Exhibit 6.3
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of June 17,
1998, among BOULDER CAPITAL OPPORTUNITIES III, INC., a corporation organized
under the laws of the State of Colorado (the "COMPANY"), SONIC JET PERFORMANCE,
LLC, a limited liability company organized under the laws of the State of
California ("SJP") and the purchasers (the "PURCHASER") set forth on the
execution page hereof (the "EXECUTION PAGES").
WHEREAS:
A. The Company, SJP and Purchaser are executing and delivering this
Agreement in connection with the reliance by the Company and the Purchaser upon
the exemption from securities registration afforded by the provisions 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 "SECURITIES ACT").
B. The Company and SJP have executed and entered into that certain
Share Exchange Agreement, dated June 15, 1998 (the "SHARE EXCHANGE AGREEMENT"),
whereby the Company will acquire substantially all of the assets and liabilities
of SJP in exchange for common stock of the Company (the "TRANSACTION"). After
completion of the Transaction the Company will change its name to "Sonic JET
Performance, Inc."
C. The Company desires to sell, and Purchaser desires to purchase, upon
the terms and conditions stated in this Agreement, 1,600 shares of the Company's
Series A Convertible Preferred Stock, no par value (the "PREFERRED SHARES"),
convertible into shares of the Company's common stock, no par value (the "COMMON
STOCK"). The rights, preferences and privileges of the Preferred Shares,
including the terms upon which such Preferred Shares are convertible into shares
of Common Stock, are set forth in the form of Certificate of Designations,
Preferences and Rights attached hereto as EXHIBIT A (the "CERTIFICATE OF
DESIGNATION"). The shares of Common Stock issuable upon conversion of the
Preferred Shares or otherwise pursuant to the Certificate of Designation are
referred to herein as the "CONVERSION SHARES". The Preferred Shares, and the
Conversion Shares are collectively referred to herein as the "SECURITIES" and
each of them may individually be referred to herein as a "SECURITY."
D. Contemporaneous with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
in the form attached hereto as EXHIBIT B (the "REGISTRATION RIGHTS AGREEMENT"),
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act and the rules and regulations promulgated thereunder,
and applicable state securities laws.
NOW, THEREFORE, the Company, SJP and the Purchaser hereby agree as
follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
(a) PURCHASE OF PREFERRED SHARES. On the Closing Date (as defined
below), subject to the satisfaction (or waiver) of the conditions set forth in
Section 7 and Section 8 below, the Company shall issue and sell to Purchaser,
and Purchaser shall purchase from the Company, the Preferred Shares. The
purchase price (the "PURCHASE PRICE") shall be One Million Five Hundred Thousand
Dollars ($1,500,000.00) for the Preferred Shares.
(b) FORM OF PAYMENT. On the Closing Date, Purchaser shall pay the
aggregate Purchase Price by wire transfer to the Company, in accordance with the
Company's written wiring instructions, against delivery of duly executed
certificates representing the Preferred Shares being purchased by Purchaser and
the Company shall deliver such certificates against delivery of such aggregate
Purchase Price.
(c) CLOSING DATE. Subject to the satisfaction (or waiver) of the
conditions thereto set forth in Section 7 and Section 8 below, the date and time
of the issuance and sale of the Preferred Shares pursuant to this Agreement (the
"CLOSING") shall be 12:00 noon, New York City time, on June 19, 1998, subject to
a two business day grace period at either party's option, but in any event not
later than June 26, 1998, or such other time as may be mutually agreed upon by
the Company and the Purchaser (the "CLOSING DATE"). The Closing shall occur at
the offices of Klehr, Harrison, Xxxxxx, Xxxxxxxxx & Xxxxxx, LLP, 0000 Xxxxxx
Xxxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000.
2. PURCHASER'S REPRESENTATIONS AND WARRANTIES
Purchaser represents and warrants to the Company as follows:
(a) PURCHASE FOR OWN ACCOUNT, ETC. Purchaser is purchasing the
Preferred Shares for Purchaser's own account and not with a present view towards
the public sale or distribution thereof, except pursuant to sales that are
exempt from the registration requirements of the Securities Act and/or sales
registered under the Securities Act. Purchaser understands that Purchaser must
bear the economic risk of this investment indefinitely, unless the Securities
are registered pursuant to the Securities Act and any applicable state
securities or blue sky laws or an exemption from such registration is available,
and that the Company has no present intention of registering the resale of any
such Securities other than as contemplated by the Registration Rights Agreement.
Notwithstanding anything in this Section 2(a) to the contrary, by making the
representations herein, the Purchaser does not agree to hold the Securities for
any minimum or other specific term and reserves the right to dispose of the
Securities at any time in accordance with or pursuant to a registration
statement or an exemption from the registration requirements under the
Securities Act.
(b) ACCREDITED INVESTOR STATUS. Purchaser is an "ACCREDITED
INVESTOR" as that term is defined in Rule 501(a) of Regulation D.
(c) RELIANCE ON EXEMPTIONS. Purchaser understands that the Preferred
Shares are being offered and sold to Purchaser in reliance upon specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of,
and Purchaser's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of Purchaser set forth herein in order to
determine the availability of such exemptions and the eligibility of Purchaser
to acquire the Preferred Shares.
(d) INFORMATION. Purchaser and its counsel, if any, have been furnished
all materials relating to the business, finances and operations of the Company
and SJP and materials relating to the offer and sale of the Preferred Shares
which have been specifically requested by Purchaser or its counsel. Purchaser
and its counsel have been afforded the opportunity to ask questions of the
Company and SJP. Neither such inquiries nor any other investigation conducted by
Purchaser or its counsel or any of its representatives shall modify, amend or
affect Purchaser's right to rely on the Company's or SJP's representations and
warranties contained in Section 3 and Section 4 below. Purchaser understands
that Purchaser's investment in the Preferred Shares involves a high degree of
risk.
(e) GOVERNMENTAL REVIEW. Purchaser understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Preferred Shares.
(f) TRANSFER OR RESALE. Purchaser understands that (i) except as
provided in the Registration Rights Agreement, the sale or resale of the
Preferred Shares and the Conversion Shares have not been and are not being
registered under the Securities Act or any state securities laws, and the
Preferred Shares and the Conversion Shares may not be transferred unless (a) the
resale of the Preferred Shares or the Conversion Shares, as applicable, has been
registered thereunder; or (b) Purchaser shall have delivered to the Company an
opinion of counsel (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions) to the effect that
the Preferred Shares or Conversion Shares to be sold or transferred may be sold
or transferred pursuant to an exemption from such registration; or (c) the
Preferred Shares or the Conversion Shares, as applicable, are sold under Rule
144 promulgated under the Securities Act (or a successor rule) ("RULE 144"); or
(d) the Preferred Shares or the Conversion Shares, as applicable, are sold or
transferred to an affiliate of Purchaser who agrees to sell or otherwise
transfer the Preferred Shares or the Conversion Shares, as applicable, only in
accordance with the provisions of this Section 2(f) and who is an Accredited
Investor; and (ii) neither the Company nor any other person is under any
obligation to register such Preferred Shares or the Conversion Shares under the
Securities Act or any state securities laws (other than pursuant to the
Registration Rights Agreement). Notwithstanding the foregoing or anything else
contained herein to the contrary, the Preferred Shares or the Conversion Shares
may be pledged as collateral in connection with a bona fide margin account or
other lending arrangement.
(g) LEGENDS. Purchaser understands that the certificates for the
Preferred Shares and, until such time as the Conversion Shares have been
registered under the Securities Act (including registration pursuant to Rule 416
thereunder) as contemplated by the Registration Rights Agreement or otherwise
may be sold by Purchaser under Rule 144, the certificates for the Conversion
Shares may bear a restrictive legend in substantially the following form:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or the securities laws of
any state of the United States. The securities represented hereby may
not be offered, sold or transferred in the absence of an effective
registration statement for the securities under applicable securities
laws unless offered, sold or transferred under an available exemption
from the registration requirements of those laws.
The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any Security upon which it is
stamped if, unless otherwise required by state securities laws, (a) the sale of
such Security is registered under the Securities Act (including registration
pursuant to Rule 416 thereunder) as contemplated by the Registration Rights
Agreement; (b) such holder provides the Company with an opinion of counsel, in
form, substance and scope customary for opinions of counsel in comparable
transactions, to the effect that a public sale or transfer of such Security may
be made without registration under the Securities Act; or (c) such holder
provides the Company with reasonable assurances that such Security can be sold
under Rule 144. Purchaser agrees to sell all Securities, including those
represented by a certificate(s) from which the legend has been removed, pursuant
to an effective registration statement or under an exemption from the
registration requirements of the Securities Act. In the event the above legend
is removed from any Security and thereafter the effectiveness of a registration
statement covering such Security is suspended or the Company determines that a
supplement or amendment thereto is required by applicable securities laws, then
upon reasonable advance notice to Purchaser the Company may
require that the above legend be placed on any such Security that cannot then be
sold pursuant to an effective registration statement or under Rule 144 and
Purchaser shall cooperate in the replacement of such legend. Such legend shall
thereafter be removed when such Security may again be sold pursuant to an
effective registration statement or under Rule 144.
(h) AUTHORIZATION; ENFORCEMENT. This Agreement and the Registration
Rights Agreement have been duly and validly authorized, executed and delivered
on behalf of Purchaser and are valid and binding agreements of Purchaser
enforceable against Purchaser in accordance with their terms.
(i) RESIDENCY. Purchaser is a resident of the jurisdiction set forth
under Purchaser's name on the Execution Page hereto executed by Purchaser.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to Purchaser as follows:
(a) ORGANIZATION AND QUALIFICATION. The Company and each of its
subsidiaries is a corporation duly organized and existing in good standing under
the laws of the jurisdiction in which it is incorporated, and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted. The Company and each of 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 and where the failure so to qualify would
have a Material Adverse Effect. "MATERIAL ADVERSE EFFECT" means any material
adverse effect on (i) the Securities, (ii) the ability of the Company or SJP to
perform its obligations hereunder or under the Certificate of Designation or the
Registration Rights Agreement, (iii) the ability of the Company or SJP to
consummate the Transaction or (iv) the business, operations, properties,
prospects or financial condition of the Company or SJP and their subsidiaries,
taken as a respective whole.
(b) AUTHORIZATION; ENFORCEMENT. (i) The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement and the Registration Rights Agreement, to issue and sell the
Preferred Shares in accordance with the terms hereof, to issue the Conversion
Shares upon conversion of the Preferred Shares in accordance with the terms of
the Certificate of Designation; (ii) the execution, delivery and performance of
this Agreement and the Registration Rights Agreement 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
issuance and reservation for issuance of the Conversion Shares) have been duly
authorized by the Company's Board of Directors and no further consent or
authorization of the Company, its Board of Directors, any committee of the Board
of Directors or the Company's shareholders is required, and (iii) this Agreement
constitutes, and, upon execution and delivery by the Company of the Registration
Rights Agreement, such agreements will constitute, valid and binding obligations
of the Company enforceable against the Company in accordance with their terms.
(c) STOCKHOLDER AUTHORIZATION. The Company believes that neither the
execution, delivery or performance of this Agreement or the Registration Rights
Agreement by the Company nor the consummation by it of the transactions
contemplated hereby or thereby (including, without limitation, the Transaction,
the issuance of the Preferred Shares or the issuance, reservation for issuance
or listing of the Conversion Shares) requires any consent, approval or
authorization of the Company's stockholders.
(d) CAPITALIZATION. The capitalization of the Company as of the date
hereof and the pro forma capitalization of the Company assuming the consummation
of the Transaction, including the authorized capital stock, the number of shares
issued and outstanding, the number of shares issuable and reserved for issuance
pursuant to the Company's stock option plans, the number of shares issuable and
reserved for issuance pursuant to securities (other than the Preferred Shares)
exercisable or exchangeable for, or convertible into, any shares of capital
stock is set forth on SCHEDULE 3(D). All of such outstanding shares of capital
stock have been, or upon issuance in accordance with the terms of any such
warrants, options or preferred stock, will be, validly issued, fully paid and
non-assessable. No shares of capital stock of the Company (including the
Preferred Shares, the Conversion Shares) are subject to preemptive rights or any
other similar rights of the stockholders of the Company or any liens or
encumbrances. Except for the Securities and as set forth on SCHEDULE 3(D), as of
the date of this Agreement, (i) there are no outstanding options, warrants,
scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exercisable or
exchangeable for, any shares of capital stock of the Company or any of its
subsidiaries, 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, and (ii) there are no agreements or arrangements
under which the Company or any of its subsidiaries is obligated to register the
sale of any of its or their securities under the Securities Act (except the
Registration Rights Agreement). Except as set forth on SCHEDULE 3(D), (i) there
are no securities or instruments containing antidilution or similar provisions
that will be triggered by the issuance of the Securities in accordance with the
terms of this Agreement, the Certificate of Designation, (ii) there are no
outstanding securities or instruments 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, and (iii) 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 Purchaser true and correct copies of the
Company's Certificate of Incorporation as in effect on the date hereof
("CERTIFICATE OF INCORPORATION"), the Company's By-laws as in effect on the date
hereof (the "BY-LAWS"), and all other instruments and agreements governing
securities convertible into or exercisable or exchangeable for capital stock of
the Company. The Certificate of Designation, in the form attached hereto, will
be duly filed prior to Closing with the Secretary of State of the State of
Colorado and, upon the issuance of the Preferred Shares in accordance with the
terms hereof, each Purchaser shall be entitled to the rights set forth therein.
(e) ISSUANCE OF SHARES. The Preferred Shares are duly authorized and,
upon issuance in accordance with the terms of this Agreement, will be validly
issued, fully paid and non-assessable, and free from all taxes, liens, claims
and encumbrances and will not be subject to preemptive rights or other similar
rights of stockholders of the Company and will not impose personal liability on
the holders thereof. The Conversion Shares are duly authorized and, in
accordance with the Certificate of Designation reserved for issuance, and, upon
conversion of the Preferred Shares in accordance with the terms thereof, will be
validly issued, fully paid and non-assessable, and free from all taxes, liens,
claims and encumbrances and will not be subject to preemptive rights or other
similar rights of stockholders of the Company and will not impose personal
liability upon the holder thereof.
(f) NO CONFLICTS. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement by the Company, the performance
by the Company of its obligations under the Certificate of Designation, and the
consummation by the Company of the transactions contemplated hereby and
thereby (including, without limitation, the Transaction, the issuance and
reservation for issuance, as applicable, of the Preferred Shares and
Conversion Shares) will not (i) result in a violation of the Certificate of
Incorporation or By-laws or (ii) conflict with, or constitute a default (or an
event which, with notice or lapse of time or both, would become a default)
under, or give to others any rights of termination, amendment (including,
without limitation, the triggering of any anti-dilution provisions) acceleration
or cancellation of, any agreement, indenture or instrument to which the Company
or any of its subsidiaries is a party, or result in a violation of any law,
rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations and rules or regulations of any self-regulatory
organizations to which either the Company or its securities are subject)
applicable to the Company or any of its subsidiaries or by which any property
or asset of the Company or any of its subsidiaries is bound or affected (except,
with respect to clause (ii), for such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations that would not,
individually or in the aggregate, have a Material Adverse Effect). Neither the
Company nor any of its subsidiaries is in violation of its Certificate of
Incorporation, By-laws or other organizational documents and neither the Company
nor any of its subsidiaries is in default (and no event has occurred which, with
notice or lapse of time or both, would put the Company or any of its
subsidiaries in default) under, nor has there occurred any event giving others
(with notice or lapse of time or both) 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, except for actual or possible
violations, defaults or rights that would not, individually or in the aggregate,
have a Material Adverse Effect. The businesses of the Company and its
subsidiaries are not being conducted, and shall not be conducted so long as
Purchaser owns any of the Securities, in violation of any law, ordinance or
regulation of any governmental entity, except for possible violations the
sanctions for which either singly or in the aggregate would not have a Material
Adverse Effect. Except as specifically contemplated by this Agreement and the
Registration Rights Agreement, the Company is not required to obtain any
consent, approval, 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 this Agreement or the Registration Rights Agreement or to perform its
obligations under the Certificate of Designation, in each case in accordance
with the terms hereof or thereof.
(g) SEC DOCUMENTS, FINANCIAL STATEMENTS. Since December 31, 1994, the
Company has timely filed (within applicable extension periods) all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT") (all of the foregoing and all exhibits
included therein and financial statements and schedules thereto and documents
incorporated by reference therein, being hereinafter referred to herein as the
"SEC DOCUMENTS"). The Company has delivered to the Purchaser true and complete
copies of the SEC Documents. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the Exchange Act or
the Securities Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and 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. None of the
statements made in any such SEC Documents is, or has been,
required to be amended or updated under applicable law (except for such
statements as have been amended or updated in subsequent filings made prior to
the date hereof). 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 and the published rules and
regulations of the SEC applicable with respect thereto. Such financial
statements have been prepared in accordance with U.S. generally accepted
accounting principles ("GAAP"), 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 not include footnotes or may be condensed or summary
statements) and fairly present in all material respects the consolidated
financial position of the Company and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
immaterial year-end audit adjustments). Except as set forth in the financial
statements of the Company included in the SEC Documents filed prior to the date
hereof, the Company has no liabilities, contingent or otherwise, other than (i)
liabilities incurred in the ordinary course of business subsequent to the date
of such financial statements, (ii) liabilities not required by GAAP to be
disclosed on a balance sheet prepared in accordance with GAAP, and (iii)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under GAAP to be reflected in such financial
statements, which liabilities and obligations referred to in clauses (i), (ii)
and (iii), individually or in the aggregate, are not material to the financial
condition or operating results of the Company. Neither the Company nor any of
its subsidiaries or any of their officers, directors, employees or agents have
provided the Purchaser with any material, nonpublic information.
(h) ABSENCE OF CERTAIN CHANGES. Since December 31, 1997, there has been
no material adverse change and no material adverse development in the business,
properties, operations, prospects, financial condition or results of operations
of the Company and its subsidiaries, taken as a whole, except as disclosed in
SCHEDULE 3(H) or in the SEC Documents filed prior to the date hereof.
(i) ABSENCE OF LITIGATION. Except as set forth on SCHEDULE 3(I) and as
expressly disclosed in the SEC Documents filed prior to the date hereof, 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, any of its subsidiaries, or any of their
respective directors or officers in their capacities as such. There are no facts
which, if known by a potential claimant or governmental authority, could give
rise to a claim or proceeding which, if asserted or conducted with results
unfavorable to the Company or any of its subsidiaries, could reasonably be
expected to have a Material Adverse Effect.
(j) INTELLECTUAL PROPERTY. Each of the Company and its subsidiaries
owns or is licensed to use all patents, patent applications, trademarks,
trademark applications, trade names, service marks, copyrights, copyright
applications, licenses, permits, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information, systems
or procedures) and other similar rights and proprietary knowledge (collectively,
"INTANGIBLES") necessary for the conduct of its business as now being conducted
and as described in the Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1997. To the best knowledge of the Company, neither the
Company nor any subsidiary of the Company infringes or is in conflict with any
right of any other person with respect to any Intangibles which, individually or
in the aggregate, if the subject of an unfavorable decision, ruling or finding,
would have a Material Adverse Effect. Neither the Company nor any of its
subsidiaries has received written notice of any pending conflict with or
infringement upon such third party Intangibles, which alleged pending conflict
or alleged infringement, if adversely determined, would result in a Material
Adverse Effect. Except as disclosed in the SEC Documents filed prior to the date
hereof, the termination of the Company's ownership of, or right to use, any
single Intangible would not result in a Material Adverse Effect on the Company.
Neither the Company nor any of its subsidiaries has entered into any consent
agreement, indemnification agreement, forbearance to xxx or settlement agreement
with respect to the validity of the Company's or its subsidiaries' ownership or
right to use its Intangibles and, to the best knowledge of the Company, there is
no reasonable basis for any such claim to be successful. The Intangibles are
valid and enforceable and no registration relating thereto has lapsed, expired
or been abandoned or canceled or is the subject of cancellation or other
adversarial proceedings, and all applications therefor are pending and in good
standing. The Company and its subsidiaries have complied, in all material
respects, with their respective contractual obligations relating to the
protection of the Intangibles used pursuant to licenses. To the best knowledge
of the Company, no person is infringing on or violating the Intangibles owned or
used by the Company or its subsidiaries.
(k) FOREIGN CORRUPT PRACTICES. Neither the Company, nor any of its
subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any subsidiary has, in the course of his actions
for, or on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977;
or made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee.
(l) DISCLOSURE. All information relating to or concerning the Company
set forth in this Agreement or provided to the Purchasers pursuant to Section
2(d) hereof or otherwise in connection with the transactions contemplated hereby
is true and correct in all material respects and the Company has not omitted to
state any material fact necessary in order to make the statements made herein or
therein, in light of the circumstances under which they were made, not
misleading. No event or circumstance has occurred or exists with respect to the
Company or its subsidiaries or their respective businesses, properties,
prospects, operations or financial conditions, which has not been publicly
disclosed but, under applicable law, rule or regulation, would be required to be
disclosed by the Company in a registration statement filed on the date hereof by
the Company under the Securities Act with respect to the primary issuance of the
Company's securities.
(m) ACKNOWLEDGMENT REGARDING PURCHASER'S PURCHASE OF THE PREFERRED
SHARES. The Company acknowledges and agrees that the Purchaser is not acting as
a financial advisor or fiduciary of the Company (or in any similar capacity)
with respect to this Agreement or the transactions contemplated hereby, the
relationship between the Company and the Purchaser is "arms-length" and any
statement made by Purchaser or any of its representatives or agents in
connection with this Agreement and the transactions contemplated hereby is not
advice or a recommendation and is merely incidental to Purchaser's purchase of
the Preferred Shares and has not been relied upon by the Company, its officers
or its directors in any way. The Company further acknowledges that the Company's
decision to enter into this Agreement has been based solely on an independent
evaluation by the Company and its representatives.
(n) FORM SB-2 ELIGIBILITY. The Company is currently eligible to
register the resale of its Common Stock on a registration statement on Form SB-2
under the Securities Act. There exist no facts or circumstances that would
prohibit or delay the preparation and filing of a registration statement on Form
SB-2 with respect to the Registrable Securities (as defined in the Registration
Rights Agreement).
(o) NO GENERAL SOLICITATION. Neither the Company nor any distributor
participating on the Company's behalf in the transactions contemplated hereby
(if any) nor any person acting for the Company, or any such distributor, has
conducted any "general solicitation," as such term is defined in Regulation D,
with respect to any of the Securities being offered hereby.
(p) NO INTEGRATED OFFERING. Neither the Company, nor any
of its affiliates, nor any person acting on its or their behalf,
has directly or indirectly made any offers or sales of any security or solicited
any offers to buy any security under circumstances that would require
registration of the Securities being offered hereby under the Securities Act or
cause this offering of Securities to be integrated with any prior offering of
securities of the Company for purposes of the Securities Act or any applicable
stockholder approval provisions.
(q) NO BROKERS. Except for a consulting fee payable to CDC Consulting,
Inc. In the amount of 400,000 shares of Common Stock, the Company has taken no
action which would give rise to any claim by any person for brokerage
commissions, finder's fees or similar payments by any Purchaser relating to this
Agreement or the transactions contemplated hereby.
(r) ACKNOWLEDGMENT OF DILUTION. The number of Conversion Shares
issuable upon conversion of the Preferred Shares may increase in certain
circumstances, including if the trading price of the Common Stock declines. The
Company's executive officers have studied and fully understand the nature of the
Securities being sold hereunder. The Company acknowledges that its obligation to
issue Conversion Shares upon conversion of the Preferred Shares in accordance
with the Certificate of Designation is absolute and unconditional, regardless of
the dilution that such issuance may have on the ownership interests of other
stockholders. Taking the foregoing into account, the Company's Board of
Directors has determined in its good faith business judgment that the issuance
of the Preferred Shares hereunder and the consummation of the other transactions
contemplated hereby are in the best interests of the Company and its
stockholders.
(s) TITLE. The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and merchantable title to all
personal property owned by them that 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(S) or such as do not
materially affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by the Company and
its subsidiaries. Any real property and facilities held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not
materially interfere with the use made and proposed to be made of such property
and buildings by the Company and its subsidiaries.
(t) TAX STATUS. Except as set forth on SCHEDULE 3(T), the Company and
each of its subsidiaries has made or filed all foreign, federal, state and local
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 has set aside on
its books provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. Except as set forth on SCHEDULE 3(T), 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. The Company
has not executed a waiver with respect to any statute of limitations relating to
the assessment or collection of any federal, state or local tax. Except as set
forth on SCHEDULE 3(T), none of the Company's tax returns is presently being
audited by any taxing authority.
(u) ENVIRONMENTAL LAWS. The Company and each of its subsidiaries (i)
are in compliance with any and all applicable foreign, federal, state and local
laws and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval.
(v) REGULATORY PERMITS. The Company and each of its subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company nor any such subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.
(w) NO OTHER AGREEMENTS. The Company has not, directly or indirectly,
made any agreements with Purchaser relating to the terms or conditions of the
transactions contemplated by this Agreement, the Certificate of Designation and
the Registration Rights Agreement except as set forth in such documents.
(x) ELIGIBILITY FOR SALE UNDER RULE 144. The Company's Common Stock is
eligible for resale under Rule 144 promulgated under the Securities Act of 1933,
as amended, without regard to the status of any holder of such Common Stock as
an affiliate of the Company or any applicable holding period thereunder. Upon
consummation of the Transaction, Kapher Trust will not be an affiliate of the
Company. For the purposes of this Section 3(x), the term "affiliate" shall be
defined as set forth in section (a)(1) of Rule 144 promulgated under the
Securities Act ("Rule 144").
4. REPRESENTATIONS AND WARRANTIES OF SJP.
SJP represents and warrants to each Purchaser as follows:
(a) ORGANIZATION AND QUALIFICATION. SJP and each of its subsidiaries is
a corporation duly organized and existing in good standing under the laws of the
jurisdiction in which it is incorporated, and has the requisite corporate power
to own its properties and to carry on its business as now being conducted. SJP
and each of 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 and where the failure so to qualify would have a Material Adverse
Effect.
(b) AUTHORIZATION; ENFORCEMENT. (i) SJP has the requisite corporate
power and authority to enter into and perform its obligations under this
Agreement; (ii) the execution, delivery and performance of this Agreement by SJP
and the consummation by it of the transactions contemplated hereby (including,
without limitation, the Transaction) have been duly authorized by SJP's Board of
Directors and no further consent or authorization of SJP, its Board of
Directors, any committee of the Board of Directors or SJP's shareholders is
required; and (iii) this Agreement constitutes valid and binding obligations of
SJP enforceable against SJP in accordance with their terms.
(c) STOCKHOLDER AUTHORIZATION. Neither the execution, delivery or
performance of this Agreement by SJP nor the consummation by it of the
transactions contemplated hereby (including, without limitation, the
Transaction) requires any consent, approval or authorization of SJP's
stockholders.
(d) CAPITALIZATION. The capitalization of SJP as of the date hereof,
including the authorized capital stock, the number of shares issued and
outstanding, the number of shares issuable and reserved for issuance pursuant to
SJP's stock option plans, the number of shares issuable and reserved for
issuance pursuant to securities exercisable or exchangeable for, or convertible
into, any shares of capital stock is set forth on SCHEDULE 4(D). All of such
outstanding shares of capital stock have been, or upon issuance in accordance
with the terms of any such warrants, options or preferred stock, will be,
validly issued, fully paid and non-assessable. No shares of capital stock of SJP
are subject to preemptive rights or any other similar rights of the stockholders
of SJP or any liens or encumbrances. Except for the Securities and as set forth
on SCHEDULE 4(D), as of the date of this Agreement, (i) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into or
exercisable or exchangeable for, any shares of capital stock of SJP or any of
its subsidiaries, or arrangements by which SJP or any of its subsidiaries is or
may become bound to issue additional shares of capital stock of SJP or any of
its subsidiaries, and (ii) there are no agreements or arrangements under which
SJP or any of its subsidiaries is obligated to register the sale of any of its
or their securities under the Securities Act. Except as set forth on SCHEDULE
4(D), (i) there are no securities or instruments containing antidilution or
similar provisions that will be triggered by the execution of this Agreement,
(ii) there are no outstanding securities or instruments of SJP or any of its
subsidiaries which contain any redemption or similar provisions, and there are
no contracts, commitments, understandings or arrangements by which SJP or any of
its subsidiaries is or may become bound to redeem a security of SJP or any of
its subsidiaries, and (iii) SJP does not have any stock appreciation rights or
"phantom stock" plans or agreements or any similar plan or agreement. SJP has
furnished to the Purchaser true and correct copies of SJP's Certificate of
Incorporation as in effect on the date hereof ("CERTIFICATE OF INCORPORATION"),
SJP's By-laws as in effect on the date hereof (the "BY-LAWS"), and all other
instruments and agreements governing securities convertible into or exercisable
or exchangeable for capital stock of SJP.
(e) NO CONFLICTS. The execution, delivery and performance of this
Agreement by SJP and the consummation by SJP of the transactions contemplated
hereby and thereby (including, without limitation, the Transaction) will not (i)
result in a violation of the Certificate of Incorporation or By-laws or (ii)
conflict with, or constitute a default (or an event which, with notice or lapse
of time or both, would become a default) under, or give to others any rights of
termination, amendment (including, without limitation, the triggering of any
anti-dilution provisions), acceleration or cancellation of, any agreement,
indenture or instrument to which SJP or any of its subsidiaries is a party, or
result in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and rules or
regulations of any self-regulatory organizations to which either SJP or its
securities are subject) applicable to SJP or any of its subsidiaries or by which
any property or asset of SJP or any of its subsidiaries is bound or affected
(except, with respect to clause (ii), for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations that would
not, individually or in the aggregate, have a Material Adverse Effect). Neither
SJP nor any of its subsidiaries is in violation of its Certificate of
Incorporation, By-laws or other organizational documents and neither SJP nor any
of its subsidiaries is in default (and no event has occurred which, with notice
or lapse of time or both, would put SJP or any of its subsidiaries in default)
under, nor has there occurred any event giving others (with notice or lapse of
time or both) any rights of termination, amendment, acceleration or cancellation
of, any agreement, indenture or instrument to which SJP or any of its
subsidiaries is a party, except for actual or possible violations, defaults or
rights that would not, individually or in the aggregate, have a Material
Adverse Effect. The businesses of SJP and its subsidiaries are not being
conducted, and shall not be conducted so long as Purchaser owns any of the
Securities, in violation of any law, ordinance or regulation of any governmental
entity, except for possible violations the sanctions for which either singly or
in the aggregate would not have a Material Adverse Effect. Except as
specifically contemplated by this Agreement and the Registration Rights
Agreement, SJP is not required to obtain any consent, approval, 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 this Agreement or the
Registration Rights Agreement in accordance with the terms hereof or thereof.
(f) ABSENCE OF CERTAIN CHANGES. Since December 31, 1997, there has been
no material adverse change and no material adverse development in the business,
properties, operations, prospects, financial condition or results of operations
of SJP and its subsidiaries, taken as a whole, except as disclosed in SCHEDULE
4(F) or in the Disclosure Materials (as defined below).
(g) ABSENCE OF LITIGATION. Except as set forth on SCHEDULE 4(G) and as
expressly disclosed in the Disclosure Materials (as defined below) filed prior
to the date hereof, 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 SJP or any
of its subsidiaries, threatened against or affecting SJP, any of its
subsidiaries, or any of their respective directors or officers in their
capacities as such. There are no facts which, if known by a potential claimant
or governmental authority, could give rise to a claim or proceeding which, if
asserted or conducted with results unfavorable to SJP or any of its
subsidiaries, could reasonably be expected to have a Material Adverse Effect.
(h) INTELLECTUAL PROPERTY. Each of SJP and its subsidiaries owns or is
licensed to use all patents, patent applications, trademarks, trademark
applications, trade names, service marks, copyrights, copyright applications,
licenses, permits, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures) and
other similar rights and proprietary knowledge (collectively, "INTANGIBLES")
necessary for the conduct of its business as now being conducted and as
described in the Disclosure Materials (as defined below). To the best knowledge
of SJP, neither SJP nor any subsidiary of SJP infringes or is in conflict with
any right of any other person with respect to any Intangibles which,
individually or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would have a Material Adverse Effect. Neither SJP nor any of
its subsidiaries has received written notice of any pending conflict with or
infringement upon such third party Intangibles, which alleged pending conflict
or alleged infringement, if adversely determined, would result in a Material
Adverse Effect. Except as disclosed in the Disclosure Materials (as defined
below), the termination of SJP's ownership of, or right to use, any single
Intangible would not result in a Material Adverse Effect on SJP. Neither SJP nor
any of its subsidiaries has entered into any consent agreement, indemnification
agreement, forbearance to xxx or settlement agreement with respect to the
validity of SJP's or its subsidiaries' ownership or right to use its Intangibles
and, to the best knowledge of SJP, there is no reasonable basis for any such
claim to be successful. The Intangibles are valid and enforceable and no
registration relating thereto has lapsed, expired or been abandoned or canceled
or is the subject of cancellation or other adversarial proceedings, and all
applications therefor are pending and in good standing. SJP and its subsidiaries
have complied, in all material respects, with their respective contractual
obligations relating to the protection of the Intangibles used pursuant to
licenses. To the best knowledge of SJP, no person is infringing on or violating
the Intangibles owned or used by SJP or its subsidiaries.
(i) FOREIGN CORRUPT PRACTICES. Neither SJP, nor any of its
subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of SJP or any subsidiary has, in the course of his actions for, or on
behalf of, SJP, used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political activity; made
any direct or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977; or made any bribe,
rebate, payoff, influence payment, kickback or other unlawful payment to any
foreign or domestic government official or employee.
(j) DISCLOSURE. All information relating to or concerning SJP set forth
in this Agreement or provided to the Purchasers pursuant to Section 2(d) hereof
or otherwise in connection with the transactions contemplated hereby is true and
correct in all material respects and SJP has not omitted to state any material
fact necessary in order to make the statements made herein or therein, in light
of the circumstances under which they were made, not misleading. No event or
circumstance has occurred or exists with respect to SJP or its subsidiaries or
their respective businesses, properties, prospects, operations or financial
conditions, which has not been publicly disclosed but, under applicable law,
rule or regulation, would be required to be disclosed by SJP in a registration
statement filed on the date hereof by SJP under the Securities Act with respect
to the primary issuance of SJP's securities.
(k) ACKNOWLEDGMENT REGARDING PURCHASER'S PURCHASE OF THE
PREFERRED SHARES. SJP acknowledges and agrees that the Purchaser
is not acting as a financial advisor or fiduciary of SJP (or in
any similar capacity) with respect to this Agreement or the transactions
contemplated hereby, the relationship between SJP and the Purchaser is
"arms-length" and any statement made by any Purchaser or any of its
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is not advice or a recommendation and is merely incidental
to Purchaser's purchase of the Preferred Shares and has not been relied upon by
SJP, its officers or its directors in any way. SJP further acknowledges that
SJP's decision to enter into this Agreement has been based solely on an
independent evaluation by SJP and its representatives.
(l) NO BROKERS. Except for a consulting fee payable to CDC Consulting,
Inc. In the amount of 400,000 shares of Common Stock, SJP has taken no action
which would give rise to any claim by any person for brokerage commissions,
finder's fees or similar payments by any Purchaser relating to this Agreement or
the transactions contemplated hereby.
(m) TITLE. SJP and its subsidiaries have good and marketable title in
fee simple to all real property and good and merchantable title to all personal
property owned by them that is material to the business of SJP and its
subsidiaries, in each case free and clear of all liens, encumbrances and defects
except such as are described in SCHEDULE 4(M) or such as do not materially
affect the value of such property and do not materially interfere with the use
made and proposed to be made of such property by SJP and its subsidiaries. Any
real property and facilities held under lease by SJP and its subsidiaries are
held by them under valid, subsisting and enforceable leases with such exceptions
as are not material and do not materially interfere with the use made and
proposed to be made of such property and buildings by SJP and its subsidiaries.
(n) TAX STATUS. Except as set forth on SCHEDULE 4(N), SJP and each of
its subsidiaries has made or filed all foreign, federal, state and local 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 SJP 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 has set aside on its books provisions
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. Except as set
forth on SCHEDULE 4(N), there are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of SJP
know of no basis for any such claim. SJP has not executed a waiver with respect
to any statute of limitations relating to the assessment or collection of any
federal, state or local tax. Except as set forth on SCHEDULE 4(N), none of SJP's
tax returns is presently being audited by any taxing authority.
(o) ENVIRONMENTAL LAWS. SJP and each of its subsidiaries (i) are in
compliance with any and all Environmental Laws, (ii) have received all permits,
licenses or other approvals required of them under applicable Environmental Laws
to conduct their respective businesses and (iii) are in compliance with all
terms and conditions of any such permit, license or approval.
(p) REGULATORY PERMITS. SJP and each of its subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, and neither SJP nor any such subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate,
authorization or permit.
(q) NO OTHER AGREEMENTS. SJP has not, directly or indirectly, made any
agreements with Purchaser relating to the terms or conditions of the
transactions contemplated by this Agreement, the Certificate of Designation and
the Registration Rights Agreement except as set forth in such documents.
(r) DISCLOSURE MATERIALS. The financial statements of SJP dated
December 31, 1997 and any other financial statements delivered by SJP to the
Purchasers (the "FINANCIAL STATEMENTS" and, together with the Schedules to this
Agreement and other documents and information furnished by or on behalf of SJP
at any time prior to the Closing, the "DISCLOSURE MATERIALS") comply in all
material respects with applicable accounting requirements. Such Financial
Statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved, except as
may be otherwise specified in such Financial Statements or the notes thereto,
and fairly present in all material respects the financial position of SJP as of
and for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal
year-end audit adjustments. There are not liabilities, contingent or otherwise,
of SJP involving material amounts not disclosed in said Financial Statements.
The Disclosure Materials do not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Since December 31, 1997 there has been no event,
occurrence or development that has had or that could have or result in a
Material Adverse Effect.
5. COVENANTS.
(a) BEST EFFORTS. The parties shall use their best efforts timely to
satisfy each of the conditions described in Section 7 and Section 8 of this
Agreement.
(b) FORM D: BLUE SKY LAWS. The Company shall file with the SEC a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof to each Purchaser 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 sale to the Purchaser
pursuant to this Agreement under applicable securities or "blue sky" laws of the
states of the United States or obtain exemption therefrom, and shall provide
evidence of any such action so taken to the Purchasers on or prior to the
Closing Date.
(c) REPORTING STATUS. So long as any Purchaser beneficially owns any of
the Securities, the Company shall timely file all reports required to be filed
with the SEC pursuant to the Exchange Act, and the Company shall not terminate
its status as an issuer required to file reports under the Exchange Act even if
the Exchange Act or the rules and regulations thereunder would permit such
termination. In addition, the Company shall take all actions necessary to
continue to be eligible to register the resale of its Common Stock on a
registration statement on Form SB-2 under the Securities Act.
(d) USE OF PROCEEDS. The Company shall use the proceeds from the sale
of the Preferred Shares as set forth in SCHEDULE 5(D).
(e) EXPENSES. Except as otherwise provided herein and in Section 5 of
the Registration Rights Agreement, each party hereto shall be responsible for
its own expenses incurred in connection with the negotiation, preparation,
execution, delivery and performance of this Agreement and the other agreements
to be executed in connection herewith.
(f) FINANCIAL INFORMATION. The Company shall send the following reports
to Purchaser until Purchaser transfers, assigns or sells all of its Securities:
(i) within 10 days after the filing with the SEC, a copy of its Annual Report on
Form 10-KSB, its Quarterly Reports on Form 10-QSB, its proxy statements and any
Current Reports on Form 8-K; (ii) within one day after release, copies of all
press releases issued by the Company or any of its subsidiaries; and (iii)
copies of any notices and other information made available or given to
shareholders of the Company generally, contemporaneously with making available
or giving thereof to such shareholders.
(g) RESERVATION OF SHARES. The Company shall at all times have
authorized and reserved for the purpose of issuance a sufficient number of
shares of Common Stock to provide for the full conversion of the outstanding
Preferred Shares and issuance of the Conversion Shares in connection therewith,
subject to and as otherwise required by the Certificate of Designation, as
applicable.
(h) LISTING. The Company shall promptly secure the listing of the
Conversion Shares upon the American Stock Exchange ("AMEX"), the New York Stock
Exchange ("NYSE"), the Nasdaq National Market ("NNM"), the Nasdaq SmallCap
Market ("SMALLCAP") or in the over-the-counter market on the electronic bulletin
board (the "BULLETIN BOARD") and will comply in all respects with the reporting,
filing and other obligations under the Listing Standards, Policies and
Requirements of the AMEX and the bylaws or rules of the NYSE and the National
Association of Securities Dealers, Inc., as applicable and shall maintain, so
long as Purchaser (or any of their affiliates) own any Securities, such listing
of all Conversion Shares from time to time issuable upon conversion of the
Preferred Shares, as applicable. The Company shall promptly provide to each
holder of Preferred Shares copies of any notices it receives regarding the
continued eligibility of the Common Stock for trading on any securities exchange
or automated quotation system on which securities of the same class or series
issued by the Company are then listed or quoted, if any.
(i) CORPORATE EXISTENCE. So long as a Purchaser beneficially owns any
Securities, the Company shall maintain its corporate existence, and in the event
of a merger, consolidation or sale of all or substantially all of the Company's
assets, the Company shall ensure that the surviving or successor entity in such
transaction (i) assumes the Company's obligations hereunder and under the
Certificate of Designation (except as otherwise provided therein) and the
agreements and instruments entered into in connection herewith regardless of
whether or not the Company would have had a sufficient number of shares of
Common Stock authorized and available for issuance in order to effect the
conversion of all Preferred Shares outstanding as of the date of such
transaction and (ii) is a publicly traded corporation whose common stock is
listed for trading on the AMEX, NYSE, NNM, SmallCap or the Bulletin Board.
Notwithstanding the foregoing, the Company covenants and agrees that it will not
engage in any merger, consolidation or sale of all or substantially all of its
assets at any time prior to the effectiveness of the registration statement
required to be filed pursuant to the Registration Rights Agreement without (A)
providing Purchaser with written notice of such transaction at least 60 days
prior to the consummation of such transaction, (B) obtaining the written consent
of the Purchaser on or before the 10th day after the delivery of such notice by
the Company, and (C) publicly announcing such transaction.
(j) NO INTEGRATED OFFERINGS. The Company shall not make any offers or
sales of any security (other than the Securities) under circumstances that would
require registration of the Securities being offered or sold hereunder under the
Securities Act or cause the offering of the Securities to be integrated with any
other offering of securities by the Company for purposes of any stockholder
approval provision applicable to the Company or its securities.
(k) LEGAL COMPLIANCE. The Company shall conduct its business and the
business of its subsidiaries in compliance with all laws, ordinances or
regulations of governmental entities applicable to such businesses, except where
the failure to do so would not have a Material Adverse Effect.
(l) FILING OF FORM 8-K. On or before the first (1st) business day
following the Closing Date, the Company shall file a Current Report on Form 8-K
with the SEC describing the terms of the transactions contemplated by this
Agreement, the Certificate of Designation and the Registration Rights Agreement
in the form required by the Exchange Act.
(m) CAPITAL AND SURPLUS; SPECIAL RESERVES. The amount to be represented
in the capital account for the Series A Preferred Stock at all times for each
outstanding share of Series A Preferred Stock shall be an amount equal to the
Redemption Amount therefor.
(n) ADDITIONAL EQUITY CAPITAL; RIGHT OF FIRST OFFER. The
-----------------------------------------------
Company and SJP agree that during the period beginning on the date hereof and
ending on the date which is 180 days following the Closing Date (the "LOCK-UP
PERIOD"), the Company will not obtain additional financing in which any equity
or equity-linked securities are issued (including any debt financing with an
equity component) ("FUTURE OFFERINGS") without first obtaining the written
consent of the Purchaser. In addition, during the period beginning on the date
hereof and ending 180 days following the expiration of the Lock-Up Period, the
Company will not conduct a future offering unless it shall have first delivered
to Purchaser, at least ten (10) business days prior to the closing of such
Future Offering, written notice describing the proposed Future Offering,
including the terms and conditions thereof, and providing Purchaser and its
affiliates an option during the ten (10) business day period following delivery
of such notice to purchase all of the securities being offered in the Future
Offering on the same terms as contemplated by such Future Offering (the
limitation referred to in this Section 5(n) is referred to as the "CAPITAL
RAISING LIMITATION"). The Capital Raising Limitation shall not apply to any
transaction involving issuances of securities as consideration in a merger,
consolidation or acquisition of assets, or in connection with any strategic
partnership or joint venture (the primary purpose of which is not to raise
equity capital), or as consideration for the acquisition of a business, product
or license by the Company. The Capital Raising Limitation also shall not apply
to (i) the issuance of securities pursuant to an underwritten public offering,
(ii) the issuance of securities upon exercise or conversion of the Company's
options, warrants or other convertible securities outstanding as of the date
hereof or (iii) the grant of additional options or warrants, or the issuance of
additional securities, under any duly authorized Company stock option or
restricted stock plan for the benefit of the Company's employees or directors.
(o) The Company shall have filed, within ten (10) days of the Closing
hereunder, a complete application on Form 211 with the National Association of
Securities Dealers seeking approval for the quotation of the Company's Common
Stock in the over the counter market on the Electronic Bulletin Board by the
National Association of Securities Dealers, Inc.
6. TRANSFER AGENT INSTRUCTIONS.
(a) The Company shall instruct its transfer agent to issue
certificates, registered in the name of each Purchaser or its nominee, for the
Conversion Shares in such amounts as specified from time to time by such
Purchaser to the Company upon conversion of the Preferred Shares, as applicable.
(b) The Company warrants that no instruction other than such
instructions referred to in this Section 6, and stop transfer instructions to
give effect to Section 2(f) hereof in the case of the transfer of the Conversion
Shares prior to registration of the Conversion Shares under the Securities Act
or without an exemption therefrom, will be given by the Company to its transfer
agent 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. Nothing in this Section shall affect in
any way each Purchaser's obligations and agreement set forth in Section 2(g)
hereof to resell the Securities pursuant to an effective registration statement
or under an exemption from the registration requirements of applicable
securities law.
(c) If a Purchaser provides the Company and the transfer agent with an
opinion of counsel, which opinion of counsel shall be in form, substance and
scope customary for opinions of counsel in comparable transactions, to the
effect that the Preferred Shares to be sold or transferred may be sold or
transferred pursuant to an exemption from registration, or a Purchaser provides
the Company with reasonable assurances that such Preferred Shares may be sold
under Rule 144, the Company shall permit the transfer and, in the case of the
Conversion Shares, promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by Purchaser.
7 CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Preferred
Shares to Purchaser at the Closing is subject to the satisfaction, at or before
the Closing, of each of the following conditions, provided that such conditions
are for the Company's sole benefit and may be waived by the Company at any time
in its sole discretion by providing prior written notice to each Purchaser.
(a) The Purchaser shall have executed this Agreement and the
Registration Rights Agreement, and delivered executed copies to the Company.
(b) The Purchaser shall have delivered the Purchase Price for the
Preferred Shares in accordance with Section 1(b) above.
(c) The representations and warranties of the Purchaser shall be true
and correct as of the date when made and as of the date and time of such closing
as though made at that time (except for representations and warranties that
relate to a different date, which shall be true and correct as of such date),
and the Purchaser shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Purchaser at or
prior to the Closing Date.
(d) No litigation, statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby that prohibits the consummation of any of the transactions contemplated
by this Agreement.
8. CONDITIONS TO PURCHASER'S OBLIGATION TO PURCHASE.
The obligation of Purchaser hereunder to purchase the Preferred Shares
to be purchased by it at the Closing and the payment of the Purchase Price is
subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that such conditions are for Purchaser's sole
benefit and may be waived by Purchaser at any time in such Purchaser's sole
discretion:
(a) The Company and SJP shall have executed this Agreement and the
Company shall have executed the Registration Rights Agreement, and each shall
have delivered executed copies to Purchaser.
(b) The Certificate of Designation shall have been accepted for filing
with the Secretary of State of the State of Colorado and a copy thereof
certified by the Secretary of State of the State of Colorado shall have been
delivered to Purchaser.
(c) The Company shall have delivered to Purchaser duly executed
certificates (each in such denominations as Purchaser shall request)
representing the Preferred Shares being so purchased by Purchaser in accordance
with Section 1(b) above.
(d) The Common Stock shall be authorized for quotation and listed on
the AMEX, the NYSE, the NNM, the SmallCap or the Bulletin Board and trading in
the Common Stock (or the AMEX, the NYSE, the NNM, the SmallCap generally or the
Bulletin Board) shall not have been suspended by the SEC, the AMEX, the NYSE,
the NNM, the SmallCap or the Bulletin Board, as applicable, and the Conversion
Shares shall be listed on the AMEX, the NYSE, the NNM, the SmallCap or the
Bulletin Board, as applicable.
(e) The representations and warranties of the Company and SJP 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 relate to a
different date, which shall be true and correct as of such date) and the Company
and SJP shall have performed, satisfied and complied with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company or SJP, as applicable at or prior to the Closing
Date. Such Purchaser shall have received certificates, executed by the Chief
Executive Officer of the Company and of SJP, dated as of the Closing Date to the
foregoing effect and as to such other matters as Purchaser may reasonably
request.
(f) No litigation, statute, rule, regulation, executive order, decree,
ruling, injunction, action or proceeding shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction or any self-regulatory organization having authority over the
matters contemplated hereby that questions the validity of, or challenges or
prohibits the consummation of, any of the transactions contemplated by this
Agreement.
(g) Purchaser shall have received an opinions of the Company's dated as
of the Closing Date, in form, scope and substance reasonably satisfactory to the
Purchaser and in substantially the form of EXHIBIT C attached hereto. Purchaser
shall be entitled to receive, and rely upon, an opinion of SJP's counsel, dated
as of the closing of the Transaction, in form, scope and substance reasonably
satisfactory to the Purchaser in connection with the consummation of the
Transaction.
(h) The Company shall have delivered evidence reasonably satisfactory
to the Purchaser that the Company's transfer agent has agreed to act in
accordance with irrevocable instructions in the form attached hereto as EXHIBIT
D.
(i) There shall have been no material adverse changes and no material
adverse developments in the business, properties, operations, prospects,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, or SJP and its subsidiaries, taken as a whole,
since the date hereof, and no information, of which the Purchasers are not
currently aware, shall come to the attention of the Purchaser that is materially
adverse to the Company or SJP.
(j) The Board of Directors of the Company and the Board of Directors of
SJP shall have adopted resolutions consistent with Section 3(b) (ii) and Section
4(b)(ii) above, respectively, and in a form reasonably acceptable to such
Purchaser.
(k) The Company and SJP shall have delivered to Purchaser certificates
evidencing the incorporation and good standing of the Company and each of its
subsidiaries and of SJP and each of its subsidiaries in such corporation's state
of incorporation issued by the Secretary of State of such state of incorporation
as of a date within ten days of the Closing Date.
(l) The Company and SJP shall have delivered to Purchaser certified
copies of their respective Articles of Incorporation as certified by the
Secretary of State of their respective states of incorporation within ten days
of the Closing Date.
(m) The Company and SJP shall have delivered to Purchaser secretary's
certificates, dated as of the Closing Date, as to (i) the resolutions described
in Section 7(j), (ii) their respective Certificates of Incorporation and (iii)
their respective Bylaws, each as in effect at the Closing.
(n) SJP shall have obtained and delivered to Purchaser written evidence
of the consent of each member of SJP to the Transaction, and the Transaction
shall have been consummated in accordance with the Share Exchange Agreement. The
Purchaser and its counsel shall have the right to review and approve, in their
sole and absolute discretion, all documentation and matters related thereto. SJP
and the Company shall have delivered to the Purchaser copies of an executed Xxxx
of Sale and an executed Assumption Agreement, or similar documents evidencing
the consummation of the Transaction.
(o) All of the "CONDITIONS TO PURCHASER'S OBLIGATION TO PURCHASE" set
forth in Section 8 that certain Securities Purchase Agreement, dated as of June
17, 1998, among the Purchaser and Kapher Trust shall have been satisfied.
(p) The Company shall have cancelled or retired to treasury at least
400,000 shares of Common Stock as set forth on Schedule 3(d) hereto.
9. GOVERNING LAW; MISCELLANEOUS.
(a) GOVERNING LAW; JURISDICTION. This Agreement shall be governed by
and construed in accordance with the laws of the State of Colorado applicable to
contracts made and to be performed in the State of Colorado. The Company and SJP
irrevocably consent to the jurisdiction of the United States federal courts and
the state courts located in the State of Colorado in any suit or proceeding
based on or arising under this Agreement and irrevocably agree that all claims
in respect of such suit or proceeding may be determined in such courts. The
Company and SJP irrevocably waive the defense of an inconvenient forum to the
maintenance of such suit or proceeding. The Company and SJP further agree that
service of process mailed by first class mail shall be deemed in every respect
effective service of process in any such suit or proceeding. Nothing herein
shall affect the right of Purchaser to serve process in any other manner
permitted by law. The Company and SJP agree that a final non-appealable judgment
in any such suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on such judgment or in any other lawful manner.
(b) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. This Agreement, once executed by a party, may be
delivered to the other parties hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
(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 or
the validity or enforceability of this Agreement in any other jurisdiction.
(e) ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the instruments
referenced herein contain the entire understanding of the Purchasers, the
Company, SJP, their affiliates and persons acting on their behalf with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company, SJP nor Purchaser makes any
representation, warranty, covenant or undertaking with respect to such matters.
No provision of this Agreement may be waived other than by an instrument in
writing signed by the party to be charged with enforcement and no provision of
this Agreement may be amended other than by an instrument in writing signed by
the Company, SJP and Purchaser.
(f) NOTICES. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
facsimile, and shall be effective upon receipt or refusal of receipt, if
delivered personally or by courier or confirmed facsimile, in each case
addressed to a party. The addresses for such communications shall be:
If to the Company:
BOULDER CAPITAL OPPORTUNITIES III, INC.
0000 Xxxx Xxxxx
0000 Xxxxx Xxxx Xxxxx
Xxxxxxx, XX 00000
Facsimile:
Attn: Xxxxxx Xxxxxxxx
with a copy simultaneously transmitted by like means to:
Xxxxxxx X. Xxxxxxx, Esquire
00000 X. 00xx Xxxxxx, #000
Xxxxx Xxxxx, XX 00000
Facsimile: (000) 000-0000
If to SJP:
SONIC JET PERFORMANCE, LLC
00000 Xxxxxxxx Xxxx
Xxxxxxxxxx Xxxxx, XX 00000
Facsimile:
Attn: Xxxxxx Xxxxxxxxx
with a copy simultaneously transmitted by like means to:
Law Offices of Xxxxxxxx X. Xxxxxxx
0000 Xxxx 00xx Xxxxxx
Xxxxx Xxx, XX 00000-0000
Facsimile: (000) 000-0000
Attn: Xxxxxxxxxxx X. Xxxxxx, X.X.
If to Purchaser, to such address set forth under Purchaser's name on
the Execution Page hereto executed by Purchaser.
Each party shall provide notice to the other parties of any change in
address.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns, including,
but not limited to, the corporation which is the surviving entity in the
Transaction. Except as provided herein or therein, neither the Company, SJP
nor any Purchaser shall assign this Agreement or the Registration Rights
Agreement or any rights or obligations hereunder or thereunder. Notwithstanding
the foregoing, Purchaser may assign its rights hereunder to any of its
"affiliates" (as that term is defined under the Exchange Act) who are Accredited
Investors without the consent of the Company (provided such assignees agree to
be bound by all of the terms and conditions hereof), or to any other person or
entity with the consent of the Company, which consent shall not be unreasonably
withheld. This provision shall not limit Purchaser's right to transfer the
Securities pursuant to the terms of the Certificate of Designation and this
Agreement or to assign such Purchaser's rights hereunder or thereunder to any
such transferee.
(h) 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. The representations, warranties, agreements and covenants
of the Company and SJP set forth in Sections 3, 4, 5, 6 and 9 hereof shall
survive the Closing notwithstanding any investigation conducted by or on behalf
of Purchaser. None of the representations and warranties made by the Company or
SJP, as applicable, herein shall act as a waiver of any rights or remedies
Purchaser may have under applicable federal or state securities laws. The
Company and/or SJP, as applicable, shall indemnify and hold harmless Purchaser
and each Purchaser's officers, directors, employees, partners, members, agents
and affiliates for all losses or damages arising as a result of or related to
any breach or alleged breach by the Company and/or SJP, as applicable, of any of
its representations or covenants set forth herein, including advancement of
reasonable expenses as they are incurred.
(j) PUBLICITY. The Company and each Purchaser shall have the right to
review before issuance any press releases, SEC filings, filings with the AMEX,
NYSE, the NNM, the SmallCap or the Bulletin Board, as applicable, or any other
public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior review
of the Purchasers, to make any press release, SEC filings or filings with the
AMEX, NYSE, the NNM, the SmallCap or the Bulletin Board, as applicable, with
respect to such transactions as is required by applicable law and regulations
(although the Purchaser shall be consulted by the Company in connection with any
such press release and filing 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
on or before June __, 1998, unless the parties agree otherwise, this Agreement
shall terminate at the close of business on such date. Notwithstanding any
termination of this Agreement, any party not in breach of this Agreement shall
preserve all rights and remedies it may have against another party hereto for a
breach of this Agreement prior to or relating to the termination hereof.
(m) JOINT PARTICIPATION IN DRAFTING. Each party to this Agreement has
participated in the negotiation and drafting of this Agreement, the Certificate
of Designation and the Registration Rights Agreement. As such, the language used
herein and therein shall be deemed to be the language chosen by the parties
hereto to express their mutual intent, and no rule of strict construction will
be applied against any party to this Agreement.
(n) EQUITABLE RELIEF. The Company and SJP, respectively, acknowledge
that a breach by it of its obligations hereunder will cause irreparable harm to
Purchaser by vitiating the intent and purpose of the transactions contemplated
hereby. Accordingly, the Company and SJP, respectively, acknowledge that the
remedy at law for a breach of its obligations hereunder (including, but not
limited to, its obligations pursuant to Section 6 hereof) will be inadequate and
agree, in the event of a breach or threatened breach by the Company or by SJP of
the provisions of this Agreement (including, but not limited to, its obligations
pursuant to Section 5 hereof), that Purchaser shall be entitled, in addition to
all other available remedies, to an injunction restraining any breach and
requiring immediate issuance and transfer of the Securities, without the
necessity of showing economic loss and without any bond or other security being
required.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the undersigned Purchaser and the Company have
caused this Agreement to be duly executed as of the date first above written.
BOULDER CAPITAL OPPORTUNITIES, INC.
By:
Name:
Title:
SONIC JET PERFORMANCE, LLC.
By:
Name:
Title:
PURCHASER:
JNC STRATEGIC FUND LTD.
By:
Name:
Title:
RESIDENCE: Cayman Islands
ADDRESS: x/x Xxxxxxx Xxxxxxx (Xxxxxx) Ltd.
Xxxxxxxx Xxxxx
00 Xxxx Xxxxxx
Xxxxxxxx XX00
Xxxxxxx
Telecopy: (000) 000-0000
Attention: Xxxxxx Xxxxx
with copies of all notices to:
Encore Capital Management, L.L.C.
00000 Xxxxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxx, XX 00000
Telecopy: (000) 000-0000
Attn: Xxxx X. Xxxx
