Ex-4.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of March 28,
2000, by and among The Netplex Group, Inc., a New York corporation, with
headquarters located at 0000 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx
00000 (the "Company"), and the investors listed on the Schedule of Buyers
attached hereto (individually, a "Buyer" and collectively, the "Buyers").
WHEREAS:
A. The Company and the Buyers are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Rule 506
of Regulation D ("Regulation D") as promulgated by the United States Securities
and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 Act");
B. The Company has authorized the following new series of its preferred
stock, par value $0.01 per share: the Company's Series D Convertible Preferred
Stock (the "Preferred Stock"), which shall be convertible into shares of the
Company's common stock, par value $0.001 per share (the "Common Stock") (as
converted, the "Conversion Shares"), in accordance with the terms of the
Company's Certificate of Amendment to its Certificate of Incorporation for the
Preferred Stock, substantially in the form attached hereto as Exhibit A (the
"Certificate of Amendment");
C. Each Buyer wishes to purchase, upon the terms and conditions stated in
this Agreement (i) the number of shares of Preferred Stock in the respective
amounts set forth opposite each Buyer's name on the Schedule of Buyers (which
number of Preferred Stock to be issued to all Buyers in the aggregate shall
equal 10,000 shares of Preferred Stock (the "Initial Preferred Shares")) and
(ii) warrants, substantially in the form attached hereto as Exhibit B (the
"Initial Warrants"), to acquire a number of shares of Common Stock for each
Initial Preferred Share purchased equal to the result of (a) $570, divided by
(b) the average of the Weighted Average Prices (as defined in the Initial
Warrants) of the Common Stock for the 30 consecutive trading days beginning on
and including the first trading day after the date on which the Company files a
Form 8-K or Form 10-K with the SEC describing the terms of the offering of
Preferred Stock pursuant to the first sentence of Section 4(j) (as exercised,
collectively, the "Initial Warrant Shares");
D. Subject to the terms and conditions set forth in this Agreement, each
Buyer has the right to purchase and the Company may be required to sell (i) a
number of additional shares of Preferred Stock equal to such Buyer's pro rata
portion of a total of 5,000 shares of Preferred Stock (based on the number of
Initial Preferred Shares each Buyer purchased in relation to the total number of
Initial Preferred Shares issued) (collectively, the "Additional Preferred
Shares") and (ii) warrants, substantially in the form of Exhibit B (the
"Additional Warrants"), to acquire a number of shares of Common Stock for each
Additional Preferred Share purchased equal to the result of (a) $570, divided by
(b) the average of the Weighted Average Prices (as defined in the Additional
Warrants) of the Common Stock for the 15 consecutive trading days beginning on
and including the first trading day after the Call Trigger Date (as defined
below) (as exercised, collectively, the "Additional Warrant Shares"); the
Initial Preferred Shares and the Additional Preferred Shares collectively are
referred to in this Agreement as the "Preferred Shares"; the Initial Warrants
and the Additional Warrants collectively are referred to in this Agreement as
the "Warrants"; and the Initial Warrant Shares, and the Additional Warrant
Shares are collectively referred to in this Agreement as the "Warrant Shares";
and
E. Contemporaneously with the execution and delivery of this Agreement,
the Company and each Buyer are executing and delivering a Registration Rights
Agreement substantially in the form attached hereto as Exhibit C (the
"Registration Rights Agreement") pursuant to which the Company has agreed to
provide certain registration rights under the 1933 Act and the rules and
regulations promulgated thereunder, and applicable state securities laws.
NOW THEREFORE, the Company and the Buyers hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS.
a. Purchase of Preferred Shares. Subject to the satisfaction (or
waiver) of the conditions set forth in Sections 6(a) and 7(a) below, the Company
shall issue and sell to each Buyer and each Buyer severally agrees to purchase
from the Company the respective number of Initial Preferred Shares set forth
opposite such Buyer's name on the Schedule of Buyers, along with Initial
Warrants to acquire a number of shares of Common Stock for each Initial
Preferred Share purchased equal to the result of (a) $570, divided by (b) the
average of the Weighted Average Prices (as defined in the Initial Warrants) of
the Common Stock for the 30 consecutive trading days beginning on and including
the first trading day after the date on which the Company files a Form 8-K or
Form 10-K with the SEC describing the terms of the offering of Preferred Stock
pursuant to the first sentence of Section 4(j) (the "Initial Closing"). Subject
to the satisfaction (or waiver) of the conditions set forth in Sections 1(c),
6(b) and 7(b), at the option of each Buyer, the Company shall issue at multiple
closings, if applicable, and sell to each such Buyer and each such Buyer may
purchase from the Company that number of Additional Preferred Shares equal to
such Buyer's pro rata portion of 5,000 Additional Preferred Shares (based on the
number of Initial Preferred Shares each Buyer purchased in relation to the total
number of Initial Preferred Shares issued), along with the Additional Warrants
to purchase a number of Additional Warrant Shares per Additional Preferred Share
equal to the result of (i) $570, divided by (ii) the average of the Weighted
Average Prices (as defined in the Additional Warrants) of the Common Stock for
the 15 consecutive trading days beginning on and including the first trading day
after the Call Trigger Date (each an "Additional Closing" and collectively with
the Initial Closing, the "Closings."). The purchase price (the "Purchase Price")
of each Preferred Share and the related Warrants at each of the Closings shall
be an aggregate of $1,000. "Business Days" means any day other than Saturday,
Sunday or other day on which commercial banks in the City of New York are
authorized or required by law to remain closed.
b. The Initial Closing Date. The date and time of the Initial
Closing (the "Initial Closing Date") shall be 10:00 a.m. Central Time, within
three (3) Business Days following the date hereof, subject to the satisfaction
(or waiver) of the conditions to the Closing set forth in Sections 6(a) and 7(a)
(or such later date as is mutually agreed to by the Company and the Buyers). The
Initial Closing shall occur on the Initial Closing Date at the offices of Xxxxxx
Xxxxxx Zavis, 000 Xxxx Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000-0000.
c. The Additional Closing Date. The date and time of each Additional
Closing (an "Additional Closing Date") shall be 10:00 a.m. Central time, on the
date specified in the Additional Share Notice (as defined below), subject to
satisfaction (or waiver) of the conditions to each Additional Closing set forth
in Sections 6(b) and 7(b) and the conditions contained in this Section 1(c) (or
such later date as is mutually agreed to by the Company and each Buyer
purchasing Preferred Shares at such Closing). At any time during the period
beginning on and including the Call Trigger Date and ending on and including the
date which is two (2) years after the Call Trigger Date, but subject to the
requirements of Sections 6(b) and 7(b) and the conditions contained in this
Section 1(c); each Buyer may purchase, at such Buyer's option, Additional
Preferred Shares and the related Additional Warrants by delivering written
notice to the Company (a "Additional Share Notice") at least five Business Days
(the "Additional Share Notice Date") prior to the Additional Closing Date set
forth in the Additional Share Notice. The Additional Share Notice shall set
forth (i) the number of Additional Preferred Shares along with the related
Additional Warrants such Buyer will purchase at such Additional Closing which
number shall not exceed such Buyer's pro rata portion of 5,000 Additional
Preferred Shares (based on the number of Initial Preferred Shares each Buyer
purchased in relation to the total number of Initial Preferred Shares issued),
(ii) the aggregate Purchase Price for the Additional Preferred Shares and the
related Additional Warrants to be purchased and (iii) the Additional Closing
Date. "Call Trigger Date" shall mean (I) the earlier of (A) the date the Company
files its Form 10-Q for the three months ended June 30, 2000, if such Form 10-Q
does not disclose that on or before August 1, 2000 the Company (x) consummated
the Subsequent Financing (as defined below), and (y) obtained a new credit
facility with a bank providing immediately available funds of at least
$5,000,000 on commercially reasonable terms (the "Credit Facility") or (B)
August 14, 2000, if the Company fails to file its Form 10-Q for the three months
ended June 30, 2000 on or before August 14, 2000, unless the Company has
publicly disclosed prior to August 14, 2000 that on or before August 1, 2000 the
Company (x) consummated the Subsequent Financing and (y) obtained the Credit
Facility,
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or (II) any date subsequent to (y) the date the Company files its Form 10-Q for
the three months ended June 30, 2000 or (z) August 14, 2000 if the Company fails
to file such form 10-Q on or before August 14, 2000, on which the Company
publicly discloses that the Credit Facility is not effective and available, or a
new credit facility with a bank which has terms which are no less favorable to
the Company than, and for an amount not less than, the Credit Facility is
effective and available. The Additional Closing shall occur on an Additional
Closing Date at the offices of Xxxxxx Xxxxxx Xxxxx, 000 Xxxx Xxxxxx Xxxxxx,
Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000-0000. The Initial Closing Date and the
Additional Closing Dates collectively are referred to in this Agreement as the
"Closing Dates". For purposes of this Section 1(c), "Subsequent Financing" means
the sale by the Company of shares of Common Stock or securities convertible into
or exercisable or exchangeable for shares of Common Stock which (i) includes net
proceeds to the Company of at least $5,000,000 at the time such offering is
consummated, (ii) is classified as equity under U.S. Generally Accepted
Accounting Principles, (iii) does not include or involve, directly or
indirectly, the exercise, conversion or exchange of any securities or rights
outstanding on March 28, 2000, and (iv) is not pursuant to any agreement entered
into by the Company prior to March 28, 2000 nor any amendment to any such
agreement.
d. Form of Payment. On each of the Closing Dates, (i) each Buyer
purchasing Preferred Shares and Warrants at such Closing shall pay the Purchase
Price to the Company for the Preferred Shares and the related Warrants to be
issued and sold to such Buyer at such Closing, by wire transfer of immediately
available funds in accordance with the Company's written wire instructions, less
any amount withheld for expenses pursuant to Section 4(i), and (ii) the Company
shall deliver to each Buyer, stock certificates (in the denominations as such
Buyer shall request) (the "Preferred Stock Certificates") representing such
number of the Preferred Shares which such Buyer is then purchasing hereunder
along with warrants representing the related Warrants, duly executed on behalf
of the Company and registered in the name of such Buyer or its designee.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself that:
a. Investment Purpose. Such Buyer (i) is acquiring the
Preferred Shares and the Warrants, (ii) upon conversion of the Preferred Shares,
will acquire the Conversion Shares then issuable and (iii) upon exercise of the
Warrants, will acquire the Warrant Shares issuable upon exercise thereof (the
Preferred Shares, the Conversion Shares, the Warrants and the Warrant Shares
collectively are referred to herein as the "Securities"), for its own account
for investment only and not with a view towards, or for resale in connection
with, the public sale or distribution thereof, except pursuant to sales
registered or exempted under the 1933 Act; provided, however, that by making the
representations herein, such Buyer does not agree to hold any of the Securities
for any minimum or other specific term and reserves the right to dispose of the
Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act.
b. Accredited Investor Status. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a)(3) of Regulation D.
c. Reliance on Exemptions. Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of the United States federal and state
securities laws and that the Company is relying in part upon the truth and
accuracy of, and such Buyer's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of such Buyer set forth herein in
order to determine the availability of such exemptions and the eligibility of
such Buyer to acquire the Securities.
d. Information. Such Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by such Buyer. Such Buyer and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer or
its advisors, if any, or its representatives shall modify, amend or affect such
Buyer's right to rely on the Company's representations and warranties contained
in Sections 3 and 9(m) below. Such Buyer understands that its investment in the
Securities involves a high degree of risk. Such Buyer has sought such
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accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Securities.
e. No Governmental Review. Such Buyer understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Securities
or the fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
f. Transfer or Resale. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel, in a form reasonably acceptable to the Company,
to the effect that such Securities to be sold, assigned or transferred may be
sold, assigned or transferred pursuant to an exemption from such registration,
or (C) such Buyer provides the Company with reasonable assurance that such
Securities can be sold, assigned or transferred pursuant to Rule 144 promulgated
under the 1933 Act, as amended, (or a successor rule thereto) ("Rule 144"); (ii)
any sale of the Securities made in reliance on Rule 144 may be made only in
accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of the Securities under circumstances in which the seller
(or the person through whom the sale is made) may be deemed to be an underwriter
(as that term is defined in the 0000 Xxx) may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC thereunder;
and (iii) neither the Company nor any other person is under any obligation to
register the Securities under the 1933 Act or any state securities laws or to
comply with the terms and conditions of any exemption thereunder.
Notwithstanding the foregoing, the Securities may be pledged in connection with
a bona fide margin account or other loan secured by the Securities.
g. Legends. Such Buyer understands that the certificates or
other instruments representing the Preferred Shares and the Warrants and, until
such time as the sale of the Conversion Shares and the Warrant Shares have been
registered under the 1933 Act as contemplated by the Registration Rights
Agreement, the stock certificates representing the Conversion Shares and the
Warrant Shares, except as set forth below, shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION OF
COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION
IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR (II)
UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN SECURED BY THE SECURITIES.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for resale under the 1933 Act, (ii) in connection with
a sale transaction, such holder provides the Company with an opinion of counsel,
in a form reasonably acceptable to the Company, to the effect that a public
sale, assignment or transfer of the Securities may be made without registration
under the 1933 Act, or (iii) such holder provides the Company with a
representation letter in the form attached hereto as Exhibit E (a
"Representation Letter") relating to the sale of the Securities pursuant to Rule
144.
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h. Authorization; Enforcement; Validity. This Agreement and the
Registration Rights Agreement have been duly and validly authorized, executed
and delivered on behalf of such Buyer and are valid and binding agreements of
such Buyer enforceable against such Buyer in accordance with their terms,
subject as to enforceability to general principles of equity and to applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and other
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.
i. Residency. Such Buyer is a resident of that jurisdiction
specified in its address on the Schedule of Buyers.
j. No Other Agreements. Such Buyer has not, directly or indirectly,
made any agreements with the Company relating to the terms or conditions of the
transactions contemplated by the Transaction Documents except as set forth in
the Transaction Documents.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers that:
a. Organization and Qualification. Except as set forth in
Schedule 3(a), the Company and its "Subsidiaries" (which for purposes of this
Agreement means any entity in which the Company, directly or indirectly, owns
capital stock or holds an equity or similar interest of an amount greater than
fifty percent (50%) of the total equity or similar interest of such entity) are
corporations duly organized and validly existing in good standing under the laws
of the jurisdiction in which they are incorporated, and have the requisite
corporate power and authorization to own their properties and to carry on their
business as now being conducted. Each of the Company and its Subsidiaries is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not have
a Material Adverse Effect. As used in this Agreement, "Material Adverse Effect"
means any material adverse effect on the business, properties, assets,
operations, results of operations or financial condition of the Company and its
Subsidiaries, if any, taken as a whole, or on the transactions contemplated
hereby or by the agreements and instruments to be entered into in connection
herewith, or on the authority or ability of the Company to perform its
obligations under the Transaction Documents (as defined below) or the
Certificate of Amendment. A complete list of entities in which the Company,
directly or indirectly, owns capital stock or holds an equity or similar
interest in an amount greater than one percent (1%) of the total equity of such
entity is set forth in Schedule 3(a).
b. Authorization; Enforcement; Validity. The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Registration Rights Agreement, the
Irrevocable Transfer Agent Instructions (as defined in Section 5), the Warrants
and each of the other agreements entered into by the parties hereto in
connection with the transactions contemplated by this Agreement (collectively,
the "Transaction Documents"), and to issue the Securities in accordance with the
terms hereof and thereof. The execution and delivery of the Transaction
Documents of the Company and the execution and filing of the Certificate of
Amendment by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including without limitation the issuance of
the Preferred Shares and the Warrants and the reservation for issuance and the
issuance of the Conversion Shares and the Warrant Shares issuable upon
conversion or exercise thereof, have been duly authorized by the Company's Board
of Directors and no further consent or authorization is required by the Company,
its Board of Directors or its stockholders. The Transaction Documents have been
duly executed and delivered by the Company. The Transaction Documents constitute
the valid and binding obligations of the Company enforceable against the Company
in accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies. The
Certificate of Amendment has been filed on or prior to the Closing Date with the
Department of State of the State of New York and will be in full force and
effect, enforceable against the Company in accordance with its terms and shall
not have been amended unless in compliance with its terms.
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c. Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of (i) 40,000,000 shares of Common Stock,
of which as of March 24, 2000, 17,797,755 shares are issued and outstanding,
5,199,362 shares are reserved for issuance pursuant to the Company's stock
option and purchase plans and 8,061,390 shares are issuable and reserved for
issuance pursuant to securities (other than the Preferred Shares and the
Warrants or shares reserved for issuance pursuant to the Company's stock option
and purchase plans) exercisable or exchangeable for, or convertible into, shares
of Common Stock and during the period between March 24, 2000 and the date
hereof, no additional issuances of Common Stock have been made which in the
aggregate exceed 50,000 shares of Common Stock and (ii) 6,000,000 shares of
Preferred Stock, of which as of the date hereof, 1,904,438 shares have been
designated as Series A Preferred Stock of which 80,597 shares are issued and
outstanding; 1,500,000 shares have been designated Series B Preferred Stock of
which no shares are issued and outstanding; and 1,500,000 shares have been
designated Series C Preferred Stock of which 1,500,000 shares are issued and
outstanding. All of such outstanding shares have been, or upon issuance will be,
validly issued and are fully paid and nonassessable. Except as disclosed in
Schedule 3(c), (A) no shares of the Company's capital stock are subject to
preemptive rights or any other similar rights (other than antidilution or
similar rights) or any liens or encumbrances suffered or permitted by the
Company; (B) there are no outstanding debt securities issued by the Company; (C)
there are no outstanding options, warrants, scrip, rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its Subsidiaries; (D) there are
no agreements or arrangements under which the Company or any of its Subsidiaries
is obligated to register the sale of any of their securities under the 1933 Act
(except the Registration Rights Agreement); (E) there are no outstanding
securities or instruments of the Company or any of its Subsidiaries which
contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any
of its Subsidiaries; (F) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities as described in this Agreement; and (G) the Company does not have
any stock appreciation rights or "phantom stock" plans or agreements or any
similar plan or agreement. The Company has furnished to each Buyer true and
correct copies of the Company's Certificate of Incorporation, as amended and as
in effect on the date hereof (the "Certificate of Incorporation"), and the
Company's Bylaws, as amended and as in effect on the date hereof (the "Bylaws"),
and the terms of all securities convertible into or exercisable for Common Stock
and the material rights of the holders thereof in respect thereto.
d. Issuance of Securities. The Preferred Shares are duly
authorized and, upon issuance in accordance with the terms hereof, shall be (i)
validly issued, fully paid and non-assessable, (ii) free from all taxes, liens
and charges with respect to the issuance thereof and (iii) entitled to the
rights and preferences set forth in the Certificate of Amendment. 2,300,000
shares of Common Stock (subject to adjustment pursuant to the Company's covenant
set forth in Section 4(f) below) have been duly authorized and reserved for
issuance upon conversion of the Preferred Shares and upon exercise of the
Warrants. Upon conversion or exercise in accordance with the Certificate of
Amendment or the Warrants, as the case may be, the Conversion Shares and the
Warrant Shares will be validly issued, fully paid and nonassessable and free
from all taxes, liens and charges with respect to the issue thereof, with the
holders being entitled to all rights accorded to a holder of Common Stock.
Assuming the accuracy of the Buyer's representations and warranties as to
factual matters contained in Section 2, the issuance by the Company of the
Securities is exempt from registration under the 1933 Act.
e. No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company, the performance by the Company of its
obligations under the Certificate of Amendment and the consummation by the
Company of the transactions contemplated hereby and thereby (including, without
limitation, the reservation for issuance and issuance of the Conversion Shares
and the Warrant Shares) will not (i) result in a violation of the Certificate of
Incorporation, any Certificate of Amendment, Preferences and Rights of any
outstanding series of preferred stock of the Company or the Bylaws; (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material agreement,
indenture or instrument to which
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the Company or any of its Subsidiaries is a party; (iii) result in a violation
of any law, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations and the rules and regulations of the
Principal Market (as defined below)) applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected. Neither the Company nor its Subsidiaries is
in violation of any term of its Certificate of Incorporation, any Certificate of
Amendment, Preferences and Rights of any outstanding series of preferred stock
of the Company or Bylaws or their organizational charter or bylaws,
respectively. Except as disclosed in Schedule 3(e), neither the Company or any
of its Subsidiaries is in violation or any term of or in default under any
contract, agreement, mortgage, indebtedness, indenture, instrument, judgment,
decree or order or any statute, rule or regulation applicable to the Company or
its Subsidiaries, except where such violations and defaults would not result,
either individually or in the aggregate, in a Material Adverse Effect. The
Company has not violated any term of and is in compliance with all the terms and
conditions of (i) each security issued by the Company to The Zanett Securities
Corporation or any predecessor or successor thereto or any affiliate or client
of The Zanett Securities Corporation ("Zanett") and (ii) each agreement to which
the Company and Zanett are parties. The business of the Company and its
Subsidiaries is not being conducted, and shall not be conducted, in violation of
any law, ordinance or regulation of any governmental entity, except where such
violations would not result, either individually or in the aggregate, in a
Material Adverse Effect. Except as specifically contemplated by this Agreement
and as required under the 1933 Act, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency or any regulatory or self-regulatory agency in
order for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents or to perform its obligations under
the Certificate of Amendment, in each case in accordance with the terms hereof
or thereof. Except as disclosed in Schedule 3(e), all consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected on or prior to
the date hereof. The Company and its Subsidiaries are unaware of any facts or
circumstances which may reasonably be expected to give rise to any of the
foregoing. The Company is not in violation of the listing requirements of the
Principal Market, including, without limitation, the requirements set forth in
Rule 4310(c)(25)(H) of the Principal Market and has no actual knowledge of any
facts which would reasonably lead to delisting or suspension of the Common Stock
by the Principal Market in the foreseeable future.
f. SEC Documents; Financial Statements. Since December 31,
1997, the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the "SEC
Documents"). A complete list of the SEC Documents is set forth on Schedule 3(f)
hereto. As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the 1934 Act and the rules and regulations of
the SEC promulgated thereunder applicable to the SEC Documents. None of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Buyers which is not
included in the SEC Documents, including, without limitation, information
referred to in Section 2(d), contains any untrue statement of a material fact or
omits to state any material fact necessary in order to make the statements
therein, in the light of the circumstance under which they are or were made, not
misleading. Neither the Company nor any of its Subsidiaries or any of their
officers, directors, employees or agents have provided the Buyers with any
material, nonpublic information, except for the Disclosed Information (as
defined below). On April 20, 2000, the Company will meet the requirements for
the use of Form S-3 for registration of the resale of the Registrable Securities
(as defined in the Registration Rights Agreement). The "Disclosed Information"
is certain information
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disclosed by the Company to each Buyer (i) on March 24, 2000 relating to the
draft, dated March 24, 2000, of the Company's Form 10-K for the year ended
December 31, 1999 (the "Draft 10-K") and (ii) on March 20, 2000 relating to
Zanett exercising its right to purchase additional prepaid warrants and
incentive warrants from the Company.
g. Absence of Certain Changes. Except as disclosed in Schedule
3(g), the Draft 10-K or as disclosed in the SEC Documents filed with the SEC on
XXXXX at least five (5) days prior to the date hereof, since December 31, 1998
there has been no material adverse change and no material adverse development in
the business, properties, assets, operations, results of operations or financial
conditions of the Company or its Subsidiaries. The Company has not taken any
steps, and does not currently expect to take any steps, to seek protection
pursuant to any bankruptcy law nor does the Company or any of its Subsidiaries
have any knowledge or reason to believe that its creditors intend to initiate
involuntary bankruptcy proceedings or any actual knowledge of any fact which
would reasonably lead a creditor to do so. Except as disclosed in Schedule 3(g)
or as disclosed in the SEC Documents filed with the SEC on XXXXX at least five
(5) days prior to the date hereof, since December 31, 1998 the Company has not
declared or paid any dividends, sold any assets, individually or in the
aggregate, in excess of $100,000 outside of the ordinary course of business or
had capital expenditures, individually or in the aggregate, in excess of
$100,000 outside the ordinary course of business.
h. Absence of Litigation. Except as disclosed in the SEC
Documents filed with the SEC on XXXXX at least five (5) days prior to the date
hereof, there is no action, suit, proceeding, inquiry or investigation before or
by any court, public board, government agency, self-regulatory organization or
body pending or, to the knowledge of the Company or any of its Subsidiaries,
threatened against or affecting the Company, the Common Stock or any of the
Subsidiaries or any of the Company's or the Subsidiaries' officers or directors
in their capacities as such, except as expressly set forth in Schedule 3(h).
Except as set forth in Schedule 3(h), to the knowledge of the Company none of
the directors or officers of the Company have been involved in securities
related litigation during the past five years.
i. Acknowledgment Regarding Buyer's Purchase of Preferred
Shares. The Company acknowledges and agrees that each of the Buyers is acting
solely in the capacity of an arm's length purchaser with respect to the
Transaction Documents and the Certificate of Amendment and the transactions
contemplated hereby and thereby. The Company further acknowledges that each
Buyer is not acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to the Transaction Documents and the
Certificate of Designation and the transactions contemplated hereby and thereby
and any advice given by any of the Buyers or any of their respective
representatives or agents in connection with the Transaction Documents and the
Certificate of Amendment and the transactions contemplated hereby and thereby is
merely incidental to such Buyer's purchase of the Securities. The Company
further represents to each Buyer that the Company's decision to enter into the
Transaction Documents has been based solely on the independent evaluation by the
Company and its representatives.
j. Intentionally Omitted.
k. No General Solicitation. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 0000 Xxx) in connection with the offer or sale of the
Securities.
l. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of the Securities to be
integrated with prior offerings by the Company for purposes of the 1933 Act or
any applicable stockholder approval provisions, including, without limitation,
under the rules and regulations of any exchange or automated quotation system on
which any of the securities of the Company are listed or designated, nor will
the Company or any of its Subsidiaries take any action or steps that would
require registration of any of the Securities under the 1933 Act or cause the
offering of the Securities to be integrated with other offerings.
m. Dilutive Effect. The Company understands and acknowledges
that the number of Conversion Shares issuable upon conversion of the Preferred
Shares and the Warrant Shares issuable upon exercise
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of the Warrants will increase in certain circumstances. The Company further
acknowledges that its obligation to issue Conversion Shares upon conversion of
the Preferred Shares in accordance with this Agreement and the Certificate of
Amendment and its obligation to issue the Warrant Shares upon exercise of the
Warrants in accordance with this Agreement and the Warrants, is, in each case,
absolute and unconditional regardless of the dilutive effect that such issuance
may have on the ownership interests of other stockholders of the Company.
n. Employee Relations. Neither the Company nor any of its
Subsidiaries is involved in any union labor dispute nor, to the knowledge of the
Company or any of its Subsidiaries, is any such dispute threatened. None of the
Company's or its Subsidiaries' employees is a member of a union which relates to
such employee's relationship with the Company, neither the Company nor any of
its Subsidiaries is a party to a collective bargaining agreement. No executive
officer (as defined in Rule 501(f) of the 0000 Xxx) has notified the Company
that such officer intends to leave the Company or otherwise terminate such
officer's employment with the Company. No executive officer, to the knowledge of
the Company and its Subsidiaries, is in violation of any material term of any
employment contract, confidentiality, disclosure or proprietary information
agreement, non-competition agreement, or any other contract or agreement or any
restrictive covenant.
o. Intellectual Property Rights. The Company and its
Subsidiaries own or possess adequate rights or licenses to use all trademarks,
trade names, service marks, service xxxx registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and other intellectual property rights necessary
to conduct their respective businesses as now conducted. Except as set forth on
Schedule 3(o), none of the Company's trademarks, trade names, service marks,
service xxxx registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade secrets or
other intellectual property rights necessary to conduct its business as now
conducted have expired or terminated, or are expected to expire or terminate
within two years from the date of this Agreement. The Company and its
Subsidiaries do not have any knowledge of any infringement by the Company or its
Subsidiaries of trademarks, trade names, service marks, service xxxx
registrations, service names, patents, patent rights, copyrights, inventions,
licenses, trade secrets or other intellectual property rights of others, or of
any development of similar or identical trade secrets or technical information
by others and, except as set forth on Schedule 3(o), there is no claim, action
or proceeding being made or brought against, or to the Company's knowledge,
being threatened against, the Company or its Subsidiaries regarding its
trademarks, trade names, service marks, service xxxx registrations, service
names, patents, patent rights, copyrights, inventions, licenses, trade secrets,
or infringement of other intellectual property rights; and the Company and its
Subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing, except where any of the foregoing would not result, either
individually or in the aggregate, in a Material Adverse Effect. The Company and
its Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties.
p. Environmental Laws. The Company and its Subsidiaries (i)
are in compliance with any and all applicable foreign, federal, state and local
laws and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval except where, in each of the
three foregoing cases, the failure to so comply would not result, either
individually or in the aggregate, in a Material Adverse Effect.
q. Title. The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in Schedule 3(q) or such
as do not materially affect the value of such property and do not interfere with
the use made and proposed to be made of such property by the Company and any of
its Subsidiaries. Any real property and facilities held under lease by the
Company and any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and facilities by the
Company and its Subsidiaries.
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r. Insurance. The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary has been
refused any insurance coverage sought or applied for and neither the Company nor
any such Subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect, taken as a
whole.
s. Regulatory Permits. Except for the absence of which would
not result, either individually or in the aggregate, in a Material Adverse
Effect, the Company and its Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state or foreign
regulatory authorities necessary to conduct their respective businesses, and
neither the Company nor any such Subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate,
authorization or permit.
t. Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
u. No Materially Adverse Contracts, Etc. Neither the Company
nor any of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's officers has or could reasonably be expected in the
future to have a Material Adverse Effect.
v. Tax Status. The Company and each of its Subsidiaries (i)
has made or filed all federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject
(unless and only to the extent that the Company and each of its Subsidiaries has
set aside on its books provisions reasonably adequate for the payment of all
unpaid and unreported taxes), (ii) has paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith and for which the Company has made appropriate reserves for on its
books, and (iii) has set aside on its books provisions reasonably adequate for
the payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations (referred to in clause (i) above) apply. There
are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim.
w. Transactions With Affiliates. Except as set forth on
Schedule 3(w) and in the SEC Documents filed at least ten days prior to the date
hereof, and other than the grant of stock options disclosed on Schedule 3(c),
none of the officers, directors, or employees of the Company is presently a
party to any transaction with the Company or any of its Subsidiaries (other than
for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any such officer, director or employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any such officer, director, or employee has a substantial interest or is
an officer, director, trustee or partner.
x. Application of Takeover Protections. The Company and its
board of directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Certificate of Incorporation or the laws of
the state of its incorporation which is or could become applicable to the Buyers
as a result of the transactions contemplated by this Agreement, including,
without limitation, the Company's issuance of the Securities and the Buyers'
ownership of the Securities.
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y. Rights Agreement. The Company has not adopted a shareholder
rights plan or similar arrangement relating to accumulations of beneficial
ownership of Common Stock or a change in control of the Company.
z. Foreign Corrupt Practices. Neither the Company, nor any of
its Subsidiaries, nor any director, officer, agent, employee or other person
acting on behalf of the Company or any of its Subsidiaries has, in the course of
its actions for, or on behalf of, the Company, used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or made any unlawful bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
aa. Year 2000 Compliance. The Company believes that the
computer applications that are currently material to its or any Subsidiary's
business and operations are reasonably expected to be able to perform properly
date-sensitive functions for all dates before and after January 1, 2000.
bb. No Other Agreements. The Company has not, directly or
indirectly, made any agreements with any Buyers relating to the terms or
conditions of the transactions contemplated by the Transaction Documents except
as set forth in the Transaction Documents.
cc. Series C Convertible Preferred Stock. Waterside Capital
Corporation, a Virginia corporation, is the only holder of the Company's Series
C Convertible Preferred Stock and the warrants issued in connection with the
issuance of the Series C Convertible Preferred Stock.
dd. The Pennsylvania Merchant Group and Xxxxxx, Xxxxx and
Xxxxx, Inc. Warrants. The warrants issued to The Pennsylvania Merchant Group on
October 21, 1999 and to Xxxxxx, Xxxxx and Xxxxx, Inc. in June, 1998, contain no
anti-dilution provision other than for stock splits, stock dividends, stock
combinations or any similar transactions.
ee. Zanett Placement Agent Agreement. The Amended and Restated
Placement Agency Agreement dated March 22, 2000 between the Company and Zanett
is the only placement agent agreement or similar agreement between the Company
and Zanett and supersedes all prior placement agent or similar agreements
between the Company and Zanett or any affiliate of Zanett.
4. COVENANTS.
a. Best Efforts. Each party shall use its best efforts to timely
satisfy each of the conditions to be satisfied by it as provided in Sections 6
and 7 of this Agreement.
b. Form D and Blue Sky. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof to each Buyer promptly after such filing. The Company shall, on or
before each of the Closing Dates, take such action as the Company shall
reasonably determine is necessary in order to obtain an exemption for or to
qualify the Securities for sale to the Buyers at each of the Closings pursuant
to this Agreement under applicable securities or "Blue Sky" laws of the states
of the United States, and shall provide evidence of any such action so taken to
each Buyer on or prior to the Closing Dates. The Company shall make all filings
and reports relating to the offer and sale of the Securities required under
applicable securities or "Blue Sky" laws of the states of the United States
following the Closing Date.
c. Reporting Status. Until the date which is 60 days after the date
on which the last Preferred Share or Warrant or right to purchase Preferred
Shares has been converted, exercised or expired, as the case may be (the
"Reporting Period"), the Company shall file all reports required to be filed
with the SEC pursuant to the 1934 Act, and the Company shall not terminate its
status as an issuer required to file reports under the 1934 Act even if the 1934
Act or the rules and regulations thereunder would otherwise permit such
termination.
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d. Use of Proceeds. The Company will use the proceeds from the sale
of the Preferred Shares for working capital purposes.
e. Financial Information. The Company agrees to send the following
to each Investor (as that term is defined in the Registration Rights Agreement)
during the Reporting Period: (i) within two (2) days after the filing thereof
with the SEC, a copy of its Annual Reports on Form 10-K, its Quarterly Reports
on Form 10-Q, any Current Reports on Form 8-K and any registration statements
(other than on Form S-8) or amendments filed pursuant to the 1933 Act,
(provided, however, that the Company will have satisfied its obligations under
this clause (i) if the information required by this clause (i) is filed on and
available for retrieval from XXXXX; (ii) on the same day as the release thereof,
facsimile copies of all press releases issued by the Company or any of its
Subsidiaries; and (iii) copies of any notices and other information made
available or given to the stockholders of the Company generally,
contemporaneously with the making available or giving thereof to the
stockholders;.
f. Reservation of Shares. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than 100% of the number of shares of Common Stock needed to
provide for the issuance of the shares of Common Stock upon conversion of all
outstanding Preferred Shares (without regard to any limitations on conversions)
and 100% of the number of shares of Common Stock needed to provide for the
issuance of the shares of Common Stock upon exercise of all outstanding Warrants
(without regard to any limitations on exercises).
g. Right of Participation. Subject to the exceptions described
below, the Company and its Subsidiaries agrees that during the period beginning
on the date hereof and ending on and including the date which is two hundred
seventy-one (271) days after the Initial Closing Date, neither the Company nor
its Subsidiaries will negotiate or contract with any party for any equity
financing (including any debt financing with an equity component) or issue any
equity securities of the Company or any Subsidiary or securities convertible or
exchangeable into or for equity securities of the Company or any Subsidiary
(including debt securities with an equity component) in any form (a
"Participation Offering") unless it shall have first delivered to each Buyer or
a designee appointed by such Buyer written notice (the "Participation Offering
Notice") describing the proposed Participation Offering, including the size,
terms and conditions thereof, and providing each Buyer an option to purchase up
to its Aggregate Participation Percentage (as defined below) of the securities
to be issued in such Participation Offering (the limitations referred to in this
and the preceding sentence are collectively referred to as the "Capital Raising
Limitations"). For purposes of this Section 4(g), "Aggregate Participation
Percentage" shall mean the percentage obtained by multiplying (I) 75% by (II)
the quotient of (i) the aggregate number of Initial Preferred Shares issued to
such Buyer on the Initial Closing Date by (ii) the aggregate number of Initial
Preferred Shares issued to all the Buyers on the Initial Closing Date. A Buyer
can exercise its option to participate in a Participation Offering by delivering
written notice to the Company within five (5) Business Days after receipt of a
Participation Offering Notice, which notice shall state the quantity of
securities being offered in the Participation Offering that such Buyer will
purchase, up to its Aggregate Participation Percentage, and that number of
securities it is willing to purchase in excess of its Aggregate Participation
Percentage. In the event that one or more Buyers fail to elect to purchase up to
each such Buyer's Aggregate Participation Percentage, then each Buyer which has
indicated that it is willing to purchase a number of securities in such
Participation Offering in excess of its Aggregate Participation Percentage shall
be entitled to purchase its pro rata portion (determined in the same manner as
described in the preceding sentence) of the securities in the Participation
Offering which one or more of the Buyers have not elected to purchase. In the
event the Buyers fail to elect to fully participate in the Participation
Offering within the periods described in this Section 4(g), the Company shall
have 45 days thereafter to sell the securities in the Participation Offering
that the Buyers did not elect to purchase, upon terms and conditions, no more
favorable to the purchasers thereof than specified in the Participation Offering
Notice. In the event the Company has not sold such securities of the
Participation Offering within such 45 day period, the Company shall not
thereafter issue or sell such securities without first offering such securities
to the Buyers in the manner provided in this Section 4(g). The Capital Raising
Limitations shall not apply to (i) a loan from a commercial bank which does not
have any equity feature, (ii) any transaction involving the Company's issuances
of securities (A) as consideration in a merger or consolidation, (B) in
connection with any strategic partnership or joint venture (the primary purpose
of which is not to raise equity capital), or (C) as consideration for the
acquisition of a business, product, license or other assets by the Company,
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(iii) the issuance of Common Stock or debt in a firm commitment, underwritten
public offering, (iv) the issuance of securities upon exercise or conversion of
the Company's options, warrants or other convertible securities outstanding as
of the date hereof, (v) the grant of additional options or warrants, or the
issuance of additional securities, under any Company stock option plan,
restricted stock plan or stock purchase plan for the benefit of the Company's
employees, directors or consultants, (vi) the issuance of securities pursuant to
an underwritten offering by the Company in reliance upon Rule 144A under the
1933 Act with proceeds to the Company of at least $50,000,000 and which does not
provide for any demand or piggyback registration rights for at least one (1)
year from the date of the offering, and (vii) the issuance of Common Stock,
without any additional equity component, which meets the following conditions:
(A) the price per share is greater than the average of the Weighted Average
Prices (as defined in the Certificate of Amendment) of the Common Stock for the
five (5) trading days ending on the date immediately preceding the Initial
Closing Date, and (B) on the date of issuance of such shares of Common Stock,
the price per share of such Common Stock is not less than eighty percent (80%)
of the market price of the Common Stock on such date of issuance. The Buyers
shall not be required to participate or exercise their right of first refusal
with respect to a particular Participation Offering in order to exercise their
right of first refusal with respect to later Participation Offerings.
h. Listing. The Company shall promptly secure the listing of all of
the Registrable Securities (as defined in the Registration Rights Agreement)
upon each national securities exchange and automated quotation system, if any,
upon which shares of Common Stock are then listed (subject to official notice of
issuance) and shall maintain, so long as any other shares of Common Stock shall
be so listed, such listing of all Registrable Securities from time to time
issuable under the terms of the Transaction Documents and the Certificate of
Amendment. The Company shall maintain the Common Stock's authorization for
quotation on the Nasdaq National Market or the Nasdaq Small Cap Market or listed
on The New York Stock Exchange or The American Stock Exchange (as applicable,
the "Principal Market"). The Company shall promptly, and in no event later than
the following Business Day, offer to provide to each Buyer copies of any notices
it receives from the Principal Market regarding the continued eligibility of the
Common Stock for listing on such automated quotation system or securities
exchange. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 4(h).
i. Expenses. Subject to Section 9(l) below, at or before the
Closing, the Company shall pay an expense allowance of $50,000 to HFTP
Investment L.L.C. (a Buyer) or their designee(s), which amount shall be paid
prior to Closing or withheld by such Buyer from its Purchase Price to be paid at
the Closing. HFTP Investment L.L.C. acknowledges that it has received $30,000 of
such amount prior to the Closing.
j. Filing of Form 8-K or Form 10-K. On or before March 30, 2000, the
Company shall file a Form 8-K or Form 10-K with the SEC describing the terms of
the transactions contemplated by the Transaction Documents and including as
exhibits to such Form 8-K or Form 10-K this Agreement, the Certificate of
Amendment, the Registration Rights Agreement and the Form of Warrant, in the
form required by the 1934 Act. On or before the first (1st) Business Day
following each Additional Closing Date the Company shall file a Form 8-K with
the SEC describing the transaction consummated or proposed on such date. On or
prior to the date the Company files the Form 8-K or Form 10-K with the SEC
relating to the Initial Closing Date referred to in the first sentence of this
Section 4(j), the Company shall publicly disclose the Disclosed Information by
filing with the SEC the Company's Form 10-K for the year ended December 31,
1999.
k. Transactions With Affiliates. So long as (i) any Preferred Shares
or Warrants are outstanding or any Buyer has the right to purchase any
Additional Preferred Shares or (ii) any Buyer owns Conversion Shares or Warrant
Shares with a market value equal to or greater than $500,000, the Company shall
not, and shall cause each of its Subsidiaries not to, enter into, amend, modify
or supplement any agreement, transaction, commitment or arrangement with any of
its or any Subsidiary's officers, directors, persons who were officers or
directors at any time during the previous two years, stockholders who
beneficially own 5% or more of the Common Stock, or affiliates of the Company or
its Subsidiaries or with any individual related by blood, marriage or adoption
to any such individual or with any entity in which any such entity or individual
owns a 5% or more beneficial interest (each a "Related Party"), except for (a)
customary employment arrangements and benefit programs on reasonable terms, (b)
any agreement, transaction, commitment or arrangement on an arms-length basis on
terms no less favorable than terms which would have been obtainable from a
person other than such Related Party, or (c) any
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agreement, transaction, commitment or arrangement which is approved by a
majority of the disinterested directors of the Company. For purposes hereof, any
director who is also an officer of the Company or any Subsidiary shall not be a
disinterested director with respect to any such agreement, transaction,
commitment or arrangement. "Affiliate" for purposes hereof means, with respect
to any person or entity, another person or entity that, directly or indirectly,
(i) has a 5% or more equity interest in that person or entity, (ii) has 5% or
more common ownership with that person or entity, (iii) controls that person or
entity, or (iv) shares common control with that person or entity. "Control" or
"controls" for purposes hereof means that a person or entity has the power,
direct or indirect, to conduct or govern the policies of another person or
entity.
l. Proxy Statement. The Company shall provide each stockholder
entitled to vote at the next meeting of stockholders of the Company, which
meeting shall occur on or before the earlier of (A) the date which is 60 days
after the Proxy Statement Triggering Date (as defined below) and (B) June 30,
2001 (the "Stockholder Meeting Deadline"), a proxy statement, which has been
previously reviewed by the Buyers and a counsel of their choice, soliciting each
such stockholder's affirmative vote at such annual stockholder meeting for
approval of the Company's issuance of all of the Securities as described in this
Agreement in accordance with applicable law and the rules and regulations of the
Principal Market (such affirmative approval being referred to herein as the
"Stockholder Approval" and the Company shall use its best efforts to solicit its
stockholders' approval of such issuance of the Securities and to cause the Board
of Directors of the Company to recommend to the stockholders that they approve
such proposal. Such proxy statement shall not seek approval of any matters other
than the approval described in the preceding sentence and the election of
directors. If the Company fails to hold a meeting of its stockholders by the
Stockholder Meeting Deadline, then, as partial relief (which remedy shall not be
exclusive of any other remedies available at law or in equity), the Company
shall pay to each holder of Preferred Shares an amount in cash per Preferred
Share equal to the product of (i) the Purchase Price multiplied by (ii) .02
multiplied by (iii) the quotient of (x) the number of days after the Stockholder
Meeting Deadline and prior to the date that a meeting of the Company's
stockholders is held, divided by (y) 30. The Company shall make the payments
referred to in the immediately preceding sentence within five days of the
earlier of (I) the filing of the proxy statement or the holding of the meeting
of the Company's stockholders, the failure of which resulted in the requirement
to make such payments, and (II) the last day of each 30-day period beginning on
the Stockholder Meeting Deadline. In the event the Company fails to make such
payments in a timely manner, such payments shall bear interest at the rate of
2.0% per month (pro rated for partial months) until paid in full. "Proxy
Statement Triggering Date" shall mean the first date after the date of this
Agreement on which the sum of (A) the number of shares of Common Stock
previously issued upon conversion of any of the shares of Preferred Stock, (B)
the number of shares of Common Stock issuable upon conversion of all the
outstanding shares of Preferred Stock based on the Conversion Price in effect on
the date of such determination (without regard to any limitation upon the
conversion), (C) the number of shares of Common Stock previously issued upon
exercise of the Warrants, (D) and the number of shares of Common Stock issuable
upon exercise of all the outstanding Warrants (without regard to any limitation
upon exercise) and (E) on or after the Call Trigger Date, the number of shares
of Common Stock which would be issuable upon conversion of the 5,000 Additional
Preferred Shares and exercise of the related Additional Warrants, as if such
Additional Preferred Shares and Additional Warrants were outstanding on such
date of determination (without regard to any limitation upon the conversion of
the Additional Preferred Shares or exercise of the Additional Warrants) equals
or exceeds 15% of the number of shares of Common Stock issued and outstanding
immediately prior to the Closing Date.
m. Corporate Existence. So long as a Buyer beneficially owns any
Preferred Shares or Warrants or has the right to purchase any Additional
Preferred Shares, the Company shall maintain its corporate existence and shall
not sell all or substantially all of the Company's assets, except in the event
of a merger or consolidation or sale of all or substantially all of the
Company's assets, where the surviving or successor entity in such transaction
(i) assumes the Company's obligations hereunder and under the agreements and
instruments entered into in connection herewith and (ii) is a publicly traded
corporation whose common stock is quoted on or listed for trading on the
Principal Market.
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5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its transfer
agent, and any subsequent transfer agent, to issue certificates, registered in
the name of each Buyer or its respective nominee(s), for the Conversion Shares
and the Warrant Shares in such amounts as specified from time to time by each
Buyer to the Company upon conversion of the Preferred Shares or exercise of the
Warrants (the "Irrevocable Transfer Agent Instructions"). Prior to registration
of the Conversion Shares and the Warrant Shares under the 1933 Act, all such
certificates shall bear the restrictive legend specified in Section 2(g). The
Company warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5 and stop transfer instructions to
give effect to Section 2(f) (in the case of the Conversion Shares and the
Warrant Shares, prior to registration of the Conversion Shares and the Warrant
Shares under the 0000 Xxx) will be given by the Company to its transfer agent
and that the Securities shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement and the
Registration Rights Agreement. If a Buyer provides the Company with an opinion
of counsel, in a form reasonably acceptable to the Company, to the effect that a
public sale, assignment or transfer of the Securities may be made without
registration under the 1933 Act or the Buyer provides the Company with a
Representation Letter (as defined in Section 2(g)) relating to the sale of the
Securities pursuant to Rule 144, the Company shall permit the transfer, and, in
the case of the Conversion Shares and the Warrant Shares, promptly instruct its
transfer agent to issue one or more certificates in such name and in such
denominations as specified by such Buyer and without any restrictive legend. The
Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Buyers by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5, that the Buyers shall be entitled,
in addition to all other available remedies, to an order and/or injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
a. Initial Closing Date. The obligation of the Company to issue and
sell the Initial Preferred Shares and the Initial Warrants to each Buyer at the
Initial Closing is subject to the satisfaction, at or before the Initial Closing
Date, of each of the following conditions, provided that these conditions are
for the Company's sole benefit and may be waived by the Company at any time in
its sole discretion by providing each Buyer with prior written notice thereof:
(i) Such Buyer shall have executed each of the Transaction Documents
to which it is a party and delivered the same to the Company.
(ii) The Certificate of Amendment shall have been filed with the
Department of State of the State of New York.
(iii) Such Buyer shall have delivered to the Company the Purchase
Price (less in the case of HFTP Investment L.L.C., the amounts withheld
pursuant to Section 4(i)) for the Initial Preferred Shares and the Initial
Warrants being purchased by such Buyer at the Initial Closing by wire
transfer of immediately available funds pursuant to the wire instructions
provided by the Company.
(iv) The representations and warranties of such Buyer shall be true
and correct as of the date when made and as of the Initial Closing Date as
though made at that time (except for representations and warranties that
speak as of a specific date), and such Buyer shall have performed,
satisfied and complied with the covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or
complied with by such Buyer at or prior to the Initial Closing Date.
b. Additional Closing Date. The obligation of the Company hereunder
to issue and sell the Additional Preferred Shares and the Additional Warrants to
each Buyer at each Additional Closing is subject to the satisfaction, at or
before such Additional Closing Date, of each of the following conditions,
provided that these
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conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion by providing each Buyer with prior written
notice thereof:
(i) Such Buyer shall have delivered to the Company the Purchase
Price for the Additional Preferred Shares and the related Additional
Warrants being purchased by such Buyer at the applicable Additional
Closing by wire transfer of immediately available funds pursuant to the
wire instructions provided by the Company.
(ii) The representations and warranties of such Buyer shall be true
and correct as of the date when made and as of the applicable Additional
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and such Buyer shall have
performed, satisfied and complied with the covenants, agreements and
conditions required by the Transaction Documents to be performed,
satisfied or complied with by such Buyer at or prior to the applicable
Additional Closing Date.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
a. Initial Closing Date. The obligation of each Buyer hereunder to
purchase the Initial Preferred Shares and the Initial Warrants from the Company
at the Initial Closing is subject to the satisfaction, at or before the Initial
Closing Date, of each of the following conditions, provided that these
conditions are for each Buyer's sole benefit and may be waived by such Buyer at
any time in its sole discretion by providing the Company with prior written
notice thereof:
(i) The Company shall have executed each of the Transaction
Documents and delivered the same to such Buyer.
(ii) The Certificate of Amendment, shall have been filed with the
Department of State of the State of New York, and a copy thereof certified
by such Department of State shall have been delivered to such Buyer.
(iii) The Common Stock (x) shall be designated for quotation or
listed on the Principal Market and (y) shall not have been suspended by
the SEC or the Principal Market from trading on the Principal Market nor
shall suspension by the SEC or the Principal Market have been threatened
either (A) in writing by the SEC or the Principal Market or (B) by falling
below the minimum listing maintenance requirements of the Principal
Market; and the Conversion Shares and the Warrant Shares issuable upon
conversion or exercise of the Preferred Shares and the related Warrants,
as the case may be shall be listed upon the Principal Market.
(iv) The representations and warranties of the Company shall be true
and correct as of the date when made and as of the Initial Closing Date as
though made at that time (except for representations and warranties that
speak as of a specific date) and the Company shall have performed,
satisfied and complied with the covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or
complied with by the Company at or prior to the Initial Closing Date. Such
Buyer shall have received a certificate, executed by the Chief Executive
Officer of the Company, dated as of the Initial Closing Date, to the
foregoing effect and as to such other matters as may be reasonably
requested by such Buyer including, without limitation, an update as of the
Initial Closing Date regarding the representation contained in Section
3(c) above.
(v) Such Buyer shall have received the opinion of Xxxxxxx Xxxxxxx
Xxxxxx & Xxxxxxxxx, LLP dated as of the Initial Closing Date, in form,
scope and substance satisfactory to such Buyer.
(vi) Such Buyer shall have received the opinion of Xxxxxxxx Xxx
Xxxx, Esq. dated as of the Initial Closing Date, in form, scope and
substance satisfactory to such Buyer.
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(vii) The Company shall have executed and delivered to such Buyer
the Preferred Stock Certificates for the Initial Preferred Shares and the
Initial Warrants (in such denominations as such Buyer shall request) for
the Initial Preferred Shares and the Initial Warrants being purchased by
such Buyer at the Initial Closing.
(viii) The Board of Directors of the Company shall have adopted
resolutions consistent with Section 3(b)(ii) above and in a form
reasonably acceptable to such Buyer (the "Resolutions").
(ix) As of the Initial Closing Date, the Company shall have reserved
out of its authorized and unissued Common Stock, solely for the purpose of
effecting the conversion of the Initial Preferred Shares and the exercise
of the Initial Warrants, at least 2,300,000 shares of Common Stock.
(x) The Irrevocable Transfer Agent Instructions, in the form of
Exhibit D attached hereto, shall have been delivered to and acknowledged
in writing by the Company's transfer agent.
(xi) The Company shall have delivered to such Buyer a certificate
evidencing the incorporation and good standing of the Company and each
active Subsidiary in such entity's state of incorporation or organization
issued by the Secretary of State of such state of incorporation or
organization as of a date within ten days of the Initial Closing Date.
(xii) The Company shall have delivered to such Buyer a certified
copy of the Certificate of Incorporation as certified by the Department of
State of the State of New York as of a date within ten days of the Initial
Closing Date.
(xiii) The Company shall have delivered to such Buyer a secretary's
certificate, dated as the Closing Date, as to (A) the Resolutions, (B) the
Certificate of Incorporation and (C) the Bylaws, each as in effect at the
Initial Closing.
(xiv) The Company shall have made all filings under all applicable
federal and state securities laws necessary to consummate the issuance of
the Securities pursuant to this Agreement in compliance with such laws.
(xv) The Company shall have delivered to such Buyer such other
documents relating to the transactions contemplated by this Agreement as
such Buyer or its counsel may reasonably request.
b. Additional Closing Dates. The obligation of each Buyer hereunder
to purchase the Additional Preferred Shares and the Additional Warrants from the
Company at each of the applicable Additional Closings is subject to the
satisfaction, at or before each of the Additional Closing Dates, of each of the
following conditions, provided that these conditions are for each Buyer's sole
benefit and may be waived by such Buyer at any time in its sole discretion:
(i) The Company shall have complied with and satisfied all of the
requirements of Section 1(c).
(ii) The Certificate of Amendment, shall be in full force and effect
and shall not have been amended since the Initial Closing Date, and a copy
thereof certified by the Department of State of the State of New York
shall have been delivered to such Buyer.
(iii) The Common Stock (x) shall be designated for quotation or
listed on the Principal Market and (y) shall not have been suspended by
the SEC or the Principal Market from trading on the Principal Market nor
shall suspension by the SEC or the Principal Market have been threatened
either (A) in writing by the SEC or the Principal Market or (B) by falling
below the minimum listing maintenance requirements of the Principal
Market; and the Conversion Shares and the Warrant Shares issuable upon
conversion or
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exercise of the Additional Preferred Shares and the related Additional
Warrants, as the case may be shall be listed upon the Principal Market.
(iv) The representations and warranties of the Company shall be true
and correct as of the date when made and as of the applicable Additional
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied with the covenants, agreements and
conditions required by the Transaction Documents or the Certificate of
Amendment to be performed, satisfied or complied with by the Company at or
prior to the applicable Additional Closing Date. Such Buyer shall have
received a certificate, executed by the Chief Executive Officer of the
Company, dated as of the applicable Additional Closing Date, to the
foregoing effect and as to such other matters as may be reasonably
requested by such Buyer including, without limitation, an update as of the
applicable Additional Closing Date regarding the representation contained
in Section 3(c).
(v) Such Buyer shall have received the opinion of Xxxxxxx Xxxxxxx
Xxxxxx & Xxxxxxxxx, LLP dated as of the applicable Additional Closing
Date, in form, scope and substance satisfactory to such Buyer.
(vi) Such Buyer shall have received the opinion of Xxxxxxxx Xxxx
Xxxx, Esq. dated as of the applicable Additional Closing Date, in form,
scope and substance satisfactory to such Buyer.
(vii) The Company shall have executed and delivered to such Buyer
the Preferred Stock Certificates for the Additional Preferred Shares and
the Additional Warrants (in such denominations as such Buyer shall
request) for the Additional Preferred Shares and the Additional Warrants
being purchased by such Buyer at the applicable Additional Closing.
(viii) The Board of Directors of the Company shall have adopted, and
shall not have amended, the Resolutions.
(ix) As of the applicable Additional Closing Date, the Company shall
have reserved out of its authorized and unissued Common Stock, solely for
the purpose of effecting the conversion of the Additional Preferred Shares
and exercise of the Additional Warrants being purchased at such Additional
Closing, a number of shares of Common Stock equal to at least 175% of the
number of shares of Common Stock which would be issuable upon conversion
in full of such Additional Preferred Shares (without regard to any
limitations on conversions) and 175% of the number of shares of Common
Stock which would be issuable upon exercise in full of such Additional
Warrants (without regard to any limitations on exercises), as if such
Additional Preferred Shares and Additional Warrants were issued and
outstanding on such Additional Closing Date.
(x) The Irrevocable Transfer Agent Instructions shall remain in
effect as of the applicable Additional Closing Date and the Company shall
cause its Transfer Agent to deliver a letter to such Buyer to that effect.
(xi) The Company shall have delivered to such Buyer a certificate
evidencing the incorporation and good standing of the Company and each
active Subsidiary in such entity's state of incorporation or organization
issued by the Secretary of State of such state of incorporation or
organization as of a date within ten days of the applicable Additional
Closing Date.
(xii) The Company shall have delivered to such Buyer a certified
copy of the Certificate of Incorporation as certified by the Department of
State of the State of New York as of a date within ten days of the
applicable Additional Closing Date.
(xiii) The Company shall have delivered to such Buyer a secretary's
certificate, dated as the Closing Date, as to (A) the Resolutions, (B) the
Certificate of Incorporation and (C) the Bylaws, each as in effect at the
applicable Additional Closing.
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(xiv) The Company shall have made all filings under all applicable
federal and state securities laws necessary to consummate the issuance of
the Securities pursuant to this Agreement in compliance with such laws.
(xv) The Company shall have delivered to such Buyer a letter from
the Company's transfer agent certifying the number of shares of Common
Stock outstanding as of a date within five days of the applicable
Additional Closing Date.
(xvi) The Initial Registration Statement (as defined in the
Registration Rights Agreement) covering the resale of the Conversion
Shares and Warrant Shares has been declared effective by the SEC on or
prior to the applicable Effectiveness Deadline and at all times since
being declared effective has been effective and available for the sale of
no less than the sum of (A) 100% of the number of Conversion Shares then
issuable upon the conversion of all outstanding Preferred Shares (without
regard to any limitations on conversions), (B) 100% of the number of
Warrant Shares into which all outstanding Warrants are then exercisable
(without regard to any limitations on exercises)and (C) the number of
Conversion Shares and Warrant Shares outstanding, which were acquired upon
conversion or exercise of the Initial Preferred Shares the Initial
Warrants, as the case may be, and held by the Buyers at such time.
(xvii) If the applicable Additional Closing is after the Stockholder
Meeting Deadline, then the Company shall have received Stockholder
Approval on or prior to the Stockholder Meeting Deadline.
(xviii) The Company shall have delivered to such Buyer such other
documents relating to the transactions contemplated by this Agreement as
such Buyer or its counsel may reasonably request.
8. INDEMNIFICATION. In consideration of each Buyer's execution and
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's other obligations under the Transaction
Documents and the Certificate of Amendment, the Company shall defend, protect,
indemnify and hold harmless each Buyer and each other holder of the Securities
and all of their stockholders, officers, directors, employees and direct or
indirect investors and any of the foregoing persons' agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"Indemnitees") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any breach of any representation or warranty made by the Company in the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (b) any breach of any covenant, agreement or
obligation of the Company contained in the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (c) any
cause of action, suit or claim brought or made against such Indemnitee and
arising out of or resulting from the execution, delivery, performance or
enforcement of the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby or (d) any transaction financed or to be
financed in whole or in part, directly or indirectly, with the proceeds of the
issuance of the Securities. To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. Except as otherwise set
forth herein, the mechanics and procedures with respect to the rights and
obligations under this Section 8 shall be the same as those set forth in
Sections 6(a) and (d) of the Registration Rights Agreement, including, without
limitation, those procedures with respect to the settlement of claims and the
Company's rights to assume the defense of claims.
9. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law; Jurisdiction; Jury Trial. The corporate laws of
the State of New York shall govern all issues concerning the relative rights of
the Company and its stockholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of New York, without giving effect
to any choice of law or conflict of law provision or rule
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(whether of the State of New York or any other jurisdictions) that would cause
the application of the laws of any jurisdictions other than the State of New
York. Each party hereby irrevocably submits to the non-exclusive jurisdiction of
the state and federal courts sitting in the City of New York, borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
b. Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
c. Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement supersedes all other
prior oral or written agreements between each Buyer, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and the Buyers which purchased at least two-thirds (_) of the Initial
Preferred Shares on the Initial Closing Date or, if prior to the Initial Closing
Date, the Buyers listed on the Schedule of Buyers as being obligated to purchase
at least two-thirds (_) of the Initial Preferred Shares, and no provision hereof
may be waived other than by an instrument in writing signed by the party against
whom enforcement is sought. No such amendment shall be effective to the extent
that it applies to less than all of the holders of the Preferred Shares or
Warrants then outstanding. No consideration shall be offered or paid to any
person to amend or consent to a waiver or modification of any provision of any
of the Transaction Documents or the Certificate of Amendment unless the same
consideration also is offered to all of the parties to the Transaction Documents
or holders of the Securities, as the case may be.
f. Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit with
a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
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If to the Company:
The Netplex Group, Inc.
0000 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxx
With a copy to:
Venable, Baetjer, Xxxxxx & Xxxxxxxxx, LLP
0000 X Xxxxxx, X.X., Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxxxxxx, Esq.
If to the Transfer Agent:
American Stock Transfer and Trust Company
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx Xxxxxx
If to a Buyer, to it at the address and facsimile number set forth on the
Schedule of Buyers, with copies to such Buyer's representatives as set forth on
the Schedule of Buyers, or at such other address and/or facsimile number and/or
to the attention of such other person as the recipient party has specified by
written notice given to each other party five days prior to the effectiveness of
such change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by a nationally recognized overnight delivery
service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
g. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Preferred Shares. The Company shall not assign
this Agreement or any rights or obligations hereunder without the prior written
consent of the holders of at least two-thirds (_) of the Preferred Shares then
outstanding, including by merger or consolidation, except pursuant to a Change
of Control (as defined in Section 4(c) of the Certificate of Amendment) with
respect to which the Company is in compliance with Section 4 of the Certificate
of Amendment. A Buyer may assign some or all of its rights hereunder to (i) a
Permitted Transferee (as defined below) without the consent of the Company and
(ii) to a person which is not a Permitted Transferee with the prior written
consent of the Company, which consent shall not be unreasonably withheld,
provided, however, that any such assignment shall not release such Buyer from
its obligations hereunder unless such obligations are assumed by such assignee
and the Company has consented to such assignment and assumption, to the extent
necessary. Notwithstanding anything to the contrary contained in the Transaction
Documents, the Buyers shall be entitled to pledge the Securities in connection
with a bona fide margin account or other loan secured by the Securities. For
purposes of this Section 9(g), a "Permitted Transferee" shall mean (i) a Buyer,
(ii) an Affiliate (as that term is defined in Rule 501(b) under the 0000 Xxx) of
a Buyer, (iii) any holder of Preferred Shares or Warrants or rights to purchase
Additional Preferred Shares, (iv) any Affiliate of a holder of Preferred Shares
or Warrants, or (v) any other investment fund that, with such investment fund's
Affiliates, has under management at least $100 million.
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h. No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. Survival. Unless this Agreement is terminated under Section 9(l),
the representations and warranties of the Company and the Buyers contained in
Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and 9,
and the indemnification provisions set forth in Section 8, shall survive the
Closings. Each Buyer shall be responsible only for its own representations,
warranties, agreements and covenants hereunder.
j. Publicity. The Company and each Buyer shall have the right to
approve before issuance any press releases or any other public statements with
respect to the transactions contemplated hereby; provided, however, that the
Company shall be entitled, without the prior approval of any Buyer, to make any
press release or other public disclosure with respect to such transactions as is
required by applicable law and regulations (although each Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a copy
thereof).
k. Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. Termination. In the event that the Initial Closing shall not have
occurred with respect to a Buyer on or before five (5) Business Days from the
date hereof due to the Company's or such Buyer's failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the nonbreaching party's
failure to waive such unsatisfied condition(s)), the nonbreaching party shall
have the option to terminate this Agreement with respect to such breaching party
at the close of business on such date without liability of any party to any
other party; provided, however, that if this Agreement is terminated pursuant to
this Section 9(l), the Company shall remain obligated to reimburse any
nonbreaching Buyers for the expenses described in Section 4(i) above.
m. Placement Agent. The Company acknowledges that it has engaged
X.X. Xxxxxxxx and Co. as placement agent in connection with the sale of the
Preferred Shares and the related Warrants, which placement agent may have
formally or informally engaged other agents on its behalf. The Company shall be
responsible for the payment of any placement agent's fees or broker's
commissions relating to or arising out of the transactions contemplated hereby.
The Company shall pay, and hold each Buyer harmless against, any liability, loss
or expense (including, without limitation, attorneys' fees and out of pocket
expenses) arising in connection with any such claim.
n. No Strict Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
o. Remedies. Each Buyer and each holder of the Securities shall have
all rights and remedies set forth in the Transaction Documents and the
Certificate of Amendment and all rights and remedies which such holders have
been granted at any time under any other agreement or contract and all of the
rights which such holders have under any law. Any person having any rights under
any provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law.
p. Payment Set Aside. To the extent that the Company makes a payment
or payments to the Buyers hereunder or pursuant to the Registration Rights
Agreement, the Certificate of Amendment or Warrants or the Buyers enforce or
exercise their rights hereunder or thereunder, and such payment or payments or
the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the
-49-
obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.
* * * * * *
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IN WITNESS WHEREOF, the Buyers and the Company have caused this Securities
Purchase Agreement to be duly executed as of the date first written above.
COMPANY: BUYERS:
THE NETPLEX GROUP, INC. HFTP INVESTMENT L.L.C.
By: /s/ XXXX X. XXXXX By: Promethean Asset Management L.L.C.
-------------------------------- Its: Investment Manager
Name: XXXX X. XXXXX
---------------------------
Title: CHAIRMAN & CEO By: /s/ [ILLEGIBLE]
-------------------------- -------------------------------------
Name:
--------------------------------
Title:
-------------------------------
XXXXXX CAPITAL LTD.
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxxx
Its: Authorized Signatory
XXXXXXX CAPITAL LTD.
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Authorized Signatory
SCHEDULE OF BUYERS
Number of
Initial
Investor Address Preferred Investor's Legal Representatives'
Investor's Name and Facsimile Number Shares Address and Facsimile Number
------------------------------- ------------------------------------- ----------- -----------------------------------
HFTP Investment L.L.C. Promethean Asset Management L.L.C. 3,400 Promethean Investment Group, L.L.C.
00 Xxxxxxxxx Xxxxxx, 00xx Xxxxx 000 Xxxxxxxxx Xxx., 00xx Xxxxx
Xxx Xxxx, XX 00000 Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. X'Xxxxx, Xx. Attn: Xxxxx X. X'Xxxxx, Xx.
Xxxx Xxxxxxx Xxxx Xxxxxxx
Telephone: (000) 000-0000 Telephone: 000-000-0000
Facsimile: (000) 000-0000 Facsimile: 000-000-0000
Residence: New York
Xxxxxx Xxxxxx & Xxxxx
000 X. Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Xxxxxx Capital Ltd. _Citadel Investment Group, L.L.C. 4,290 Xxxxxx Xxxxxx & Xxxxx
000 Xxxx Xxxxxxxxxx Xxxxxx 000 X. Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000 Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxx Attention: Xxxxxx X. Xxxxxxxx, Esq.
Telephone: (000) 000-0000 Telephone: (000) 000-0000
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
Residence: Cayman Islands
Xxxxxxx Capital Ltd. _Citadel Investment Group, L.L.C. 2,310 Xxxxxx Xxxxxx & Zavis
000 Xxxx Xxxxxxxxxx Xxxxxx 000 X. Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000 Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxxx Attention: Xxxxxx X. Xxxxxxxx, Esq.
Telephone: (000) 000-0000 Telephone: (000) 000-0000
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
Residence: Cayman Islands
SCHEDULES
Schedule 3(a) Subsidiaries
Schedule 3(c) Capitalization
Schedule 3(e) Conflicts
Schedule 3(f) SEC Documents
Schedule 3(g) Material Changes
Schedule 3(h) Litigation
Schedule 3(o) Intellectual Property
Schedule 3(q) Liens
Schedule 3(w) Certain Transactions
EXHIBITS
Exhibit A Form of Certificate of Amendment for the Series D
Preferred Stock
Exhibit B Form of Warrant
Exhibit C Form of Registration Rights Agreement
Exhibit D Form of Irrevocable Transfer Agent Instructions
Exhibit E Form of Representation Letter
