SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of the date of acceptance set
forth below, is entered into by and between COLORMAX TECHNOLOGIES, INC., a
Delawaare corporation, with headquarters located at 00000 Xxxxxxxx Xxxx, Xxxxxx,
Xxxxxxxxxx 00000 (the "Company"), and each entity named on a signature page
hereto (each, a "Buyer") (each agreement with a Buyer being deemed a separate
and independent agreement between the Company and such Buyer, except that each
Buyer acknowledges and consents to the rights granted to each other Buyer under
such agreement and the Transaction Agreements, as defined below, referred to
therein).
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in accordance with and in reliance upon the exemption from securities
registration afforded, inter alia, by Rule 506 under Regulation D ("Regulation
D") as promulgated by the United States Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "1933 Act"), and/or
Section 4(2) of the 1933 Act; and
WHEREAS, the Buyer wishes to purchase, upon the terms and subject to the
conditions of this Agreement, Series B 7% Convertible Preferred Stock of the
Company (the "Convertible Preferred Stock") which will be convertible into
shares of Common Stock, $.001 par value per share, of the Company (the "Common
Stock"), upon the terms and subject to the conditions of such Convertible
Preferred Stock , together with the Warrants (as defined below) exercisable for
the purchase of shares of Common Stock, and subject to acceptance of this
Agreement by the Company;
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. Purchase.
(i) The undersigned hereby agrees to purchase from the Company Convertible
Preferred Stock in the principal amount set forth on the signature page of this
Agreement (the "Preferred Stock") out of a total offering of not more than
$4,000,000 of such Convertible Preferred Stock, and having the terms and
conditions and being in the form attached hereto as Annex I(a).
(ii) Subject to the terms and conditions of this Agreement and the other
Transaction Agreements, the Buyer will purchase (x) the Preferred Stock on the
Closing Date (as defined below).
(iii) The purchase price to be paid by the Purchaser shall be equal to the
face amount of the Preferred Stock being purchased on the relevant Closing Date
(as defined below) and shall be payable in United States Dollars.
b. Certain DefinitionAs used herein, each of the following terms has
the meaning set forth below, unless the context otherwise requires:
(i) "Preferred Stock" means all or any portion of the Preferred Stock.
(ii) "Securities" means the Preferred Stock, the
Warrants and the Common Stock issuable upon conversion of the Preferred Stock or
the exercise of the Warrants.
(iii) "Purchase Price" means the purchase price for the Preferred Stock.
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(iv) "Closing Date" means the date of the closing of the purchase and sale
of the Preferred Stock, as provided herein.
(v) "Closing Date" means the Closing Date.
(vi) "Effective Date" means the effective date of the Registration
Statement covering the Registrable Securities (as those terms are defined in the
Registration Rights Agreement defined below) for the Preferred Stock and
Warrants issued on the Closing Date.
(vii) "Market Price of the Common Stock" means (x) the closing bid price of
the Common Stock for the trading day ending on the trading day immediately
before the relevant date indicated in the relevant provision hereof (unless a
different relevant period is specified in the relevant provision), as reported
by Bloomberg, LP or, if not so reported, as reported on the over-the-counter
market or (y) if the Common Stock is listed on a stock exchange, the closing
price on such exchange on the trading day immediately before the relevant date
indicated in the relevant provision hereof (unless a different relevant period
is specified in the relevant provision), as reported in The Wall Street Journal.
(xi) "Converted Shares" means the shares of Common Stock issuable upon
conversion of the Preferred Stock.
(xii) "Warrant Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.
(xiii) "Shares" means the shares of Common Stock representing any or all of
the Converted Shares and the Warrant Shares.
(xiv) "Certificates" means the relevant Preferred Stock and the relevant
Warrants, each duly executed on behalf of the Company and issued in the name of
the Buyer.
(xv) "Person" means any living person or any entity, such as, but not
necessarily limited to, a corporation, partnership or trust.
(xvi) "Affiliate" means, with respect to a specific Person referred to in
the relevant provision, another Person who or which controls or is controlled by
or is under common control with such specified Person.
(xvii)"Transaction Documents means the Securities Purchase Agreement, the
Registration Rights Agreement, the Warrant, and the Certificate of Designations.
c. Form of Payment; Delivery of Certificates.
(i) The Buyer shall pay the Purchase Price for the relevant Preferred Stock
by delivering immediately available good funds in United States Dollars to the
escrow agent (the "Escrow Agent" identified in the Joint Escrow Instructions
attached hereto as Annex II (the "Joint Escrow Instructions") on the date prior
to the relevant Closing Date.
(ii) No later than the relevant Closing Date, but in any event
promptly following payment by the Buyer to the Escrow Agent of the relevant
Purchase Price, the Company shall deliver the relevant Certificates to the
Escrow Agent.
(iii) By signing this Agreement, each of the Buyer and the Company,
subject to acceptance by the Escrow Agent, agrees to all of the terms and
conditions of, and becomes a party to, the Joint Escrow Instructions, all of the
provisions of which are incorporated herein by this reference as if set forth in
full.
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d. Method of Payment. Payment into escrow of the Purchase Price shall be
made by wire transfer of funds to:
Bank of New York
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
ABA# 000000000
For credit to the account of Xxxxxxx & Prager, Esqs.
Account No.: [To be provided by Xxxxxxx & Xxxxxx]
Re: Colormax Technologies, Inc.
Not later than 5:00 p.m., New York time, on the date which is seven (7) New York
Stock Exchange trading days after the Company shall have accepted this Agreement
and returned a signed counterpart of this Agreement to the Escrow Agent by
facsimile, the Buyer shall deposit with the Escrow Agent the Purchase Price for
the Preferred Stock in currently available funds. Time is of the essence with
respect to such payment, and failure by the Buyer to make such payment, shall
allow the Company to cancel this Agreement.
e. Escrow Property. The Purchase Price and the Certificates delivered to
the Escrow Agent as contemplated by Sections 1(c) and (d) hereof are referred to
as the "Escrow Property".
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees with,
the Company as follows:
a. Without limiting Buyer's right to sell the Common Stock pursuant
to the Registration Statement, the Buyer is purchasing the Preferred Stock and
the Warrants and will be acquiring the Shares for its own account for investment
only and not with a view towards the public sale or distribution thereof and not
with a view to or for sale in connection with any distribution thereof.
b. The Buyer is (i) an "accredited investor" as that term is defined in
Rule 501 of the General Rules and Regulations under the 1933 Act by reason of
Rule 501(a)(3), (ii) experienced in making investments of the kind described in
this Agreement and the related documents, (iii) able, by reason of the business
and financial experience of its officers (if an entity) and professional
advisors (who are not affiliated with or compensated in any way by the Company
or any of its affiliates or selling agents), to protect its own interests in
connection with the transactions described in this Agreement, and the related
documents, and (iv) able to afford the entire loss of its investment in the
Securities.
c. All subsequent offers and sales of the Preferred Stock and the
Shares by the Buyer shall be made pursuant to registration of the Shares under
the 1933 Act or pursuant to an exemption from registration.
d. The Buyer understands that the Preferred Stock is being offered
and sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying upon the truth and accuracy of, and the Buyer's compliance
with, the representations, warranties, agreements, acknowledgments and
understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Preferred Stock.
e. The Buyer and its advisors, if any, have been furnished with or
have been given access to all materials relating to the business, finances and
operations of the Company and materials
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relating to the offer and sale of the Preferred Stock and the offer of the
Shares which have been requested by the Buyer, including Annex V hereto. The
Buyer and its advisors, if any, have been afforded the opportunity to ask
questions of the Company and have received complete and satisfactory answers to
any such inquiries. Without limiting the generality of the foregoing, the Buyer
has also had the opportunity to obtain and to review the Company's Form 10-SB
Registration Statement (the "Company's SEC Documents").
f. The Buyer understands that its investment in the Securities
involves a high degree of risk.
g. The Buyer understands that no United States federal or state
agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities.
h. This Agreement has been duly and validly authorized, executed and
delivered on behalf of the Buyer and is a valid and binding agreement of the
Buyer enforceable in accordance with its terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors' rights generally.
i. The Buyer is a corporation duly organized, validly existing and
in good standing under the laws of the Cayman Islands and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted. The Buyer is duly qualified as a foreign corporation to do business
and is in good standing in each jurisdiction where the nature of the business
conducted or property owned by it makes such qualification necessary, other than
those jurisdictions in which the failure to so qualify would not have a material
adverse effect on the business, operations or condition (financial or otherwise)
or results of operations of the Company and its subsidiaries taken as a whole.
j. Buyer is a "sophisticated investor" (as described in Rule
506(b)(2)(ii) of Regulation D) and an "accredited investor" (as defined in Rule
501(a) of Regulation D), and Purchaser has such knowledge and experience in
business and financial matters that it is capable of evaluating the merits and
risks of an investment in the Company's securities.
k. The Buyer expressly agrees that that until all of the Preferred
Stock shall have been converted, the Buyer shall not engage in short sales of
the Common Stock of the Company. The Buyer acknowledges that purchases, sales
and other transactions may be subject to various federal and state securities
laws and agrees to comply with all such applicable securities laws.
3. COMPANY REPRESENTATIONS, ETC. The Company represents and
warrants to the Buyer that, except as provided in Annex V hereto:
a. Concerning the Preferred Stock and the Shares. There are no
preemptive rights of any stockholder of the Company, as such, to acquire the
Preferred Stock, the Warrants or the Shares.
b. Reporting Company Status. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in each jurisdiction
where the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have a material adverse effect on the business, operations
or condition (financial or otherwise) or results of operation of the Company and
its subsidiaries taken as a whole. The Company has filed a Form 10-SB to
register its Common Stock pursuant to Section 12 of the 1934 Act, and the Common
Stock is listed and traded on The NASDAQ/Bulletin Board Market. The Company has
received no notice, either oral or written, with
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respect to the continued eligibility of the Common Stock for such listing, and
the Company has maintained all requirements for the continuation of such
listing.
c. Authorized Shares. The authorized capital stock of the Company
consists of (i)100,000,000 shares of Common Stock, $.001 par value per share, of
which approximately 22, 902,582 had been issued as of March 1, 2000,
(ii)1,000,000 shares of Class A Convertible Preferred Shares , $.10 par value
per share, (iv) 50,000,000 shares of Class B Convertible Preferred Shares, $.001
par value, and (iv) 50,000,000 Class C Convertible Preferred Shares, $.001 par
value per share, with rights, preferences and limitations to be determined by
the Board of Directors of the Company. All issued and outstanding shares of
Common Stock have been duly authorized and validly issued and are fully paid and
nonassessable. The Company has sufficient authorized and unissued shares of
Common Stock as may be necessary to effect the issuance of the Shares. The
Shares have been duly authorized and, when issued upon conversion of, or as
interest on, the Preferred Stock or upon exercise of the Warrants, each in
accordance with its respective terms, will be duly and validly issued, fully
paid and non- assessable and will not subject the holder thereof to personal
liability by reason of being such holder.
d. Securities Purchase Agreement; Registration Rights Agreement and Stock.
This Agreement and the Registration Rights Agreement, the form of which is
attached hereto as Annex IV (the "Registration Rights Agreement"), and the
transactions contemplated thereby, have been duly and validly authorized by the
Company, this Agreement has been duly executed and delivered by the Company and
this Agreement is, and the Preferred Stock, the Warrants and the Registration
Rights Agreement, when executed and delivered by the Company, will be, valid and
binding agreements of the Company enforceable in accordance with their
respective terms, subject as to enforceability to general principles of equity
and to bankruptcy, insolvency, moratorium, and other similar laws affecting the
enforcement of creditors' rights generally.
e. Non-contravention. The execution and delivery of this Agreement and the
Registration Rights Agreement by the Company, the issuance of the Securities,
and the consummation by the Company of the other transactions contemplated by
this Agreement, the Registration Rights Agreement, and the Preferred Stock do
not and will not conflict with or result in a breach by the Company of any of
the terms or provisions of, or constitute a default under (i) the articles of
incorporation or by-laws of the Company, each as currently in effect, (ii) any
indenture, mortgage, deed of trust, or other material agreement or instrument to
which the Company is a party or by which it or any of its properties or assets
are bound, including any listing agreement for the Common Stock except as herein
set forth, (iii) to its knowledge, any existing applicable law, rule, or
regulation or any applicable decree, judgment, or order of any court, United
States federal or state regulatory body, administrative agency, or other
governmental body having jurisdiction over the Company or any of its properties
or assets, or (iv) the Company's listing agreement for its Common Stock, except
such conflict, breach or default which would not have a material adverse effect
on the business, operations or condition (financial or otherwise) or results of
operations of the Company and its subsidiaries, taken as a whole, or on the
transactions contemplated herein.
f. Approvals. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the stockholders of the Company is required to be obtained
by the Company for the issuance and sale of the Securities to the Buyer as
contemplated by this Agreement, except such authorizations, approvals and
consents that have been obtained.
g. SEC Filings. None of the Company's SEC Documents contained, at the time
they were filed, any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
made therein in light of the circumstances under which they were made, not
misleading. The Company has since January 1, 1999 timely filed all requisite
forms, reports and exhibits thereto with the SEC.
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h. Absence of Certain Changes. Since December 31, 1998, there has been no
material adverse change and no material adverse development in the business,
properties, operations, condition (financial or otherwise), or results of
operations of the Company, except as disclosed in the Company's SEC Documents.
Since December 31, 1998, except as provided in the Company's SEC Documents, the
Company has not (i) incurred or become subject to any material liabilities
(absolute or contingent) except liabilities incurred in the ordinary course of
business consistent with past practices; (ii) discharged or satisfied any
material lien or encumbrance or paid any material obligation or liability
(absolute or contingent), other than current liabilities paid in the ordinary
course of business consistent with past practices; (iii) declared or made any
payment or distribution of cash or other property to stockholders with respect
to its capital stock, or purchased or redeemed, or made any agreements to
purchase or redeem, any shares of its capital stock; (iv) sold, assigned or
transferred any other tangible assets, or canceled any debts or claims, except
in the ordinary course of business consistent with past practices; (v) suffered
any substantial losses or waived any rights of material value, whether or not in
the ordinary course of business, or suffered the loss of any material amount of
existing business; (vi) made any changes in employee compensation, except in the
ordinary course of business consistent with past practices; or (vii) experienced
any material problems with labor or management in connection with the terms and
conditions of their employment.
i. Full Disclosure. There is no fact known to the Company (other than
general economic conditions known to the public generally or as disclosed in the
Company's SEC Documents) that has not been disclosed in writing to the Buyer
that (i) would reasonably be expected to have a material adverse effect on the
business or condition of the Company (financial or otherwise) or results of
operations of the Company and its subsidiaries, taken as a whole , (ii) would
reasonably be expected to materially and adversely affect the ability of the
Company to perform its obligations pursuant to this Agreement or any of the
agreements contemplated hereby (collectively, including this Agreement, the
"Transaction Agreements"), or (iii) would reasonably be expected to materially
and adversely affect the value of the rights granted to the Buyer in the
Transaction Agreements.
j. Absence of Litigation. Except as set forth in the Company's SEC
Documents, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board or body pending or, to the knowledge of the
Company, threatened against or affecting the Company, wherein an unfavorable
decision, ruling or finding would have a material adverse effect on the
properties, business or financial condition, or results of operation of the
Company and its subsidiaries taken as a whole or the transactions contemplated
by any of the Transaction Agreements or which would adversely affect the
validity or enforceability of, or the authority or ability of the Company to
perform its obligations under, any of the Transaction Agreements.
k. Absence of Events of Default. Except as set forth in Section 3(e)
hereof, no Event of Default (or its equivalent term), as defined in the
respective agreement to which the Company is a party, and no event which, with
the giving of notice or the passage of time or both, would become an Event of
Default (or its equivalent term) (as so defined in such agreement), has occurred
and is continuing, which would have a material adverse effect on the business,
operations or the condition (financial or otherwise) or results of operations of
the Company and its subsidiaries, taken as a whole.
l. Prior Issues. During the twelve (12) months preceding the date hereof,
the Company has not issued any convertible securities or, except as provided in
the Company's SEC Documents, any shares of the Common Stock or Preferred Stock.
m. No Undisclosed Liabilities or Events. The Company has no
liabilities or obligations other than those disclosed in the Company's SEC
Documents or those incurred in the ordinary course of the Company's business
since December 31, 1998, and which individually or in the aggregate, do not or
would not have a material adverse effect on the properties, business, condition
(financial or otherwise), or results of operations of the Company and its
subsidiaries, taken as a whole. No event or circumstances has occurred or exists
with respect to the Company or its properties, business, condition
83
(financial or otherwise), or results of operations, which, under applicable law,
rule or regulation, requires public disclosure or announcement prior to the date
hereof by the Company but which has not been so publicly announced or disclosed.
Except for mergers or acquisitions requiring the issuance of common stock and/or
preferred stock, there are no proposals currently under consideration or
currently anticipated to be under consideration by the Board of Directors or the
executive officers of the Company which proposal would (x) change the
certificate of incorporation or other charter document or by-laws of the
Company, each as currently in effect, with or without shareholder approval,
which change would reduce or otherwise adversely affect the rights and powers of
the shareholders of the Common Stock or (y) materially or substantially change
the business, assets or capital of the Company, including its interests in
subsidiaries.
n. No Default. The Company is not in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any material indenture, mortgage, deed of trust or other material
instrument or agreement to which it is a party or by which it or its property is
bound.
o. No Integrated Offering. Neither the Company nor any of its
affiliates nor any person acting on its or their behalf has, directly or
indirectly, at any time since November 1, 1999, made any offer or sales of any
security or solicited any offers to buy any security under circumstances that
would eliminate the availability of the exemption from registration under Rule
506 of Regulation D in connection with the offer and sale of the Securities as
contemplated hereby.
p. Dilution. The number of Shares issuable upon conversion of the
Preferred Stock and the exercise of the Warrants may increase substantially in
certain circumstances, including, but not necessarily limited to, the
circumstance wherein the trading price of the Common Stock declines prior to the
conversion of the Preferred Stock. The Company's executive officers and
directors have studied and fully understand the nature of the Securities being
sold hereby and recognize that they have a potential dilutive effect. The board
of directors of the Company has concluded, in its good faith business judgment,
that such issuance is in the best interests of the Company. The Company
specifically acknowledges that its obligation to issue the Shares upon
conversion of the Preferred Stock and upon exercise of the Warrants is binding
upon the Company and enforceable regardless of the dilution such issuance may
have on the ownership interests of other shareholders of the Company.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Transfer Restrictions. The Buyer acknowledges that (1) the
Preferred Stock have not been and are not being registered under the provisions
of the 1933 Act and, except as provided in the Registration Rights Agreement,
the Shares have not been and are not being registered under the 1933 Act, and
may not be transferred unless (A) subsequently registered thereunder or (B) the
Buyer shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration; (2) any sale of the Securities made in
reliance on Rule 144 promulgated under the 1933 Act may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Securities under circumstances in which the
seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the SEC
thereunder; and (3) neither the Company nor any other person is under any
obligation to register the Securities (other than pursuant to the Registration
Rights Agreement) under the 1933 Act or to comply with the terms and conditions
of any exemption thereunder.
b. Restrictive Legend. The Buyer acknowledges and agrees that the
Preferred Stock and the Warrants, and, until such time as the Common Stock has
been registered under the 1933 Act as contemplated by the Registration Rights
Agreement and sold in accordance with an effective Registration Statement,
certificates and other instruments representing any of the Securities shall bear
a restrictive
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legend in substantially the following form (and a stop-transfer order may be
placed against transfer of any such Securities):
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES
LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR
OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED.
c. Registration Rights Agreement. The parties hereto agree to enter into
the Registration Rights Agreement on or before the Closing Date.
d. Filings. The Company undertakes and agrees to make all necessary filings
in connection with the sale of the Securities to the Buyer under any United
States laws and regulations applicable to the Company, or by any domestic
securities exchange or trading market, and to provide a copy thereof to the
Buyer promptly after such filing.
e. Reporting Status. So long as the Buyer beneficially owns any of the
Securities, the Company shall file all reports required to be filed with the SEC
pursuant to Section 13 or 15(d) of the 1934 Act, and the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would permit such
termination. The Company will take all reasonable action under its control to
obtain and to continue the listing and trading of its Common Stock (including,
without limitation, all Registrable Securities) on The NASDAQ/Bulletin Board
Market and will comply in all material respects with the Company's reporting,
filing and other obligations under the by-laws or rules of the National
Association of Securities Dealers, Inc. ("NASD") or The NASDAQ/Bulletin Board
Market.
f. Use of Proceeds. The Buyer acknowledges that the Company intends to make
acquisitions or effect mergers subsequent to the execution of this Agreement.
Accordingly, the Company will use the proceeds from the sale of the Preferred
Stock (excluding amounts paid by the Company for legal fees, finder's fees and
escrow fees in connection with the sale of the Preferred Stock) for cash
deposits associated with such acquisitions or mergers and for internal working
capital purposes. Except for the express purposes detailed in this section 4f,
unless specifically consented to in advance in each instance by the Buyer, the
Company shall not, directly or indirectly, use such proceeds for any loan to or
investment in any other corporation, partnership enterprise or other person or
for the repayment of any outstanding loan by the Company to any other party.
g. Certain Agreements. (i) The Company covenants and agrees that it will
not, without the prior written consent of the Buyer, enter into any subsequent
or further offer or sale of Common Stock or securities convertible into Common
Stock (collectively, "New Common Stock") with any third party pursuant to a
transaction which in any manner permits the sale of the New Common Stock on any
date which is earlier than one hundred eighty (180) days from the last day of
the calendar month in which the Effective Date occurs.
(ii) The provisions of subparagraph (g)(i) will not apply to (w)
Common Stock issued pursuant to an exemption from registration under the
Securities Act of 1933 other than pursuant to Regulation S; (x) an underwritten
public offering of shares of Common Stock or Preferred Stock; (y) an offering of
convertible Preferred Stock at market or above; or (z) the issuance of
securities (other than for cash) in connection with an acquisition, merger,
consolidation, sale of assets, disposition or the exchange of the capital stock
for assets, stock or other joint venture interests.
(iii) By the Closing Date, the Company shall obtain the agreement (each, a
"Principal's Agreement") of each of its Principals (as defined below) that,
without the prior written consent of the
85
Buyer in each instance, such Principal will not sell or otherwise transfer
or offer to sell or otherwise transfer any shares of Common Stock directly or
indirectly held by such Principal prior to one hundred twenty (120) days after
the Effective Date. Each such Principal's Agreement shall (w) specify that it is
entered into as an inducement to the Buyer's execution, delivery and performance
of this Agreement, (x) name the Buyer as a third party beneficiary thereof, (y)
acknowledge that the Company's transfer agent will be provided with instructions
that transfers by a Principal require the consent of the Company and the Buyer,
and (z) contemplate that, in addition to any other damages or remedies that may
be appropriate, the Principal's Agreement shall be enforceable by injunction
sought by the Company and the Buyer or any one or more of them. A "Corporate
Principal" is a person who meets any one or more of the following criteria: (A)
a person who is a director or principal officer of the Company (each, a "Company
Principal") and who, directly or indirectly, holds in excess of five (5%)
percent of any shares of Common Stock of the Company (each, a "Company
Principal"); (B) a spouse of a Company Principal (a "Principal's Spouse") who,
directly or indirectly, holds any shares of Common Stock of the Company, (C) a
parent or child of a Company Principal who resides in the household of a Company
Principal or of a Principal's Spouse (each, a "Principal's Relative") and who,
directly or indirectly, holds any shares of Common Stock, or (D) any other
person or entity, including, without limitation, for profit or non-profit
corporations, partnerships and trusts, whose voting rights regarding Common
Stock of the Company is subject to the direction, control or other influence of
any Company Principal, Principal's Spouse, or Principal's Relative.
(iv) In the event the Company breaches the provisions of this
Section 4(g), the Conversion Rate (as defined in the Certificate of
Designations) shall be amended to be equal to (x) 90% of (y) the amount
determined in accordance with the provisions of the Preferred Stock without
regard to this provision, and the Purchaser may require the Company to
immediately redeem all outstanding Preferred Stock in accordance with Section
4(j)(y) hereof.
h. Available Shares. The Company shall have at all times authorized
and reserved for issuance, free from preemptive rights, shares of Common Stock
sufficient to yield two hundred percent (200%) of the number of shares of Common
Stock issuable (i) at conversion as may be required to satisfy the conversion
rights of the Buyer pursuant to the terms and conditions of the Preferred Stock
which have been issued and not yet converted, and (ii) upon exercise as may be
required to satisfy the exercise rights of the Buyer pursuant to the terms and
conditions of the Warrants which have been issued and not yet converted.
i. Warrants. The Company agrees to issue to the Buyer on each Closing Date
transferable, divisible warrants with cashless exercise rights (the "Warrants")
for the purchase of one (1) share of Common Stock for every 6.66 shares into
which the Preferred Stock purchased by the Buyer are convertible into on the
Closing Date. Fractional shares shall be rounded up to the next highest share.
The Warrants shall bear an exercise price equal to one hundred twenty percent
(120%) of the Market Price of the Common Stock on the relevant Closing Date. The
Warrants will expire on the last day of the month in which the fourth
anniversary of the relevant Closing Date occurs. The Warrants shall be in the
form annexed hereto as Annex VI, together with registration rights as provided
in the Registration Rights Agreement and piggy-back registration after the
expiration of the effectiveness of the Registration Statement contemplated by
the Registration Rights Agreement.
j. Limitation on Issuance of Shares. The Company may be limited in the
number of shares of Common Stock it may issue by virtue of (i) the number of
authorized shares or (ii) the applicable rules and regulations of the principal
securities market on which the Common Stock is listed or traded, including, but
not necessarily limited to, NASDAQ Rule 4310(c)(25)(H)(i)(d)(2) (collectively,
the "Cap Regulations"). Without limiting the other provisions thereof, the
Certificate of Designations shall provide that (i) the Company will take all
steps reasonably necessary to be in a position to issue shares of Common Stock
on conversion of the Preferred Stock without violating the Cap Regulations and
(ii) if, despite taking such steps, the Company still can not issue such shares
of Common Stock without violating the Cap Regulations, the holder of a Preferred
Stock which can not be converted as result of the Cap
86
Regulations (each such Preferred Stock, an "Unconverted Preferred Stock")
shall have the option, exercisable in such holder's sole and absolute
discretion, to elect either of the following remedies:
(x) if permitted by the Cap Regulations, require the
Company to issue shares of Common Stock in accordance with such holder's
notice of conversion at a conversion purchase price equal to the average
of the closing bid price per share of Common Stock for any five (5)
consecutive trading days (subject to certain equitable adjustments for
certain events occurring during such period) during the sixty (60) trading
days immediately preceding the date of notice of conversion; or
(y) require the Company to redeem each Unconverted
Preferred Stock for an amount (the "Redemption Amount") equal to 120% of
the Liquidation Preference and Accrued Dividends.
A holder of an Unconverted Preferred Stock may elect one of the above remedies
with respect to a portion of such Unconverted Preferred Stock and the other
remedy with respect to other portions of the Unconverted Preferred Stock. The
Certificate of Designations shall contain provisions substantially consistent
with the above terms, with such additional provisions as may be consented to by
the Buyer. The provisions of this paragraph are not intended to limit the scope
of the provisions otherwise included in the Certificate of Designations.
k. Reimbursement. If (i) any Buyer, other than by reason of its
gross negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by any stockholder of the Company,
in connection with or as a result of the consummation of the transactions
contemplated by the Transaction Agreements, or if such Buyer is impleaded in any
such action, proceeding or investigation by any Person, or (ii) any Buyer, other
than by reason of its gross negligence or willful misconduct or by reason of its
trading of the Common Stock in a manner that is illegal under the federal
securities laws, becomes involved in any capacity in any action, proceeding or
investigation brought by the SEC against or involving the Company or in
connection with or as a result of the consummation of the transactions
contemplated by the Transaction Agreements, or if such Buyer is impleaded in any
such action, proceeding or investigation by any Person, then in any such case,
the Company will reimburse such Buyer for its reasonable legal and other
expenses (including the cost of any investigation and preparation) incurred in
connection therewith, as such expenses are incurred. In addition, other than
with respect to any matter in which such Buyer is a named party, the Company
will pay such Buyer the charges, as reasonably determined by such Buyer, for the
time of any officers or employees of such Buyer devoted to appearing and
preparing to appear as witnesses, assisting in preparation for hearings, trials
or pretrial matters, or otherwise with respect to inquiries, hearing, trials,
and other proceedings relating to the subject matter of this Agreement. The
reimbursement obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any Affiliates of the Buyers who are
actually named in such action, proceeding or investigation, and partners,
directors, agents, employees and controlling persons (if any), as the case may
be, of the Buyers and any such Affiliate, and shall be binding upon and inure to
the benefit of any successors, assigns, heirs and personal representatives of
the Company, the Buyers and any such Affiliate and any such Person. The Company
also agrees that neither any Buyer nor any such Affiliate, partners, directors,
agents, employees or controlling persons shall have any liability to the Company
or any person asserting claims on behalf of or in right of the Company in
connection with or as a result of the consummation of the Transaction Agreements
except to the extent that any losses, claims, damages, liabilities or expenses
incurred by the Company result from the gross negligence or willful misconduct
of such Buyer.
5. TRANSFER AGENT INSTRUCTIONS.
a. Promptly following the delivery by the Buyer of the Purchase
Price for the Preferred Stock in accordance with Section 1(c) hereof, the
Company will irrevocably instruct its transfer agent to
87
issue Common Stock from time to time upon conversion of the Preferred Stock in
such amounts as specified from time to time by the Company to the transfer
agent, bearing the restrictive legend specified in Section 4(b) of this
Agreement prior to registration of the Shares under the 1933 Act, registered in
the name of the Buyer or its nominee and in such denominations to be specified
by the Buyer in connection with each conversion of the Preferred Stock. The
Company warrants that no instruction other than such instructions referred to in
this Section 5 and stop transfer instructions to give effect to Section 4(a)
hereof prior to registration and sale of the Shares under the 1933 Act will be
given by the Company to the transfer agent and that the Shares shall otherwise
be freely transferable on the books and records of the Company as and to the
extent provided in this Agreement, the Registration Rights Agreement, and
applicable law. Nothing in this Section shall affect in any way the Buyer's
obligations and agreement to comply with all applicable securities laws upon
resale of the Securities. If the Buyer provides the Company with an opinion of
counsel reasonably satisfactory to the Company that registration of a resale by
the Buyer of any of the Securities in accordance with clause (1)(B) of Section
4(a) of this Agreement is not required under the 1933 Act, the Company shall
(except as provided in clause (2) of Section 4(a) of this Agreement) permit the
transfer of the Securities and, in the case of the Converted Shares or the
Warrant Shares, as the case may be, promptly instruct the Company's transfer
agent to issue one or more certificates for Common Stock without legend in such
name and in such denominations as specified by the Buyer.
b. (i) The Company will permit the Buyer to exercise its right to
convert the Preferred Stock by telecopying or delivering an executed and
completed Notice of Conversion to the Company and delivering, within five (5)
business days thereafter, the original Preferred Stock being converted to the
Company by express courier, with a copy to the transfer agent.
(ii) The term "Conversion Date" means, with respect to any conversion
elected by the holder of the Preferred Stock, the date specified in the Notice
of Conversion, provided the copy of the Notice of Conversion is telecopied to or
otherwise delivered to the Company in accordance with the provisions hereof so
that it is received by the Company on or before such specified date.
(iii) The Company will transmit the certificates representing the Converted
Shares issuable upon conversion of any Preferred Stock (together, unless
otherwise instructed by the Buyer, with Preferred Stock not being so converted)
to the Buyer at the address specified in the Notice of Conversion (which may be
the Buyer's address for notices as contemplated by Section 11 hereof or a
different address) via express courier , by electronic transfer or otherwise,
within three (3) business days if the address for delivery is in the United
States and within five (5) business days if the address for delivery is outside
the United States (such fifth business day or seventh business day, as the case
may be, the "Delivery Date") after (A) the business day on which the Company has
received both of the Notice of Conversion (by facsimile or other delivery) and
the original Preferred Stock being converted (and if the same are not delivered
to the Company on the same date, the date of delivery of the second of such
items) or (B) the date an interest payment on the Preferred Stock, which the
Company has elected to pay by the issuance of Common Stock, as contemplated by
the Preferred Stock, was due.
c. The Company understands that a delay in the issuance of the
Unlegended Shares beyond the Delivery Date could result in economic loss to the
Purchaser. As compensation to the Purchaser for such loss, the Company agrees to
pay late payments to the Purchaser for late issuance of Unlegended Shares in
accordance with the following schedule (where "No. of Days Late" is defined as
the number of days beyond five (5) business days from Delivery Date):
Late Payment For Each
No. of Days Late $10,000 of Common Stock
---------------------- -----------------------
1 $100
2 $200
3 $300
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4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 +$200 for each Business
Day Late beyond 10 days
The Company shall pay any payments incurred under this Section 9.4 in
immediately available funds upon demand. Nothing herein shall limit the
Purchaser's right to pursue actual damages for the Company's failure to issue
and deliver the Unlegended Shares to the Purchaser.
d. If, by the relevant Delivery Date, the Company fails for any
reason to deliver the Unlegended Shares and after such Delivery Date, the holder
of the Shares (a "Holder") purchases, in an open market transaction or
otherwise, shares of Common Stock (the "Covering Shares") in order to make
delivery in satisfaction of a sale of Common Stock by the Holder (the "Sold
Shares"), which delivery such Holder anticipated to make using the Shares to be
issued upon such conversion (a "Buy-In"), the Company shall pay to the Holder,
in addition to all other amounts contemplated in other provisions of the
Transaction Agreements, and not in lieu thereof, the Buy-In Adjustment Amount
(as defined below). The "Buy-In Adjustment Amount" is the amount equal to the
excess, if any, of (x) the Holder's total purchase price (including brokerage
commissions, if any) for the Covering Shares over (y) the net proceeds (after
brokerage commissions, if any) received by the Holder from the sale of the Sold
Shares. The Company shall pay the Buy-In Adjustment Amount to the Holder in
immediately available funds immediately upon demand by the Holder. By way of
illustration and not in limitation of the foregoing, if the Holder purchases
shares of Common Stock having a total purchase price (including brokerage
commissions) of $11,000 to cover a Buy-In with respect to shares of Common Stock
it sold for net proceeds of $10,000, the Buy-In Adjustment Amount which Company
will be required to pay to the Holder will be $1,000.
e. In lieu of delivering physical certificates representing the Common
Stock issuable upon conversion, provided the Company's transfer agent is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer program, upon request of the Buyer and its compliance with the
provisions contained in this paragraph, so long as the certificates therefor do
not bear a legend and the Buyer thereof is not obligated to return such
certificate for the placement of a legend thereon, the Company shall use its
best efforts to cause its transfer agent to electronically transmit the Common
Stock issuable upon conversion to the Buyer by crediting the account of Buyer's
Prime Broker with DTC through its Deposit Withdrawal Agent Commission system.
f. The Company will authorize its transfer agent to give information
relating to the Company directly to the Buyer or the Buyer's representatives
upon the request of the Buyer or any such representative. The Company will
provide the Buyer with a copy of the authorization so given to the transfer
agent.
g. The Company will authorize its transfer agent to give information
relating to the Company directly to the Buyer or the Buyer's representatives
upon the request of the Buyer or any such representative. The Company will
provide the Buyer with a copy of the authorization so given to the transfer
agent.
h. If, at any time (i) the Company challenges, disputes or denies
the right of a holder of Preferred Stock to effect a conversion of the Preferred
Stock into Common Stock or otherwise dishonors or rejects any Conversion Notice
delivered in accordance with the terms of this Agreement or the Certificate of
Designations or any exercise of any Warrant in accordance with its terms
("Warrant Exercise"), or (ii) any third party who is not and has never been an
Affiliate of such holder commences any
89
lawsuit or proceeding or otherwise asserts any claim before any court or public
or governmental authority, which lawsuit, proceeding or claim seeks to
challenge, deny, enjoin, limit, modify, delay or dispute the right of such
holder to effect the conversion of the Preferred Stock into Common Stock, and
the Company refuses to honor any such Conversion Notice or Warrant Exercise,
then such holder shall have the right, by written notice to the Company, to
require the Company to promptly redeem the Preferred Stock for cash at a
redemption price (the "Mandatory Purchase Amount") equal to (x) one hundred
twenty-two percent (122%) of the liquidation preference of the unconverted
Preferred Stock held by such holder plus (y) all accrued but unpaid dividends on
the Preferred Stock through the date of payment of the Mandatory Purchase
Amount. Under any of the circumstances set forth above, the Company shall be
responsible for the payment of all costs and expenses of such holder, including,
but not necessarily limited to, reasonable legal fees and expenses, as and when
incurred in connection with such holder's disputing any such action or pursuing
such holder's rights hereunder (in addition to any other rights such holder may
have hereunder or otherwise). The Mandatory Purchase Amount will be payable to
such holder in cash within five (5) business days from the date such holder
gives the Company written notice that it is exercising its rights under this
paragraph.
i. The holder of any Preferred Stock shall be entitled to exercise
its conversion privilege with respect to the Preferred Stock notwithstanding the
commencement of any case under 11 U.S.C. ss.101 et seq. (the "Bankruptcy Code").
In the event the Company is a debtor under the Bankruptcy Code, the Company
hereby waives, to the fullest extent permitted, any rights to relief it may have
under 11 U.S.C. ss.362 in respect of such holder's conversion privilege. The
Company hereby waives, to the fullest extent permitted, any rights to relief it
may have under 11 U.S.C. ss.362 in respect of the conversion of the Preferred
Stock. The Company agrees, without cost or expense to such holder, to take or to
consent to any and all action necessary to effectuate relief under 11 U.S.C.
ss.362.
6. CLOSING DATES.
a. The Closing Date shall occur on the date which is the first NYSE
trading day after each of the conditions contemplated by Sections 7 and 8 hereof
shall have either been satisfied or been waived by the party in whose favor such
conditions run.
b. The closing of the purchase and issuance of Preferred Stock shall
occur on the relevant Closing Date at the offices of the Escrow Agent and shall
take place no later than 3:00 P.M., New York time, on such day or such other
time as is mutually agreed upon by the Company and the Buyer.
c. Notwithstanding anything to the contrary contained herein, the
Escrow Agent will be authorized to release the Escrow Funds to the Company and
to others and to release the other Escrow Property on the relevant Closing Date
upon satisfaction of the conditions set forth in Sections 7 and 8 hereof and as
provided in the Joint Escrow Instructions.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell the
relevant Preferred Stock to the Buyer pursuant to this Agreement on the relevant
Closing Date is conditioned upon:
a. The execution and delivery of this Agreement by the Buyer;
b. Delivery by the Buyer to the Escrow Agent of good funds as
payment in full of an amount equal to the Purchase Price for the relevant
Preferred Stock in accordance with this Agreement;
c. The accuracy on such Closing Date of the representations and
warranties of the Buyer contained in this Agreement, each as if made on such
date, and the performance by the Buyer on or before such date of all covenants
and agreements of the Buyer required to be performed on or before such date; and
90
d. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained.
8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the
Preferred Stock on the relevant Closing Date is conditioned upon:
a. The execution and delivery of this Agreement and the Registration Rights
Agreement by the Company;
b. Delivery by the Company to the Escrow Agent of the relevant Certificates
in accordance with this Agreement;
c. The accuracy in all material respects on such Closing Date of the
representations and warranties of the Company contained in this Agreement. each
as if made on such date, and the performance by the Company on or before such
date of all covenants and agreements of the Company required to be performed on
or before such date;
d. On such Closing Date, the Registration Rights Agreement shall be in full
force and effect and the Company shall not be in default thereunder;
e. On such Closing Date, the Buyer shall have received an opinion of
counsel for the Company, dated such Closing Date, in form, scope and substance
reasonably satisfactory to the Buyer, substantially to the effect set forth in
Annex III attached hereto;
f. There shall not be in effect any law, rule or regulation prohibiting or
restricting the transactions contemplated hereby, or requiring any consent or
approval which shall not have been obtained;
g. From and after the date hereof to and including such Closing Date, the
trading of the Common Stock shall not have been suspended by the SEC or the NASD
and trading in securities generally on the New York Stock Exchange or The
NASDAQ/Bulletin Board Market shall not have been suspended or limited, nor shall
minimum prices been established for securities traded on The NASDAQ/Bulletin
Board Market, nor shall there be any outbreak or escalation of hostilities
involving the United States or any material adverse change in any financial
market that in either case in the reasonable judgment of the Buyer makes it
impracticable or inadvisable to purchase the Preferred Stock; and
9. GOVERNING LAW: MISCELLANEOUS.
a. This Agreement shall be governed by and interpreted in accordance
with the laws of the State of Delaware for contracts to be wholly performed in
such state and without giving effect to the principles thereof regarding the
conflict of laws. Each of the parties consents to the jurisdiction of the
federal courts whose districts encompass any part of the City of Wilmington or
the state courts of the State of Delaware sitting in the City of Wilmington in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on forum non conveniens, to the bringing of any such proceeding in such
jurisdictions. To the extent determined by such court, the Company shall
reimburse the Buyer for any reasonable legal fees and disbursements incurred by
the Buyer in enforcement of or protection of any of its rights under any of the
Transaction Agreements.
b. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
91
c. This Agreement shall inure to the benefit of and be binding upon
the successors and assigns of each of the parties hereto.
d. All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
e. A facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto.
f. This Agreement may be signed in one or more counterparts, each of
which shall be deemed an original.
g. The headings of this Agreement are for convenience of reference
and shall not form part of, or affect the interpretation of, this Agreement.
h. 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.
i. This Agreement may be amended only by an instrument in writing
signed by the party to be charged with enforcement thereof.
j. This Agreement supersedes all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof.
10. NOTICES. Any notice required or permitted hereunder shall be given in
writing (unless otherwise specified herein) and shall be deemed effectively
given on the earliest of
(a) the date delivered, if delivered by personal
delivery as against written receipt therefor or by confirmed
facsimile transmission,
(b) the seventh business day after deposit, postage
prepaid, in the United States Postal Service by registered or
certified mail, or
(c) the third business day after mailing by
international express courier, with delivery costs and fees prepaid,
in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate by
ten (10) days' advance written notice similarly given to each of the
other parties hereto):
COMPANY: Colormax Technologies, Inc.
0000 Xxxxxxxx Xxxx
Xxxxxx, Xxxxxxxxxx
Telephone No.: (000) 000-0000
Telecopier No.:
with a copy to: Xxxxxxx Xxxxxxxxxx, Esq.
Attn:
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
BUYER: At the address set forth on the signature page of this Agreement.
92
with a copy to: Xxxxxxx & Xxxxxx, Esqs.
Xxxxx 0000
00 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopier No. (000) 000-0000
ESCROW AGENT: Xxxxxxx & Xxxxxx, Esqs.
Xxxxx 0000
00 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopier No. (000) 000-0000
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's and the
Buyer's representations and warranties herein shall survive the execution and
delivery of this Agreement and the delivery of the Certificates and the Warrants
and the payment of the Purchase Price, and shall inure to the benefit of the
Buyer and the Company and their respective successors and assigns.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK.]
93
IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer by
one of its officers thereunto duly authorized as of the date set forth below.
AMOUNT AND PURCHASE PRICE OF PREFERRED STOCK: $4,000,000.00
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed on its behalf this 5th day of March, 2000.
Address Printed Name of Subscriber
By:
Telecopier No.
-----------------------------------
Printed Name and Title
Jurisdiction of Incorporation
or Organization
As of the date set forth below, the undersigned hereby accepts this Agreement
and represents that the foregoing statements are true and correct and that it
has caused this Securities Purchase Agreement to be duly executed on its behalf.
COLORMAX TECHNOLOGIES, INC.
By: /s/ Xxxxxx Xxxxxx
Title: President
Date: March 5, 2000
94
