the then outstanding
shares of Common Stock so long as the Investor does not own more than 4.99% of
the then outstanding Common Stock at any given time.
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17. Miscellaneous.
(a) Issue Date; Choice of Law; Venue; Jurisdiction. The provisions of
this Warrant shall be construed and shall be given effect in all respects as if
it had been issued and delivered by the Company on the date hereof. This
Warrant shall be binding upon any successors or assigns of the Company. This
Warrant will be construed and enforced in accordance with and governed by the
laws of the State of New York, except for matters arising under the Securities
Act, without reference to principles of conflicts of law. The parties consent
to the exclusive jurisdiction of the U.S. District Court sitting in the Southern
District of the State of New York in connection with any dispute arising under
this Warrant and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions. Each party hereby agrees
that if the other party to this Warrant obtains a judgment against it in such a
proceeding, the party which obtained such judgment may enforce same by summary
judgment in the courts of any country having jurisdiction over the party against
whom such judgment was obtained, and each party hereby waives any defenses
available to it under local law and agrees to the enforcement of such a
judgment. Each party to this Warrant irrevocably consents to the service of
process in any such proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to such party at its address set forth herein.
Nothing herein shall affect the right of any party to serve process in any other
manner permitted by law. Each party waives its right to a trial by jury.
(b) Restrictions. The holder hereof acknowledges that the Warrant
Shares acquired upon the exercise of this Warrant, if not registered (or if no
exemption from registration exists), will have restrictions upon resale imposed
by state and federal securities laws. Each certificate representing the Warrant
Shares issued to the Holder upon exercise (if not registered or if no exemption
from registration exists) will bear the following legend:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE
UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND SUCH OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO A TRANSACTION THAT IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH
REGISTRATION".
(c) Modification and Waiver. This Warrant and any provisions hereof
may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of the same is sought.
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(d) Notices. Any notice, request or other document required or
permitted to be given or delivered to the holders hereof of the Company shall be
delivered or shall be sent by certified or registered mail, postage prepaid, to
each such holder at its address as shown on the books of the Company or to the
Company at the address set forth in the Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized.
Dated:
GLOBAL MAINTECH CORPORATION
By: ______________________________
Name:
Title:
NOTICE OF EXERCISE
------------------
To: GLOBAL MAINTECH CORPORATION
(1) The undersigned hereby elects to purchase ________ shares of Common Stock
of GLOBAL MAINTECH CORPORATION pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price in full,
together with all applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
_______________________________
(Name)
_______________________________
(Address)
_______________________________
Dated:
______________________________
Signature
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
_______________________________________________ whose address is
_______________________________________________________________.
_______________________________________________________________
Dated: ______________,
Holder's Signature: _____________________________
Holder's Address: _____________________________
_____________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in an fiduciary or other representative
capacity should file proper evidence of authority to assign the foregoing
Warrant.
