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EXHIBIT 4.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of March 18, 1998,
is entered into by and between BRISTOL RETAIL SOLUTIONS, INC., a Delaware
corporation, with headquarters located at 0000 Xxxxx Xxxxxx, Xxxxx 000 Xxxxxxx
Xxxxx, Xxxxxxxxxx 00000 (the "Company"), and the undersigned (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and delivering
this Agreement in accordance with and in reliance upon the exemption from
securities registration afforded, inter alia, by Rule 506 under Regulation D
("Regulation D") as promulgated by the United States Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the "1933
Act"), and/or Section 4(2) of the 1933 Act; and
WHEREAS, the Buyer wishes to purchase, upon the terms and subject
to the conditions of this Agreement, 6% Convertible Preferred Stock, $.001 par
value per share (the "Convertible Preferred Stock"), of the Company which will
be convertible into shares of Common Stock, $.001 par value per share of the
Company (the "Common Stock"), upon the terms and subject to the conditions of
such Convertible Preferred Stock, and subject to acceptance of this Agreement by
the Company;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. PURCHASE; CERTAIN DEFINITIONS. (i) The undersigned hereby
agrees to purchase from the Company shares of the Convertible Preferred Stock in
the amount set forth on the signature page of this Agreement (the "Initial
Preferred Stock"), out of a total offering of $2,000,000 of such Convertible
Preferred Stock, and having the terms and conditions set forth in the
Certificate of Designations, Voting Powers, Preferences and Rights to the
Certificate of Incorporation of the Company attached hereto as ANNEX I (the
"Certificate of Designations"). The purchase price for the Initial Preferred
Stock shall be as set forth on the signature page hereto (the "Purchase Price")
and shall be payable in United States Dollars.
(ii) As used herein, the term "Preferred Stock" means the
Initial Preferred Stock and the Additional Preferred Stock (as defined below),
together with all shares, if any, of the Convertible Preferred Stock issued as
dividends thereon, unless the context otherwise requires.
(iii) As used herein, the term "Securities" means the
Preferred Stock and the Common Stock issuable upon conversion of the Preferred
Stock.
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b. FORM OF PAYMENT. The Buyer shall pay the purchase price for
the Initial Preferred Stock by delivering immediately available good funds in
United States Dollars to the escrow agent (the "Escrow Agent") identified in the
Joint Escrow Instructions attached hereto as ANNEX II (the "Joint Escrow
Instructions"). No later than the Closing Date (as defined below), the Company
shall deliver one or more certificates representing the Initial Preferred Stock
duly executed on behalf of the Company (collectively, the "Certificate") to the
Escrow Agent. By signing this Agreement, the Buyer and the Company, and subject
to acceptance by the Escrow Agent, each agrees to all of the terms and
conditions of, and becomes a party to, the Joint Escrow Instructions, all of the
provisions of which are incorporated herein by this reference as if set forth in
full.
c. METHOD OF PAYMENT. Payment into escrow of the Purchase Price
for the Initial Preferred Stock shall be made by wire transfer of funds to:
Bank of New York
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
ABA# 000000000
For credit to the account of Xxxxxxx & Xxxxxx, Esqs.
Account No.: <_____________________>
Not later than 1:00 p.m., New York time, on the date which is one (1) New York
Stock Exchange trading day after the Company shall have accepted this Agreement
and returned a signed counterpart of this Agreement to the Escrow Agent by
facsimile, the Buyer shall deposit with the Escrow Agent the aggregate purchase
price for the Initial Preferred Stock, in immediately available funds. Time is
of the essence with respect to such payment, and failure by the Buyer to make
such payment shall allow the Company to cancel this Agreement.
d. ESCROW PROPERTY. The Purchase Price and the Certificate
delivered to the Escrow Agent as contemplated by Sections 1(b) and (c) hereof
are referred to as the "Escrow Property."
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees
with, the Company as follows:
a. Without limiting Buyer's right to sell the Common Stock
pursuant to the Registration Statement (as that term is defined in the
Registration Rights Agreement defined below), the Buyer is purchasing the
Preferred Stock and will be acquiring the shares of
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Common Stock issuable upon conversion of the Preferred Stock (the "Converted
Shares") for its own account for investment or as Agent for other "accredited
investors", and not with a view towards the public sale or distribution thereof
and not with a view to or for sale in connection with any distribution thereof.
b. The Buyer is (i) an "accredited investor" as that term is
defined in Rule 501 of the General Rules and Regulations under the 1933 Act by
reason of Rule 501(a)(3), (ii) experienced in making investments of the kind
described in this Agreement and the related documents, (iii) able, by reason of
the business and financial experience of its officers (if an entity) and
professional advisors (who are not affiliated with or compensated in any way by
the Company or any of its affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement, and
the related documents, and (iv) able to afford the entire loss of its investment
in the Securities.
c. All subsequent offers and sales of the Preferred Stock and the
shares of Common Stock representing the Converted Shares (such Common Stock
sometimes referred to as the "Shares") by the Buyer shall be made pursuant to
registration of the Shares under the 1933 Act or pursuant to an exemption from
registration.
d. The Buyer understands that the Initial Preferred Stock are
being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying upon the truth and accuracy of, and the Buyer's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Preferred Stock.
e. The Buyer and its advisors, if any, have been furnished with
all materials relating to the business, finances and operations of the Company
and materials relating to the offer and sale of the Initial Preferred Stock and
the offer of the Shares which have been requested by the Buyer, including ANNEX
V hereto. The Buyer and its advisors, if any, have been afforded the opportunity
to ask questions of the Company and have received complete and satisfactory
answers to any such inquiries. Without limiting the generality of the foregoing,
the Buyer has also had the opportunity to obtain and to review the Company's (i)
the Company's annual report on Form 10-K for the year ending December 31, 1996,
(ii) the Company's quarterly report on Form 10-Q for the quarterly period ending
September 30, 1997 (the "SEC Reports"); and the Buyer understands that its
investments in the Shares involves a high degree of risk;
f. The Buyer understands that its investment in the Securities
involves a high degree of risk.
g. The Buyer understands that no United States federal or state
agency or any other government or governmental agency has passed on or made any
recommendation or
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endorsement of the Securities.
h. This Agreement has been duly and validly authorized, executed
and delivered on behalf of the Buyer and is a valid and binding agreement of the
Buyer enforceable in accordance with its terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors' rights generally.
i. Notwithstanding the provisions hereof or of the Preferred
Stock, in no event (except (i) with respect to an automatic conversion of the
Preferred Stock as provided in the Certificate of Designations or (ii) if the
Company is in default of any of its obligations under the Preferred Stock or any
of the Transaction Agreements, as defined below) shall the holder be entitled to
convert any Preferred Stock to the extent that, after such conversion, the sum
of (1) the number of shares of Common Stock beneficially owned by the Buyer and
its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of the
Preferred Stock), and (2) the number of shares of Common Stock issuable upon the
conversion of the Preferred Stock with respect to which the determination of
this proviso is being made, would result in beneficial ownership by the Buyer
and its affiliates of more than 9.9% of the outstanding shares of Common Stock.
For purposes of the proviso to the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), except as otherwise provided
in clause (1) of such proviso.
3. COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants to the Buyer that:
a. CONCERNING THE PREFERRED STOCK AND THE SHARES. The Convertible
Preferred Stock has been duly authorized and, when issued, will be duly and
validly issued, fully paid and non-assessable and will not subject the holder
thereof to personal liability by reason of being such holder. There are no
preemptive rights of any stockholder of the Company, as such, to acquire the
Preferred Stock or the Shares.
b. REPORTING COMPANY STATUS. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in each jurisdiction
where the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have a material adverse effect on the business, operations
or prospects or condition (financial or otherwise) of the Company and its
subsidiaries, taken as a whole. The Company has registered its Common Stock
pursuant to Section 12 of the 1934 Act, and the Common Stock is listed and
traded on the NASDAQ/SmallCap market. The
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Company has received no notice, either oral or written, with respect to the
continued eligibility of the Common Stock for such listing, and the Company has
maintained all requirements for the continuation of such listing.
c. AUTHORIZED SHARES. The Company has at December 9, 1997,
5,548,510 shares of Common Stock outstanding, and has sufficient authorized and
unissued Shares as may be reasonably necessary to effect the conversion of the
Preferred Stock [2/3 of Market Price on 1st Closing Date] and exercise of the
Warrants at the lower of the closing bid price of a share of Common Stock on the
Initial Closing Date or the Effective Date of the Registration Statement, and of
all the Preferred Stock outstanding. The Converted Shares have been duly
authorized and, when issued upon conversion of, or as interest on, the Preferred
Stock in accordance with its terms, will be duly and validly issued, fully paid
and non-assessable and will not subject the holder thereof to personal liability
by reason of being such holder.
d. SECURITIES PURCHASE AGREEMENT; REGISTRATION RIGHTS AGREEMENT
AND STOCK. This Agreement and the Registration Rights Agreement, the form of
which is attached hereto as ANNEX IV (the "Registration Rights Agreement"), and
the transactions contemplated hereby and thereby, have been duly and validly
authorized by the Company, this Agreement has been duly executed and delivered
by the Company and this Agreement is, and the Preferred Stock, and the
Registration Rights Agreement, when executed and delivered by or on behalf of
the Company, will be, valid and binding agreements of the Company enforceable in
accordance with their respective terms, subject, as to enforceability, to
general principles of equity and to bankruptcy, insolvency, moratorium, and
other similar laws affecting the enforcement of creditors' rights generally.
e. NON-CONTRAVENTION. The execution and delivery of this
Agreement and the Registration Rights Agreement by the Company, the issuance of
the Securities, and the consummation by the Company of the other transactions
contemplated by this Agreement, the Registration Rights Agreement, and the
Preferred Stock do not and will not conflict with or result in a breach by the
Company of any of the terms or provisions of, or constitute a default under (i)
the articles of incorporation or by-laws of the Company, each as currently in
effect, (ii) except as disclosed in ANNEX V, any indenture, mortgage, deed of
trust, or other material agreement or instrument to which the Company is a party
or by which it or any of its properties or assets are bound, including any
listing agreement for the Common Stock (except as herein set forth), (iii) to
its knowledge, any existing applicable law, rule, or regulation or any
applicable decree, judgment, or order of any court, United States federal or
state regulatory body, administrative agency, or other governmental body having
jurisdiction over the Company or any of its properties or assets, or (iv) any
listing agreement for its Common Stock, except such conflict, breach or default
which would not have a material adverse effect on the transactions contemplated
herein.
f. APPROVALS. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or
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market or the stockholders of the Company is required to be obtained by the
Company for the issuance and sale of the Securities to the Buyer as contemplated
by this Agreement, except such authorizations, approvals and consents that have
been obtained.
g. SEC FILINGS. None of the Company's SEC Reports contained, at
the time they were filed, 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 made therein in light of the circumstances under which they were
made, not misleading. Except as set forth on ANNEX V hereto, the Company has
since June 1997 timely filed all requisite forms, reports and exhibits thereto
with the SEC.
h. ABSENCE OF CERTAIN CHANGES. Since September 30, 1997, there
has been no material adverse change and no material adverse development in the
business, properties, operations, condition (financial or otherwise), or results
of operations of the Company and its subsidiaries, taken as a whole, except as
disclosed in ANNEX V or in the Company's SEC Reports. Since September 30, 1997,
the Company has not (i) incurred or become subject to any material liabilities
(absolute or contingent) except liabilities incurred in the ordinary course of
business consistent with past practices; (ii) discharged or satisfied any
material lien or encumbrance or paid any material obligation or liability
(absolute or contingent), other than current liabilities paid in the ordinary
course of business consistent with past practices; (iii) declared or made any
payment or distribution of cash or other property to stockholders with respect
to its capital stock, or purchased or redeemed, or made any agreements to
purchase or redeem, any shares of its capital stock; (iv) sold, assigned or
transferred any other tangible assets, or canceled any debts or claims, except
in the ordinary course of business consistent with past practices; (v) suffered
any substantial losses or waived any rights of material value, whether or not in
the ordinary course of business, or suffered the loss of any material amount of
existing business; (vi) made any changes in employee compensation, except in the
ordinary course of business consistent with past practices; or (vii) experienced
any material problems with labor or management in connection with the terms and
conditions of their employment.
i. FULL DISCLOSURE. There is no fact known to the Company (other
than general economic conditions known to the public generally or as disclosed
in the Company's SEC Reports), that has not been disclosed in writing to the
Buyer that (i) would reasonably be expected to have a material adverse effect on
the business or financial condition of the Company or (ii) would reasonably be
expected to materially and adversely affect the ability of the Company to
perform its obligations pursuant to this Agreement or any of the agreements
contemplated hereby (collectively, including this Agreement, the "Transaction
Agreements").
j. ABSENCE OF LITIGATION. Except as set forth in ANNEX V hereto,
and in the Company's SEC Reports, which the Buyer has reviewed, there is no
action, suit, proceeding, inquiry or investigation before or by any court,
public board or body pending or, to the knowledge of the Company, threatened
against or affecting the Company, wherein an
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unfavorable decision, ruling or finding would have a material adverse effect on
the properties, business or financial condition. results of operation or
prospects of the Company and its subsidiaries taken as a whole or the
transactions contemplated by any of the Transaction Agreements or which would
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under, any of the Transaction
Agreements.
k. ABSENCE OF EVENTS OF DEFAULT. Except as set forth in ANNEX V
hereto and Section 3(e) hereof, no Event of Default (or its equivalent term), as
defined in the respective agreement to which the Company is a party, and no
event which, with the giving of notice or the passage of time or both, would
become an Event of Default (or its equivalent term) (as so defined in such
agreement), has occurred and is continuing, which would have a material adverse
effect on the Company's financial condition or results of operations.
l. PRIOR ISSUES. Except as set forth in ANNEX V, during the
twelve (12) months preceding the date hereof, the Company has not issued any
Common Stock or convertible securities in capital transactions which have not
been fully disclosed in the Company's filings with the SEC. All such issuances
have been fully converted into shares of common stock and there are no
outstanding unconverted debt or convertible securities from those transactions.
m. NO UNDISCLOSED LIABILITIES OR EVENTS. The Company has no
liabilities or obligations other than those disclosed in the Company's SEC
Reports or those incurred in the ordinary course of the Company's business since
September 30, 1997, and which, individually or in the aggregate, do not or would
not have a material adverse effect on the properties, business, condition
(financial or otherwise), results of operations or prospects of the Company and
its subsidiaries, taken as a whole. No event or circumstances has occurred or
exists with respect to the Company or its properties, business, condition
(financial or otherwise), results of operations or prospects, which, 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.
n. NO DEFAULT. The Company is not in default in the performance
or observance of any material obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust or other material instrument
or agreement to which it is a party or by which it or its property is bound.
o. NO INTEGRATED OFFERING. Neither the Company nor any of its
affiliates nor any person acting on its or their behalf has, directly or
indirectly, at any time since June 1997, made any offer or sales of any security
or solicited any offers to buy any security under circumstances that would
eliminate the availability of the exemption from registration under Regulation D
in connection with the offer and sale of the Securities as contemplated hereby.
p. DILUTION. The number of Shares issuable upon conversion of the
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Preferred Stock may increase substantially in certain circumstances, including,
but not necessarily limited to, the circumstance wherein the trading price of
the Common Stock declines prior to the conversion of the Preferred Stock. The
Company's executive officers and directors have studied and fully understand the
nature of the Securities being sold hereby and recognize that they have a
potential dilutive effect. The board of directors of the Company has concluded,
in its good faith business judgment, that such issuance is in the best interests
of the Company. The Company specifically acknowledges that its obligation to
issue the Shares upon conversion of the Preferred Stock is binding upon the
Company and enforceable regardless of the dilution such issuance may have on the
ownership interests of other shareholders of the Company.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. TRANSFER RESTRICTIONS. The Buyer acknowledges that (1) the
Preferred Stock has not been and is not being registered under the provisions of
the 1933 Act and, except as provided in the Registration Rights Agreement, the
Shares have not been and are not being registered under the 1933 Act, and may
not be transferred unless (A) subsequently registered thereunder or (B) the
Buyer shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration; (2) any sale of the Securities made in
reliance on Rule 144 promulgated under the 1933 Act may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Securities under circumstances in which the
seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the SEC
thereunder; and (3) neither the Company nor any other person is under any
obligation to register the Securities (other than pursuant to the Registration
Rights Agreement) under the 1933 Act or to comply with the terms and conditions
of any exemption thereunder.
b. RESTRICTIVE LEGEND. The Buyer acknowledges and agrees that the
Preferred Stock and, until such time as the Common Stock has been registered
under the 1933 Act as contemplated by the Registration Rights Agreement and sold
pursuant to an effective Registration Statement, certificates and other
instruments representing any of the Securities shall bear a restrictive legend
in substantially the following form (and a stop-transfer order may be placed
against transfer of any such Securities):
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR
OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE
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SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE
TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
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c. REGISTRATION RIGHTS AGREEMENT. The parties hereto agree to
enter into the Registration Rights Agreement on or before the Closing Date.
d. FILINGS. The Company undertakes and agrees to make all
necessary filings in connection with the sale of the Preferred Stock to the
Buyer under any United States laws and regulations, or by any domestic
securities exchange or trading market, and to provide a copy thereof to the
Buyer promptly after such filing.
e. REPORTING STATUS. So long as the Buyer beneficially owns any
of the Preferred Stock, the Company shall file all reports required to be filed
with the SEC pursuant to Section 13 or 15(d) of the 1934 Act, and the Company
shall not terminate its status as an issuer required to file reports under the
1934 Act even if the 1934 Act or the rules and regulations thereunder would
permit such termination.
f. USE OF PROCEEDS. The Company will use the proceeds from the
sale of the Preferred Stock (excluding amounts paid by the Company for legal
fees, finder's fees and escrow agent fees in connection with the sale of the
Preferred Stock) for general capital purposes and acquisitions, but shall not,
directly or indirectly, use such proceeds for investment in any other affiliate
or to repay debt to affiliates.
g. FUTURE PURCHASES. (i) The Company unconditionally and
irrevocably agrees to issue, and the Buyer agrees to purchase, up to an
additional $1,000,000 liquidation amount of Preferred Stock (the "Additional
Preferred Stock") in two tranches of $500,000 each (the "Additional Tranches"),
on the terms and subject to the conditions hereinafter provided.
(ii) The closing for each Additional Tranche shall occur on a
date (the "Additional Closing Date"), which date shall not be later than the
thirty (30) days and sixty (60) days respectively after the Effective Date (as
defined below) or as otherwise mutually agreed upon by the Company and the
Buyer. The closing of the Additional Tranche shall be conducted upon the same
terms and conditions as those applicable to the Initial Preferred Stock.
(iii) On each Additional Closing Date, (A) the Registration
Statement required to be filed under the Registration Rights Agreement shall
continue to be effective, (B) the representations and warranties of the Company
contained in Section 3 hereof shall be true and correct in all material respects
(and the Company's issuance of the Additional Preferred Stock shall constitute
the Company's making each such representation and warranty as of such date), and
(C) the Market Price of the Common Stock (as defined below) for each of the five
(5) trading days immediately preceding the Additional Closing Date shall exceed
$2.50 per share, (D) the average daily share volume for the Common Stock for the
ten (10) trading day period preceding the Additional Closing Date shall have
equaled or exceeded 25,000 shares of Common Stock, (E) there shall have been no
material adverse changes (financial or otherwise) in the business or conditions
of the Company from the Closing Date through and including the Additional
Closing Date (and the Company's issuance of the Additional Preferred Stock shall
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constitute the Company's making such representation and warranty as of such
date), and (F) the Common Stock issuable upon conversion of the Additional
Preferred Stock and upon exercise of the Additional Warrants, together with the
Common stock issuable upon conversion of the Preferred Stock and exercise of the
Warrants previously issued will not at a conversion or exercise price equal to
66% of the Market Price on such Additional Closing Date, result in the issuance
of more than 20% of the Company's outstanding Common Stock in accordance with
NASDAQ Rule 4310(c)(25)(H)(i)(d)(2) ("Cap Regulations").
(iv) The term "Market Price of the Common Stock" means, the
closing bid price of the Common Stock as reported, at the option of the Buyer,
by Bloomberg, LP or the National Association of Securities Dealers.
h. Certain Agreements. (i) The Company covenants and agrees that
it will not, without the prior written consent of the Buyer, enter into any
subsequent or further offer or sale of Common Stock or securities convertible
into Common Stock with any third party until the earlier of the date which is
one hundred eighty (180) days after the Effective Date (as defined below).
(ii) The provisions of subparagraph (g)(i) will not apply to (w)
Common Stock issued pursuant to Rule 144, provided the holder thereof holds such
Common Stock for at least one year from the date of issuance; (x) a secondary
public offering of shares of Common Stock at market; (y) an offering of
convertible debentures at market or above; or (z) the issuance of securities
(other than for cash) in connection with a merger, consolidation, sale of
assets, disposition or the exchange of the capital stock for assets, stock or
other joint venture interests; provided, such securities would not be included
in the Registration Statement relating to the Shares and a registration
statement in respect of such stock shall not be filed prior to sixty (60) days
after the Effective Date.
(iii) The term "Effective Date" means the effective date of the
Registration Statement covering the Registrable Securities (as defined in the
Registration Rights Agreement).
(iv) In the event the Company breaches the provisions of this
[PARAGRAPH] 4(h), the Conversion Price shall be amended to be the lesser of 68%
of the lowest five (5) day average closing bid for the twenty-five (25) days
prior to the Conversion Notice, but at no time in excess of 100% of the five (5)
day average bid price prior to Closing, and Purchaser may require the Company to
immediately redeem all outstanding Preferred Stock in accordance with Section
4(k)(y).
i. AVAILABLE SHARES. The Company shall have at all times
authorized and reserved for issuance, free from preemptive rights, shares of
Common Stock sufficient to yield two hundred percent (200%) of the number of
shares of Common Stock issuable at conversion rights of the Buyer pursuant to
the terms and conditions of the Preferred Stock for all
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outstanding shares of Preferred Stock and upon exercise of the Warrants.
j. WARRANTS. The Company agrees to issue to Buyer at the Closing,
transferable divisible warrants with cashless exercise provisions (the
"Warrants") for 125,000 shares of Common Stock per $1,000,000 pro rata. Such
Warrants shall bear an exercise price per share of Common Stock as follows: 110%
of the lesser of the Market Price on the Initial Closing Date or Effective Date,
and shall be exercisable immediately upon issuance, and for a period of five (5)
years thereafter, in the form annexed hereto as Exhibit VI, together with
piggy-back registration rights, and demand registration rights under the
Registration Rights Agreement.
k. LIMITATION ON ISSUANCE OF SHARES. The Company may be limited
in the number of shares of Common Stock it may issue by the "Cap Regulations".
Without limiting the other provisions thereof, the Preferred Stock shall provide
that (i) the Company will take all steps reasonably necessary to be in a
position to issue shares of Common Stock on conversion of the Preferred Stock
and/or exercise of the Warrants without violating the Cap Regulations and (ii)
if, despite taking such steps, the Company still can not issue such shares of
Common Stock without violating the Cap Regulations, the holder of Preferred
Stock and Warrants which can not be converted as result of the Cap Regulations
(each such share, an "Unconverted Preferred Stock") shall have the option,
exercisable in such holders' sole and absolute discretion, to elect either of
the following remedies:
(x) require the Company to issue shares of Common Stock in
accordance with such holder's notice of conversion at a conversion
purchase price equal to the average of the closing bid price per share
of Common Stock for the five (5) consecutive trading days (subject to
certain equitable adjustments for certain events occurring during such
period) preceding the date of notice of conversion; or
(y) require the Company to redeem each Unconverted Preferred
Stock for an amount in cash (the "Redemption Amount") equal to:
V x M
--------
CP
where:
"V" means the principal of an Unconverted Preferred Stock plus
any accrued but unpaid interest thereon;
"CP" means the conversion price in effect on the date of
redemption (the "Redemption Date") specified in the notice from the
holder of the Unconverted
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Preferred Stock electing this remedy; and
"M" means the highest closing bid price per share of the Common
Stock during the period beginning on the Redemption Date and ending on
the date of payment of the Redemption Amount.
The Preferred Stock shall contain provisions substantially consistent with the
above terms, with such additional provisions as may be consented to by the
Buyer. The provisions of this paragraph are not intended to limit the scope of
the provisions otherwise included in the Preferred Stock.
5. TRANSFER AGENT INSTRUCTIONS.
a. Promptly following the delivery by the Buyer of the aggregate
purchase price for the Initial Preferred Stock in accordance with Section 1(c)
hereof, the Company will irrevocably instruct its transfer agent to issue Common
Stock from time to time upon conversion of the Preferred Stock in such amounts
as specified from time to time by the Company to the transfer agent, bearing the
restrictive legend specified in Section 4(b) of this Agreement prior to
registration of the Shares under the 1933 Act, registered in the name of the
Buyer or its nominee and in such denominations to be specified by the Buyer in
connection with each conversion of the Preferred Stock. The Company warrants
that no instruction other than such instructions referred to in this Section 5
and stop transfer instructions to give effect to Section 4(a) hereof prior to
registration and sale of the Shares under the 1933 Act will be given by the
Company to the transfer agent and that the Shares shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement, the Registration Rights Agreement, and applicable
law. Nothing in this Section shall affect in any way the Buyer's obligations and
agreement to comply with all applicable securities laws upon resale of the
Securities. If the Buyer provides the Company with an opinion of counsel
reasonably satisfactory to the Company that registration of a resale by the
Buyer of any of the Securities in accordance with clause (1)(B) of Section 4(a)
of this Agreement is not required under the 1933 Act, the Company shall (except
as provided in clause (2) of Section 4(a) of this Agreement) permit the transfer
of the Securities and, in the case of the Converted Shares, promptly instruct
the Company's transfer agent to issue one or more certificates for Common Stock
without legend in such name and in such denominations as specified by the Buyer.
b. (i) The Company will permit the Buyer to exercise its right to
convert the Preferred Stock by telecopying an executed and completed Notice of
Conversion to the Company and delivering within five (5) business days
thereafter, the original Notice of Conversion by express courier, with a copy to
the Company's transfer agent.
(ii) The term "Conversion Date" means, with respect to any
conversion elected by the holder of the Preferred Stock after the Effective
Date, the date specified in the
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Notice of Conversion, provided the copy of the Notice of Conversion is
telecopied to or otherwise delivered to the Company in accordance with the
provisions hereof so that is received by the Company on or before such specified
date. The Conversion Date for any mandatory conversion at maturity shall be the
Maturity Date of the Preferred Stock.
(iii) The Company shall, at its expense, take all actions
and use all means necessary and diligent to cause its transfer agent to transmit
the certificates representing the Converted Shares issuable upon conversion of
any Preferred Stock (together with Preferred Stock not being so converted) to
the Buyer via express courier, by electronic transfer or otherwise, within three
(3) business days after receipt by the Company of the later of (i) receipt by
the transfer agent of the copy of the original Notice of Conversion, and (ii)
the Conversion Date (the "Delivery Date").
c. The Company understands that a delay in the issuance of the
Shares of Common Stock beyond the Delivery Date could result in economic loss to
the Buyer. As compensation to the Buyer for such loss, the Company agrees to pay
late payments to the Buyer in the event that due entirely to the Corporations
direct or indirect actions or its failure to act (the "Company's Actions") the
transfer agent issues and delivers the Shares upon Conversion in accordance with
the following schedule (where "No. Business Days Late" is defined as the number
of business days beyond five (5) business days from Delivery Date:
Late Payment For Each $10,000
of Preferred Stock Liquidation
No. Business Days Late Amount Being Converted
---------------------- ------------------------------
1 $100
2 $200
3 $300
4 $400
5 $500
>5 $500 +$200 for each Business
Day Late beyond 5 days from
The Delivery Date
The Company shall pay any payments incurred under this Section in immediately
available funds upon demand. Nothing herein shall limit the Buyer's right to
pursue actual damages for the Company's Actions resulting in the transfer
agent's failure to issue and deliver the Common Stock to the Buyer. Furthermore,
in addition to any other remedies which may be available to the Buyer, in the
event that due to the Company's Actions, the transfer agent fails to deliver
such shares of Common Stock within five (5) business days after the Delivery
Date, the Buyer will be entitled to revoke the relevant Notice of Conversion by
delivering a notice to such
15
effect to the Company whereupon the Company and the Buyer shall each be restored
to their respective positions immediately prior to delivery of such Notice of
Conversion, and Buyer may require the Company to immediately redeem all
outstanding Preferred Stock in accordance with Section 4(k)(y).
d. If, by the relevant Delivery Date, due to the Company's
Actions, and the transfer agent fails for any reason to deliver the Shares to be
issued upon conversion of a Preferred Stock and after such Delivery Date, the
holder of the Preferred Stock being converted (a "Converting Holder") purchases,
in an open market transaction or otherwise, shares of Common Stock (the
"Covering Shares") in order to make delivery in satisfaction of a sale of Common
Stock by the Converting Holder (the "Sold Shares"), which delivery such
Converting Holder anticipated to make using the Shares to be issued upon such
conversion (a "Buy-In"), the Company shall pay to the Converting Holder, in
addition to all other amounts contemplated in other provisions of the
Transaction Agreements, and not in lieu thereof, the Buy-In Adjustment Amount
(as defined below). The "Buy-In Adjustment Amount" is the amount equal to the
excess, if any, of (x) the Converting Holder's total purchase price (including
brokerage commissions, if any) for the Covering Shares over (y) the net proceeds
(after brokerage commissions, if any) received by the Converting Holder from the
sale of the Sold Shares. The Company shall pay the Buy-In Adjustment Amount to
the Buyer in immediately available funds immediately upon demand by the
Converting Holder. By way of illustration and not in limitation of the
foregoing, if the Converting Holder purchases shares of Common Stock having a
total purchase price (including brokerage commissions) of $11,000 to cover a
Buy-In with respect to shares of Common Stock it sold for net proceeds of
$10,000, the Buy-In Adjustment Amount which Company will be required to pay to
the Converting Holder will be $1,000.
e. Subject to the completeness and accuracy of the Buyer's
representations and warranties herein, upon the conversion of any Preferred
Stock by a person who is a non-U.S. Person, and following the expiration of any
applicable Restricted Period (as those terms are defined in Regulation S), the
Company, shall, at its expense, take all necessary action (including the
issuance of an opinion of counsel) to assure that the Company's transfer agent
shall issue stock certificates without restrictive legend or stop orders in the
name of Buyer (or its nominee (being a non-U.S. Person) or such non-U.S. Persons
as may be designated by Buyer) and in such denominations to be specified at
conversion representing the number of shares of Common Stock issuable upon such
conversion, as applicable. Nothing in this Section 5, however, shall affect in
any way Buyer's or such nominee's obligations and agreement to comply with all
applicable securities laws upon resale of the Securities. The remedies set forth
in paragraphs 5(c), (d) and (e) shall be cumulative.
f. In lieu of delivering physical certificates representing the
unlegended securities issuable upon conversion, provided the Company's transfer
agent is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer program, upon request of the Buyer and its compliance with
the
16
provisions contained in this paragraph, so long as the certificates therefor do
not bear a legend and the Buyer thereof is not obligated to return such
certificate for the placement of a legend thereon, the Company shall use its
best efforts to cause its transfer agent to electronically transmit the Common
Stock issuable upon conversion to the Buyer by crediting the account of Buyer's
Prime Broker with DTC through its Deposit Withdrawal Agent Commission system.
g. The original certificate representing the Preferred Stock
shall be delivered by the Buyer to the Company simultaneous with the final
Notice of Conversion.
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6. DELIVERY INSTRUCTIONS.
The Initial Preferred Stock shall be delivered by the Company to
the Escrow Agent pursuant to Section 1(b) hereof, on a delivery against payment
basis, no later than on the Closing Date.
7. CLOSING DATE.
(i) The closing of the issuance and sale of the Initial Preferred
Stock shall occur on the date (the "Closing Date") which is the first NYSE
trading day after the fulfillment or waiver of all closing conditions pursuant
to Sections 8 and 9 hereof or such other date and time as is mutually agreed
upon by the Company and the Buyer. The date of the Additional Closing Date shall
be the date specified by either party upon at least five (5) business days'
advance notice to the other party; provided, however, that it shall be a
condition of the Additional Closing Date that (i) the conditions of Section 4(g)
be satisfied, and (ii) each of the conditions contemplated by Sections 8 and 9
hereof shall have been satisfied or waived on or before such date.
(ii) Each closing of the purchase and issuance of Preferred Stock
shall occur on the Closing Date or the Additional Closing Date, as the case may
be, at the offices of the Escrow Agent and shall take place no later than 12:00
Noon, New York time, on such day or such other time as is mutually agreed upon
by the Company and the Buyer.
(iii) Notwithstanding anything to the contrary contained herein,
the Escrow Agent will be authorized to release the Escrow Property only upon
satisfaction of the conditions set forth in Sections 8 and 9 hereof.
8. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell the
Preferred Stock on the Closing Date and Additional Closing Dates to the Buyer
pursuant to this Agreement is conditioned upon:
a. The receipt and acceptance by the Buyer of this Agreement as
evidenced by execution of this Agreement by the buyer for at least One Million
Dollars ($1,000,000) Dollars in principal amount of Preferred Stock (or such
lesser amount as the Company, in its sole discretion, shall determine on the
Closing Date);
b. Delivery by the Buyer to the Escrow Agent of good funds as
payment in full of an amount equal to the Purchase Price for the Preferred Stock
in accordance with Section 1(c) hereof;
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c. The accuracy on the Closing Date and each Additional Closing
Date of the representations and warranties of the Buyer contained in this
Agreement as if made on the Closing Date and each Additional Closing Date, and
the performance by the Buyer on or before the Closing Date and each Additional
Closing Date of all covenants and agreements of the Buyer required to be
performed on or before the Closing Date and each Additional Closing Date;
d. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained.
9. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase
the Preferred Stock on the Closing Date and each Additional Closing Date is
conditioned upon:
a. Acceptance by the Company of this Agreement for the sale of
Preferred Stock, as indicated by execution of this Agreement;
b. Delivery by the Company to the Escrow Agent of the appropriate
Preferred Stock in accordance with this Agreement;
c. The accuracy in all material respects on the Closing Date and
each Additional Closing Date of the representations and warranties of the
Company contained in this Agreement as if made on the Closing Date and such
Additional Closing Date and the performance by the Company on or before the
Closing Date and each Additional Closing Date of all covenants and agreements of
the Company required to be performed on or before the Closing Date and such
Additional Closing Date, and as to Additional Preferred Stock, the conditions
set forth in Section 4j; and
d. On the Closing Date and each Additional Closing Date, the
Buyer having received an opinion of counsel for the Company, dated the Closing
Date and each Additional Closing Date, in form, scope and substance reasonably
satisfactory to the Buyer, to the effect set forth in ANNEX III attached hereto,
and on the first Closing Date only, the Registration Rights Agreement annexed
hereto as ANNEX IV and the Warrants.
e. No statute, rule, regulation, executive order, decree, ruling
or injunction shall be enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction which prohibits or adversely
effects any of the transactions contemplated by this Agreement or the
Transaction Documents, and no proceeding or investigation shall have been
commenced or threatened which may have the effect of prohibiting or adversely
effecting any of the transactions contemplated by this Agreement or the
Transaction Documents.
19
f. From and after the date hereof to and including the initial
Closing Date and each Additional Closing Date, the trading of the Common Stock
shall not have been suspended by the SEC, or the NASD and trading in securities
generally on the New York Stock Exchange or NASDAQ/SmallCap shall not have been
suspended or limited, nor shall minimum prices been established for securities
traded on NASDAQ/Small Cap, nor shall there be any outbreak or escalation of
hostilities involving the United States or any material adverse change in any
financial market that in either case in the reasonable judgment of the Buyer
makes it impracticable or inadvisable to purchase the initial Preferred Stock or
the Additional Preferred Stock, as the case may be.
10. GOVERNING LAW: MISCELLANEOUS.
a. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Delaware for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws. Each of the parties consents to the jurisdiction
of the federal courts whose districts encompass any part of the City of New York
or the state courts of the State of New York sitting in the City of New York 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.
b. A facsimile transmission of this signed Agreement shall be
legal and binding on all parties hereto.
c. This Agreement may be signed in one or more counterparts, each
of which shall be deemed an original.
d. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
e. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
f. This Agreement may be amended only by an instrument in
writing signed by the party to be charged with enforcement thereof.
g. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
11. NOTICES. Any notice required or permitted hereunder shall be
given
20
in writing (unless otherwise specified herein) and shall be deemed effectively
given on the earliest of
(i) the date delivered, if delivered by personal delivery as
against written receipt therefor or by confirmed facsimile
transmission,
(ii) the seventh business day after deposit, postage prepaid, in
the United States Postal Service by registered or certified mail,
or
(iii) the third business day after mailing by international
express courier, with delivery costs and fees prepaid,
in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate by
ten (10) days' advance written notice similarly given to each of the other
parties hereto):
COMPANY: BRISTOL RETAIL SOLUTIONS, INC.
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
ATTN: Xxxxxxx X. Xxxxxx
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
with a copy to:
Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx, P.C.
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000-0000
ATTN: Xxxx Xxxxxx, Esq.
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
BUYER: At the address set forth on the signature page of this Agreement.
ESCROW AGENT: Xxxxxxx & Xxxxxx, Esqs.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier No. (000) 000-0000
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
Company's representations and warranties herein shall survive the execution and
delivery of this Agreement and the delivery of the Preferred Stock and the
Purchase Price, and shall inure to the benefit of the Buyer and its successors
and assigns.
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IN WITNESS WHEREOF, this Agreement has been duly executed by the
Buyer or one of its officers thereunto duly authorized as of the date set forth
below.
NUMBER OF SHARES OF PREFERRED STOCK TO BE PURCHASED:
AGGREGATE PURCHASE PRICE OF SUCH PREFERRED STOCK: $
SIGNATURES FOR ENTITIES
