Exhibit 10.2
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of March 24,
2000, by and among Entrade Inc., a Pennsylvania corporation, with headquarters
located at 000 Xxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000 (the "Company"), and
the investors listed on the Schedule of Buyers attached hereto (individually, a
"Buyer" and collectively, the "Buyers").
WHEREAS:
A. The Company and each Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D ("Regulation D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 Act");
B. The Company has authorized a new series of its Preferred Stock, par
value $1,000 per share, which shall be called the Company's Series A Convertible
Preferred Stock (the "Preferred Stock"), which shall be convertible into shares
of the Company's common stock, no par value per share (the "Common Stock") (as
converted, the "Conversion Shares"), in accordance with the terms of the
Company's Statement with Respect to Shares stating the Designation and voting
rights, preferences, limitations and special rights of the Preferred Stock in
the form attached hereto as Exhibit A (the "Statement of Designations");
C. Each Buyer wishes to purchase, upon the terms and conditions stated
in this Agreement, (i) the number of shares of Preferred Stock set forth
opposite such Buyer's name on the Schedule of Buyers (which number of shares to
be issued to all Buyers in the aggregate shall equal 30,000 shares of Preferred
Stock (the "Preferred Shares"), and (ii) warrants (the "Warrants") to purchase
the number of shares of Common Stock set forth opposite such Buyer's name on the
Schedule of Buyers (which number of shares in the aggregate shall equal 400,000
shares of Common Stock (as exercised collectively, the "Warrant Shares")), such
Warrants to be substantially in the form attached hereto as Exhibit B;
D. Contemporaneously with the execution and delivery of this Agreement,
the Company and each Buyer are executing and delivering a Registration Rights
Agreement substantially in the form attached hereto as Exhibit C (the
"Registration Rights Agreement") pursuant to which the Company has agreed to
provide certain registration rights under the 1933 Act and the rules and
regulations promulgated thereunder, and applicable state securities laws.
NOW THEREFORE, the Company and each Buyer hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS.
a. Purchase of Preferred Shares. Subject to satisfaction (or
waiver) of the conditions set forth in Sections 6 and 7, the Company shall issue
and sell to each Buyer and each Buyer agrees to purchase from the Company the
number of Preferred Shares set forth opposite such Buyer's name on the Schedule
of Buyers, along with the related Warrants (the "Closing"). The purchase price
(the "Purchase Price") of each Preferred Share and the related Warrants at the
Closing shall be an aggregate of $1,000. "Business Day" means any day other than
Saturday, Sunday or other day on which commercial banks in the city of New York
are authorized or required by law to remain closed.
b. The Closing Date. The date and time of the Closing (the
"Closing Date") shall be 10:00 a.m., Eastern Time, within one (1) Business Day
following the date hereof, subject to satisfaction (or waiver) of the conditions
to the Closing set forth in Sections 6 and 7 (or such later date as is mutually
agreed to by the Company and the Buyer). The Closing shall occur on the Closing
Date at the offices of Xxxxxx Xxxxxx & Xxxxx, 000 Xxxx Xxxxxx Xxxxxx, Xxxxx
0000, Xxxxxxx, Xxxxxxxx 00000-0000.
c. Form of Payment. On the Closing Date (i) each Buyer shall
pay the Purchase Price to the Company for the Preferred Shares and the related
Warrants to be issued and sold to such Buyer by wire transfer of immediately
available funds in accordance with the Company's written wire instructions, and
(ii) the Company shall deliver to each Buyer stock certificates (in the
denominations as such Buyer shall request) (the "Stock Certificates")
representing such number of the Preferred Shares which such Buyer is then
purchasing along with the related Warrants, duly executed on behalf of the
Company and registered in the name of such Buyer.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself
that:
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a. Investment Purpose. Such Buyer (i) is acquiring the
Preferred Shares and the Warrants, (ii) upon conversion of the Preferred Shares,
will acquire the Conversion Shares then issuable, (iii) upon exercise of the
Warrants, will acquire the Warrant Shares issuable upon exercise thereof and
(iv) in certain circumstances may receive Dividend Shares (as defined in the
Statement of Designations) (the Preferred Shares, the Warrants, the Conversion
Shares, the Dividend Shares and the Warrant Shares, collectively are referred to
herein as the "Securities"), for its own account for investment only and not
with a view towards, or for resale in connection with, the public sale or
distribution thereof, except pursuant to sales registered or exempted under the
1933 Act; provided, however, that by making the representations herein, such
Buyer does not agree to hold any of the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any time in
accordance with or pursuant to a registration statement or an exemption under
the 0000 Xxx.
b. Accredited Investor and QIB Status. Such Buyer is an
"accredited investor" as that term is defined in Rule 501(a) of Regulation D.
With regards to HFTP Investment L.L.C. (a Buyer), HFTP Investment L.L.C.
represents and warrants that it is a "qualified institutional Buyer" as that
term is defined in Rule 144A promulgated under the 1933 Act.
c. Reliance on Exemptions. Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
such Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire such Securities.
d. Information. Such 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 Securities
which have been requested by such Buyer. Such Buyer and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer or
its advisors, if any, or its representatives shall modify, amend or affect such
Buyer's right to rely on the Company's representations and warranties contained
in Sections 3 and 9(m) below. Such Buyer understands that its investment in the
Securities involves a high degree of risk. Such Buyer has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Securities.
e. No Governmental Review. Such Buyer understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Securities
or the fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
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f. Transfer or Resale. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel, in a form reasonably satisfactory to the Company,
to the effect that such Securities to be sold, assigned or transferred may be
sold, assigned or transferred pursuant to an exemption from such registration,
or (C) such Buyer provides the Company with reasonable assurance that such
Securities can be sold, assigned or transferred pursuant to Rule 144 promulgated
under the 1933 Act (or a successor rule thereto) ("Rule 144"); (ii) any sale of
the Securities made in reliance on Rule 144 may be made only in accordance with
the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of
the Securities under circumstances in which the seller (or the person through
whom the sale is made) may be deemed to be an underwriter (as that term is
defined in the 0000 Xxx) may require compliance with some other exemption under
the 1933 Act or the rules and regulations of the SEC thereunder; and (iii)
neither the Company nor any other person is under any obligation to register
such Securities under the 1933 Act or any state securities laws or to comply
with the terms and conditions of any exemption thereunder. Notwithstanding the
foregoing, the Securities may be pledged in connection with a bona fide margin
account or other loan secured by the Securities.
g. Legends. Such Buyer understands that the certificates or
other instruments representing the Preferred Shares and the Warrants and, until
such time as the sale of the Conversion Shares and the Warrant Shares have been
registered under the 1933 Act as contemplated by the Registration Rights
Agreement, the stock certificates representing the Conversion Shares and the
Warrant Shares, except as set forth below, shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. SUCH SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A FORM REASONABLY
SATISFACTORY TO THE ISSUER, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO
RULE 144 UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, SUCH SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if (i) such Securities are registered for sale under the 1933 Act, (ii)
in connection with a sale, assignment or transfer of such securities, such
holder provides the Company with an opinion of counsel, in a form reasonably
satisfactory to the Company, to the effect that such sale, assignment or
transfer of such Securities may be made without registration under the 1933 Act,
or (iii) such holder provides the Company with reasonable assurances that such
Securities can be sold pursuant to Rule 144. Such Buyer acknowledges, covenants
and agrees to sell Securities represented by a certificate(s) from which the
legend has been removed, only pursuant to (i) a registration statement effective
under the 1933 Act, or (ii) advice of counsel to such holder that such sale is
exempt from the registration requirements of Section 5 of the 1933 Act.
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h. Authorization; Enforcement. This Agreement and the
Registration Rights Agreement have been duly and validly authorized, executed
and delivered on behalf of such Buyer and are valid and binding agreements of
such Buyer enforceable against such Buyer in accordance with their terms,
subject as to enforceability to general principles of equity and to applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and other
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.
i. Residency. Such Buyer is a resident of that jurisdiction
specified on the Schedule of Buyers.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers
that:
a. Organization and Qualification. The Company and its
"Subsidiaries" (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns greater than 25% of the capital stock
or holds greater than a 25% equity or similar interest) are corporations duly
organized and validly existing under the laws of the jurisdiction in which they
are incorporated and the Company and its United States Subsidiaries are in good
standing under the laws of the jurisdictions in which they are organized, and
have the requisite corporate power and authorization to own properties and to
carry on their business as now being conducted. Each of the Company and its
Subsidiaries is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which its ownership of property or the
nature of the business conducted by it makes such qualification necessary,
except to the extent that the failure to be so qualified or be in good standing
would not have a Material Adverse Effect. As used in this Agreement, "Material
Adverse Effect" means any material adverse effect on the business, properties,
assets, operations, results of operations or financial condition of the Company
and its Subsidiaries taken as a whole, or on the transactions contemplated
hereby or by the agreements and instruments to be entered into in connection
herewith, or on the authority or ability of the Company to perform its
obligations under the Transaction Documents (as defined below) or the Statement
of Designations. A complete list of the entities in which the Company, directly
or indirectly, owns capital stock or holds an equity or similar interest is set
forth in Schedule 3(a).
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b. Authorization; Enforcement; Compliance with Other
Instruments. The Company has the requisite corporate power and authority to
enter into and perform its obligations under this Agreement, the Registration
Rights Agreement, the Irrevocable Transfer Agent Instructions (as defined in
Section 5), the Warrants and each of the other agreements entered into by the
parties hereto in connection with the transactions contemplated by this
Agreement (collectively, the "Transaction Documents"), and to issue the
Securities in accordance with the terms hereof and thereof. The execution and
delivery of the Transaction Documents by the Company and the execution and
filing of the Statement of Designations by the Company and the consummation by
it of the transactions contemplated hereby and thereby, including without
limitation the issuance of the Preferred Shares and the Warrants and the
reservation for issuance and the issuance of the Conversion Shares and the
Warrant Shares issuable upon conversion or exercise thereof, have been duly
authorized by the Executive Committee of the Company's Board of Directors which
authority has been duly delegated to the Executive Committee by the Company's
Board of Directors and no further consent or authorization is required by the
Company, its Board of Directors or its stockholders. The Transaction Documents
have been duly executed and delivered by the Company. This Agreement and the
Registration Rights Agreement and, when executed and delivered, the other
Transaction Documents, constitute the valid and binding obligations of the
Company enforceable against the Company in accordance with their terms, except
as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of creditors'
rights and remedies.
c. Capitalization. The authorized capital stock of the Company
consists of (i) 40,000,000 shares of Common Stock, of which as of March 15,
2000, 16,448,074 shares are issued and outstanding, 5,567,886 shares are
issuable and reserved for issuance pursuant to the Company's stock option and
purchase plans and 1,457,044 shares are issuable and reserved for issuance
pursuant to securities (other than the Preferred Shares, the Warrants and shares
of Common Stock referred to above as issuable and reserved for issuance pursuant
to the Company's stock option and purchase plans) exercisable or exchangeable
for, or convertible into, shares of Common Stock and (ii) 4,000,000 shares of
preferred stock, of which as of the date hereof, no shares are issued and
outstanding. As of the Closing Date the Company shall not have issued or
reserved for issuance any shares of Common Stock since March 15, 2000 in excess
of 50,000 shares of Common Stock, except pursuant to the exercise of options for
which shares of Common Stock were reserved as of March 15, 2000 and are
reflected in the number of reserved shares set forth in clause (i) of the
immediately preceding sentence. All of such outstanding shares have been and
are, or upon issuance will be, validly issued, fully paid and nonassessable.
Except as disclosed in Schedule 3(c), (i) no shares of the Company's capital
stock are subject to preemptive rights or any other similar rights or any liens
or encumbrances suffered or permitted by the Company; (ii) there are no
outstanding debt securities issued by the Company; (iii) there are no
outstanding options, warrants, scrip,
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rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Company or any of its Subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to issue additional shares of capital stock of the
Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries; (iv) there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to register the
sale of any of their securities under the 1933 Act (except the Registration
Rights Agreement); (v) there are no outstanding securities of the Company or any
of its Subsidiaries which contain any redemption or similar provisions, and
there are no contracts, commitments, understandings or arrangements by which the
Company or any of its Subsidiaries is or may become bound to redeem a security
of the Company or any of its Subsidiaries; (vi) there are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the Securities as described in this Agreement; and
(vii) the Company does not have any stock appreciation rights or "phantom stock"
plans or agreements or any similar plan or agreement. The Company has furnished
to the Buyer true and correct copies of the Company's Articles of Incorporation,
as amended and as in effect on the date hereof (the "Articles of
Incorporation"), and the Company's By-laws, as in effect on the date hereof (the
"By-laws"), and the terms of all securities convertible into or exercisable for
Common Stock and the material rights of the holders thereof in respect thereto.
d. Issuance of Securities. The Preferred Shares are duly
authorized and, upon issuance in accordance with the terms hereof, shall be (i)
validly issued, fully paid and non-assessable, (ii) free from all taxes, liens
and charges with respect to the issuance thereof and (iii) entitled to the
rights and preferences set forth in the Statement of Designations. At least
1,900,000 shares of Common Stock (subject to adjustment pursuant to the
Company's covenant set forth in Section 4(f) below) have been duly authorized
and reserved for issuance upon conversion of the Preferred Shares and exercise
of the Warrants. Upon conversion or exercise in accordance with the Statement of
Designations or the Warrants or issuance in accordance with the Statement of
Designations, as the case may be, the Conversion Shares, the Warrant Shares and
the Dividend Shares, respectively, will be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issuance thereof, with the holders being entitled to all rights accorded to a
holder of Common Stock. Based in part upon the representations and warranties of
each Buyer as to factual matters set forth in Section 2, the issuance by the
Company of the Securities is exempt from registration under the 1933 Act. The
offer and sale by the Company of the Preferred Shares and the Warrants is being
made in reliance upon the exemption from registration set forth in Rule 506 of
Regulation D under the 1933 Act and is only being made to "accredited investors"
that meet the requirements of Rule 501(a) of Regulation D and similar exemptions
under state law.
e. No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company, the performance by the Company of its
obligations under the Statement of Designations and the consummation by the
Company of the transactions contemplated hereby and thereby (including, without
limitation, the reservation for issuance and issuance of the Conversion Shares
and the Warrant Shares) will not (i) result in a violation of the Articles of
Incorporation, any Statement with Respect to Shares of any outstanding series of
preferred stock of the Company or the By-laws; (ii) conflict with, or constitute
a default (or an event which with notice or lapse of time or both would become a
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default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its Subsidiaries is a party; or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations and the rules and regulations
of the principal market or exchange on which the Common Stock is traded or
listed) applicable to the Company or any of its Subsidiaries or by which any
property or asset of the Company or any of its Subsidiaries is bound or
affected. Neither the Company nor its Subsidiaries is in violation of any term
of (i) its Articles of Incorporation, any Statement with Respect to Shares of
any outstanding series of preferred stock or its By-laws or their organizational
charter or by-laws, respectively, or (ii) any statute, rule or regulation
applicable to the Company or its Subsidiaries and neither the Company nor its
Subsidiaries is in default under any contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order, except, with
respect to this clause (ii), for such violations or defaults which would not,
individually or in the aggregate, have a Material Adverse Effect. The business
of the Company and its Subsidiaries is not being conducted, and shall not be
conducted, in violation of any law, ordinance or regulation of any governmental
entity except for such violations the sanctions for which either individually or
in the aggregate would not have a Material Adverse Effect. Except as
specifically contemplated by this Agreement and except such as have been
obtained as of the date hereof, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency or any regulatory or self-regulatory agency in
order for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents or the Statement of Designations in
accordance with the terms hereof or thereof. Except as disclosed in Schedule
3(e), all consents, authorizations, orders, filings and registrations which the
Company is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof and such consents shall have
been obtained prior to the Closing. The Company and its Subsidiaries are unaware
of any facts or circumstances which might reasonably be expected to give rise to
any of the foregoing. The Company is not in violation of the listing
requirements (other than the timely filing of additional listing applications)
of The New York Stock Exchange, Inc. ("NYSE") as in effect on the date hereof
and on the Closing Date and has no actual knowledge of any facts which would
reasonably lead to delisting or suspension of the Common Stock by NYSE in the
foreseeable future.
f. SEC Documents; Financial Statements. Since August 20, 1999,
the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the 1934 Act, (all of the foregoing filed since December 31,
1998 and prior to the date hereof and the draft, dated March 10, 2000, of the
Company's Form 10-K for the year ended December 31, 1999 which has been provided
to each of the Buyers (the "Draft 1999 10-K") and all exhibits included therein
and financial statements and schedules thereto and documents incorporated by
reference therein being hereinafter referred to as the "SEC Documents"). A
complete list of the Company's SEC Documents is set forth on Schedule 3(f). As
of their respective dates, the SEC Documents complied in all material respects
with the requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, other than the fact that
on March 2, 2000 the Company filed a Form 10-Q/A amending its Form 10-Q for the
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three months ended September 30, 1999, however the Company does not believe that
it has any liability for the filing of, or the disclosures contained in, such
Form 10-Q/A or Form 10-Q. None of the SEC Documents, at the time they were filed
with the SEC, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. As of their respective dates, the financial statements of
the Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements of the SEC with respect
thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). Neither the Company
nor any of its Subsidiaries nor any of their officers, directors, employees or
agents have provided the Buyers with any material, nonpublic information, except
as may be disclosed in the Draft 1999 10-K.
g. Absence of Certain Changes. Except as disclosed in Schedule
3(g), since August 20, 1999 there has been no material adverse change and no
material adverse development in the business, properties, operations, financial
condition, liabilities or results of operations of the Company or its
Subsidiaries, taken as a whole. The Company has not taken any steps, and does
not currently expect to take any steps, to seek protection pursuant to any
bankruptcy law nor does the Company or any of its Subsidiaries have any
knowledge that its creditors intend to initiate involuntary bankruptcy
proceedings or any knowledge of any fact which would reasonably lead a creditor
to do so.
h. Absence of Litigation. Except as disclosed in Schedule
3(h), there is no action, suit, proceeding, inquiry or investigation before or
by any court, public board, government agency, self-regulatory organization or
body pending or, to the knowledge of the Company or any of its Subsidiaries,
threatened against or affecting the Company, the Common Stock or any of the
Company's Subsidiaries or any of the Company's or the Company's Subsidiaries'
officers or directors in their capacities as such, except as expressly set forth
in Schedule 3(h). Except as set forth in Schedule 3(h), to the knowledge of the
Company none of the directors or officers of the Company have been involved in
securities related litigation during the past five years.
i. Acknowledgment Regarding the Buyer's Purchase of Preferred
Shares. The Company acknowledges and agrees that each of the Buyers is acting
solely in the capacity of arm's length purchaser with respect to the Transaction
Documents and the Statement of Designations and the transactions contemplated
thereby. The Company further acknowledges that none of the Buyers is acting as a
financial advisor or fiduciary of the Company (or in any similar capacity) with
respect to the Transaction Documents and the Statement of Designations and the
transactions contemplated thereby and any advice given by any of the Buyers or
any of their respective representatives or agents in connection with the
Transaction Documents and the Statement of Designations and the transactions
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contemplated thereby is merely incidental to such Buyer's purchase of the
Securities. The Company further represents to each Buyer that the Company's
decision to enter into the Transaction Documents has been based solely on the
independent evaluation by the Company and its representatives.
j. No Undisclosed Events, Liabilities, Developments or
Circumstances. Except for the issuance of the Preferred Shares and Warrants
contemplated by this Agreement, no event, liability, development or circumstance
has occurred or exists with respect to the Company or its Subsidiaries or their
respective businesses, properties, operations or financial condition, that would
be required to be disclosed by the Company under applicable securities laws on a
registration statement (including by way of incorporation by reference) filed
with the SEC relating to an issuance and sale by the Company of its Common Stock
and which has not been publicly disclosed.
k. Intentionally omitted
l. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of Securities to be
integrated with prior offerings by the Company for purposes of the 1933 Act or
any applicable stockholder approval provisions, including, without limitation,
under the rules and regulations of NYSE, nor will the Company or any of its
Subsidiaries take any action or steps that would require registration of the
Securities under the 1933 Act or cause the offering of the Securities to be
integrated with other offerings.
m. Employee Relations. Neither the Company nor any of its
Subsidiaries is involved in any union labor dispute nor, to the knowledge of the
Company or any of its Subsidiaries, is any such dispute threatened. None of the
Company's or its Subsidiaries' employees is a member of a union, neither the
Company nor any of its Subsidiaries is a party to a collective bargaining
agreement, and the Company and its Subsidiaries believe that their relations
with their employees are good. Except as set forth in Schedule 3(m), no
executive officer (as defined in Rule 501(f) of the 0000 Xxx) has notified the
Company's Board of Directors that such officer intends to leave the Company or
otherwise terminate such officer's employment with the Company and the Company
does not expect to terminate any such officer during the six months following
the date of this Agreement.
n. Intellectual Property Rights. The Company and its
Subsidiaries own or possess adequate rights or licenses to use all trademarks,
trade names, service marks, service xxxx registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. Except as set forth on Schedule 3(n), none of the
Company's trademarks, trade names, service marks, service xxxx registrations,
service names, patents, patent rights, copyrights, inventions, licenses,
approvals, government authorizations, trade secrets or other intellectual
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property rights have expired or terminated, or are expected to expire or
terminate within two years from the date of this Agreement. The Company and its
Subsidiaries do not have any knowledge of any infringement by the Company or its
Subsidiaries of trademarks, trade name rights, patents, patent rights,
copyrights, inventions, licenses, service names, service marks, service xxxx
registrations, trade secrets or other similar rights of others, or of any such
development of similar or identical trade secrets or technical information by
others and, except as set forth on Schedule 3(n), no claim, action or proceeding
has been made or brought against, or to the Company's knowledge, has been
threatened against, the Company or its Subsidiaries regarding trademarks, trade
name rights, patents, patent rights, inventions, copyrights, licenses, service
names, service marks, service xxxx registrations, trade secrets or other
infringement; and the Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing. Except as set forth
in Schedule 3(n), the Company and its Subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of all of
their intellectual properties except where the failure to do so would not have
either individually or in the aggregate a Material Adverse Effect.
o. Regulatory Permits. Except where the absence of which would
not have a Material Adverse Effect, the Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses. Neither the Company nor any such Subsidiary has received any notice
of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.
p. Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
q. Tax Status. Except as set forth in Schedule 3(q), the
Company and each of its Subsidiaries has made or filed all federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and for which the
Company has set aside on its books provision reasonably adequate for the payment
of all taxes for periods subsequent to the periods to which such returns,
reports or declarations apply. There are no unpaid taxes in any material amount
claimed to be due by the taxing authority of any jurisdiction, and the officers
of the Company know of no basis for any such claim.
11
r. Transactions With Affiliates and Employees. Except as set
forth on Schedule 3(r) or in the SEC Documents filed at least ten days prior to
the date hereof and other than the grant or exercise of stock options disclosed
on Schedule 3(c), none of the officers, directors or employees of the Company is
presently a party to any transaction with the Company or any of its Subsidiaries
(other than for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any corporation, partnership,
trust or other entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner.
s. Dilutive Effect. The Company understands and acknowledges
that the number of Conversion Shares issuable upon conversion of the Preferred
Shares will increase in certain circumstances. The Company further acknowledges
that its obligation to issue Conversion Shares upon conversion of the Preferred
Shares in accordance with this Agreement and the Statement of Designations and
its obligation to issue the Warrant Shares in accordance with this Agreement and
the Warrants is, in each case, absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
stockholders of the Company.
t. Application of Takeover Protections. The Company and its
board of directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Articles of Incorporation or the laws of the
state of its incorporation which is or could become applicable to the Buyers as
a result of the Buyers and the Company fulfilling their obligations under the
Transaction Documents and the Statement of Designations, including, without
limitation, the Company's issuance of the Securities and the Buyers' ownership
of the Securities.
u. Rights Agreement. The Company has not adopted a shareholder
rights plan or similar arrangement relating to accumulations of beneficial
ownership of Common Stock or a change of control of the Company.
v. Year 2000 Compliance. The Company believes that the
computer applications that are material to its or any Subsidiary's business and
operations are reasonably expected to be able to perform properly date-sensitive
functions for all dates before and after January 1, 2000.
12
w. Title. The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good title to all
personal property owned by them which is material to the business of the Company
and its Subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as are described in Schedule 3(w) or such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and any of its
Subsidiaries. Any real property and facilities held under lease by the Company
and any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
x. Insurance. Except as disclosed in Schedule (x), the Company
and each of its Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as management
of the Company or its Subsidiaries believes to be prudent and customary in the
businesses in which the Company or its Subsidiaries are engaged. Neither the
Company nor any such Subsidiaries has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not materially and adversely affect
the condition, financial or otherwise, or the earnings, business or operations
of the Company and its Subsidiaries, taken as a whole.
y. Environmental Laws. The Company and its Subsidiaries (i)
except as may be disclosed in the SEC Documents filed on XXXXX at least five (5)
Business Days prior to the date of this Agreement or the Draft 1999 10-K, are in
compliance in all material respects with any and all applicable foreign,
federal, state and local laws and regulations relating to the protection of
human health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws"), (ii) have received
all permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses, except where the
failure to receive such permits, licenses or approvals would not, individually
or in the aggregate, have a Material Adverse Effect and (iii) are in compliance
in all material respects with all terms and conditions of any such permit,
license or approval, except where the failure to be in compliance or receive
such permits, licenses or approvals would not, individually or in the aggregate,
have a Material Adverse Effect.
z. Intentionally Omitted.
aa. No Materially Adverse Contracts. Except as specifically
disclosed in the SEC Documents, or as set forth in Schedule 3(aa), neither the
Company nor any of its Subsidiaries is subject to any charter, corporate or
other legal restriction, or any judgment, decree, order, rule or regulation
which in the judgment of the Company's officers has or is expected in the future
to have a Material Adverse Effect. Except as specifically disclosed in the SEC
Documents, or as set forth in Schedule 3(aa), neither the Company nor any of its
Subsidiaries is a party to any contract or agreement which in the judgment of
the Company's officers has or is expected to have a Material Adverse Effect.
4. COVENANTS.
a. Best Efforts. Each party hereto shall use its best efforts
to satisfy timely each of the conditions to be satisfied by it as provided in
Sections 6 and 7 of this Agreement.
13
b. Form D and Blue Sky. The Company agrees to file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof to each Buyer promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Securities for, or obtain exemption for
the Securities for, sale to each Buyer at the Closing pursuant to this Agreement
under applicable securities or "Blue Sky" laws of the states of the United
States, and shall provide evidence of any such action so taken to such Buyer on
or prior to the Closing Date. The Company shall make all filings and reports
relating to the offer and sale of the Securities required under applicable
securities or "Blue Sky" laws of the states of the United States following the
Closing Date.
c. Reporting Status. Until the earlier of (i) the date which
is one year after the date on which the each Investor (as that term is defined
in the Registration Rights Agreement) may sell all of the Conversion Shares and
the Warrant Shares acquired by such Buyer without restriction pursuant to Rule
144(k) promulgated under the 1933 Act (or successor thereto) and (ii) the date
on which (A) each Investor shall have sold all the Conversion Shares and the
Warrant Shares acquired by such Investor and (B) none of the Preferred Shares or
Warrants is outstanding (the "Reporting Period"), the Company shall file all
reports required to be filed with the SEC pursuant to 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 otherwise permit such termination.
d. Use of Proceeds. The Company will use the proceeds from the
sale of the Preferred Shares for substantially the same purposes and in
substantially the same amounts as indicated in Schedule 4(d).
e. Financial Information. The Company agrees to send the
following to each Investor during the Reporting Period: (i) unless filed and
available through the SEC's XXXXX system, within two (2) Business Days after the
filing thereof with the SEC, a copy of its Annual Reports on Form 10-K, its
Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K and any
registration statements (other than on Form S-8) or amendments thereto filed
pursuant to the 1933 Act; (ii) on the same day as the release thereof, facsimile
copies of all press releases issued by the Company or any of its Subsidiaries
(or the day after, if released through a recognized wire service) and (iii)
copies of any notices and other information made available or given to the
stockholders of the Company generally, contemporaneously with the making
available or giving thereof to the stockholders.
f. Reservation of Shares. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than the sum of (A) 200% of the number of shares of Common
Stock needed to provide for the issuance of the Conversion Shares and (B) 100%
of the number of shares of Common Stock needed to provide for the issuance of
the Warrant Shares (without regard to any limitations on conversions or exercise
thereof).
14
g. Proxy Statement. The Company shall provide each stockholder
entitled to vote at a meeting of stockholders of the Company, which meeting
shall occur on or before the earlier of (A) the date which is 75 days after the
Proxy Statement Triggering Date (as defined below) and (B) May 31, 2001 (the
"Stockholder Meeting Deadline"), a proxy statement, which has been previously
reviewed by each Buyer and Legal Counsel (as defined in the Registration Rights
Agreement), soliciting each such stockholder's affirmative vote at such
stockholder meeting for approval of the Company's issuance of all of the
Securities as described in this Agreement (such affirmative vote being referred
to as the "Stockholder Approval"), and the Company shall use its best efforts to
(i) solicit its stockholders' approval of such issuance of the Securities and
(ii) cause the Board of Directors of the Company to recommend to the
stockholders that they approve such proposal. If the Company fails to hold a
meeting of its stockholders by the Stockholder Meeting Deadline, then, as
partial relief (which remedy shall not be exclusive of any other remedies
available at law or in equity), the Company shall pay to each holder of
Preferred Shares an amount in cash per Preferred Share held by such holder equal
to the product of (i) $1,000; multiplied by (ii) 0.015; multiplied by (iii) the
quotient of (x) the number of days after the Stockholder Meeting Deadline that a
meeting of the Company's stockholders is not held, divided by (y) 30. The
Company shall make the payments referred to in the immediately preceding
sentence within five days of the earlier of (I) the holding of the meeting of
the Company's stockholders, the failure of which resulted in the requirement to
make such payments, and (II) the last day of each 30-day period beginning on the
Stockholder Meeting Deadline. In the event the Company fails to make such
payments in a timely manner, such payments shall bear interest at the rate of
1.5% per month (pro rated for partial months) until paid in full. "Proxy
Statement Triggering Date" shall mean the first date after the date of this
Agreement on which during the five consecutive trading days ending on and
including such date of determination there are three trading days on which the
sum of (A) the number of shares of Common Stock previously issued upon
conversion of any Preferred Shares and (B) the number of shares of Common Stock
issuable upon conversion of all the outstanding Preferred Shares based on the
Conversion Price in effect on the date of such determination (without regard to
any limitation upon the conversion of any Preferred Shares), equals or exceeds
12% of the number of shares of Common Stock issued and outstanding immediately
prior to the Closing Date.
h. Listing. The Company shall promptly secure the listing of
all of the Registrable Securities (as defined in the Registration Rights
Agreement) upon each national securities exchange (including NYSE and automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance) and shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all Registrable
Securities from time to time issuable under the terms of the Transaction
Documents and the Statement of Designations. The Company shall maintain the
Common Stock's authorization for listing on the Nasdaq National Market or NYSE.
Neither the Company nor any of its Subsidiaries shall take any action which may
result in the delisting or suspension of the Common Stock on the Nasdaq National
Market or NYSE (other than to switch listings from NYSE to the Nasdaq National
Market). The Company shall promptly, and in no event later than the following
Business Day, offer to provide to each Buyer copies of any notices it receives
from the Nasdaq National Market or NYSE regarding the continued eligibility of
the Common Stock for listing on such automated quotation system or securities
15
exchange, but only if such notices shall not contain any material nonpublic
information. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 4(h).
i. Expenses. Subject to Section 9(l) below, at the Closing,
the Company shall pay an expense allowance of $50,000 to HFTP Investment L.L.C.
(a Buyer), which amount shall be withheld by such Buyer from its Purchase Price.
j. Transactions With Affiliates. So long as (i) any Preferred
Shares or Warrants are outstanding or (ii) any Buyer owns Conversion Shares or
Warrant Shares with a market value of at least $500,000, the Company shall not,
and shall cause each of its Subsidiaries not to, enter into, amend, modify or
supplement, or permit any Subsidiary to enter into, amend, modify or supplement,
any agreement, transaction, commitment or arrangement with any of its or any
Subsidiary's officers, directors, persons who were officers or directors at any
time during the previous two years, stockholders who beneficially own 5% or more
of the Common Stock, or Affiliates or with any individual related by blood,
marriage or adoption to any such individual or with any entity in which any such
entity or individual owns a 5% or more beneficial interest (each a "Related
Party"), except for (a) customary employment arrangements and benefit programs
on reasonable terms, (b) any agreement, transaction, commitment or arrangement
which is approved by a majority of the disinterested directors of the Company or
(c) any agreement, transaction, commitment or arrangement on an arms-length
basis on terms no less favorable than terms which would have been obtainable
from a person other than such Related Party. For purposes hereof, any director
who is also an officer of the Company or any Subsidiary of the Company shall not
be a disinterested director with respect to any such agreement, transaction,
commitment or arrangement. "Affiliate" for purposes hereof means, with respect
to any person or entity, another person or entity that, directly or indirectly,
(i) has a 5% or more equity interest in that person or entity, (ii) has 5% or
more common ownership with that person or entity, (iii) controls that person or
entity, or (iv) shares common control with that person or entity. "Control" or
"controls" for purposes hereof means that a person or entity has the power,
direct or indirect, to conduct or govern the policies of another person or
entity.
k. Filing of Form 8-K and Form 10-K. On or before Wednesday,
March 29, 2000 following the Closing Date, the Company shall file a Form 8-K
with the SEC describing the terms of the transaction contemplated by the
Transaction Documents and consummated at the Closing and including as exhibits
to such Form 8-K this Agreement (including the Schedules to this Agreement), the
Statement of Designations, the Registration Rights Agreement and the Form of
Warrant, in the form required by the 1934 Act. On or prior to the date the
Company files the Form 8-K referred to in the immediately preceding sentence
with the SEC, the Company shall file with the SEC the Company's annual report on
Form 10-K for the year ending December 31, 1999, in the form of the Draft 1999
10-K.
16
l. Corporate Existence. So long as any Buyer beneficially owns
any Preferred Shares or Warrants, the Company shall maintain its corporate
existence and shall not sell all or substantially all of the Company's assets,
except in the event of a merger or consolidation or sale of all or substantially
all of the Company's assets, where the surviving or successor entity in such
transaction (i) assumes the Company's obligations hereunder and under the
agreements and instruments entered into in connection herewith and (ii) is a
publicly traded corporation whose common stock is listed for trading on the
Nasdaq National Market or NYSE.
m. Mandatory Conversion or Redemption. On or before the date
which is 30 days after the Registration Statement is declared effective by the
SEC, the Company (i) shall deliver to each Buyer one or more Company's
Conversion Election Notices or Notices of Redemption at Company's Election (as
each such term is defined in the Statement of Designations) for the conversion
or redemption, respectively, of an aggregate of at least 10% of the Preferred
Shares purchased by such Buyer at the Closing, subject to the satisfaction of
the conditions set forth in Sections 7 and 6, respectively, of the Statement of
Designations, (ii) shall comply with its obligations under Sections 7 and 6 of
the Statement of Designations with respect to the Company's Conversion Election
Notices and Notices of Redemption at Company's Election, respectively, referred
to in the preceding clause (i), and (iii) shall not have delivered any Company's
Mandatory Conversion Period Termination Notice (as defined in the Statement of
Designations) with respect to a Company's Conversion Election Notice referred to
in clause (i) above. On or before the date which is 365 days after the Closing
Date, the Company (A) shall deliver to the Buyers one or more Company's
Conversion Election Notices or Notices of Redemption at Company's Election for
the conversion or redemption, respectively, of an aggregate total, when
cumulated with the number of Preferred Shares converted or redeemed pursuant to
the first sentence of this Section 4(m) for such Buyer, of at least 30% of the
Preferred Shares purchased by such Buyer at the Closing, subject to the
satisfaction of the conditions set forth in Sections 7 and 6, respectively, of
the Statement of Designations, (B) shall comply with its obligations under
Sections 7 and 6 of the Statement of Designations with respect to the Company's
Conversion Election Notices and Notices of Redemption at Company's Election,
respectively, referred to in the preceding clause (A), and (C) shall not have
delivered any Company's Mandatory Conversion Period Termination Notice with
respect to a Company's Conversion Election Notice referred to in clause (A)
above.
n. Restriction on Short Sales. Each Buyer agrees that, subject
to the exceptions described below, during the period beginning on the Closing
Date and ending on the earlier of (i) the first date on which such Buyer no
longer holds any Preferred Shares and (ii) the Company Period Termination Date
(as defined in the Statement of Designations), neither such Buyer nor any of its
affiliates shall engage directly in any transaction constituting a "short sale"
(as defined in Rule 3b-3 of the 0000 Xxx) of the Common Stock (collectively,
"Short Sales"); provided, however, that each Buyer and its affiliates are
entitled to engage in transactions which constitute Short Sales to the extent
that following such transaction the aggregate short position of such Buyer and
its affiliates does not exceed the sum of (a) the number of shares of Common
Stock equal to the aggregate number of shares of Common Stock which such Buyer
and its affiliates have the right to acquire upon exercise of the Warrants held
by such Buyer and its affiliates (without regard to any limitations on exercises
of the Warrants), plus (b) prior to the first occurrence of a Short Sale Release
17
Date (as defined below), during the period beginning on and including the first
day of a Company's Mandatory Conversion Period (as defined in Section 7 of the
Statement of Designations) and ending on and including the date which is the
later of (A) the last day of such Company's Mandatory Conversion Period and (B)
the date on which the Company has delivered all conversion shares relating to
all Conversion Notices submitted during such Mandatory Conversion Period, that
number of shares of Common Stock equal to the quotient of (i) the Conversion
Amount with respect to the number of Preferred Shares set forth in a Company's
Conversion Election Notice (as defined in Section 7 of the Statement of
Designations) for such Buyer and its affiliates with respect to such Company's
Mandatory Conversion Period, divided by (ii) the lowest Conversion Price (as
defined in the Statement of Designations) during the period beginning on and
including the first day of such Company's Mandatory Conversion Period and ending
on and including the last trading day of such Company's Mandatory Conversion
Period, plus (c) on and after the first date after the Closing Date on which
there occurs a Short Sale Release Date, the number of shares of Common Stock
equal to the quotient of (I) the aggregate Conversion Amount with respect to
Preferred Shares held by such Buyer and its affiliates, divided by (II) the
lowest Conversion Price on any day (whether or not such day is a Conversion
Date) during the period beginning on and including the first Short Sale Release
Date and ending on and including the first date after the Closing Date on which
neither such Buyer nor its affiliates hold any Preferred Shares, plus (d) prior
to the first occurrence of a Short Sale Release Date, that number of shares of
Common Stock equal to the number of shares of Common Stock for which Short Sales
where executed during the Company's Mandatory Conversion Period and for which
the holders of the Preferred Stock submitted Conversion Notices during the
Company's Mandatory Conversion Period. Notwithstanding the foregoing, the
restriction on Short Sales set forth in the first sentence of this Section 4(n)
shall not apply (I) on and after the first date on which there shall have
occurred a Triggering Event described in clause (iv), (v) or (vi) of Section
3(b) of the Statement of Designations or an event that with the passage of time
and without being cured would constitute a Triggering Event described in clause
(iv), (v) or (vi) of Section 3(b) of the Statement of Designations; (II) on or
after the date on which the Company issues or sells or is deemed to have issued
or sold any Convertible Securities or Options (each as defined in the Statement
of Designations) other than Strategic Convertible Securities (as defined in
Section 8 of the Statement of Designations) that are convertible into or
exercisable or exchangeable for shares of Common Stock at a conversion or
exercise price which varies or may vary with the market price of the Common
Stock, including by way of one or more reset(s) to a fixed price; (III) with
respect to a Short Sale so long as such Buyer delivers a Conversion Notice (as
defined in the Statement of Designations) within two (2) Business Days of such
Short Sale entitling such Buyer to receive a number of shares of Common Stock at
least equal to the number of shares of Common Stock sold in such Short Sale;
(IV) with respect to any transaction involving options on the Common Stock; (V)
on or after any date on which the Company fails to pay the Company's Election
Redemption Price (as defined in Section 6 of the Statement of Designations)
within two (2) Business Days of the applicable Company's Election Redemption
Date (as defined in Section 6 of the Statement of Designations) in accordance
with a Redemption at Company's Election pursuant to Section 6 of the Statement
of Designations; (VI) on or after the first date on which the Company fails to
comply with its obligations under Section 4(m); or (VII) on or after the
Stockholder Meeting Deadline if the Company fails to receive the Stockholder
Approval on or prior to the Stockholder Meeting Deadline. "Short Sale Release
Date" means the date of the occurrence of (A) the first date on which there
18
shall have occurred a Triggering Event described in clause (i), (ii), (iii),
(vii) or (viii) of Section 3(b) of the Statement of Designations or an event
that with the passage of time and without being cured would constitute a
Triggering Event described in clause (i), (ii), (iii) or (vii) of Section 3(b)
of the Statement of Designations or (B) the first date after the Closing Date on
which there shall have occurred the consummation of a Hostile Tender Offer (as
defined in Section 6 of the Statement of Designations) or announcement by the
Company of a pending, proposed or intended Change of Control (as defined in
Section 4(b) of the Statement of Designations) other than a Hostile Tender
Offer. On any date during the period beginning on the date of the first
occurrence of a Short Sale Release Date after the Closing Date and ending on the
earlier of (i) the first date on which such Buyer no longer holds any Preferred
Shares and (ii) the date which is two (2) years after the Closing Date, but not
more than once during any calendar month, the Company may request in writing to
such Buyer that it disclose to the Company the number of shares of Common Stock
which such Buyer and its affiliates have outstanding as Short Sales as of the
date such Buyer receives such written request from the Company. Such Buyer shall
disclose such Short Sale information to the Company within five (5) Business
Days of such Buyer's receipt of the Company's written request made in accordance
with the immediately preceding sentence.
o. Trading Restrictions. Each Buyer agrees that, subject to
the exceptions described below, during the period beginning on the date which is
455 days after the Closing Date and ending on the earlier of (i) the first date
on which such Buyer no longer holds any Preferred Shares and (ii) the date which
is two (2) years after the Closing Date neither such Buyer nor any of its
affiliates shall engage directly in any Short Sale of the Common Stock provided,
however, that each Buyer and its affiliates are entitled to engage in
transactions which constitute Short Sales to the extent that following such
transaction the aggregate short position of such Buyer and its affiliates does
not exceed the sum of (A) the number of shares of Common Stock equal to the
aggregate number of shares of Common Stock which such Buyer and its affiliates
have the right to acquire upon exercise of the Warrants held by such Buyer and
its affiliates (without regard to any limitations on exercises of the Warrants),
plus (B) the number of shares of Common Stock equal to the quotient of (I) the
aggregate Conversion Amount with respect to the Preferred Shares held by such
Buyer and its affiliates, divided by (II) the lowest Conversion Price during the
period beginning on and including the date which is 455 days after the Closing
Date and ending on and including the date which is the earlier of (x) the first
date on which such Buyer no longer holds any Preferred Shares and (y) the date
which is two (2) years after the Closing Date. Each Buyer agrees that, subject
to the exceptions described below, during the period beginning on the date which
is 455 days after the Closing Date and ending on the earlier of (i) the first
date on which such Buyer no longer holds any Preferred Shares and (ii) the date
which is two (2) years after the Closing Date neither such Buyer nor any of its
affiliates shall directly effect any Short Sale of the Common Stock on any
trading day (a "Sale Day") at a price which is less than each sale price of the
Common Stock on such Sale Day by sellers other than such Buyer and its
affiliates. Notwithstanding the foregoing, the restriction on Short Sales set
forth in the first sentence of this Section 4(o) and the trading restrictions
set forth in the second sentence of this Section 4(o) shall not apply (a) on and
after the first date on which there shall have occurred (I) a Triggering Event
or (II) an event that with the passage of time and without being cured would
constitute a Triggering Event (other than a Triggering Event described in
Section 3(b)(viii)); (b) on or after the date on which there shall have occurred
(x) the consummation of a Hostile Tender Offer or (y) the announcement by the
19
Company of a pending, proposed or intended Change of Control (other than a
Hostile Tender Offer) which the Company has not accurately and publically
announced as being consummated, terminated or abandoned; (c) on or after a
Liquidity Default Date (as defined in the Statement of Designations); (d) on or
after the date on which the Company issues or sells or is deemed to have issued
or sold any Convertible Securities or Options (other than Exempt Convertible
Securities (as defined in the Statement of Designations)) that are convertible
into or exercisable or exchangeable for shares of Common Stock at a conversion
or exercise price which varies or may vary with the market price of the Common
Stock, including by way of one or more reset(s) to a fixed price; (e) with
respect to a Short Sale so long as such Buyer delivers a Conversion Notice
within two (2) Business Days of such Short Sale entitling such Buyer to receive
a number of shares of Common Stock at least equal to the number of shares of
Common Stock sold in such Short Sale; (f) with respect to any transaction
involving options on the Common Stock; (g) on or after any date on which the
Company fails to pay the Company's Election Redemption Price within two (2)
Business Days of the Company's Election Redemption Date in accordance with a
Redemption at Company's Election pursuant to Section 6 of the Statement of
Designations; (h) on or after the first date on which the Company fails to
comply with its obligations under Section 4(m); or (i) on or after the
Stockholder Meeting Deadline if the Company fails to receive the Stockholder
Approval on or prior to the Stockholder Meeting Deadline.
p. Right to Exchange Preferred Shares. So long as any
Preferred Shares remain outstanding, if the Company issues or agrees to issue
any New Equity Securities (as defined below), the Company shall provide written
notice thereof via facsimile and overnight courier to each holder of Preferred
Shares ("New Financing Notice") at least ten (10) days prior to the date that
the Company enters into any agreement with respect to any New Equity Securities
or issues any New Equity Securities. Within one business day after each issuance
of New Equity Securities, the Company shall make an irrevocable exchange offer
to each holder of Preferred Shares on such terms and conditions as each such
holder shall reasonably require to exchange any or all of such holder's
Preferred Shares for a like amount (based on the following formula to value each
Preferred Share: the Stated Value plus any accrued and unpaid dividends) of the
New Equity Securities. Each such exchange offer shall remain open until the
earlier of (i) the date which is 15 business days after the receipt by each
holder of Preferred Shares of the New Financing Notice or (ii) such time as all
of the holders of Preferred Shares accept or reject, in writing, such exchange
offer. "New Equity Securities" means Convertible Securities or Options, other
than Excluded Securities (as defined in the Statement of Designations), where
the conversion, exercise or exchange price of such securities may not be less
than the market price of the Common Stock on the date of issuance of such
securities nor may the conversion, exercise or exchange price of such securities
be reduced or adjusted down after the date of issuance of such securities (other
than in connection with a stock split, stock dividend or other similar
transaction).
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its
transfer agent, and any subsequent transfer agent, to issue certificates,
20
registered in the name of each Buyer or its respective nominee(s), for the
Conversion Shares and the Warrant Shares in such amounts as specified from time
to time by each Buyer to the Company upon conversion of the Preferred Shares or
exercise of the Warrants (in the form attached hereto as Exhibit E, the
"Irrevocable Transfer Agent Instructions") unless such issuance is prohibited by
Section 5 or Section 15 of the Statement of Designations. Prior to registration
of the Conversion Shares and the Warrant Shares under the 1933 Act, all such
certificates shall bear the restrictive legend specified in Section 2(g) of this
Agreement. The Company warrants that no instruction other than the Irrevocable
Transfer Agent Instructions referred to in this Section 5, and stop transfer
instructions to give effect to Section 2(f) hereof (in the case of the
Conversion Shares and the Warrant Shares, prior to registration of the
Conversion Shares and the Warrant Shares under the 0000 Xxx) will be given by
the Company to its transfer agent with respect to the Conversion Shares and the
Warrant Shares and that the Securities shall otherwise be freely transferable on
the books and records of the Company as and to the extent provided in this
Agreement and the Registration Rights Agreement. If a Buyer provides the Company
with an opinion of counsel, in a form reasonably satisfactory to the Company,
that registration of a resale by such Buyer of any of such Securities is not
required under the 1933 Act or such Buyer provides the Company with reasonable
assurances that the Securities can be sold pursuant to Rule 144, the Company
shall permit the transfer, and, in the case of the Conversion Shares and the
Warrant Shares, promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by such Buyer
and without any restrictive legends. The Company acknowledges that a breach by
it of its obligations hereunder will cause irreparable harm to the affected
Buyer by vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 5 would be inadequate and agrees,
in the event of a breach or threatened breach by the Company of the provisions
of this Section 5, that the affected Buyer shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic loss
and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the
Preferred Shares and the Warrants to each Buyer at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion by providing
each Buyer with prior written notice thereof:
(i) Such Buyer shall have executed each of this Agreement and
the Registration Rights Agreement and delivered the same to the
Company.
(ii) Such Buyer shall have delivered to the Company the
Purchase Price (less, with respect to HFTP Investment L.L.C., the
amounts withheld pursuant to Section 4(i)) for the Preferred Shares and
the related Warrants being purchased by such Buyer at the Closing by
wire transfer of immediately available funds pursuant to the wire
instructions provided by the Company.
21
(iii) The representations and warranties of such Buyer
contained herein shall be true and correct as of the date when made and
as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and
such Buyer shall have performed, satisfied and complied with the
covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by such Buyer at
or prior to the Closing Date.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the
Preferred Shares and the related Warrants at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for such Buyer's sole benefit and
may be waived by such Buyer at any time in its sole discretion by providing the
Company and each Buyer with prior written notice thereof:
(i) The Company shall have executed each of the Transaction
Documents, and delivered the same to such Buyer.
(ii) The Statement of Designations shall have been filed with
the Secretary of State of the Commonwealth of Pennsylvania, and a copy
thereof certified by the Secretary of State of the Commonwealth of
Pennsylvania shall have been delivered to such Buyer.
(iii) The Common Stock shall be listed on NYSE and since
August 20, 1999, shall not have been suspended from trading on or
delisted from such exchange nor shall delisting or suspension by such
exchange have been threatened either (A) in writing by such exchange or
(B) by falling below the minimum listing maintenance requirements of
such exchange. The Company shall have complied with the listing
requirements of NYSE for the Conversion Shares and the Warrant Shares
issuable upon conversion or exercise of the Preferred Shares and the
related Warrants, as the case may be.
(iv) The representations and warranties of the Company
contained herein shall be true and correct as of the date when made and
as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date) and
the Company shall have performed, satisfied and complied with the
covenants, agreements and conditions required by the Transaction
Documents and the Statement of Designations to be performed, satisfied
or complied with by the Company at or prior to the Closing Date. Such
Buyer shall have received a certificate, executed by the Chief
Executive Officer of the Company, dated as of the Closing Date, to the
foregoing effect and as to such other matters as such Buyer may
reasonably request, including, without limitation, an update as of the
Closing Date regarding the representation contained in Section 3(c)
above.
22
(v) Such Buyer shall have received the opinion of Duane,
Morris & Heckscher LLP dated as of the Closing Date, in substantially
the form of Exhibit D, attached hereto.
(vi) The Company shall have executed and delivered to such
Buyer the Stock Certificates for the Preferred Shares and the related
Warrants being purchased by such Buyer at the Closing.
(vii) The Board of Directors of the Company shall have adopted
resolutions consistent with Section 3(b) above in a form reasonably
acceptable to such Buyer (the "Resolutions").
(viii) As of the Closing Date, the Company shall have reserved
out of its authorized and unissued Common Stock, solely for the purpose
of effecting the conversion of the Preferred Shares and exercise of the
Warrants, at least 1,900,000 shares of Common Stock.
(ix) The Irrevocable Transfer Agent Instructions, in the form
of Exhibit E attached hereto, shall have been delivered to and
acknowledged in writing by the Company's transfer agent.
(x) The Company shall have delivered to such Buyer a
certificate evidencing the incorporation and good standing of the
Company and each United States Subsidiary in such corporation's state
of organization issued by the Secretary of State of such state of
incorporation as of a date within ten days of the Closing Date.
(xi) The Company shall have delivered to such Buyer a
secretary's certificate, dated as of the Closing Date, certifying as to
(A) the Resolutions, (B) the Articles of Incorporation and (C) the
By-laws, each as in effect at the Closing Date.
(xii) The Company shall have delivered to such Buyer a
certified copy of its Articles of Incorporation as certified by the
Secretary of State of the Commonwealth of Pennsylvania within ten days
of the Closing Date.
(xiii) The Company shall have delivered to such Buyer a letter
from the Company's transfer agent certifying the number of shares of
Common Stock outstanding as of a date within five days of the Closing
Date.
(xiv) The Company shall have delivered to such Buyer such
other documents relating to the transactions contemplated by the
Transaction Documents as such Buyer or its counsel may reasonably
request.
8. INDEMNIFICATION. In consideration of each Buyer's execution and
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's other obligations under the Transaction
23
Documents and the Statement of Designations, the Company shall defend, protect,
indemnify and hold harmless each Buyer and each other holder of the Securities
and all of their stockholders, officers, directors, employees and direct or
indirect investors and any of the foregoing persons' agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"Indemnitees") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or Statement of Designations or any other
certificate, instrument or document contemplated hereby or thereby, (b) any
breach of any covenant, agreement or obligation of the Company contained in the
Transaction Documents or the Statement of Designations or any other certificate,
instrument or document contemplated hereby or thereby or (c) any cause of
action, suit or claim brought or made against such Indemnitee (other than a
cause of action, suit or claim which is (x) brought or made by the Company and
(y) is not a shareholder derivative suit) and arising out of or resulting from
(i) the execution, delivery, performance or enforcement of the Transaction
Documents or the Statement of Designations, (ii) any transaction financed or to
be financed in whole or in part, directly or indirectly, with the proceeds of
the issuance of the Securities or (iii) solely from the status of such Buyer or
holder of the Securities as an investor in the Company. To the extent that the
foregoing undertaking by the Company may be unenforceable for any reason, the
Company shall make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities which is permissible under applicable law.
9. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law; Jurisdiction; Jury Trial. All questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
York. Each party hereby irrevocably submits to the non-exclusive jurisdiction of
the state and federal courts sitting in the City of New York, borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
24
b. Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other parties; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
c. Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement supersedes all
other prior oral or written agreements between each Buyer, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein. This Agreement and the instruments referenced herein contain
the entire understanding of the parties with respect to the matters covered
herein and therein and, except as specifically set forth herein or therein,
neither the Company nor any Buyer makes any representation, warranty, covenant
or undertaking with respect to such matters. No provision of this Agreement may
be amended other than by an instrument in writing signed by the Company and the
Buyers which purchased at least two-thirds (2/3) of the Preferred Shares on the
Closing Date, or their assigns or, if prior to the Closing Date, the Buyers
listed on the Schedule of Buyers as being obligated to purchase at least
two-thirds (2/3) of the Preferred Shares. No provision hereof may be waived
other than by an instrument in writing signed by the party against whom
enforcement is sought. No such amendment shall be effective to the extent that
it applies to less than all of the holders of the Preferred Shares or Warrants
then outstanding. No consideration shall be offered or paid to any person to
amend or consent to a waiver or modification of any provision of any of the
Transaction Documents or the Statement of Designations unless the same
consideration also is offered to all of the parties to the Transaction Documents
or holders of the Securities, as the case may be.
25
f. Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) one (1) Business Day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
If to the Company:
Entrade Inc.
000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxxxx, General Counsel
With a copy to:
Duane, Morris & Xxxxxxxx LLP
000 Xxxx Xxxxxx Xxxxxx, Xxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxx, Esq.
If to the Transfer Agent:
Xxxxx Xxxxxx Shareholder Services, L.L.C.
000 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxx Xxxxxxxx, Xxxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx XxXxxxxx
If to a Buyer, to it at the address and facsimile number set forth on
the Schedule of Buyers, with copies to such Buyer's representatives as set forth
on the Schedule of Buyers, or at such other address and/or facsimile number
and/or to the attention of such other person(s) as the recipient party has
specified by written notice given to each other party five days prior to the
effectiveness of such change. Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communications, (B)
mechanically or electronically generated by the sender's facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a nationally recognized overnight
delivery service shall be rebuttable evidence of personal service, receipt by
facsimile or receipt from a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above, respectively.
26
g. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Preferred Shares and the related
Warrants. The Company shall not assign this Agreement or any rights or
obligations hereunder, including by merger or consolidation, without the prior
written consent of the Buyers which purchased at least two-thirds (2/3) of the
Preferred Shares on the Closing Date, or their assigns. The rights under this
Agreement are assignable by a Buyer without the consent of the Company;
provided, however, that any such assignment shall not release such Buyer from
its obligations hereunder unless such obligations are assumed by such assignee
and the Company has consented to such assignment and assumption, which consent
shall not be unreasonably withheld. Notwithstanding anything to the contrary
contained in the Transaction Documents or the Statement of Designations, Buyers
shall be entitled to pledge the Securities in connection with a bona fide margin
account or other loan secured by the Securities.
h. No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
i. Survival. Unless this Agreement is terminated under Section
9(l), the representations and warranties of the Company and each Buyer contained
in Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and
9, and the indemnification provisions set forth in Section 8, shall survive the
Closing. Each Buyer shall be responsible only for its own representations,
warranties, agreements and covenants hereunder.
j. Publicity. The Company and each Buyer shall have the right
to approve before issuance any press releases or any other public statements
with respect to the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without the prior approval of any Buyer, to make
any press release or other public disclosure with respect to such transactions
as the Company reasonably believes, after consulting with its counsel, to be
required by applicable law and regulations (although each Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a copy
thereof).
k. Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. Termination. In the event that the Closing shall not have
occurred with respect to a Buyer on or before one (1) Business Day after the
date hereof due to the Company's or a Buyer's failure to satisfy the conditions
set forth in Sections 6 and 7 above (and the non-breaching party's failure to
waive such unsatisfied condition(s)), the non-breaching party shall have the
option to terminate this Agreement with respect to such breaching party at the
close of business on such date without liability of any party to any other
party; provided, however, that if this Agreement is terminated pursuant to this
Section 9(l), the Company shall remain obligated to reimburse a non-breaching
Buyer for expenses up to the amount described in Section 4(i) above.
27
m. Placement Agent. The Company acknowledges that it has
engaged X.X. Xxxxxxxx & Co. as a placement agent in connection with the sale of
the Preferred Shares and the Warrants. The Company shall be responsible for the
payment of any placement agent's fees or brokers' commissions relating to or
arising out of the transactions contemplated hereby. The Company shall pay, and
hold each Buyer harmless against, any liability, loss or expense (including,
without limitation, attorneys' fees and out of pocket expenses) arising in
connection with any such claim.
n. No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
o. Remedies. Each Buyer and each holder of the Securities
shall have all rights and remedies set forth in the Transaction Documents and
the Statement of Designations and all rights and remedies which such holders
have been granted at any time under any other agreement or contract and all of
the rights which such holders have under any law. Any person having any rights
under any provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.
p. Payment Set Aside. To the extent that the Company makes a
payment or payments to any Buyer hereunder or pursuant to the Registration
Rights Agreement, the Statement of Designations or the Warrants or such Buyer
enforces or exercises its rights hereunder or thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company or to a trustee, receiver or any other person under any
law (including, without limitation, any bankruptcy law, state or federal law,
common law or equitable cause of action), then, to the extent of any such
restoration, the obligation or part thereof originally intended to be satisfied
shall be revived and continued in full force and effect as if such payment had
not been made or such enforcement or setoff had not occurred.
* * * * * *
28
IN WITNESS WHEREOF, the Buyers and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYERS:
ENTRADE INC. HFTP INVESTMENT L.L.C.
By: Promethean Asset Management, L.L.C.
Its: Investment Manager
By:
Name:______________________
Title:_____________________ By:______________________
Xxxxx X. X'Xxxxx, Xx.
Managing Member
XXXXXX CAPITAL LTD.
By: ______________________
Name: Xxxxxx X. Xxxxxxx
Its: Authorized Signatory
XXXXXXX CAPITAL LTD.
By: ______________________
Name: Xxxxxx X. Xxxxxxx
Its: Authorized Signatory
XXXXXXXX, L.P.
By: XXXXXX, XXXXXX & CO., L.P.
Its: General Partner
By: ______________________
Name: Xxxxxxx X. Xxxxxx
Its: Chief Operating Officer
29
SCHEDULE OF BUYERS
Number Number
of of
Investor Address Preferred Warrant Investor's Representatives' Address
Investor Name and Facsimile Number Shares Shares and Facsimile Number
---------------------------------------------------------------------------------------------------------------------------
HFTP Investment L.L.C. c/o Promethean Asset Management, L.L.C. 10,000 133,334 Promethean Investment Group, L.L.C.
000 Xxxxxxxxx Xxxxxx, 00xx Floor 000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000 Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. X'Xxxxx, Xx. Attn: Xxxxx X. X'Xxxxx, Xx.
Xxxx X. Xxxxxxx Xxxx X. Xxxxxxx
Telephone: 000-000-0000 Telephone: 000-000-0000
Facsimile: 000-000-0000 Facsimile: 000-000-0000
Residence: New York
Xxxxxx Xxxxxx & Zavis
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 312-902-1061
Xxxxxx Capital Ltd. c/o Citadel Investment Group, L.L.C. 6,500 86,666 Xxxxxx Xxxxxx & Xxxxx
000 Xxxx Xxxxxxxxxx Xxxxxx 000 X. Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000 Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxx Attention: Xxxxxx X. Xxxxxxxx, Esq.
Telephone: (000) 000-0000 Telephone: (000) 000-0000
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
Residence: Cayman Islands
Xxxxxxx Capital Ltd. c/o Citadel Investment Group, L.L.C. 3,500 46,667 Xxxxxx Xxxxxx & Zavis
000 Xxxx Xxxxxxxxxx Xxxxxx 000 X. Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000 Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxx Attention: Xxxxxx X. Xxxxxxxx, Esq.
Telephone: (000) 000-0000 Telephone: (000) 000-0000
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
Residence: Cayman Islands
Xxxxxxxx, L.P. c/o Xxxxxx, Xxxxxx & Co., L.P. 10,000 133,333 c/o Xxxxxx, Xxxxxx & Co., L.P.
000 Xxxx Xxxxxx - 26th Floor 000 Xxxx Xxxxxx - 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000 Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxx or Xxx Xxxxxx Attn: Xxxx Xxxx or Xxx Xxxxxx
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
Telephone: (000) 000-0000 Telephone: (000) 000-0000
Residence: Cayman Islands
Stroock & Stroock & Xxxxx LLP
000 Xxxxxx Xxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxx X. Chill, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
30
SCHEDULES
Schedule of Buyers
Schedule 3(a) - Subsidiaries
Schedule 3(c) - Capitalization
Schedule 3(e) - Conflicts
Schedule 3(f) - SEC Documents
Schedule 3(g) - Material Changes
Schedule 3(h) - Litigation
Schedule 3(m) - Executive Officers
Schedule 3(n) - Intellectual Property
Schedule 3(q) - Tax Status
Schedule 3(r) - Transactions with Affiliates
Schedule 3(w) - Liens
Schedule 3(x) - Insurance
Schedule 3(aa) - Certain Agreements
Schedule 4(d) - Use of Proceeds
EXHIBITS
Exhibit A - Form of Statement of Designations
Exhibit B - Form of Warrant
Exhibit C - Form of Registration Rights Agreement
Exhibit D - Form of Company Counsel Opinion
Exhibit E - Form of Irrevocable Transfer Agent Instructions
