Exhibit 4.1
SECURITIES PURCHASE AGREEMENT
AGREEMENT, dated as of November 8, 2002, between Dial-Thru
International Corporation (the " Company") and Global Capital Funding
Group, L.P. (" Purchaser").
R E C I T A L S:
WHEREAS, the Company desires to sell and issue to the Purchaser, and
Purchaser desires to purchase from the Company, a $1,250,000 principal
amount Secured Promissory Note due November 8, 2004 (" Note"), with terms
and conditions as set forth in the form of Note attached hereto as Exhibit
A; and
WHEREAS, in order to induce the Purchaser to enter into the
transactions described in this Agreement, the Company desires to issue
to the Purchaser up to an aggregate of 500,000 warrants to purchase shares
of Common Stock upon the Closing (as defined herein) on the terms and
conditions described in the form of the common stock purchase warrant
attached hereto as Exhibit E (the " Warrants"); and
WHEREAS, the Purchaser will have certain registration rights with
respect to such shares of Common Stock issuable upon exercise of the
Warrants (the " Warrant Shares") as set forth in the Registration Rights
Agreement in the form attached hereto as Exhibit B; and
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1. DEFINITIONS
ARTICLE 1.1 Definitions . The following terms, as used herein, have
the following meanings:
"Affiliate" means, with respect to any Person (the " Subject Person"),
(i) any other Person (a " Controlling Person") that directly, or indirectly
through one or more intermediaries, Controls the Subject Person or (ii) any
other Person (other than the Subject Person or a Consolidated Subsidiary of
the Subject Person) which is Controlled by or is under common Control with
a Controlling Person.
"Agreement" means this Securities Purchase Agreement, as amended,
supplemented or otherwise modified from time to time in accordance with
its terms.
"Asset Sale" has the meaning set forth in Section 8.4.
"Benefit Arrangement" means at any time an employee benefit plan within
the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer
Plan and which is maintained or otherwise contributed to by the Company.
"Benefit Plans" has the meaning set forth in Section 4.9(b).
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized or required by
law to close.
"Capital Reorganization" has the meaning set forth in Section 11.6.
"Change in Control" means (i) after the date of this Agreement, any
person or group of persons (within the meaning of Sections 13 and 14 of the
Exchange Act and the rules and regulations of the Commission relating to
such sections) other than the Purchaser shall have acquired beneficial
ownership (within the meaning of Rules 13d-3 and 13d-5 promulgated by the
Commission pursuant to the Exchange Act) of 33a% or more of the outstanding
shares of Common Stock of the Company; (ii) individuals constituting the
Board of Directors of the Company on the date hereof (together with any new
Directors whose election by such Board of Directors or whose nomination for
election by the stockholders of the Company was approved by a vote of at
least 50.1% of the Directors still in office who are either Directors as of
the date hereof or whose election or nomination for election was previously
so approved), cease for any reason to constitute at least two-thirds of the
Board of Directors of the Company then in office and (iii) any sale or
other disposition (other than by reason of death or disability) by Xxxx
Xxxxxxx, Chief Executive Officer and Chairman, to any Person of more than
an aggregate of 500,000 shares of Common Stock of the Company, without the
prior written consent of Purchaser during the term of the Note.
"Closing Bid Price" shall mean for any security as of any date, the
lowest closing bid price as reported by Bloomberg, L.P. (" Bloomberg") on
the principal securities exchange or trading market where such security is
listed or traded or, if the foregoing does not apply, the lowest closing bid
price of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no lowest
trading price is reported for such security by Bloomberg, then the average
of the bid prices of any market makers for such securities as reported in
the "Pink Sheets" by the National Quotation Bureau, Inc. If the lowest
closing bid price cannot be calculated for such security on such date on
any of the foregoing bases, the lowest closing bid price of such security
on such date shall be the fair market value as mutually determined by the
Purchaser and the Company for which the calculation of the closing bid price
requires, and in the absence of such mutual determination, as determined by
the Board of Directors of the Company in good faith.
"Closing Date" means the date on which all of the conditions set forth
in Sections 6.1 and 6.2 shall have been satisfied and Note in the aggregate
principal amount of $1,250,000 and Warrants to acquire 500,000 shares of
Common Stock are issued by the Company to the Purchaser.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" has the meaning set forth in the Security Agreement
"Commission" means the Securities and Exchange Commission or any entity
succeeding to all of its material functions.
"Common Stock" means the common stock, $.001 par value per share, of
the Company.
"Company" means Dial-Thru International Corporation, a Delaware
corporation.
"Company Corporate Documents" means the certificate of incorporation
and bylaws of the Company.
"Consolidated Subsidiary" means at any date with respect to any Person
or Subsidiary or other entity, the accounts of which would be consolidated
with those of such Person in its consolidated financial statements if such
statements were prepared as of such date.
"Control" (including, with correlative meanings, the terms
"Controlling," "Controlled by" and under "common Control with"), as used
with respect to any Person, means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
that Person, whether through the ownership of voting securities, by contract
or otherwise.
"Deadline" has the meaning set forth in Section 10.1.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, Note, or other similar instruments
issued by such Person, (iii) all obligations of such Person as lessee which
(y) are capitalized in accordance with GAAP or (z) arise pursuant to sale-
leaseback transactions, (iv) all reimbursement obligations of such Person in
respect of letters of credit or other similar instruments, (v) all Debt of
others secured by a Lien on any asset of such Person, whether or not such
Debt is otherwise an obligation of such Person and (vi) all Debt of others
Guaranteed by such Person.
"Debt from Related Persons"means (i) Existing Debt from Related Persons
and (ii) New Debt from Related Persons.
"Default" means any event or condition which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Default Fee" has the meaning set forth in Section 10.4.
"Directors" means the individuals then serving on the Board of
Directors or similar such management council of the Company.
"Environmental Laws" means any and all federal, state and local
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges or releases of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes
into the environment, including, without limitation, ambient air, surface
water, ground water, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, petroleum or petroleum products,
chemicals or industrial, toxic or hazardous substances or wastes or the
cleanup or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, or any successor statute.
"ERISA Group" means the Company and each Subsidiary.
"Event of Default" has the meaning set forth in Article XII hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Debt from Related Persons" means those certain 10%
Convertible Notes of the Company in the aggregate principal amount of
$2,348,391 issued to the Related Persons on October 25, 2001, as such
obligations may be amended and restated from time to time.
"Financing" means a public or private financing consummated (meaning
closing and funding) through the issuance of debt or equity securities (or
securities convertible into or exchangeable for debt or equity securities)
of the Company for cash, except for the issuance of stock options or
warrants to purchase the Company's Common Stock.
"Fixed Price" has the meaning set forth in Section 11.1.
"Formula Price" shall mean a dollar amount equal to the aggregate
principal amount of the Note then outstanding, together with all accrued
and unpaid interest thereon.
"GAAP" has the meaning set forth in Section 1.2.
"Intellectual Property" has the meaning set forth in Section 4.20.
"Interest Shares" shall mean any shares of Common Stock issued to
Purchaser pursuant to the terms of the Note as payment of interest on the
Note.
"Investment" means any investment in any Person, whether by means of
share purchase, partnership interest, capital contribution, loan, time
deposit or otherwise.
"Lien" means any lien, mechanic's lien, materialmen's lien, lease,
easement, charge, encumbrance, mortgage, conditional sale agreement, title
retention agreement, agreement to sell or convey, option, claim, title
imperfection, encroachment or other survey defect, pledge, restriction,
security interest or other adverse claim, whether arising by contract or
under law or otherwise (including, without limitation, any financing lease
having substantially the same economic effect as any of the foregoing, and
the filing of any financing statement under the Uniform Commercial Code or
comparable law of any jurisdiction in respect of any of the foregoing).
"Majority Holders" means (i) as of the Closing Date, the Purchaser and
(ii) at any time thereafter, the holders of more than 50% in aggregate
principal amount of the Note outstanding at such time.
"Material Plan" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $500,000.
"Maturity Date" shall mean the date of maturity of the Note;
specifically, November 8, 2004.
"NASD" has the meaning set forth in Section 7.10.
"Nasdaq Market" means the Nasdaq Stock Market's National Market System.
"National Market" means the Nasdaq Market, the Nasdaq Small Cap Market,
the New York Stock Exchange, Inc. or the American Stock Exchange, Inc.
"Net Cash Proceeds" means, with respect to any transaction, the total
amount of cash proceeds received by the Company or any Subsidiary less
(i) reasonable underwriters' fees, brokerage commissions, reasonable
professional fees and other customary out-of-pocket expenses payable in
connection with such transaction, and (ii) in the case of dispositions of
assets, (A) actual transfer taxes (but not income taxes) payable with
respect to such dispositions, and (B) the amount of Debt, if any, secured by
a Lien on the asset or assets disposed of and required to be, and actually
repaid by the Company or any Subsidiary in connection therewith, and any
trade payables specifically relating to such asset or assets sold by the
Company or any Subsidiary that are not assumed by the purchaser of such
asset or assets.
"New Debt from Related Persons" means an aggregate of $1,000,000 loaned
to the Company at any one time or from time to time following the Closing by
one or more of the Related Persons.
"Notice of Exercise" means the form to be delivered by a holder of a
Warrant upon exercise of all or a portion thereof to the Company
substantially in the form of Exhibit A to the form of Warrant.
"Officer's Certificate" shall mean a certificate executed by the
President, chief executive officer or chief financial officer of the
Company in the form of Exhibit D attached hereto.
"OTC Bulletin Board" means the over-the-counter bulleting board
operated by the NASD.
"Other Taxes" has the meaning set forth in Section 3.6(b).
"Pay-off Amount" means the total principal amount plus any accrued and
unpaid interest outstanding on the Company's $1,000,000 Principal Amount 6%
Convertible Debenture owned by Purchaser.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permits" means all domestic and foreign licenses, franchises, grants,
authorizations, permits, easements, variances, exemptions, consents,
certificates, orders and approvals necessary to own, lease and operate
the properties of, and to carry on the business of the Company and the
Subsidiaries.
"Person" means an individual, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock
Company, government (or any agency or political subdivision thereof) or
other entity of any kind.
"Plan" means at any time an employee pension benefit plan which is
covered by Title IV of ERISA or subject to the minimum funding standards
under the Code and either (i) is maintained, or contributed to, by any
member of the ERISA group for employees of any member of the ERISA group
or (ii) has at any time within the preceding five years been maintained, or
contributed to, by any Person which was at such time a member of the ERISA
group for employees of the Person which was at such time a member of the
ERISA Group.
"Purchase Price" means the purchase price for the Securities set forth
in Section 2.2 hereof.
"Purchaser" means Global Capital Funding Group, L.P. and its successors
and assigns, including holders from time to time of the Note.
"Registrable Securities" has the meaning set forth in Section 10.4(a).
"Registration Default" has the meaning set forth in Section 10.4(c).
"Registration Statement" has the meaning set forth in Section 10.4(b).
"Registration Rights Agreement" means the agreement between the Company
and the Purchaser dated the date hereof substantially in the form set forth
in Exhibit B attached hereto.
"Related Person" means one or more of the following Persons: Xxxx
Xxxxxxx, Xxxxx Xxxxxxxxx and Xxxxx Xxxxxx.
"Required Effectiveness Date" has the meaning set forth in
Section 10.4(b).
"Reserved Amount" has the meaning set forth in Section 7.10.
"Sale Event" has the meaning set forth in Section 3.4.
"SEC Reports" shall have the meaning set forth in Section 4.7.
"Securities" means the Note, Interest Shares, the Warrants and the
Warrant Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Agreement" means that certain Security Agreement between the
Company and Purchaser, pursuant to which certain of the Company's assets
will serve as collateral to secure the Note, in the form set forth in
Exhibit F attached hereto.
"Share Reorganization" has the meaning set forth in Section 11.2.
"Solvency Certificate" shall mean a certificate executed by the chief
executive officer of the Company as to the solvency of the Company, the
adequacy of its capital and its ability to pay its debts, all after giving
effect to the issuance and sale of the Note, which such Solvency Certificate
shall be in the from of Exhibit C attached hereto.
"Subsidiaries" has the meaning set forth in Section 4.27.
"Subsidiary Corporate Documents" means the certificates of
incorporation and bylaws of each Subsidiary.
"Taxes" has the meaning set forth in Section 3.6.
"Trading Day" shall mean any Business Day in which the OTC Bulleting
Board, National Market or other automated quotation system or exchange on
which the Common Stock is then traded is open for trading for at least four
(4) hours.
"Transaction Agreements" means this Agreement, the Note, the Security
Agreement, the Warrants, and the Registration Rights Agreement.
"Transfer" means any disposition of Securities that would constitute
a sale thereof under the Securities Act.
"Unfunded Liabilities" means, with respect to any Plan at any time, the
amount (if any) by which (i) the present value of all benefits under Plan
exceeds (ii) the fair market value of all Plan assets allocable to such
benefits (excluding any accrued but unpaid contributions), all determined as
of the then most recent valuation date for such Plan, but only to the extent
that such excess represents a potential liability of a member of the ERISA
Group to the PBGC or any other Person under Title IV of ERISA.
"Warrants" means the Common Stock Purchase Warrants issued to the
Purchaser for up to an aggregate of 500,000 shares of Common Stock on the
Closing Date in the form of Exhibit E hereto.
"Warrant Shares" has the meaning set forth in the Recitals.
ARTICLE 1.2 Accounting Terms and Determinations . Unless otherwise
specified herein, all accounting terms used herein shall be interpreted,
all accounting determinations hereunder shall be made, and all financial
statements required to be delivered hereunder shall be prepared, in
accordance with generally accepted accounting principles as in effect from
time to time, applied on a consistent basis (except for changes concurred in
by the Company's independent public accountants) (" GAAP"). All references
to "dollars," "Dollars" or "$" are to United States dollars unless otherwise
indicated.
ARTICLE 2. PURCHASE AND SALE OF SECURITIES
ARTICLE 2.1 Purchase and Sale of Note .
(a) Subject to the terms and conditions set forth herein, the
Company agrees to issue and sell to Purchaser, and Purchaser agrees to
purchase from the Company, the Note in the aggregate principal amount
of up to $1,250,000.
(b) Purchaser shall acquire the Note on the Closing Date in an
aggregate principal amount of One Million Two Hundred Fifty Thousand
Dollars ($1,250,000).
(c) In connection with the Purchaser's agreement to purchase the
Note specified in this Article II, the Company shall issue and deliver
to the Purchaser on the Closing Date, Warrants to purchase an aggregate
of 500,000 shares of Common Stock.
(d) The Note is secured by certain assets of the Company pursuant
to the Security Agreement (the "Security Agreement"), of even date
herewith.
ARTICLE 2.2 Purchase Price . The purchase price for the Note and
Warrants shall be $1,250,000 (the " Purchase Price") and shall be allocated
as set forth on Schedule 2.2.
ARTICLE 2.3 Closing and Mechanics of Payment . Subject to satisfaction
of the conditions set forth in Sections 6.1 and 6.2 hereof, the Closing Date
shall occur on November 8, 2002.
ARTICLE 3. PAYMENT TERMS OF NOTE
ARTICLE 3.1 Ranking; Payment of Principal and Interest; Payment
Mechanics . The Note shall rank pari passu in right of payment (but not with
respect to the rights in the Collateral (as defined in the Note)) to the
Company's outstanding debt as of the Closing Date and senior to any debt
incurred by the Company following the Closing Date. The Company will pay
all amounts due on each Note by the method and at the address specified
for such purpose by the applicable Purchaser in writing, without the
presentation or surrender of any Note or the making of any notation thereon,
except that upon written request of the Company made concurrently with or
reasonably promptly after payment or prepayment in full of the Note, the
holder shall surrender the Note for cancellation, reasonably promptly after
any such request, to the Company at its principal executive office. Prior
to any sale or other disposition of any Note, the holder thereof will, at
its election, either endorse thereon the amount of principal paid thereon
and the last date to which interest has been paid thereon or surrender the
Note to the Company in exchange for a new Note. The Company will afford the
benefits of this Section 3.1 to any direct or indirect transferee of the
Note and that has made the same agreement relating to this Note as the
Purchaser has in this Section 3.1; provided that such transferee is an
"accredited investor" under Rule 501 of the Securities Act and has delivered
to the Company such representations, warranties and covenants as may be
reasonably requested thereby.
ARTICLE 3.2 . Payment of Interest . Interest shall accrue on the
outstanding principal amount of the Note as of the date of issuance and
shall be payable as specified therein.
ARTICLE 3.3 Voluntary Prepayment . For so long as an Event of Default
has not occurred and is continuing, the Company may at any time until the
Maturity Date, at its option, repay, the full amount of, the Note at the
Pre-Payment Price set forth in the Note following at least five (5) Business
Days prior written notice to the Purchaser (the expiration of such five (5)
Business Day period being referred to as the "Prepayment Date"); provided,
however, that if such date is not a Business Day, the Prepayment Date shall
be the next Business Day thereafter.
ARTICLE 3.4 Mandatory Prepayments .
(a) Upon the occurrence of a (i) Change in Control of the Company or
(ii) a transfer of all or substantially all of the assets of the Company to
any Person in a single transaction or series of related transactions, or
(iii) a consolidation, merger or amalgamation of the Company with or into
another Person in which the Company is not the surviving entity (other
than a merger which is effected solely to change the jurisdiction of
incorporation of the Company and results in a reclassification, conversion
or exchange of outstanding shares of Common Stock solely into shares of
Common Stock), (each a " Sale Event"), or the occurrence of a Registration
Default which continues uncured for a period of sixty (60) days, then, in
each case, the Company shall, upon request of the Majority Holders, redeem
this Note in cash for the then applicable Prepayment Price.
(b) Upon the consummation of one or more Financings other than the
issuance of New Debt from Related Persons, the Company shall use 25% of the
Net Cash Proceeds therefrom (unless the Net Cash Proceeds from each such
Financing is less than $250,000) to redeem the Note. The redemption price
payable upon any such redemption shall be the Prepayment Price.
ARTICLE 3.5 Prepayment Procedures .
(a) Any permitted prepayment or redemption of the Note pursuant to
Sections 3.3 or 3.4 above shall be deemed to be effective and consummated
(for purposes of determining the Formula Price or Pre-Payment Price as
follows:
(i) A prepayment pursuant to Section 3.3, the "Prepayment Date"
specified therein;
(ii) A redemption pursuant to Section 3.4(a), the date of
consummation of the applicable Sale Event or the Registration Default;
and
(iii) A redemption pursuant to Section 3.4(b), three (3)
Business Days following the date of consummation of the applicable
Financing (meaning closing and funding).
(b) On the Maturity Date (if the Company has elected to repay in cash
the remaining principal balance of the Note) or on the effective date of a
repayment or redemption a portion of the principal balance of the Note as
specified in Section 3.5(a) above, the Company shall deliver by wire
transfer of funds the repayment/redemption price to each Purchaser of the
Note subject to redemption. Should any Purchaser not receive payment of any
amounts due on redemption of its Note by reason of the Company's failure to
make payment within three business days of the times prescribed above for
any reason, the Company shall pay to the applicable holder on demand
(x) interest on the sums not paid when due at an annual rate equal to the
lesser of (I) the maximum lawful rate and (II) 18% per annum, compounded
at the end of each thirty (30) days, until the applicable holder is paid
in full and (y) all costs of collection, including, but not limited to,
reasonable attorneys' fees and costs, whether or not suit or other formal
proceedings are instituted.
ARTICLE 3.6 Payment of Additional Amounts .
(a) Any and all payments by the Company hereunder or under the Note to
any Purchaser and each "qualified assignee" thereof shall be made free and
clear of and without deduction or withholding for any and all present or
future taxes, levies, imposts, deductions, charges or withholdings, and
all liabilities with respect thereto (all such taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter referred
to as " Taxes") unless such Taxes are required by law or the administration
thereof to be deducted or withheld. If the Company shall be required by
law or the administration thereof to deduct or withhold any Taxes from or
in respect of any sum payable under the Note (i) the holders of the Note
subject to such Taxes shall have the right, but not the obligation, for a
period of thirty (30) days commencing upon the day it shall have received
written notice from the Company that it is required to withhold Taxes to
transfer all or any portion of the Note to a qualified assignee to the
extent such transfer can be effected in accordance with the other provisions
of this Agreement and applicable law; (ii) the Company shall make such
deductions or withholdings; and (iii) the Company shall forthwith pay the
full amount deducted or withheld to the relevant taxation or other authority
in accordance with applicable. A "qualified assignee" of a Purchaser is a
Person that is organized under the laws of (I) the United States or (II)
any jurisdiction other than the United States or any political subdivision
thereof and that (y) represents and warrants to the Company that payments of
the Company to such assignee under the laws in existence on the date of this
Agreement would not be subject to any Taxes and (z) from time to time, as
and when requested by the Company, executes and delivers to the Company
and the Internal Revenue Service forms, and provides the Company with any
information necessary to establish such assignee's continued exemption from
Taxes under applicable law.
(b) Within 30 days after the date of any payment of Taxes, the Company
will furnish to Purchaser the original or a certified copy of a receipt
evidencing payment thereof.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Purchaser as of the Closing
Date, the following:
ARTICLE 4.1 Organization and Qualification . The Company and each
Subsidiary is a corporation (or other legal entity) duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, with full power and authority to own, lease, use and operate
its properties and to carry on its business as and where now owned, leased,
used, operated and conducted. The Company is qualified to conduct business
as a foreign corporation and is in good standing in every jurisdiction in
which the nature of the business conducted by it makes such qualification
necessary, except where such failure would not have a Material Adverse
Effect. A " Material Adverse Effect" means any material adverse effect
on the operations, results of operations, properties, assets or condition
(financial or otherwise) of the Company or the Company and its Subsidiaries,
taken as a whole, or on the transactions contemplated hereby or by the
agreements or instruments to be entered into in connection herewith.
ARTICLE 4.2 Authorization and Execution .
(a) The Company has all requisite corporate power and authority to
enter into and perform each Transaction Agreement and to consummate the
transactions contemplated hereby and thereby and to issue the Securities
in accordance with the terms hereof and thereof.
(b) The execution, delivery and performance by the Company of each
Transaction Agreement and the issuance by the Company of the Securities have
been duly and validly authorized and no further consent or authorization of
the Company, its Board of Directors or its shareholders is required.
(c) This Agreement has been duly executed and delivered by the
Company.
(d) This Agreement constitutes, and upon execution and delivery
thereof by the Company, each of the Transaction Agreements will constitute,
a valid and binding agreement of the Company, in each case enforceable
against the Company in accordance with its respective terms, subject to
(i) applicable bankruptcy, insolvency or similar laws affecting the
enforceability of creditors rights generally and (ii) equitable principles
of general applicability.
ARTICLE 4.3 Capitalization . As of the date hereof, the authorized,
issued and outstanding capital stock of the Company is as set forth on
Schedule 4.3 hereto and no other shares of capital stock of the Company
will be outstanding as of the Closing Date. All of such outstanding shares
of capital stock are, or upon issuance will be, duly authorized, validly
issued, fully paid and nonassessable. No shares of capital stock of the
Company are subject to preemptive rights or similar rights of the
stockholders of the Company or any liens or encumbrances imposed through
the actions or failure to act of the Company. Other than as set forth on
Schedule 4.3 hereto, as of the date hereof, (i) there are no outstanding
options, warrants, scrip, rights to subscribe for, puts, calls, rights of
first refusal, agreements, understandings, claims or other commitments or
rights of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for any shares of capital stock of the
Company or any of its Subsidiaries, or arrangements by which the Company or
any of its Subsidiaries is or may become bound to issue additional shares
of capital stock of the Company or any of its Subsidiaries, and (ii) there
are no agreements or arrangements under which the Company or any of its
Subsidiaries are obligated to register the sale of any of its or their
securities under the Securities Act (except pursuant to the Registration
Rights Agreement and the Registration Rights Agreement between the Company
and Purchaser dated April 11, 2001) and (iii) there are no anti-dilution or
price adjustment provisions contained in any security issued by the Company
(or in any agreement providing rights to security holders) that will be
triggered by the issuance of the Note, Warrants or Warrant Shares. The
Company has furnished to Purchaser true and correct copies of the Company's
Corporate Documents, and the terms of all securities convertible into or
exercisable for Common Stock and the material rights of the holders thereof
in respect thereto.
ARTICLE 4.4 Governmental Authorization . The execution and delivery by
the Company of the Transaction Agreements does not and will not, the
issuance and sale by the Company of the Securities does not and will not,
and the consummation of the transactions contemplated hereby and by the
other Transaction Agreements will not, require any action by or in respect
of, or filing with, any governmental body, agency or governmental official
except (a) such actions or filings that have been undertaken or made prior
to the date hereof and that will be in full force and effect (or as to
which all applicable waiting periods have expired) on and as of the date
hereof or which are not required to be filed on or prior to the Closing
Date, (b) such actions or filings that, if not obtained, would not result
in a Material Adverse Effect, and (c) the filing of a "Form D" and relevant
blue sky filings, each as described in Section 7.13 below.
ARTICLE 4.5 Issuance of Shares . Upon exercise in accordance with the
terms of the Warrants (assuming the payment of the exercise price set forth
in the Warrants), the Warrant Shares and the Interest Shares (if any) shall
be duly and validly issued and outstanding, fully paid and nonassessable,
free and clear of any Taxes, Liens and charges with respect to issuance and
shall not be subject to preemptive rights or similar rights of any other
stockholders of the Company. Assuming the representations and warranties of
the Purchaser herein are true and correct in all material respects, each of
the Securities will have been issued in material compliance with all
applicable U.S. federal and state securities laws.
ARTICLE 4.6 No Conflicts . The execution and delivery by the Company
of the Transaction Agreements, the issuance and sale by the Company of the
Securities and the consummation of the transactions contemplated hereby and
by the other Transaction Agreements will not, contravene or constitute a
default under or violation of (i) any provision of applicable law or
regulation, (ii) the Company Corporate Documents, (iii) any agreement,
judgment, injunction, order, decree or other instrument binding upon the
Company or any Subsidiary or any of their respective assets, or result in
the creation or imposition of any Lien on any asset of the Company or any
Subsidiary. The Company and each Subsidiary is in compliance with and
conforms to all statutes, laws, ordinances, rules, regulations, orders,
restrictions and all other legal requirements of any domestic or foreign
government or any instrumentality thereof having jurisdiction over the
conduct of its businesses or the ownership of its properties, except where
such failure would not have a Material Adverse Effect.
ARTICLE 4.7 Financial Information and SEC Reports . Since January 1,
2001, the Company has timely filed all forms, reports and documents with the
Commission required to be filed by it under the Exchange Act through the
date hereof (all of the foregoing filed prior to the date hereof and all
exhibits included therein and financial statements and schedules thereto and
documents (other than exhibits) incorporated by reference therein, being
referred to herein collectively as the " SEC Reports"). The Company has
delivered or made available to each Purchaser true and complete copies of
the SEC Reports, except for such exhibits and incorporated documents. Such
SEC Reports, at the time filed, complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the
Commission thereunder applicable to such SEC Reports. None of the SEC
Reports, including without limitation, any financial statements or schedules
included therein, contains any untrue statement of a material fact or omits
to state a material fact necessary to in order to make the statements made,
in light of the circumstances under which they were made, not misleading.
There have been no material adverse changes in the Company's business,
properties, results of operations, condition (financial or otherwise) or
prospects since the date of the Company's most recent Report on Form 10-K
for the year ended October 31, 2001 which have not been disclosed in the
Company's SEC Reports or to the Purchaser in writing. The audited and
unaudited consolidated balance sheets of the Company and its Subsidiaries
contained in the SEC Reports, and the related consolidated statements of
income, changes in stockholders' equity and changes in cash flows for the
periods then ended, including the footnotes thereto, except as indicated
therein, (i) complied in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission with
respect thereto and (ii) have been prepared in accordance with GAAP
consistently applied throughout the periods indicated, except that the
unaudited financial statements do not contain footnotes, may be in condensed
or summary form and may be subject to normal audit adjustments and normal
annual adjustments. Such financial statements fairly present in all
material respects the financial condition of the Company and its
Subsidiaries at the dates indicated and the consolidated results of
their operations and cash flows for the periods then ended and, except as
indicated therein, reflect all claims against and all Debts and liabilities
of the Company and its Subsidiaries, fixed or contingent. Since January 1,
2002, except as disclosed in the SEC Reports, there has been (x) no material
adverse change in the assets or liabilities, or in the business or
condition, financial or otherwise, or in the results of operations or
prospects, of the Company and its Subsidiaries, whether as a result of any
legislative or regulatory change, revocation of any license or rights to
do business, fire, explosion, accident, casualty, labor trouble, flood,
drought, riot, storm, condemnation, act of God, public force or otherwise
and (y) no material adverse change in the assets or liabilities, or in
the business or condition, financial or otherwise, or in the results of
operations or prospects, of the Company and its Subsidiaries except in the
ordinary course of business; and no fact or condition exists or, to the
knowledge of the Company, is contemplated or threatened which might be
reasonably expected to cause such a change in the future.
ARTICLE 4.8 Litigation . Except as set forth On Schedule 4.8, there is
no action, suit or proceeding pending or, to the knowledge of the Company,
threatened against the Company or any Subsidiary, before any court or
arbitrator or any governmental body, agency or official in which there is
a reasonable possibility of an adverse decision which could materially
adversely affect the business, condition (financial or otherwise),
operations, performance, properties or prospects of the Company or which
challenges the validity of any Transaction Agreements.
ARTICLE 4.9 Compliance with ERISA and other Benefit Plans .
(a) Each member of the ERISA Group has fulfilled its obligations under
the minimum funding standards of ERISA and the Code with respect to each
Plan and is in compliance in all material respects with the presently
applicable provisions of ERISA and the Code with respect to each Plan. No
member of the ERISA Group has (i) sought a waiver of the minimum funding
standard under Section 412 of the Code in respect of any Plan, (ii) failed
to make any required contribution or payment to any Plan or Multiemployer
Plan or in respect of any Benefit Arrangement, or made any amendment to
any Plan or Benefit Arrangement, which has resulted or could be reasonably
expected to result in the imposition of a Lien or the posting of a bond or
other security under ERISA or the Code or (iii) incurred any liability under
Title IV of ERISA other than a liability to the PBGC for premiums under
Section 4007 of ERISA, if any.
(b) The benefit plans not covered under clause (a) above (including
profit sharing, deferred compensation, stock option, employee stock
purchase, bonus, retirement, health or insurance plans, collectively the "
Benefit Plans") relating to the employees of the Company are duly registered
where required by, and are in good standing in all material respects under,
all applicable laws. All required employer and employee contributions under
the Benefit Plans to the date hereof have been made, the respective fund or
funds established under the Benefit Plans, if any, are funded in accordance
with applicable laws, and no past service funding liabilities exist
thereunder.
(c) No Benefit Plans have any unfunded liabilities, either on a
"going concern" or "winding up" basis and determined in accordance with all
applicable laws and actuarial practices and using actuarial assumptions and
methods that are reasonable in the circumstances. No event has occurred and
no condition exists with respect to any Benefit Plans that has resulted or
could reasonably be expected to result in any pension plan having its
registration revoked or wound up (in whole or in part) or refused for the
purposes of any applicable laws or being placed under the administration of
any relevant pension benefits regulatory authority or being required to pay
any taxes or penalties (in any material amounts) under any applicable laws.
ARTICLE 4.10 Environmental Matters . The costs and liabilities
associated with Environmental Laws (including the cost of compliance
therewith) are unlikely to have a material adverse effect on the business,
condition (financial or otherwise), operations, performance, properties or
prospects of the Company or any Subsidiary. Each of the Company and the
Subsidiaries conducts its businesses in compliance in all material respects
with all applicable Environmental Laws.
ARTICLE 4.11 Taxes . Except as set forth on Schedule 4.11 (unpaid
excise taxes) all United States federal, state, county, municipality, local
or foreign income tax returns and all other material tax returns (including
foreign tax returns) which are required to be filed by or on behalf of the
Company and each Subsidiary have been filed and all material taxes due
pursuant to such returns or pursuant to any assessment received by the
Company and each Subsidiary have been paid except those being disputed in
good faith and for which adequate reserves have been established. The
charges, accruals and reserves on the books of the Company and each
Subsidiary in respect of taxes have been established in accordance with
GAAP and Regulation S-X of the Exchange Act.
ARTICLE 4.12 Investments, Joint Ventures . Other than as set forth in
Schedule 4.12, the Company has no direct or indirect Investment in any
Person, and the Company is not a party to any partnership, management,
shareholders' or joint venture or similar agreement.
ARTICLE 4.13 Not an Investment Company . Neither the Company nor any
Subsidiary is an "Investment Company" within the meaning of Investment
Company Act of 1940, as amended.
ARTICLE 4.14 Full Disclosure . The information heretofore furnished by
the Company to the Purchaser for purposes of or in connection with this
Agreement or any transaction contemplated hereby does not, and all such
information hereafter furnished by the Company or any Subsidiary to the
Purchaser will not (in each case taken together and on the date as of which
such information is furnished), contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements contained therein, in the light of the circumstances under which
they are made, not misleading.
ARTICLE 4.15 No Solicitation; No Integration with Other Offerings . No
form of general solicitation or general advertising was used by the Company
or, to the best of its actual knowledge, any other Person acting on behalf
of the Company, in connection with the offer and sale of the Securities.
Neither the Company, nor, to its knowledge, any Person acting on behalf of
the Company, has, either directly or indirectly, sold or offered for sale to
any Person (other than the Purchaser) any of the Securities or, within the
six months prior to the date hereof, any other similar security of the
Company except as contemplated by this Agreement, and the Company represents
that it will use its best efforts such that neither itself nor any Person
authorized to act on its behalf (except that the Company makes no
representation as to the Purchaser and their Affiliates) will sell or
offer for sale any such security to, or solicit any offers to buy any such
security from, or otherwise approach or negotiate in respect thereof with,
any Person or Persons so as thereby to cause the issuance or sale of any of
the Securities to be in violation of any of the provisions of Section 5 of
the Securities Act. To the knowledge of the Company, the issuance of the
Securities to the Purchaser will not be integrated with any other issuance
of the Company's securities (past, current or future) which requires
stockholder approval under the rules of the Nasdaq Market.
ARTICLE 4.16 Permits . (a) Each of the Company and its Subsidiaries has
all material Permits; (b) all such Permits are in full force and effect, and
each of the Company and its Subsidiaries has fulfilled and performed all
material obligations with respect to such Permits; (c) to the knowledge of
the Company, no event has occurred which allows, or after notice of lapse of
time would allow, revocation or termination by the issuer thereof or which
results in any other material impairment of the rights of the holder of
any such Permit; and (d) the Company has no reason to believe that any
governmental body or agency is considering limiting, suspending or revoking
any such Permit.
ARTICLE 4.17 Leases . Other than as disclosed in the SEC Reports,
neither the Company nor any Subsidiary is a party to any capital lease
obligation with a value greater than $250,000 or to any operating lease with
an aggregate annual rental greater than $250,000 during the life of such
lease.
ARTICLE 4.18 Absence of Any Undisclosed Liabilities or Capital Calls .
There are no liabilities of the Company or any Subsidiary of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable
or otherwise, and there is no existing condition, situation or set of
circumstances which would reasonably be expected to result in such a
liability, other than (i) those liabilities provided for in the financial
statements delivered pursuant to Section 4.7 hereof and (ii) other
undisclosed liabilities which, individually or in the aggregate, would
not have a Material Adverse Effect.
ARTICLE 4.19 Public Utility Holding Company . Neither the Company nor
any Subsidiary is, or will be upon issuance and sale of the Securities and
the use of the proceeds described herein, subject to regulation under the
Public Utility Holding Company Act of 1935, as amended, the Federal Power
Act, the Interstate Commerce Act or to any federal or state statute or
regulation limiting its ability to issue and perform its obligations under
any Transaction Agreement.
ARTICLE 4.20 Intellectual Property Rights . Each of the Company and its
Subsidiaries owns, or is licensed under, and has the rights to use, all
material patents, trademarks, trade names, copyrights, technology, know-how
and processes (collectively, " Intellectual Property") used in, or necessary
for the conduct of its business; no claims have been asserted by any Person
to the use of any such Intellectual Property or challenging or questioning
the validity or effectiveness of any license or agreement related thereto,
other than as set forth on Schedule 4.8. To the best of Company's and its
Subsidiaries' knowledge, there is no valid basis for any such claim and the
use of such Intellectual Property by the Company and its Subsidiaries will
not infringe upon the rights of any Person.
ARTICLE 4.21 Insurance . Except as set forth on Schedule 4.21, the
Company and its Subsidiaries maintain, with financially sound and reputable
insurance companies, insurance in at least such amounts and against such
risks such that any uninsured loss would not have a Material Adverse Effect.
All insurance coverages of the Company and its Subsidiaries are in full
force and effect and there are no past due premiums in respect of any such
insurance.
ARTICLE 4.22 Title to Assets and Properties . Except as set forth on
Schedule 4.22 or otherwise as a result of Liens granted pursuant to the
Security Agreement, the Company and its Subsidiaries have good and
marketable title to all their respective assets and properties, real and
personal, free and clear of all Liens.
ARTICLE 4.23 Reserved.
ARTICLE 4.24 Internal Accounting Controls . The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient,
in the judgment of the Company's Board of Directors, to provide reasonable
assurance that (i) transactions are executed in accordance with managements'
general or specific authorizations, (ii) transactions are recorded as
necessary to permit preparation of financial statements in conformity
with GAAP and to maintain asset accountability, (iii) access to assets
is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
ARTICLE 4.25 Foreign Practices . Neither the Company nor any of its
Subsidiaries nor, to the Company's knowledge, any employee or agent of the
Company or any Subsidiary has made any payments of funds of the Company or
Subsidiary, or received or retained any funds, in each case (x) in violation
of any law, rule or regulation or (y) of a character required to be
disclosed by the Company in any of the SEC Reports.
ARTICLE 4.26 Subsidiaries . Except for the directly and indirectly
owned subsidiaries of the Company as set forth on Schedule 4.26 (the
"Subsidiaries"), the Company does not own or hold any shares of stock or
any other security or interest in any other equity, or any rights to acquire
any such security or interest. Except for the Subsidiaries disclosed on
Schedule 4.26, the Company has never had any subsidiary corporation of which
the securities having a majority of voting power in electing the board of
directors or representing a majority of the economic interests were, at the
time as of which any determination was made, owned by the Company either
directly or indirectly. The number of authorized, issued and outstanding
shares of capital stock of the Subsidiaries is as set forth on Schedule
4.26. All outstanding shares of the Subsidiaries capital stock are validly
issued, fully paid and nonassessable, are free from, and were not issued in
violation of any preemptive rights, and are owned of record and beneficially
by the Company.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
ARTICLE 5.1 Purchaser . Purchaser hereby represents and warrants to
the Company that:
(a) the Purchaser is an "accredited investor" within the meaning of
Rule 501(a) under the Securities Act and the Securities to be acquired by it
pursuant to this Agreement are being acquired for its own account and, as of
the date hereof, not with a view toward, or for sale in connection with, any
distribution thereof except in compliance with applicable United States
federal and state securities law; provided that the disposition of the
Purchaser's property shall at all times be and remain within its control;
(b) the execution, delivery and performance of this Agreement and
the purchase of the Securities pursuant thereto are within the Purchaser's
corporate or partnership powers, as applicable, and have been duly and
validly authorized by all requisite corporate or partnership action;
(c) this Agreement has been duly executed and delivered by the
Purchaser;
(d) the execution and delivery by the Purchaser of the Transaction
Agreements to which it is a party does not, and the consummation of the
transactions contemplated hereby and thereby will not, contravene or
constitute a default under or violation of (i) any provision of applicable
law or regulation, or (ii) any agreement, judgment, injunction, order,
decree or other instrument binding upon such Purchaser;
(e) Purchaser understands that the Securities have not been registered
under the Securities Act and may not be transferred or sold except as
specified in this Agreement or in the Transaction Agreements;
(f) this Agreement and each of the Transaction Agreements to which
Purchaser is a party constitutes a valid and binding agreement of the
Purchaser enforceable in accordance with its terms, subject to (i)
applicable bankruptcy, insolvency or similar laws affecting the
enforceability of creditors rights generally and (ii) equitable principles
of general applicability;
(g) the Purchaser has such knowledge and experience in financial and
business matters so as to be capable of evaluating the merits and risks of
its investment in the Securities and the Purchaser is capable of bearing the
economic risks of such investment;
(h) the Purchaser is knowledgeable, sophisticated and experienced in
business and financial matters; the Purchaser has previously invested in
securities similar to the Securities and fully understands the limitations
on transfer described herein; the Purchaser has been afforded access to
information about the Company and the financial condition, results of
operations, property, management and prospects of the Company sufficient to
enable it to evaluate its investment in the Securities; the Purchaser has
been afforded the opportunity to ask such questions as it has deemed
necessary of, and to receive answers from, representatives of the Company
concerning the terms and conditions of the offering of the Securities and
the merits and the risks of investing in the Securities; and the Purchaser
has been afforded the opportunity to obtain such additional information
which the Company possesses or can acquire that is necessary to verify
the accuracy and completeness of the information given to the Purchaser
concerning the Company. The foregoing does not in any way relieve the
Company of its representations and other undertakings hereunder, and shall
not limit any Purchaser's ability to rely thereon; and
(i) no part of the source of funds used by the Purchaser to acquire
the Securities constitutes assets allocated to any separate account
maintained by the Purchaser in which any employee benefit plan (or its
related trust) has any interest.
ARTICLE 6. CONDITIONS PRECEDENT TO PURCHASE OF SECURITIES
ARTICLE 6.1 Conditions Precedent to the Purchaser's Obligations to
Purchase . The obligation of Purchaser hereunder to purchase the Note at
the Closing is subject to the satisfaction, on or before the Closing Date
of each of the following conditions, provided that these conditions are for
Purchaser's sole benefit and may be waived by Purchaser at any time in its
sole discretion;
(a) The Company shall have executed this Agreement, the Escrow
Agreement and the Registration Rights Agreement and delivered the same to
the Purchaser;
(b) The Company shall have delivered to the Purchaser a duly executed
Note in accordance with Article 2 hereof, the Security Agreement and all
related documents.
(c) The Company shall have delivered the Solvency Certificate;
(d) The representations and warranties of the Company contained
in each Transaction Agreement shall be true and correct in all material
respects as of the date when made and as of the Closing Date as though made
at such time (except for representations and warranties that speak as of a
specified date) and the Company shall have performed, satisfied and complied
with all covenants, agreements and conditions required by such Transaction
Agreements to be performed, satisfied or complied with by it at or prior
to the Closing Date. The Purchaser shall have received an Officer's
Certificate executed by the chief executive officer of the Company, dated as
of the Closing Date, to the foregoing effect and as to such other matters as
may be reasonably requested by the Purchaser, including but not limited to
certificates with respect to the Company Corporate Documents, resolutions
relating to the transactions contemplated hereby and the incumbencies of
certain officers and Directors of the Company. The form of such certificate
is attached hereto as Exhibit D;
(e) The Company shall have received all governmental, Board of
Directors, shareholders and third party consents and approvals necessary in
connection with the issuance and sale of the Securities;
(f) All applicable waiting periods in respect to the issuance and sale
of the Securities shall have expired without any action having been taken by
any competent authority that could restrain, prevent or impose any
materially adverse conditions thereon or that could seek or threaten any of
the foregoing;
(g) No law or regulation shall have been imposed or enacted that, in
the judgment of the Purchaser, could adversely affect the transactions set
forth herein or in the other Transaction Agreements, and no law or
regulation shall have been proposed that in the reasonable judgment of
Purchaser could reasonably have any such effect;
(h) Purchaser shall have received an opinion, dated the Closing Date,
of counsel to the Company in form and substance reasonably satisfactory to
Purchaser;
(i) All fees and expenses due and payable by the Company on or prior
to the Closing Date shall have been paid;
(j) The Company Corporate Documents and the Subsidiary Corporate
Documents, if any, shall be in full force and effect and no term or
condition thereof shall have been amended, waived or otherwise modified
without the prior written consent of the Purchaser;
(k) There shall have occurred no material adverse change in the
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Company or any Subsidiary since July 31,
2002;
(l) There shall exist no action, suit, investigation, litigation or
proceeding pending or threatened in any court or before any arbitrator or
governmental instrumentality that challenges the validity of or purports
to affect this Agreement or any other Transaction Agreement, or other
transaction contemplated hereby or thereby or that could reasonably be
expected to have a Material Adverse Effect, or any material adverse effect
on the enforceability of the Transaction Agreements or the Securities or the
rights of the holders of the Securities or the Purchaser hereunder;
(m) There shall not have occurred any disruption or adverse change in
the financial or capital markets generally, or in the market for the Common
Stock (including but not limited to any suspension or delisting), which the
Purchaser reasonably deems material in connection with the purchase of the
Securities;
(n) Immediately before and on the Closing Date, no Default or Event of
Default shall have occurred and be continuing;
(o) The Purchaser shall have received all other opinions, resolutions,
certificates, instruments, agreements or other documents as they shall
reasonably request; and
(p) The Company shall have delivered to Purchaser the Use of Proceeds
Schedule 7.8.
ARTICLE 6.2 Conditions to the Company's Obligations . The obligations
of the Company to issue and sell the Securities to the Purchaser pursuant to
this Agreement are subject to the satisfaction, at or prior to any Closing
Date, of the following conditions:
(a) The representations and warranties of the Purchaser contained
herein shall be true and correct in all material respects on the Closing
Date and the Purchaser shall have performed and complied in all material
respects with all agreements required by this Agreement to be performed or
complied with by the Purchaser at or prior to the Closing Date;
(b) The issue and sale of the Securities by the Company shall not be
prohibited by any applicable law, court order or governmental regulation;
(c) Receipt by the Company of duly executed counterparts of this
Agreement, the Escrow Agreement and the Registration Rights Agreement signed
by the Purchaser; and
(d) The Company shall have received payment of the Purchase Price,
less the Pay-Off Amount and the applicable transaction fees.
ARTICLE 7. AFFIRMATIVE COVENANTS
The Company hereby agrees that, from and after the date hereof for so
long as any principal amount of the Note remains outstanding (except for
Sections 7.1(a) and (d), 7.10, 7.11 and 7.12 which shall apply for so long
as the Note or Warrants remain outstanding) and for the benefit of the
Purchaser:
ARTICLE 7.1 Information . The Company will deliver to each holder of
the Note:
(a) promptly upon the filing thereof, copies of (i) all registration
statements (other than the exhibits thereto and any registration statements
on Form S-8 or its equivalent), and (ii) all reports of Forms 10-K, 10-Q and
8-K (or other equivalents) which the Company or any Subsidiary has filed
with the Commission;
(b) simultaneously with the delivery of each item referred to in
clause (a) above, a certificate from the chief financial officer of the
Company stating that no Default or Event of Default has occurred and is
continuing, or, if as of the date of such delivery a Default shall have
occurred and be continuing, a certificate from the Company setting forth the
details of such Default or Event of Default and the action which the Company
is taking or proposes to take with respect thereto;
(c) within two (2) days after any officer of the Company obtains
knowledge of a Default or Event of Default, or that any Person has given any
notice or taken any action with respect to a claimed Default hereunder, a
certificate of the chief financial officer of the Company setting forth the
details thereof and the action which the Company is taking or proposed to
take with respect thereto;
(d) promptly upon the mailing thereof to the shareholders of the
Company generally, copies of all financial statements, reports and proxy
statements so mailed and any other document generally distributed to
shareholders;
(e) at least two (2) Business Days prior to the consummation of any
Financing or other event requiring a repayment of the Note under Section
3.4, notice thereof together with a summary of all material terms thereof
and copies of all documents and instruments associated therewith;
(f) notice promptly upon the occurrence of any event by which the
Reserved Amount becomes less than the maximum number of Warrant Shares
issuable pursuant to the Transaction Agreements; and
(g) promptly following the commencement thereof, notice and a
description in reasonable detail of any litigation or proceeding to which
the Company or any Subsidiary is a party in which the amount involved is
$250,000 or more and not covered by insurance or in which injunctive or
similar relief is sought or which the Company is required to disclose in
its SEC Reports.
ARTICLE 7.2 Payment of Obligations . The Company will, and will cause
each Subsidiary to, pay and discharge, at or before maturity, all their
respective material obligations, including, without limitation, tax
liabilities, in the ordinary course of business, except where the same may
be contested in good faith by appropriate proceedings and will maintain, in
accordance with GAAP, appropriate reserves for the accrual of any of the
same.
ARTICLE 7.3 Maintenance of Property; Insurance . The Company will, and
will cause each Subsidiary to, keep all property useful and necessary in
its business in good working order and condition, ordinary wear and tear
excepted. In addition, the Company and each Subsidiary will maintain
insurance in at least such amounts and against such risks as it has insured
against as of the Closing Date.
ARTICLE 7.4 Maintenance of Existence . The Company will, and will cause
each Subsidiary to, continue to engage in business of the same general type
as now conducted by the Company and such Subsidiaries, and will preserve,
renew and keep in full force and effect its respective corporate existence
and their respective material rights, privileges and franchises necessary or
desirable in the normal conduct of business.
ARTICLE 7.5 Compliance with Laws . The Company will, and will cause
each Subsidiary to, comply, in all material respects, with all federal,
state, municipal, local or foreign applicable laws, ordinances, rules,
regulations, municipal by-laws, codes and requirements of governmental
authorities (including, without limitation, Environmental Laws and ERISA and
the rules and regulations thereunder) except (i) where compliance therewith
is contested in good faith by appropriate proceedings or (ii) where non-
compliance therewith could not reasonably be expected, in the aggregate,
to have a material adverse effect on the business, condition (financial or
otherwise), operations, performance, properties or prospects of the Company
or such Subsidiary.
ARTICLE 7.6 Inspection of Property, Books and Records . The Company
will, and will cause each Subsidiary to, keep proper books of record and
account in which full, true and correct entries shall be made of all
dealings and transactions in relation to their respective businesses and
activities; and will permit, during normal business hours, the Purchaser,
representatives of the Purchaser and representatives of the U. S. Small
Business Administration, to visit and inspect any of their respective
properties, upon reasonable prior notice, to examine and make abstracts from
any of their respective books and records and to discuss their respective
affairs, finances and accounts with their respective executive officers and
independent public accountants (and by this provision the Company authorizes
its independent public accountants to disclose and discuss with the
Purchaser the affairs, finances and accounts of the Company and its
Subsidiaries), all at such reasonable times.
ARTICLE 7.7 Investment Company Act . The Company will not be or become
an open-end investment trust, unit investment trust or face-amount
certificate company that is or is required to be registered under Section 8
of the Investment Company Act of 1940, as amended.
ARTICLE 7.8 Use of Proceeds . The proceeds from the issuance and sale
of the Note by the Company shall be used as set forth on Schedule 7.8.
None of the proceeds from the issuance and sale of the Note by the Company
pursuant to this Agreement will be used directly or indirectly for the
purpose, whether immediate, incidental or ultimate, of purchasing or
carrying any "margin stock" within the meaning of Regulation G of the Board
of Governors of the Federal Reserve System.
ARTICLE 7.9 Compliance with Terms and Conditions of Material Contracts
The Company will, and will cause each Subsidiary to, comply, in all
respects, with all terms and conditions of all material contracts to which
it is subject, so long as each Person who is a party to any such contract
continues to perform its obligations thereunder.
ARTICLE 7.10 Reserved Shares and Listings .
(a) The Company shall at all times have authorized, and reserved for
the purpose of issuance, a sufficient number of shares of Common Stock to
provide for the exercise in full of the Warrants and the issuance of the
Warrant Shares (based on the exercise price of the Warrants) (collectively,
the "Reserved Amount"). The Company shall not reduce the Reserved Amount
without the prior written consent of Purchaser. If at any time the number
of shares of Common Stock authorized and reserved for issuance is below
the Reserved Amount, the Company will promptly take all corporate action
necessary to authorize and reserve a sufficient number of shares, including,
without limitation, calling a special meeting of shareholders to authorize
additional shares, in the case of an insufficient number of authorized
shares.
(b) The Company will maintain the listing and trading of its Common
Stock on the OTC Bulletin Board. The Company will use its commercially
reasonable best efforts to obtain as soon as practicable and maintain the
listing and trading of its Common Stock on a National Market. The Company
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the National Association of
Securities Dealers, Inc. (the "NASD") and such exchanges, as applicable.
The Company shall promptly provide to Purchaser copies of any notices it
receives regarding the continued eligibility of the Common Stock for listing
on the OTC Bulletin Board or any National Market.
ARTICLE 7.11 Irrevocable Instructions . Upon receipt of a Notice of
Exercise, as applicable, the Company shall immediately issue irrevocable
instructions to its transfer agent to issue certificates, registered in
the name of each Purchaser or its nominee, for the Warrant Shares in such
amounts as specified from time to time by each Purchaser to the Company in
such Notice. Upon exercise of any Warrants in accordance with their terms,
the Company will use its best efforts to cause its transfer agent to, issue
one or more certificates representing shares of Common Stock in such name
or names and in such denominations specified by a Purchaser in a Notice
of Exercise. As long as the Registration Statement contemplated by the
Registration Rights Agreement shall remain effective, the shares of Common
Stock issuable upon exercise of any Warrants shall be issued to any
transferee of such shares from Purchaser, including transferee's of such
shares pursuant to an effective registration statement, without any
restrictive legend. The Company further warrants and agrees that no
instructions other than these instructions have been or will be given to
its transfer agent. Nothing in this Section 7.11 shall affect in any way a
Purchaser's obligation to comply with all securities laws applicable to such
Purchaser upon exercise of any Warrant or on resale of any shares of Common
Stock, including any prospectus delivery requirements.
ARTICLE 7.12 Maintenance of Reporting Status; Supplemental Information .
So long as any of the Securities are outstanding, the Company shall timely
file all reports required to be filed with the Commission pursuant to the
Exchange Act. The Company shall not terminate its status as an issuer
required to file reports under the Exchange Act, even if the Exchange Act or
the rules and regulations thereunder would permit such termination. If at
anytime the Company is not subject to the requirements of Section 13 or
15(d) of the Exchange Act, the Company will promptly furnish at its
expense, upon request, for the benefit of the holders from time to time of
Securities, information satisfying the information requirements of Rule 144
under the Securities Act.
ARTICLE 7.13 Form D; Blue Sky Laws . The Company agrees to file a "Form
D" with respect to the Securities as required under Regulation D of the
Securities Act and to provide a copy thereof to the Purchaser promptly after
such filing. The Company shall, on or before the Closing Date, take such
action as the Company shall reasonably determine is necessary to qualify
the Securities for sale to the Purchaser at the Closing pursuant to this
Agreement under applicable securities or "blue sky" laws of the states of
the United States (or to obtain an exemption from such qualification), and
shall provide evidence of any such action so taken to each Purchaser on or
prior to the Closing Date.
ARTICLE 8. NEGATIVE COVENANTS
The Company hereby agrees that, from and after the date hereof for so
long as the Note remains outstanding and for the benefit of the Purchaser:
ARTICLE 8.1 Limitations on Debt or Other Liabilities . Neither the
Company nor any Subsidiary will create, incur, assume or suffer to exist (at
any time after the Closing Date, after giving effect to the application of
the proceeds of the issuance of the Securities), without the prior written
consent of Purchaser, any Debt except (w) Debt from Related Persons, (x)
Debt incurred in a Permitted Financing, (y) Debt incurred in connection
with equipment leases to which the Company or its Subsidiaries are a party
incurred in the ordinary course of business; and (z) Debt incurred in
connection with trade accounts payable, imbalances and refunds arising in
the ordinary course of business.
ARTICLE 8.2 Transactions with Affiliates . The Company and each
Subsidiary will not, directly or indirectly, pay any funds to or for
the account of, make any investment (whether by acquisition or stock or
indebtedness, by loan, advance, transfer of property, guarantee or other
agreement to pay, purchase or service, directly or indirectly, and Debt, or
otherwise) in, lease, sell, transfer or otherwise dispose of any assets,
tangible or intangible, to, or participate in, or effect any transaction in
connection with any joint enterprise or other joint arrangement with, any
Affiliate, except, (1) pursuant to those agreements specifically identified
on Schedule 8.2 attached hereto (with a copy of such agreements annexed to
such Schedule 8.2) or (2) on terms to the Company or such Subsidiary no
less favorable than terms that could be obtained by the Company or such
Subsidiary from a Person that is not an Affiliate of the Company upon
negotiation at arms' length, as determined in good faith by the Board of
Directors of the Company; provided that no determination of the Board of
Directors shall be required with respect to any such transactions entered
into in the ordinary course of business.
ARTICLE 8.3 Merger or Consolidation . The Company will not, in a
single transaction or a series of related transactions, (i) consolidate
with or merge with or into any other Person, or (ii) permit any other Person
to consolidate with or merge into it, unless the Company shall be the
survivor of such merger or consolidation and (x) immediately before
and immediately after given effect to such transaction (including any
indebtedness incurred or anticipated to be incurred in connection with the
transaction), no Default or Event of Default shall have occurred and be
continuing; and (y) the Company has delivered to the Purchaser an Officer's
Certificate stating that such consolidation, merger or transfer complies
with this Agreement, and that all conditions precedent in this Agreement
relating to such transaction have been satisfied.
ARTICLE 8.4 Limitation on Asset Sales . Except as set forth on
Schedule 8.4, neither the Company nor any Subsidiary will consummate an
Asset Sale of material assets of the Company or any Subsidiary without
prior written notice of Purchaser, which consent will not be unreasonably
withheld. As used herein, "Asset Sale" means any sale, lease, transfer
or other disposition (or series of related sales, leases, transfers or
dispositions) or sales of capital stock of a Subsidiary (other than
directors' qualifying shares), property or other assets (each referred
to for the purpose of this definition as a "disposition"), including any
disposition by means of a merger, consolidation or similar transaction
other than a disposition of property or assets at fair market value in
the ordinary course of business.
ARTICLE 8.5 Restrictions on Certain Amendments . Neither the Company
nor any Subsidiary will waive any provision of, amend, or suffer to be
amended, any provision of such entity's existing Debt, any material
contract or agreement previously or hereafter filed by the Company with the
Commission as part of its SEC Reports, any Company Corporate Document or
Subsidiary Corporate Document if such amendment, in the Company's reasonable
judgment, would materially adversely affect the Purchaser or the holders of
the Securities without the prior written consent of the Purchaser.
ARTICLE 8.6 Restrictions on Issuances of Securities . In the event the
Company proposes to sell securities in a Discounted Equity Offering (as
defined below), the Company agrees that it will grant Purchaser a right of
first refusal to purchase securities proposed to be sold in such offering.
Purchaser shall have five (5) business days after notice to Purchaser by the
Company of such proposed sale of securities pursuant to this Section 8.6, to
exercise its right of first refusal. "Discounted Equity Offering" shall
mean the issuance of any of its equity securities (or securities convertible
into or exchangeable or exercisable for equity securities (the "Derivative
Securities")) on terms that allow a holder thereof to acquire such equity
securities (or Derivative Securities) at a discount to the Market Price of
the Common Stock at the time of issuance or, in the case of Derivative
Securities, at a conversion price based on any formula (other than standard
anti-dilution provisions) based on the Market Price on a date later than the
date of issuance which is below the Market Price on the date of issuance
other than (i) borrowings under conventional credit facilities existing as
of the date hereof, (ii) stock issued or credit facilities to be established
in connection with acquisitions, (iii) equity securities or Derivative
Securities in connection with employee and director stock option and stock
purchase plans and (iv) securities issued under the Warrants. As used
herein, "discount" shall include, but not be limited to, (i) any warrant,
right or other security granted or offered in connection with such issuance
which, on the applicable date of grant, is offered with an exercise or
conversion price, as the case may be, at less than the then current Market
Price of the Common Stock or, if such security has an exercise or conversion
price based on any formula (other than standard anti-dilution provisions)
based on the Market Price on a date later than the date of issuance, then at
a price below the Market Price on such date of exercise or conversion, as
the case may be, or (ii) any commissions, fees or other allowances paid
in connection with such issuances (other than customary underwriter or
placement agent commissions, fees or allowances). For the purposes of
determining the Market Price at which Common Stock is acquired under this
Section, normal underwriting commissions and placement fees (including
underwriters' warrants) shall be excluded. Notwithstanding the foregoing,
the Company may enter into the following types of transactions without first
granting the Purchaser a right of first refusal to purchase the following
securities, (collectively referred to as "Permitted Financings"): (1)
"permanent financing" transactions, which would include any form of debt or
equity financing (other than an underwritten offering), which is followed by
a reduction of the said financing commitment to zero and payment of all
related fees and expenses; (2) "project financing" which provide for the
issuance of recourse debt instruments in connection with the operation
of the Company's business as presently conducted or as proposed to be
conducted; (3) an underwritten offering of Common Stock, provided that such
offering provides for the registration of the Conversion Shares if the
Registration Statement has not been declared effective; and (4) other
financing transactions specifically consented to in writing by the
Purchaser.
ARTICLE 8.7 Limitation on Stock Repurchases . Except as otherwise set
forth in the Warrants, the Company shall not, without the written consent of
the Majority Holders, redeem, repurchase or otherwise acquire (whether for
cash or in exchange for property or other securities or otherwise) any
shares of capital stock of the Company or any warrants, rights or options to
purchase or acquire any such shares.
ARTICLE 9. RESTRICTIVE LEGENDS
ARTICLE 9.1 Restrictions on Transfer . From and after their respective
dates of issuance, none of the Securities shall be transferable except upon
the conditions specified in this Article IX, which conditions are intended
to ensure compliance with the provisions of the Securities Act in respect of
the Transfer of any of such Securities or any interest therein. Purchaser
will use its best efforts to cause any proposed transferee of any Securities
held by it to agree to take and hold such Securities subject to the
provisions and upon the conditions specified in this Article IX.
ARTICLE 9.2 Legends. The Warrants and the Warrant Shares issuable
upon any exercise of any Warrant, shall bear restrictive legends in
accordance with applicable securities laws. The Warrant Shares, upon resale
by the Purchaser pursuant to the Registration Statement, shall be freely
tradeable and unrestricted.
ARTICLE 9.3 Notice of Proposed Transfers . Prior to any proposed
Transfer of the Securities (other than a Transfer (i) registered or exempt
from registration under the Securities Act, (ii) to an affiliate of a
Purchaser which is an "accredited investor" within the meaning of Rule
501(a) under the Securities Act, provided that any such transferee shall
agree to be bound by the terms of this Agreement and the Registration Rights
Agreement, and shall have provided to the Company such representations,
warranties and covenants as may be reasonably requested thereby, or (iii)
to be made in reliance on Rule 144 under the Securities Act), the holder
thereof shall give written notice to the Company of such holder's intention
to effect such Transfer, setting forth the manner and circumstances of the
proposed Transfer, which shall be accompanied by (a) an opinion of counsel
reasonably acceptable to the Company, confirming that such transfer does not
give rise to a violation of the Securities Act, (B) representation letters
in form and substance reasonably satisfactory to the Company to ensure
compliance with the provisions of the Securities Act and (C) letters in
form and substance reasonably satisfactory to the Company from each such
transferee stating such transferee's agreement to be bound by the terms
of this Agreement and the Registration Rights Agreement. Such proposed
Transfer may be effected only if the Company shall have received such notice
of transfer, opinion of counsel, representation letters and other letters
referred to in the immediately preceding sentence, whereupon the holder of
such Securities shall be entitled to Transfer such Securities in accordance
with the terms of the notice delivered by the holder to the Company.
ARTICLE 10. ADDITIONAL AGREEMENTS AMONG THE PARTIES
ARTICLE 10.1 Liquidated Damages .
(a) The Company shall, and shall use its best efforts to cause its
transfer agent to, issue and deliver shares of Common Stock consistent with
Section 7.11 hereof within three (3) New York Stock Exchange Trading Days
of delivery of a Notice of Exercise, as applicable (the "Deadline") to
the Purchaser (or any party receiving Securities by transfer from such
Purchaser) at the address of the Purchaser set forth in the Notice of
Exercise, as the case may be. The Company understands that a delay in the
issuance of such certificates after the Deadline could result in economic
loss to the Purchaser.
(b) Without in any way limiting the Purchaser's right to pursue other
remedies, including actual damages and/or equitable relief, the Company
agrees that if delivery of the Warrant Shares is more than one (1) Business
Day after the Deadline (other than a failure due to the circumstances
described in Section 4.3 of the Note, which failure shall be governed by
such Section) the Company shall pay to each Purchaser, as liquidated damages
and not as a penalty, $500 for each $100,000 of Note then outstanding per
day in cash, for each of the first ten (10) days beyond the Deadline, and
$1,000 for each $100,000 of Note then outstanding per day in cash for each
day thereafter that the Company fails to deliver such Common Stock. Such
cash amount shall be paid to each Purchaser upon demand.
ARTICLE 10.2 Exercise Notice . The Company agrees that, in addition to
any other remedies which may be available to the Purchaser, including, but
not limited to, the remedies available under Section 10.1, in the event the
Company fails for any reason (other than as a result of actions taken by a
Purchaser in breach of this Agreement) to effect delivery to a Purchaser of
certificates with or without restrictive legends as contemplated by Article
IX representing the shares of Common Stock on or prior to the Deadline after
exercise of any Warrant, such Purchaser will be entitled, if prior to
the delivery of such certificates, to revoke the Notice of Exercise, as
applicable, by delivering a notice to such effect to the Company whereupon
the Company and the Purchaser shall each be restored to their respective
positions immediately prior to delivery of such Notice of Exercise.
ARTICLE 10.3 Reserved .
ARTICLE 10.4 Registration Rights .
(a) The Company shall grant the Purchaser registration rights covering
the Warrant Shares and Interest Shares (if any) (the "Registrable
Securities") on the terms set forth in the Registration Rights Agreement and
herein.
(b) The Company shall prepare and file, within 180 days following
the Closing Date (the "Filing Date"), a registration statement (the
"Registration Statement") covering the sale of the Registrable Securities.
The Company shall use its best efforts to cause the Registration Statement
to be declared effective by the Commission no later than (x) 210 days
following the Closing Date or (y) after the receipt of a "no review" or
similar letter from the Commission (the "Required Effectiveness Date"). The
Company shall pay all expenses of registration (other than underwriting fees
and discounts, if any, in respect of Registrable Securities offered and sold
under such Registration Statement by the Purchaser).
(c) If the Registration Statement is not filed by the Filing Date, the
Company shall pay to Purchaser, as liquidated damages and not as a penalty,
an amount equal to two percent (2%) of the principal amount of Note
outstanding for each 30-day period (prorated) until the Registration
Statement is filed with the Commission, provided that such damages shall
not exceed four percent (4%) of such principal amount of the Note. If the
Registration Statement is not declared effective by the Commission by the
Required Effectiveness Date, the Company shall pay to the Purchaser, as
liquidated damages and not as a penalty, an aggregate amount of one percent
(1%) of the outstanding principal amount of the Note (a " Default Fee"),
for each 30-day period (prorated) the Registration Statement is not
declared effective by the Commission following the Required Effectiveness
Date; provided, however, such damages shall not exceed 4% of the principal
amount of the Note in the aggregate. In the event the Company fails to
obtain an effective registration statement by the 360th day following the
Closing Date, Purchaser shall have the right to require the Company to
redeem the Note and the Warrants at the Prepayment Price set forth in
Section 4 of the Note and the Redemption Price set forth in Section 14 of
the Warrant, respectively. If, following the declaration of effectiveness
of the Registration Statement, the Registration Statement (or any prospectus
or supplemental prospectus contained therein) shall cease to be effective
for any reason (including, but not limited to, the occurrence of any event
that results in any prospectus or supplemental prospectus containing an
untrue statement of a material fact or omitting a material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading), the
Company fails to file required amendments to the Registration Statement in
order to allow the Purchaser to exercise its rights to receive unrestricted,
unlegended, freely tradeable shares of Common Stock, or if for any reason
there are insufficient shares of such shares of Common Stock registered
under the then current Registration Statement to effect full exercise of the
Warrants or for the issuance of the Interest Shares (each a "Registration
Default"), the Company shall immediately take all necessary steps to cause
the Registration Statement to be amended or supplemented so as to cure the
Registration Default. Failure to cure a Registration Default within ten
(10) Business Days shall result in the Company paying to Purchaser
liquidated damages at the rate of one percent (1%) of the outstanding
principal amount of Note for each 30-day period (prorated) that the
Registration Default remains uncured, provided that such damages shall
not exceed four percent (4%) of such principal amount of the Note.
(d) In the event that there is an insufficient number of authorized,
issuable, unlegended and freely tradeable shares of Common Stock registered
under the Registration Statement filed by the Company to fully exercise all
Warrants held by Purchaser or for the issuance of the Interest Shares and to
sell such shares issued thereon, then the Company shall immediately file
an amendment to the then current registration statement to register a
sufficient number of such shares to exercise the Warrants and sell the
Interest Shares and Warrant Shares. The failure of the Company to register
a sufficient number of such shares to fully exercise such Warrants shall be
a Registration Default under Section 10.4(c).
(e) Any such Registration Default shall be paid in cash by the Company
to the Purchaser by wire transfer in immediately available funds on the last
day of each calendar week following the event requiring its payment.
(f) If, for any reason (including but not limited to the issuance
of all shares of Common Stock covered by the prospectus included in the
Registration Statement), the Registration Default is incurred for a period
of sixty (60) days, the holders of a majority of the Note then outstanding
may elect to cause the Company to repay the Note in full at the Prepayment
Price set forth in Section 4 of the Note.
ARTICLE 11. ADJUSTMENT OF FIXED PRICE
ARTICLE 11.1 Reorganization . The exercise price of the Warrants (the "
Fixed Price") shall be adjusted, as applicable, as hereafter provided.
ARTICLE 11.2 Share Reorganization . If and whenever the Company shall:
(i) subdivide the outstanding shares of Common Stock into a
greater number of shares;
(ii) consolidate the outstanding shares of Common Stock into a
smaller number of shares;
(iii) issue Common Stock or securities convertible into or
exchangeable for shares of Common Stock as a stock dividend to all or
substantially all the holders of Common Stock; or
(iv) make a distribution on the outstanding Common Stock to all
or substantially all the holders of Common Stock payable in Common
Stock or securities convertible into or exchangeable for Common Stock;
any of such events being herein called a "Share Reorganization," then in
each such case the Fixed Price shall be adjusted, effective immediately
after the record date at which the holders of Common Stock are determined
for the purposes of the Share Reorganization or, if no record date is fixed,
the effective date of the Share Reorganization, by multiplying the Fixed
Price in effect on such record or effective date, as the case may be, by a
fraction of which:
(I) the numerator shall be the number of shares of Common Stock
outstanding on such record or effective date (without giving effect to
the transaction); and
(II) the denominator shall be the number of shares of Common
Stock outstanding after giving effect to such Share Reorganization,
including, in the case of a distribution of securities convertible into
or exchangeable for shares of Common Stock, the number of shares of
Common Stock that would have been outstanding if such securities had
been converted into or exchanged for Common Stock on such record or
effective date.
ARTICLE 11.3 Capital Reorganization . If and whenever there shall occur:
(i) a reclassification or redesignation of the shares of Common
Stock or any change of the shares of Common Stock into other shares,
other than in a Share Reorganization;
(ii) a consolidation, merger or amalgamation of the Company
with, or into another body corporate; or
(iii) the transfer of all or substantially all of the assets
of the Company to another body corporate;
(any such event being herein called a "Capital Reorganization"), then in
each such case the holder who exercises the Warrants after the effective
date of such Capital Reorganization shall be entitled to receive and shall
accept, upon the exercise of such right, in lieu of the number of shares of
Common Stock to which such holder was theretofore entitled upon the exercise
of the conversion privilege, the aggregate number of shares or other
securities or property of the Company or of the body corporate resulting
from such Capital Reorganization that such holder would have been entitled
to receive as a result of such Capital Reorganization if, on the effective
date thereof, such holders had been the holder of the number of shares of
Common Stock to which such holder was theretofore entitled upon conversion;
provided, however, that no such Capital Reorganization shall be consummated
in effect unless all necessary steps shall have been taken so that such
holders shall thereafter be entitled to receive such number of shares or
other securities of the Company or of the body corporate resulting from such
Capital Reorganization, subject to adjustment thereafter in accordance with
provisions the same, as nearly as may be possible, as those contained above.
ARTICLE 11.4 Adjustment Rules . The following rules and procedures shall
be applicable to adjustments made in this Article XI:
(a) no adjustment in the Fixed Price shall be required unless such
adjustment would result in a change of at least 1% in the Fixed Price then
in effect, provided, however, that any adjustments which, but for the
provisions of this clause would otherwise have been required to be made,
shall be carried forward and taken into account in any subsequent
adjustment;
(b) if any event occurs of the type contemplated by the adjustment
provisions of this Article XI but not expressly provided for by such
provisions, the Company will give notice of such event as provided herein,
and the Company's board of directors will make an appropriate adjustment in
the Fixed Price so that the rights of the holders of the applicable Security
shall not be diminished by such event; and
(c) if a dispute shall at any time arise with respect to any
adjustment of the Fixed Price, such dispute shall be conclusively determined
by the auditors of the Company or, if they are unable or unwilling to act,
by a firm of independent chartered accountants selected by the Directors and
any such determination shall be binding upon the Company and Purchaser.
ARTICLE 11.5 Certificate as to Adjustment . The Company shall from time
to time promptly after the occurrence of any event which requires an
adjustment in the Fixed Price deliver to the Purchaser a certificate
specifying the nature of the event requiring the adjustment, the amount of
the adjustment necessitated thereby, the Fixed Price after giving effect
to such adjustment and setting forth, in reasonable detail, the method of
calculation and the facts upon which such calculation is based.
ARTICLE 11.6 Notice to Noteholders . If the Company shall fix a record
date for:
(a) any Share Reorganization (other than the subdivision of
outstanding Common Stock into a greater number of shares or the
consolidation of outstanding Common Stock into a smaller number of shares),
(b) any Capital Reorganization (other than a reclassification or
redesignation of the Common Stock into other shares),
(c) Sale Event; or
(d) any cash dividend,
the Company shall, not less than 10 days prior to such record date or, if no
record date is fixed, prior to the effective date of such event, give to the
Purchaser notice of the particulars of the proposed event or the extent that
such particulars have been determined at the time of giving the notice.
ARTICLE 12. EVENTS OF DEFAULT
ARTICLE 12.1 Events of Default. If one or more of the following events
(each an "Event of Default") shall have occurred and be continuing:
(a) failure by the Company to pay or repay when due, all or any part
of the principal on the Note (whether by virtue of the agreements specified
in this Agreement or the Note);
(b) failure by the Company to pay (i) within five (5) Business Days
of the due date thereof any interest on the Note or (ii) within five (5)
Business Days following the delivery of notice to the Company of any fees
or any other amount payable (not otherwise referred to in (a) above or this
clause (b)) by the Company under this Agreement or any other Transaction
Agreement;
(c) reserved;
(d) failure on the part of the Company to observe or perform any
covenant contained in Article VIII of this Agreement;
(e) failure on the part of the Company to observe or perform any
covenant or agreement contained in any Transaction Agreement (other than
those covered by clauses (a), (b), (c) or (d) above) for 30 days from the
date of such occurrence;
(f) the trading in the Common Stock shall have been suspended by
the Commission or by the OTC Bulletin Board (except for any suspension
of trading of limited duration solely to permit dissemination of material
information regarding the Company and except if, at the time there is any
suspension on the OTC Bulletin Board, the Common Stock is then listed and
approved for trading on any National Market within ten (10) Trading Days
thereof) except as a result of the general suspension of trading of all
securities so listed;
(g) reserved;
(h) the Company shall have its Common Stock delisted from the OTC
Bulletin Board or a National Market for at least ten (10) consecutive
Trading Days and is unable to obtain a listing on a National Market within
such ten (10) Trading Days;
(i) the Registration Statement shall not have been declared effective
by the Commission by the Required Effectiveness Date, or such effectiveness
shall not be maintained for the Registration Maintenance Period, in each
case which results in the Company incurring the Default Fee for a period
in excess of sixty (60) days;
(j) the Company or any material Subsidiary has commenced a voluntary
case or other proceeding seeking liquidation, winding-up, reorganization
or other relief with respect to itself or its debts under any bankruptcy,
insolvency, moratorium or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, or has
consented to any such relief or to the appointment of or taking possession
by any such official in an involuntary case or other proceeding commenced
against it, or has made a general assignment for the benefit of creditors,
or has taken any corporate action to authorize any of the foregoing;
(k) an involuntary case or other proceeding has been commenced against
the Company or any material Subsidiary seeking liquidation, winding-up,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency, moratorium or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 60 days, or an order for relief
has been entered against the Company or any Subsidiary under the federal
bankruptcy laws as now or hereafter in effect;
(l) default in any payment provision (whether interest or principal)
governing the terms of any Debt of the Company or any Subsidiary in excess
of $1,000,000, which has not been cured within any applicable period of
grace associated therewith;
(m) judgments or orders for the payment of money which in the
aggregate at any one time exceed $1,000,000 and are not covered by insurance
have been rendered against the Company or any Subsidiary by a court of
competent jurisdiction and such judgments or orders shall continue
unsatisfied and unstayed for a period of 60 days; or
(n) any representation, warranty, certification or statement made
by the Company in any Transaction Agreement or which is contained in any
certificate, document or financial or other statement furnished at any time
under or in connection with any Transaction Agreement shall prove to have
been untrue in any material respect when made resulting in a Material
Adverse Effect.
then, and in every such occurrence, any Purchaser may, with respect to
an Event of Default specified in paragraphs (a) or (b), and the Majority
Holders may, with respect to any other Event of Default, by notice to
the Company, declare the Note to be, and the Note shall thereon become
immediately due and payable; provided that in the case of any of the Events
of Default specified in paragraph (j) or (k) above with respect to the
Company or any Subsidiary, then, without any notice to the Company or any
other act by any Purchaser, the entire amount of the Note shall become
immediately due and payable, provided, further, if any Event of Default has
occurred and is continuing, and irrespective of whether any Note has been
declared immediately due and payable hereunder, any Purchaser of Note may
proceed to protect and enforce the rights of such Purchaser by an action
at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein or in any Note, or
for an injunction against a violation of any of the terms hereof or thereof,
or in aid of the exercise of any power granted hereby or thereby or by law
or otherwise, and provided further, in the case of any Event of Default, the
amount declared due and payable on the Note shall be the Prepayment Price.
ARTICLE 12.2 Powers and Remedies Cumulative . No right or remedy herein
conferred upon or reserved to the Purchaser is intended to be exclusive of
any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any
other appropriate right or remedy. Every power and remedy given by the Note
or by law may be exercised from time to time, and as often as shall be
deemed expedient, by the Purchaser.
ARTICLE 13. MISCELLANEOUS
ARTICLE 13.1 Notices . All notices, demands and other communications to
any party hereunder shall be in writing (including telecopier or similar
writing) and shall be given to such party at its address set forth on the
signature pages hereof, or such other address as such party may hereafter
specify for the purpose to the other parties. Each such notice, demand or
other communication shall be effective (i) if given by telecopy, when such
telecopy is transmitted to the telecopy number specified on the signature
page hereof, (ii) if given by mail, four days after such communication
is deposited in the mail with first class postage prepaid, addressed as
aforesaid or (iii) if given by any other means, when delivered at the
address specified in or pursuant to this Section.
ARTICLE 13.2 No Waivers; Amendments .
(a) No failure or delay on the part of any party in exercising any
right, power or remedy hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right, power or remedy
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy.
(b) Any provision of this Agreement may be amended, supplemented or
waived if, but only if, such amendment, supplement or waiver is in writing
and is signed by the Company and the Majority Holders; provided, that
without the consent of each holder of any Note affected thereby, an
amendment or waiver may not (a) reduce the aggregate principal amount of
Note whose holders must consent to an amendment or waiver, (b) reduce the
rate or extend the time for payment of interest on any Note, (c) reduce the
principal amount of or extend the stated maturity of any Note or (d) make
any Note payable in money or property other than as stated in such Note. In
determining whether the holders of the requisite principal amount of Note
have concurred in any direction, consent, or waiver as provided in any
Transaction Agreement, Note which are owned by the Company or any other
obligor on or guarantor of the Note, or by any Person Controlling,
Controlled by, or under common Control with any of the foregoing, shall be
disregarded and deemed not to be outstanding for the purpose of any such
determination; and provided further that no such amendment, supplement or
waiver which affects the rights of the Purchaser and their affiliates
otherwise than solely in their capacities as holders of Note shall be
effective with respect to them without their prior written consent.
ARTICLE 13.3 Indemnification .
(a) The Company agrees to indemnify and hold harmless each Purchaser,
its Affiliates, and each Person, if any, who controls such Purchaser, or any
of its Affiliates, within the meaning of the Securities Act or the Exchange
Act (each, a "Controlling Person"), and the respective partners, agents,
employees, officers and Directors of each Purchaser, their Affiliates and
any such Controlling Person (each an "Indemnified Party") and collectively,
the "Indemnified Parties"), from and against any and all losses, claims,
damages, liabilities and expenses (including, without limitation and as
incurred, reasonable costs of investigating, preparing or defending any such
claim or action, whether or not such Indemnified Party is a party thereto,
provided that the Company shall not be obligated to advance such costs to
any Indemnified Party other than the Purchaser unless it has received from
such Indemnified Party an undertaking to repay to the Company the costs so
advanced if it should be determined by final judgment of a court of
competent jurisdiction that such Indemnified Party was not entitled
to indemnification hereunder with respect to such costs) which may be
incurred by such Indemnified Party in connection with any investigative,
administrative or judicial proceeding brought or threatened that relates to
or arises out of, or is in connection with any activities contemplated by
any Transaction Agreement or any other services rendered in connection
herewith; provided that the Company will not be responsible for any claims,
liabilities losses, damages or expenses that are determined by final
judgment of a court of competent jurisdiction to result from such
Indemnified Party's gross negligence, willful misconduct or bad faith.
(b) If any action shall be brought against an Indemnified Party with
respect to which indemnity may be sought against the Company under this
Agreement, such Indemnified Party shall promptly notify the Company in
writing and the Company, at its option, may, assume the defense thereof,
including the employment of counsel reasonably satisfactory to such
Indemnified Party and payment of all reasonable fees and expenses. The
failure to so notify the Company shall not affect any obligations the
Company may have to such Indemnified Party under this Agreement or otherwise
unless the Company is materially adversely affected by such failure. Such
Indemnified Party shall have the right to employ separate counsel in such
action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of such Indemnified Party, unless (i)
the Company has failed to assume the defense and employ counsel or (ii) the
named parties to any such action (including any impleaded parties) include
such Indemnified Party and the Company, and such Indemnified Party shall
have been advised by counsel that there may be one or more legal defenses
available to it which are different from or additional to those available to
the Company, in which case, if such Indemnified Party notifies the Company
in writing that it elects to employ separate counsel at the expense of the
Company, the Company shall not have the right to assume the defense of such
action or proceeding on behalf of such Indemnified Party, provided, however,
that the Company shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be responsible hereunder for the reasonable
fees and expenses of more than one such firm of separate counsel, in
addition to any local counsel, which counsel shall be designated by the
Purchaser. The Company shall not be liable for any settlement of any such
action effected without the written consent of the Company (which shall not
be unreasonably withheld) and the Company agrees to indemnify and hold
harmless each Indemnified Party from and against any loss or liability by
reason of settlement of any action effected with the consent of the Company.
In addition, the Company will not, without the prior written consent of the
Purchaser, settle or compromise or consent to the entry of any judgment in
or otherwise seek to terminate any pending or threatened action, claim, suit
or proceeding in respect to which indemnification or contribution may be
sought hereunder (whether or not any Indemnified Party is a party thereto)
unless such settlement, compromise, consent or termination includes an
express unconditional release of the Purchaser and the other Indemnified
Parties, satisfactory in form and substance to the Purchaser, from all
liability arising out of such action, claim, suit or proceeding.
(c) If for any reason the foregoing indemnity is unavailable
(otherwise than pursuant to the express terms of such indemnity) to an
Indemnified Party or insufficient to hold an Indemnified Party harmless,
then in lieu of indemnifying such Indemnified Party, the Company shall
contribute to the amount paid or payable by such Indemnified Party as a
result of such claims, liabilities, losses, damages, or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand and by the Purchaser on the other from the
transactions contemplated by this Agreement or (ii) if the allocation
provided by clause (i) is not permitted under applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
received by the Company on the one hand and the Purchaser on the other, but
also the relative fault of the Company and the Purchaser as well as any
other relevant equitable considerations. Notwithstanding the provisions of
this Section 13.3, the aggregate contribution of all Indemnified Parties
shall not exceed the amount of interest and fees actually received by the
Purchaser pursuant to this Agreement. It is hereby further agreed that the
relative benefits to the Company on the one hand and the Purchaser on the
other with respect to the transactions contemplated hereby shall be
determined by reference to, among other things, whether any untrue or
alleged untrue statement of material fact or the omission or alleged
omission to state a material fact related to information supplied by the
Company or by the Purchaser and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or omission. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
(d) The indemnification, contribution and expense reimbursement
obligations set forth in this Section 13.3 (i) shall be in addition to any
liability the Company may have to any Indemnified Party at common law or
otherwise; (ii) shall survive the termination of this Agreement and the
other Transaction Agreements and the payment in full of the Note and (iii)
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Purchaser or any other Indemnified
Party.
ARTICLE 13.4 Expenses: Documentary Taxes . The Company has agreed to
pay an application fee of 1.5% of the principal amount of Note to Purchaser
at the Closing. The Company agrees to pay to Global Capital Advisors, Ltd.,
on the Closing Date, a fee of $15,000.00 (the "Out of Pocket Fee") in full
satisfaction of all obligations of the Company to Purchaser and its agents
in connection with the negotiation and preparation of the Transaction
Agreements, relevant due diligence, and fees and disbursements of legal
counsel. In addition, the Company agrees to pay any and all stamp, transfer
and other similar taxes, assessments or charges payable in connection with
the execution and delivery of any Transaction Agreement or the issuance of
the Securities to Purchaser, excluding their assigns.
ARTICLE 13.5 Payment . The Company agrees that, so long as a Purchaser
shall own any Note purchased by it from the Company hereunder, the Company
will make payments to such Purchaser of all amounts due thereon by wire
transfer by 4:00 P.M. (New York City time).
ARTICLE 13.6 Successors and Assigns . This Agreement shall be binding
upon the Company and upon the Purchaser and their respective successors and
assigns; provided that the Company shall not assign or otherwise transfer
its rights or obligations under this Agreement to any other Person without
the prior written consent of the Majority Holders. All provisions hereunder
purporting to give rights to Purchaser and their affiliates or to holders of
Securities are for the express benefit of such Persons and their successors
and assigns.
ARTICLE 13.7 Brokers . The Company represents and warrants to
Purchaser, and Purchaser represents and warrants to the Company that it has
not employed any broker, finder, financial advisor or investment banker who
would be entitled to any brokerage, finder's or other fee or commission
payable by the Company or the Purchaser in connection with the sale of the
Securities.
ARTICLE 13.8 Delaware Law; Submission to Jurisdiction; Waiver of Jury
Trial; Appointment of Agent . THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE. EACH
PARTY HERETO HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED
STATES DISTRICT COURT FOR DELAWARE AND OF ANY STATE COURT SITTING IN
DELAWARE FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH
PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY
IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
Section 13.9 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction
to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired, or
invalidated unless a failure of consideration would result thereby.
Section 13.10 Survival. Sections 7.1(a), (d), 7.4, 7.6, 7.8, 7.10,
7.11, 7.12, Article 10 and Section 12.1 Subsections (f), (h) and (i)
contained in this Agreement shall survive the payment in full of the Note
and shall remain operative and in full force until the Warrants have been
fully exercised.
Section 13.11 Counterparts. This Agreement may be executed by telecopy
signatures and in any number of counterparts each of which shall be an
original with the same effect as if the signatures there to and hereto were
upon the same instrument.
SIGNATURES ON FOLLOWING PAGE
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers, as of the date first
above written.
DIAL-THRU INTERNATIONAL CORPORATION
By: _____________________________________________
Title: _____________________________________________
Address: 00000 Xxxxxx Xxxxxxxxx
Xxxxx 000
Xxx Xxxxxxx, XX 00000
Fax: 000-000-0000
Attn: Xxxx Xxxxxxx
GLOBAL CAPITAL FUNDING GROUP, L.P.
By its General Partner Global Capital
Management Services, Inc.
By: _____________________________________________
Title: _____________________________________________
Address: 000 Xxxxxx Xxxx Xxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Fax: 000-000-0000
Attn: Xx. Xxxxx X. Xxxxxx
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS............................... 1
Section 1.1 Definitions......................... 1
Section 1.2 Accounting Terms and Determinations. 8
ARTICLE II. PURCHASE AND SALE OF SECURITIES.......... 8
Section 2.1 Purchase and Sale of Note........... 8
Section 2.2 Purchase Price...................... 8
Section 2.3 Closing and Mechanics of Payment.... 8
ARTICLE III. PAYMENT TERMS OF NOTE................... 9
Section 3.1 Ranking; Payment of Principal and
Interest; Payment Mechanics.................... 9
Section 3.2. Payment of Interest................. 9
Section 3.3 Voluntary Prepayment................ 9
Section 3.4 Mandatory Prepayments............... 9
Section 3.5 Prepayment Procedures............... 10
Section 3.6 Payment of Additional Amounts....... 10
ARTICLE IV. REPRESENTATIONS AND WARRANTIES........... 11
Section 4.1 Organization and Qualification...... 11
Section 4.2 Authorization and Execution......... 11
Section 4.3 Capitalization ..................... 12
Section 4.4 Governmental Authorization.......... 12
Section 4.5 Issuance of Shares.................. 13
Section 4.6 No Conflicts........................ 13
Section 4.7 Financial Information and
SEC Reports.................................... 13
Section 4.8 Litigation.......................... 14
Section 4.9 Compliance with ERISA and other
Benefit Plans.................................. 14
Section 4.10 Environmental Matters.............. 15
Section 4.11 Taxes.............................. 15
Section 4.12 Investments, Joint Ventures........ 15
Section 4.13 Not an Investment Company.......... 15
Section 4.14 Full Disclosure.................... 15
Section 4.15 No Solicitation; No Integration
with Other Offerings........................... 16
Section 4.16 Permits............................ 16
Section 4.17 Leases............................. 16
Section 4.18 Absence of Any Undisclosed
Liabilities or Capital Calls................... 16
Section 4.19 Public Utility Holding Company..... 16
Section 4.20 Intellectual Property Rights....... 17
Section 4.21 Insurance.......................... 17
Section 4.22 Title to Assets and Properties..... 17
Section 4.23 Reserved........................... 17
Section 4.24 Internal Accounting Controls....... 17
Section 4.25 Foreign Practices.................. 17
Section 4.26 Subsidiaries....................... 17
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER 18
Section 5.1 Purchaser........................... 18
ARTICLE VI. CONDITIONS PRECEDENT TO PURCHASE OF SECURITIES 19
Section 6.1 Conditions Precedent to the
Purchaser's Obligations to Purchase............ 19
Section 6.2 Conditions to the Company's
Obligations.................................... 21
ARTICLE VII. AFFIRMATIVE COVENANTS................... 21
Section 7.1 Information.......................... 21
Section 7.2 Payment of Obligations............... 22
Section 7.3 Maintenance of Property; Insurance... 22
Section 7.4 Maintenance of Existence............. 23
Section 7.5 Compliance with Laws................. 23
Section 7.6 Inspection of Property, Books and
Records........................................ 23
Section 7.7 Investment Company Act............... 23
Section 7.8 Use of Proceeds...................... 23
Section 7.9 Compliance with Terms and
Conditions of Material Contracts............... 23
Section 7.10 Reserved Shares and Listings....... 23
Section 7.11 Irrevocable Instructions........... 24
Section 7.12 Maintenance of Reporting Status;
Supplemental Information....................... 24
Section 7.13 Form D; Blue Sky Laws.............. 25
ARTICLE VIII. NEGATIVE COVENANTS..................... 25
Section 8.1 Limitations on Debt or
Other Liabilities.............................. 25
Section 8.2 Transactions with Affiliates........ 25
Section 8.3 Merger or Consolidation............. 25
Section 8.4 Limitation on Asset Sales........... 26
Section 8.5 Restrictions on Certain Amendments.. 26
Section 8.6 Restrictions on Issuances
of Securities.................................. 26
Section 8.7 Limitation on Stock Repurchases..... 27
ARTICLE IX. RESTRICTIVE LEGENDS...................... 27
Section 9.1 Restrictions on Transfer............ 27
Section 9.2 Legends............................. 27
Section 9.3 Notice of Proposed Transfers........ 27
ARTICLE X. ADDITIONAL AGREEMENTS AMONG THE PARTIES... 28
Section 10.1 Liquidated Damages................. 28
Section 10.2 Exercise Notice.................... 28
Section 10.3 Reserved........................... 29
Section 10.4 Registration Rights................ 29
ARTICLE XI. ADJUSTMENT OF FIXED PRICE................ 30
Section 11.1 Reorganization..................... 30
Section 11.2 Share Reorganization............... 30
Section 11.3 Capital Reorganization............. 31
Section 11.4 Adjustment Rules................... 32
Section 11.5 Certificate as to Adjustment....... 32
Section 11.6 Notice to Noteholders.............. 32
ARTICLE XII. EVENTS OF DEFAULT....................... 33
Section 12.1 Events of Default.................. 33
Section 12.2 Powers and Remedies Cumulative..... 35
ARTICLE XIII. MISCELLANEOUS.......................... 35
Section 13.1 Notices............................ 35
Section 13.2 No Waivers; Amendments............. 35
Section 13.3 Indemnification.................... 36
Section 13.4 Expenses: Documentary Taxes....... 38
Section 13.5 Payment............................ 38
Section 13.6 Successors and Assigns............. 38
Section 13.7 Brokers............................ 38
Section 13.8 Delaware Law; Submission to
Jurisdiction; Waiver of Jury Trial;
Appointment of Agent........................... 38
LIST OF SCHEDULES
Schedule 2.2 Allocation of Purchase Price
Schedule 4.3 Capitalization
Schedule 4.8 Litigation
Schedule 4.11 Taxes
Schedule 4.12 Investment, Joint Ventures
Schedule 4.21 Insurance
Schedule 4.22 Title to Assets and Properties
Schedule 4.26 Subsidiaries
Schedule 7.8 Use of Proceeds
Schedule 8.2 Transactions with Affiliates
LIST OF EXHIBITS
Exhibit A Secured Promissory Note
Exhibit B Registration Rights Agreement
Exhibit C Form of Solvency Certificate
Exhibit D Form of Officer's Certificate
Exhibit E Common Stock Purchase Warrant
Exhibit F Security Agreement
