COVOL TECHNOLOGIES, INC.
DEBENTURE AGREEMENT AND SECURITY AGREEMENT
January 9, 1998
TABLE OF CONTENTS
Section Page
1. Loans; Terms and Conditions; Issuance of Debenture and Warrants..........1
1.1 Loans...........................................................1
1.2 Terms and Conditions............................................1
1.3 Issuance of Debenture and Warrants..............................1
2. Representations, Warranties and Covenants of the Company.................1
2.1 Corporate Existence; Compliance with Law........................1
2.2 Corporate Power; Authorization; Enforceable Obligations.........2
2.3 Authorization and Valid Issuance of Debenture and Warrants......2
2.4 Securities Laws.................................................3
2.5 Disclosure......................................................3
2.6 Authorized and Outstanding Shares of Capital Stock..............3
2.7 Ownership of Property; Liens....................................3
2.8 Patents, Trademarks, Copyrights and Licenses....................3
2.9 No Material Adverse Effect......................................3
2.10 Environmental Laws..............................................4
2.11 Use of Proceeds.................................................4
3. Representations, Warranties and Covenants of the Investor................4
3.1 Purchase Entirely for Own Account...............................4
3.2 Disclosure of Information.......................................4
3.3 Investment Experience...........................................4
3.4 Restricted Securities...........................................4
3.5 Legends.........................................................5
3.6 Accredited Investor.............................................5
4. Valuation of Warrants....................................................5
4.1 Value of Warrants...............................................5
4.2 Financial and Tax Reporting.....................................5
4.3 Issue Price.....................................................5
4.4 Interpretation..................................................5
5. Security Agreement.......................................................6
5.1 Security Interest...............................................6
5.2 Collateral......................................................6
5.3 Perfection and Priority.........................................6
5.4 Affirmative Covenants...........................................6
5.5 Negative Covenants..............................................7
5.6 Insurance; Payment of Premiums..................................7
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5.7 Remedies Upon Default...........................................8
6. Conditions Precedent.....................................................9
6.1 Execution and Delivery of Agreement.............................9
6.2 Documents and Other Agreements..................................9
6.3 Absence of Material Adverse Change.............................10
6.4 Conditions to the Closing.....................................10
7. Miscellaneous...........................................................10
7.1 Survival of Warranties.........................................10
7.2 Successors and Assigns.........................................10
7.3 Governing Law..................................................11
7.4 Counterparts...................................................11
7.5 Titles and Subtitles...........................................11
7.6 Notices........................................................11
7.7 Expenses.......................................................11
7.8 Amendments and Waivers.........................................11
7.9 Severability...................................................11
7.10 Indemnity......................................................11
7.11 Waiver of Trial by Jury........................................12
7.12 Entire Agreement...............................................12
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DEBENTURE AGREEMENT AND SECURITY AGREEMENT
THIS DEBENTURE AGREEMENT AND SECURITY AGREEMENT is made as of the 9th
day of January, 1998, by and among COVOL TECHNOLOGIES, INC., a Delaware
corporation (the "Company"), and AJG FINANCIAL SERVICES, INC., a Delaware
corporation ("Investor").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Loans; Terms and Conditions; Issuance of Debenture and Warrants.
1.1 Loans. During the period July 17, 1997, to and including
January 9, 1998, Investor provided debt financing in the form of loans
("Loans") to the Company for use by the Company in the construction of
the Wash Plant at the Company's facility at Wellington, Utah. The
aggregate principal amount of the Loans, together with accrued interest
thereon, is $4,367,351.28.
1.2 Terms and Conditions. This Agreement confirms the terms
and conditions upon which Investor made the Loans to the Company.
1.3 Issuance of Debenture and Warrants. To evidence the
aggregate outstanding principal amount of the Loans made by Investor to
the Company, together with interest thereon to the date hereof, the
Company shall issue to Investor, concurrently with the execution and
delivery of this Agreement (the "Closing"), the Company's Debenture in
the form set forth in Exhibit A hereto, and the Company's Warrants (one
designated Warrant A and the other designated Warrant B) evidencing
rights to purchase initially up to an aggregate of 432,544 shares of
Common Stock of the Company. The Debenture shall replace the Company's
Promissory Note, dated January 9, 1998, payable to the order of
Investor in the principal amount of $4,325,432.79, and such Promissory
Note shall be marked "replaced by Debenture dated January 9, 1998", and
delivered to the Company.
2. Representations, Warranties and Covenants of the Company. The
Company hereby represents, warrants and covenants to Investor that:
2.1 Corporate Existence; Compliance with Law. The Company (i)
is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware; (ii) is duly qualified as a
foreign corporation and in good standing under the laws of each
jurisdiction where its ownership or lease of property or the conduct of
its business requires such qualification; (iii) has the requisite
corporate power and authority and the legal right to own, pledge,
mortgage or otherwise encumber and operate its properties, to lease the
property it operates under lease, and to conduct its business as now,
heretofore and proposed to be conducted; (iv) has all material
licenses, permits, consents or approvals
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from or by, and has or will have made all material filings with, and
has or will have given all material notices to, all governmental
authorities having jurisdiction, to the extent required for such
ownership, operation and conduct; (v) is in compliance with its
certificate of incorporation and by-laws; and (vi) is in compliance
with all applicable provisions of law, including, without limitation,
the Employee Retirement Income Security Act of 1974, as amended, those
regarding the collection, payment and deposit of employees' income,
unemployment and Social Security taxes, and those relating to
environmental matters where the failure to comply could reasonably be
expected to have a material adverse effect on the business of the
Company.
2.2 Corporate Power; Authorization; Enforceable Obligations.
The execution, delivery and performance by the Company of this
Agreement and the Debenture (i) are within the Company's corporate
power; (ii) have been duly authorized by all necessary or proper
corporate action; (iii) are not in contravention of any provision of
the Company's certificate of incorporation or by-laws; (iv) will not
violate any law or regulation, or any order or decree of any court or
governmental instrumentality; (v) will not conflict with or result in
the breach or termination of, constitute a default under, or accelerate
any performance required by, any indenture, mortgage, deed of trust,
lease, agreement or other instrument to which the Company is a party or
by which the Company or any of its property is bound (except such
conflict, breach, termination, default or acceleration as could not
reasonably be expected to have a material adverse effect on the
business of the Company); (vi) will not result in the creation or
imposition of any lien upon any of the property of the Company other
than those in favor of the Investor; and (vii) do not require the
consent or approval of any governmental body, agency, authority or any
other Person. At or prior to the Closing, each of the documents to be
delivered at such time shall have been duly executed and delivered for
the benefit of or on behalf of the Company, and each shall then
constitute a legal, valid and binding obligation of the Company to the
extent it is a party thereto, enforceable against it in accordance with
its terms, subject to the effects of laws governing creditors rights
generally and general principles of equity.
2.3 Authorization and Valid Issuance of Debenture and
Warrants. All corporate action on the part of the Company and its
officers, directors and stockholders necessary for the authorization,
issuance and delivery of the Debenture being issued hereunder and the
reservation for issuance of shares of Common Stock issuable upon
exercise of the Warrants have been taken or will be taken prior to the
Closing, and this Agreement, the Debenture and the Warrants shall then
constitute valid and legally binding obligations of the Company, each
enforceable in accordance with its terms. The Debentures which are
being acquired by the Investor, when issued and delivered in accordance
with the terms hereof for the consideration expressed herein, will be
duly and validly issued. The Common Stock issuable upon exercise of the
Warrants has been duly and validly reserved for issuance and, upon
issuance in accordance with the terms of the Warrants and the Company's
Certificate of Incorporation, shall be duly and validly issued, fully
paid and
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nonassessable, and issued in compliance with all applicable federal and
state securities laws, as currently in effect.
2.4 Securities Laws. In reliance on the investment
representations contained in Section 3.1 hereof, the offer, issuance,
sale and delivery of the Warrants, as provided in this Agreement, is
exempt from the registration requirements of the Securities Act of
1933, as amended, and the rules and regulations thereunder, and all
applicable state securities laws.
2.5 Disclosure. The Company's Form 10-K for the fiscal year
ended September 30, 1997, and all other written information furnished
to Investor did not, as of the date of such information, contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein not misleading.
2.6 Authorized and Outstanding Shares of Capital Stock. After
giving effect to the Closing, the authorized capital stock of the
Company consists of 50,000,000 shares of Common Stock, $0.001 par
value, of which11,326,404 Shares are issued and outstanding. Except for
(i) the Warrants and (ii) rights to acquire 5,104,518 Shares (a) no
subscription, warrant, option or other right to purchase or acquire any
shares of any class of capital stock is authorized or outstanding, and
(b) there is no commitment of the Company to issue any such shares,
warrants, options or other such rights or securities.
2.7 Ownership of Property; Liens. The Company owns good and
merchantable title to, or valid leasehold interests in, all of its
properties and assets; and the Company has received all deeds,
assignments, waivers, consents, non-disturbance and recognition or
similar agreements, bills of sale and other documents, and duly
effected all recordings, filings and other actions necessary to
establish, protect and perfect the Company's right, title and interest
in and to all such property to the extent necessary to use such
property in its ordinary business operations.
2.8 Patents, Trademarks, Copyrights and Licenses. The Company
owns all material licenses, patents, patent applications, copyrights,
service marks, trademarks, trade xxxx applications, and trade names
necessary to continue to conduct its business as heretofore conducted
by it, now conducted by it and proposed to be conducted by it, each of
which is listed, together with Patent and Trademark Office application
or registration numbers, where applicable, on Schedule 2.8 hereto. The
Company conducts its businesses without infringement or claim of
infringement of any license, patent, copyright, service xxxx,
trademark, trade name, trade secret or other intellectual property
right of others. To the best knowledge of the Company, there is no
infringement or claim of infringement by others of any material,
license, patent, copyright, service xxxx, trademark, trade name, trade
secret or other intellectual property right of the Company.
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2.9 No Material Adverse Effect. Except as disclosed on
Schedule 2.9 hereto, no event has occurred since September 30, 1997,
and is continuing which has had or could reasonably be expected to have
a material adverse effect on the business, assets, properties,
operations, prospects or financial or other condition of the Company.
2.10 Environmental Laws. All premises and facilities owned,
leased, used or operated by the Company or, to the knowledge of any
executive officer of the Company after a reasonable investigation, any
predecessor in interest, have been, and continue to be, owned, leased,
used or operated in compliance in all material respects with all
applicable environmental laws.
2.11 Use of Proceeds. The proceeds of the loans by Investor to
the Company were used for the construction of the Wash Plant at the
Company's facility at Wellington, Utah.
3. Representations, Warranties and Covenants of the Investor. Investor
hereby represents and warrants that:
3.1 Purchase Entirely for Own Account. Investor hereby
confirms that the Debenture and the Warrants to be received by Investor
hereunder and the Common Stock issuable upon exercise of the Warrants
(collectively, the "Securities") will be acquired for Investor's own
account and not with a view to the resale or distribution of any part
thereof, and that Investor has no agreement or arrangement with regard
to or present intention of selling, granting any participation in, or
otherwise distributing the same; provided, however, notwithstanding the
foregoing, Investor may effect transactions in reliance on Rule 144A
promulgated under the Securities Act of 1933, as amended (the "Act").
3.2 Disclosure of Information. Investor has received all the
information it considers necessary or appropriate for deciding whether
to purchase the Securities being issued hereunder. Investor further
represents that it has had an opportunity to ask questions and receive
answers from the Company regarding the terms and conditions of the sale
of the Securities.
3.3 Investment Experience. Investor acknowledges that it is
able to fend for itself, can bear the economic risk of its investment
and has such knowledge and experience in financial or business matters
that it is capable of evaluating the merits and risks of the investment
in the Securities being issued hereunder.
3.4 Restricted Securities. Investor understands that the
Debenture and the shares of Common Stock issuable upon exercise of the
Warrants it is acquiring pursuant hereto are characterized as
"restricted securities" under the federal securities laws inasmuch as
each is being acquired from the Company in a transaction not involving
a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Act only
in certain limited circumstances. In this connection, Investor
represents
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that it is familiar with Rule 144 under the Act, as presently in
effect, and understands the resale limitations imposed thereby and by
the Act.
3.5 Legends. It is understood that the Debenture and the
Warrants being issued hereunder and the Common Stock issuable upon
exercise of the Warrants will bear a legend substantially similar to
the following:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR REGISTERED OR
OTHERWISE QUALIFIED FOR SALE UNDER ANY APPLICABLE STATE
SECURITIES LAWS AND MAY NOT BE TRANSFERRED OR SOLD OR OFFERED
FOR SALE OR OTHERWISE TRANSFERRED, PLEDGED, HYPOTHECATED OR
DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER THE ACT AND
REGISTERED OR OTHERWISE QUALIFIED FOR SALE UNDER SUCH STATE
SECURITIES LAWS OR AN EXCEPTION FROM REGISTRATION THEREUNDER
IS AVAILABLE."
3.6 Accredited Investor. Investor is an Accredited Investor
within the definition set forth in Rule 501(a) under the Act.
4. Valuation of Warrants.
4.1 Value of Warrants. The fair market value of Warrant A as
of the date hereof is $1,000.00 and the fair market value of Warrant B
as of the date hereof is $100.00, and accordingly, of the $4,367,351.28
stated principal amount of the Debenture, $1,100.00 is to be provided
by Investor to the Company for the Warrants. Said fair market value was
determined by the parties based on comparisons with comparable warrants
of other issuers and Investor's customary investment considerations for
equity and debt financing of such kind.
4.2 Financial and Tax Reporting. The Company and Investor
shall prepare their respective financial accounting statements, and
shall prepare and file their respective Federal (as well as state and
local) income tax returns, in a manner consistent with the foregoing
allocation of the stated principal amount of the Debenture between the
Debenture and the Warrants, including but not limited to Investor's tax
basis in the Warrants and Debenture in accordance with Section
1.1012(d) of the Treasury Regulations.
4.3 Issue Price. The "issue price" (within the meaning of
Section 1272(b) of the Internal Revenue Code of 1986 (the "Code")) of
the Debenture shall be equal to $4,366,251.28.
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4.4 Interpretation. No provision in this Agreement shall be
interpreted, alone or in conjunction with any other agreement between
or among Investor and the Company, or either of them (i) to alter the
amount of the exercise price of the Warrants or to alter any rights
granted to Investor in conjunction with the Warrants, or (ii) to limit
or impair in any way the rights of Investor under the Warrants, this
Agreement, the Debenture or any other agreement.
5. Security Agreement. Payment of the Debenture shall be secured to the
extent described below:
5.1 Security Interest. The Company hereby grants to Investor a
security interest in the property and its proceeds described in Section
5.2 herein to secure the Company's obligations under the Debenture (the
"Security Interest").
5.2 Collateral. The property in which the Security Interest is
granted (the "Collateral") consists of a continuing interest in the
following: the Wash Plant at the Company's facility at Xxxxxx Road,
Wellington, Utah, and all machinery and equipment which is a part
thereof, including the machinery and equipment described on Schedule
5.2 hereto and all processing equipment, conveyors, data processing and
computer equipment with software and peripheral equipment, tools,
attachments, accessories, and other equipment of every kind and nature,
whether now owned or hereafter acquired, together with all additions
and accessions thereto, replacements therefor, all parts therefor, all
substitutions for any of the foregoing, fuel therefor, and all manuals,
drawings, instructions, warranties and rights with respect thereto, and
all products and proceeds thereof and condemnation awards and insurance
proceeds with respect thereto.
5.3 Perfection and Priority. The Security Interest grant
herein shall be a first priority lien on the Collateral, subject to no
other liens, claims or rights of others.
5.4 Affirmative Covenants. The Company covenants that it
shall:
(a) Keep and maintain all Collateral consisting of
equipment and machinery in good operating condition and
repair; make all necessary replacements thereof so that the
value and operating efficiency thereof shall at all times be
maintained and preserved; promptly inform Investor of any
additions to or deletions from such equipment and machinery;
and prevent any such equipment and machinery from becoming a
fixture to real estate or accession to other personal
property;
(b) Promptly discharge any liens, encumbrances or
other claims against the Collateral;
(c) Maintain such insurance as may be required by law
and such other insurance to such extent and against such
hazards and liabilities as is customarily
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maintained by companies similarly situated, and include
Investor as an additional insured on all liability policies;
and
(d) Comply strictly and in all respects with all
applicable environmental laws.
5.5 Negative Covenants. The Company covenants that it shall
not, without Investor's prior written consent, which Investor may or
may not in its sole discretion give:
(a) Enter into any transaction which materially and
adversely affects the Collateral or the Company's ability to
repay the indebtedness under the Debenture;
(b) Remove the Collateral from the Company's facility
at Wellington, Utah, or keep the Collateral at any other
location unless (i) the Company gives Investor written notice
thereof and of the new location of the Collateral at least
thirty (30) days prior thereto, and (ii) the other location is
within the continental United States of America; or
(c) Create or permit any lien on any of the
Collateral, other than liens created hereunder.
5.6 Insurance; Payment of Premiums. The Company shall, at its
sole cost and expense, keep and maintain the Collateral insured for its
full insurable value against loss or damage by fire, theft, explosion,
sprinklers and all other hazards and risks ordinarily insured against
by other owners or users of such properties in similar businesses and
notify Investor promptly of any occurrence causing a material loss or
decline in value of the Collateral and the estimated (or actual, if
available) amount of such loss or decline. All policies of insurance on
the Collateral shall be in form and with insurers recognized as
adequate by prudent business persons and all such policies shall be in
such amounts as may be satisfactory to Investor. The Company shall
deliver to Investor a certificate of insurance and, upon request, the
original (or certified copy) of each policy of insurance, and evidence
of payment of all premiums therefor. Such policies of insurance shall
contain an endorsement, in form and substance acceptable to Investor,
showing loss payable to Investor, as its interests may appear. Such
endorsement, or an independent instrument furnished to Investor, shall
provide that the insurance companies will give Investor at least thirty
(30) days prior written notice before any such policy or policies of
insurance shall be altered or canceled and that no act or default of
the Company or any other person shall affect the right of Investor to
recover under such policy or policies of insurance in case of loss or
damage. The Company hereby directs all insurers under such policies of
insurance to pay all proceeds payable thereunder directly to Investor,
as its interests may appear. The Company irrevocably makes, constitutes
and appoints Investor (and all officers, employees or agents designated
by Investor) as the Company's true and lawful attorney (and
agent-in-fact) for the purpose of making, settling and adjusting claims
under such policies of insurance, endorsing the name
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of the Company on any check, draft, instrument or other items of
payment for the proceeds of such policies of insurance and for making
all determinations and decisions with respect to such policies of
insurance. In the event the Company, at any time hereafter, shall fail
to obtain or maintain any of the policies of insurance required above
or to pay any premium in whole or in part relating thereto, then
Investor, without waiving or releasing any obligations or default by
the Company hereunder, may at any time thereafter (but shall be under
no obligation to) obtain and maintain such policies of insurance and
pay such premium and take any other action with respect thereto which
Investor deems advisable. All sums so disbursed by Investor, including
reasonable attorneys' fees, court costs, expenses and other charges
relating thereto, shall be payable on demand by the Company to Investor
and shall be additional liabilities under the Debenture secured by the
Collateral.
5.7 Remedies Upon Default. In the event of any Event of
Default under the Debenture, Investor may do any one or more of the
following:
(a) Declare any indebtedness under the Debenture
immediately due and payable;
(b) Enforce the security interest given in this
Agreement under the provisions of the Uniform Commercial Code
of the applicable state or any other equivalent law;
(c) Enter upon the premises of the Company, without
any obligation to pay rent to the Company, through self-help
and without judicial process, without first obtaining a final
judgment or giving the Company notice and opportunity for a
hearing on the validity of Investor's claim, or any other
place or places where the Collateral is located and kept, and
remove the Collateral therefrom to the premises of Investor or
any agent of Investor, for such time as Investor may desire,
in order to effectively collect or liquidate the Collateral,
or (ii) require the Company to assemble the Collateral and
make it available to Investor at a place to be designated by
Investor, in its sole discretion;
(d) Take possession of the Collateral or any part of
it and of the records pertaining to the Collateral;
(e) Sell or otherwise dispose of all or any
Collateral at public or private sale or sales, with such
notice as may be required by law, in lots or in bulk, for cash
or on credit, all as Investor, in its sole discretion, may
deem advisable; (ii) adjourn such sales from time to time with
or without notice; (iii) conduct such sales on the Company's
premises or elsewhere and use the Company's premises without
charge for such sales for such time or times as Investor may
see fit. Investor shall have the right to sell, lease or
otherwise dispose of the Collateral, or any part thereof, for
cash, credit or any combination thereof, and Investor may
purchase all or any part of the
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Collateral at public or, if permitted by law, private sale
and, in lieu of actual payment of such purchase price, may
setoff the amount of such price against the indebtedness under
the Debenture. The proceeds realized from the sale of any
Collateral shall be applied first to the reasonable costs,
expenses and attorneys' fees and expenses incurred by Investor
for collection and for acquisition, completion, protection,
removal, storage, sale and delivery of the Collateral; second
to interest due upon any of the indebtedness under the
Debenture; and third to the principal of the indebtedness
under the Debenture. If any deficiency shall arise, the
Company shall remain liable to Investor therefor; and
(f) Exercise any other rights and remedies of a
secured party under the Uniform Commercial Code of the
applicable state or other applicable law, all of which rights
and remedies shall be cumulative and non-exclusive, to the
extent permitted by law.
6. Conditions Precedent
This Agreement shall become effective upon the satisfaction of the
following conditions precedent:
6.1 Execution and Delivery of Agreement. This Agreement or
counterparts thereof shall have been duly executed by, and delivered
to, the Company and the Investor.
6.2 Documents and Other Agreements. The Investor shall have
received all of the following, each in form and substance satisfactory
to the Investor:
(a) The Debenture;
(b) The Warrants (the "Warrants");
(c) Registration Rights Agreement between the Company
and the Investor (the "Registration Rights Agreement");
(d) A Certificate of the Secretary of the Company,
together with true and correct copies of the Certificate of
Incorporation and By-Laws of the Company, and all amendments
thereto, true and correct copies of the resolutions of the
Board of Directors of the Company authorizing or ratifying the
execution, delivery and performance of this Agreement, the
Debenture, the Warrants and the Registration Rights Agreement,
and the names of the officer or officers of the Company
authorized to sign this Agreement, the Debenture, the Warrants
and the Registration Rights Agreement, together with a sample
of the true signature of each such officer;
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(e) Certified copies of all documents evidencing any
other necessary corporate action, consents and governmental
approvals (if any) with respect to this Agreement, the
Debenture, the Warrants and the Registration Rights Agreement;
(f) The favorable opinion of Xxxxxxxxx Xxxxxxx &
XxXxxxxxxx, special counsel for the Company, addressed to the
Investor with respect to such matters as may be reasonably
requested by the Investor;
(g) The favorable opinion of Xxxxxx X. Xxxxxxxx,
general counsel for the Company, addressed to the Investor
with respect to such matters as may be reasonably requested by
the Investor;
(h) The Certificate of Incorporation of the Company
certified by the Secretary of State of Delaware;
(i) Good Standing Certificates for the Company from
the Secretaries of State of Delaware, Alabama, Pennsylvania,
Utah, Virginia and West Virginia;
(j) UCC lien search reports of filings against the
Company for such jurisdictions as the Investor deems
appropriate;
(k) UCC Financing Statements filed against the
Company in respect to such jurisdictions as the Investor deems
appropriate; and
(l) Landlord's Waiver and Consent by Earthco;
(m) Certificate of insurance, together with a
properly executed Lender's Loss Payable Clause.
6.3 Absence of Material Adverse Change. No material adverse
change in the business, operations or condition, financial or
otherwise, of the Company shall have occurred or be continuing.
6.4 Conditions to the Closing. It shall be a condition to the
Closing that the conditions contained in Sections 5.1, 5.2 and 5.3
shall have been fulfilled.
7. Miscellaneous.
7.1 Survival of Warranties. The warranties, representations
and covenants of the Company and the Investor contained in or made
pursuant to this Agreement shall survive the execution and delivery of
this Agreement and the Closing and shall in no way be affected by any
investigation of the subject matter thereof made by or on behalf of
Investor or the Company.
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7.2 Successors and Assigns. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective successors and assigns of
the parties (including transferees of the Debenture issued hereunder or
any Common Stock issued upon exercise of the Warrants).
7.3 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Utah without regard to choice
of law principles.
7.4 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
7.5 Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.
7.6 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be
deemed effectively given upon personal delivery to the party to be
notified or upon deposit with a reputable overnight courier or with the
United States Post Office, by registered or certified mail, postage
prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other
address as such party may designate by ten (10) days advance written
notice to the other parties.
7.7 Expenses. Each party shall bear its own expenses in
connection with the transactions contemplated by this Agreement.
7.8 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived
only with the written consent of the Company and the Investor. Any
amendment or waiver effected in accordance with this Section shall be
binding upon each holder of any securities purchased under this
Agreement at the time outstanding, each future holder of all such
securities, and the Company.
7.9 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall
be excluded from this Agreement and the balance of the Agreement shall
be interpreted as if such provision were so exuded and shall be
enforceable in accordance with its terms.
7.10 Indemnity. The Company hereby indemnifies the Investor,
and its directors, officers, employees, affiliates and agents
(collectively, "Indemnified Persons") against, and agrees to hold each
such Indemnified Person harmless from, any and all losses, claims,
damages and liabilities, including claims brought by any stockholder or
former stockholder
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of the Company, and related expenses, including reasonable counsel fees
and expenses, incurred by such Indemnified Person arising out of any
claim, litigation, investigation or proceeding (whether or not such
Indemnified Person is a party thereto) relating to any transactions,
services or matters that are the subject of this Agreement; provided,
however, that such indemnity shall not apply to any such losses,
claims, damages, or liabilities or related expenses determined by a
court of competent jurisdiction to have arisen from the gross
negligence or willful misconduct of such Indemnified Person.
7.11 Waiver of Trial by Jury. THE COMPANY AND THE INVESTOR
HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR
COUNTERCLAIM OF ANY KIND DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATED TO THIS AGREEMENT OR THE DEBENTURE OR ANY ACT OR OMISSION WHICH
EITHER PARTY ASSERTS RESULTED IN ANY LIABILITY TO THE COMPANY, THE
INVESTOR OR THEIR RESPECTIVE OFFICERS, DIRECTORS, STOCKHOLDERS,
PARTNERS, EMPLOYEES OR AGENTS, TO THE FULL EXTENT PERMITTED BY LAW.
7.12 Entire Agreement. This Agreement, the Debenture, and
other documents delivered pursuant hereto constitute the full and
entire understanding and agreement between the parties with regard to
the subjects hereof and thereof.
7.13 Permissible Offset. To the extent the Company fails to
make payment of principal or interest when due under the Debenture,
Holder may setoff the amount of such deficiency against "Royalty
Amounts" (net of any commission that the Company would be required to
pay (e.g., Coalco)) due and owing to the Company from the Holder. For
purposes of this Section 7.13, "Royalty Amounts" shall mean royalties
and license fees due to the Company either from the Holder or from any
of the Holder's assigns or transferees that may owe a royalty or
license fee to the Company.
THE SECURITIES ARE SUITABLE ONLY FOR SOPHISTICATED INVESTORS FOR WHOM AN
INVESTMENT IN THE SECURITIES DOES NOT CONSTITUTE A COMPLETE INVESTMENT PROGRAM
AND WHO FULLY UNDERSTAND AND ARE WILLING TO ASSUME THE RISK INVOLVED IN PURCHASE
OF THE SECURITIES. NO OFFER TO SELL (OR SOLICITATION OF AN OFFER TO BUY) IS
BEING MADE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL. THERE WILL BE NO PUBLIC OFFERING OF THE SECURITIES.
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS
INVOLVED. THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY ANY FEDERAL OR
STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY NOR HAS ANY SUCH FEDERAL OR
STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY PASSED UPON THE
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ACCURACY OR ADEQUACY OF ANY INFORMATION PROVIDED HEREWITH. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
Address: 0000 Xxxxx Xxxxxxxx Xxxx COVOL TECHNOLOGIES, INC.
Xxxx, Xxxx 00000
By: /Xxxxxxx X. Xxxxxxx/
-------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: President
Address: The Xxxxxxxxx Centre AJG FINANCIAL SERVICES, INC.
Xxx Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxx 00000-0000
By: /Xxxxx X. Xxxx/
-------------------------
Name: Xxxxx X. Xxxx
Title: President
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