SENIOR SUBORDINATED UNSECURED CONVERTIBLE NOTES PURCHASE
AGREEMENT OF NOVEMBER 10, 1998
(THE RESTRUCTURED PURCHASE AGREEMENT)
This Agreement (hereinafter referred to as the "Restructured Purchase
Agreement") dated as of November 10, 1998 is by and between Officeland Inc., an
Ontario corporation, with its principal place of business in Toronto, Ontario
(the "Company"), those purchasers who have executed and who are identified in
Exhibit A attached hereto and their respective affiliates (individually, a
"Purchaser" and collectively, the "Purchasers") and International Capital
Partners, Inc., a Connecticut corporation with its principal place of business
in Stamford, Connecticut ("ICP").
The Company, ICP, BP (as hereinafter defined) and certain investors are
parties to the Initial Purchase Agreement (as hereinafter defined). The Initial
Purchase Agreement, prior to being amended by the Initial Purchase Amending
Agreement (as hereinafter defined), contemplated the sale to the investors named
as "Purchasers" in Exhibit A thereto of Senior Notes for an aggregate principal
amount of $7,000,000 (the "Aggregate Investment"), to be used by the Company for
the purposes contemplated in the Initial Purchase Agreement. By means of the
Initial Purchase Amending Agreement, each of the parties to the Initial Purchase
Agreement agreed, inter alia, to reduce the Aggregate Investment to an aggregate
investment of $2,000,000.
The Purchasers have agreed to enter into this Restructured Purchase
Agreement for the purpose of purchasing New Senior Notes (as hereinafter
defined), for an aggregate principal amount not exceeding $5,000,000, upon the
terms and conditions set out herein.
In consideration of the mutual promises and covenants contained in this
Restructured Purchase Agreement, and intending to be legally bound by the terms
and conditions of this Restructured Purchase Agreement, the parties hereby agree
as follows:
1. Definitions
1.1 Initial Purchase Agreement Definitions All capitalized terms used
in this Restructured Purchase Agreement shall, unless expressly otherwise
defined herein, have the same meanings as given to them, respectively, in the
Initial Purchase Agreement, which defined terms are incorporated by reference in
this Restructured Purchase Agreement. In some instances, definitions of certain
terms, which have been defined in the Initial Purchase Agreement, are repeated
herein for ease of reference.
1.2 Additional Definitions In this Restructured Purchase Agreement, the
following terms shall have the following meanings, respectively:
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(a) "Aggregate Investment" has the meaning ascribed thereto in the
second preamble to this Restructured Purchase Agreement;
(b) "Applicable Percentage" means the applicable percentage of the
aggregate purchase price set out in Exhibit A;
(c) "Ardara" means Ardara Investment Inc.;
(d) "Ardara Initial Investment" means the sum of $571,429 paid by
Ardara to purchase a Senior Note under the terms of the
Initial Purchase Agreement and "Ardara Initial Note" means the
Senior Note so purchased;
(e) "Bassini Group" means, collectively, BP and all of the persons
named as "Purchasers" in Exhibit A to the Initial Purchase
Agreement, other than Ardara;
(f) "BP" means Bassini, Playfair + Associates LLC, an Anguillan
limited liability company with its principal place of business
in New York, New York;
(g) "Class B Stock" has the meaning ascribed to it in Section 2.2;
(h) "Dollar Fifty Warrant" means the warrant in the form set out
in Exhibit F1;
(i) "Initial Purchase Agreement" means the Senior Subordinated
Unsecured Convertible Notes Purchase Agreement made as of the
4th day of June, 1998 among Ardara, the Bassini Group, ICP and
the Company (a copy of which is attached as Exhibit B hereto),
as amended by the Initial Purchase Amending Agreement ;
(j) "Initial Purchase Amending Agreement" means an amending
agreement among each of the parties to the Initial Purchase
Agreement, made as of the 23rd day of October, 1998, a copy of
which is attached as Exhibit C hereto;
(k) "Loan Agreements" means, collectively, the loan agreements
dated June 4, 1998, made between each of the Founders and the
Company and "Loan Agreement" means any one of such loan
agreements;
(l) "New Advisory Fee" has the meaning ascribed to it in Section
2.7;
(m) "New Disclosure Schedule" means the disclosure schedule
attached as Exhibit J hereto;
(n) "New Initial Aggregate Purchase Price" has the meaning
ascribed to it in Subsection 2.4(a);
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(o) "New Initial Closing" and "New Initial Closing Date" have the
meanings respectively ascribed to them in Section 3.2 ;
(p) "New Projections" has the meaning ascribed to it in Section
2.8;
(q) "New Senior Notes" has the meaning ascribed to it in Section
2.1;
(r) "New Subsequent Aggregate Purchase Price" has the meaning
ascribed to it in Section 2.4(b);
(s) "New Subsequent Closing" has the meaning ascribed to it in
Section 2.4(b);
(t) "New Subsequent Closing Date" means the applicable "Subsequent
Closing Date", as defined in Subsections 2.2(d) and (e) of the
Initial Purchase Agreement;
(u) "New Warrants" has the meaning ascribed to it in Section 2.3;
(v) "Non Management Portion" means, for the purposes of Sections
2.7 and 2.8 hereof, the amount remaining after deducting from
the aggregate principal amount of New Senior Notes purchased
and sold hereunder the aggregate prinicpal amount of any New
Senior Notes which may be sold to the existing directors
and/or management of the Company;
(w) "Pre-approved Transaction" means, in respect of the occurrence
thereof, that a definitive binding agreement of purchase and
sale (including all exhibits and schedules) (the "Acquisition
Agreement") has been entered into on substantially the terms
approved by a majority of the members of the Acquisition
Committee in respect of any one of the following intended
acquisitions by the Company: Telecom Corporation of Chicago,
Inc. or Eastern Equipment Brokers, Inc.;
(x) "Purchasers' Solicitors" means Fogler ▇▇▇▇▇▇▇▇, counsel to ICP
and the Purchasers;
(y) "Restructured Articles of Amendment" has the meaning ascribed
to it in Section 2.2;
(z) "Restructured Purchase Agreement" means this Agreement;
(aa) "Restructured Rights Terms" means, for the purposes of this
Restructured Purchase Agreement, the purchase and conversion
terms of the New Senior Notes and the New Warrants, as set out
in this Restructured Purchase Agreement;
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(bb) "Special Stock" as used herein, and wherever referenced in the
Initial Purchase Agreement, shall be deemed, for the purposes
of this Restructured Purchase Agreement, to mean,
collectively, the Class A Stock and the Class B Stock; and
(cc) "Two Dollar Warrant" means the warrant in the form set out in
Exhibit F2.
2. Authorization and Sale of New Senior Notes, Class "B" Special Shares
and New Warrants
2.1 Authorization of New Senior Subordinated Unsecured Convertible
Notes. The Company has duly authorized the issuance and sale of new three-year
senior subordinated unsecured convertible notes (collectively, the "New Senior
Notes") in an aggregate principal amount not to exceed $5,000,000. The New
Senior Notes shall be convertible by the holder into shares of Class B Stock at
the Conversion Price per Unit (as defined in the New Senior Notes) plus one
Dollar Fifty Warrant and one Two Dollar Warrant for each share of Class B Stock
so issued and shall have the rights, privileges, restrictions and conditions set
forth in the form of New Senior Note attached hereto as Exhibit D.
2.2 Authorization of Class "B" Special Shares. The Company has duly
authorized, for issuance upon conversion of the New Senior Notes, an unlimited
number of Class "B" Special Shares (the "Class B Stock"). The Class B Stock
shall be convertible into Common Shares at the option of the holder at any time
on the basis of one Common Share for each share of Class B Stock so converted
and shall have the rights, privileges, restrictions and conditions set forth in
Articles of Amendment, a copy of which is attached hereto as Exhibit E (the
"Restructured Articles of Amendment"). The Company has duly filed with the
Ontario Ministry of Consumer and Commercial Relations the Restructured Articles
of Amendment which have been endorsed with a certificate thereon by such
Ministry.
2.3 Authorization of Warrants. The Company has duly authorized, upon
conversion of the New Senior Notes, the issuance of the Dollar Fifty Warrants
and the Two Dollar Warrants (collectively, the "New Warrants") entitling the
holders thereof to purchase an aggregate number of Common Shares equal to the
aggregate number of Common Shares issuable upon conversion of the holder's
shares of Class B Stock into Common Shares, at a per share exercise price of
$1.50 per Common Share and $2.00 oer Common Share, respectively, subject to
adjustment as provided for in the New Warrants. The New Warrants shall be in the
form of the warrants respectively set out in Exhibits F1 and F2, with
appropriate insertions.
2.4 Sale of New Senior Notes to the Purchasers. Subject to the terms
and conditions of this Restructured Purchase Agreement, the Company hereby
agrees to sell and issue to each Purchaser, and each Purchaser hereby severally
agrees to purchase from the Company, the principal amount of New Senior Notes
that appears in front of such Purchaser's name in Exhibit A, for an aggregate
purchase price of up to $5,000,000, in two or more tranches, as follows:
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(a) At the time of the New Initial Closing (as hereinafter
defined), the Company hereby sells and issues to each
Purchaser, and each Purchaser hereby severally purchases from
the Company the Applicable Percentage (rounded to the next
highest whole dollar) of the principal amount of New Senior
Notes that appears in front of such Purchaser's name in
Exhibit A, for an aggregate purchase price of $1,550,000 (the
"New Initial Aggregate Purchase Price");
(b) At the time of the closing of the second tranche of the
aggregate purchase price (the "New Subsequent Closing"), the
Company hereby agrees to sell and issue to each Purchaser, and
each Purchaser hereby severally agrees to purchase from the
Company the Applicable Percentage (rounded to the next highest
whole dollar) of the principal amount of New Senior Notes that
appears in front of such Purchaser's name in Exhibit A, for an
aggregate purchase price of $1,200,000 (the "New Subsequent
Aggregate Purchase Price"); and
(c) The closing of any further tranche or tranches of the
aggregate purchase price (in each case, a "New Subsequent
Closing"), the last of which shall take place no later than
July 31, 1999, shall take place on such dates and for such
amounts (in each case, a "Further Subsequent Aggregate
Purchase Price") as may be mutually agreed upon between the
Company and the Purchasers, but otherwise upon the terms and
conditions set out in this Restructured Purchase Agreement.
2.5 Class B Stock and New Warrants. Subject to the terms and conditions
of this Restructured Purchase Agreement, the Company hereby agrees to issue to
each Purchaser that number of shares of Class B Stock and New Warrants into
which the New Senior Notes held by each Purchaser are convertible in accordance
with the terms of the New Senior Notes.
2.6 Common Shares. Subject to the terms and conditions of this
Restructured Purchase Agreement, the Company hereby agrees to issue that number
of Common Shares into which the Class B Stock is convertible and New Warrants
are exercisable in accordance with the terms of the Class B Stock and New
Warrants, respectively.
2.7 New Advisory Fee. The Company hereby agrees to pay to ICP
Investments, Inc. at the direction of ICP an advisory fee (the "New Advisory
Fee") in the aggregate amount of three and one-half per cent (3.5%) of the Non
Management Portion, in consideration for certain advisory financial services
provided by ICP to the Company. The New Advisory Fee shall be payable in respect
of the Non Management Portion of the New Initial Aggregate Purchase Price on the
New Initial Closing Date (as hereinafter defined); in respect of the Non
Management Portion of the New Subsequent Aggregate Purchase Price, on the New
Subsequent Closing Date; and thereafter on account of the Non Management Portion
of any Further Subsequent Aggregate Purchase Price, on the applicable New
Subsequent Closing Date.
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2.8 Additional Advisory Fee. The Company hereby agrees to pay to ICP
Investments, Inc. at the direction of ICP a further advisory fee (the
"Additional Advisory Fee") in the amount of two per cent (2%) of the Non
Management Portion, as further consideration for certain financial advisory
services provided by ICP to the Company. The Additional Advisory Fee shall be
payable to ICP Investments, Inc. in the same ratio and at the same times as
Advances (as defined in the Loan Agreements) are made to the Founders
thereunder, subject to the provisions of Section 7.3 hereof.
2.9 Use of Proceeds. The Company shall use the net proceeds for the
same purposes as provided in Section 1.8 of the Initial Purchase Agreement,
mutatis mutandis. The reference in the Initial Purchase Agreement to the
"Projections" shall be deemed to refer to the revised projections attached as
Exhibit G hereto (the "New Projections").
2.10 Additional Arrangements with Ardara The Company hereby further
agrees with Ardara and the other Purchasers hereby acknowledge and agree as
follows:
(a) Exchange of Ardara Initial Note At the time of the New Initial
Closing, Ardara shall be entitled to exchange the Ardara
Senior Note for a New Senior Note, in the same principal
amount as the Ardara Senior Note; and
(b) Further Ardara Investment Upon receipt of a copy of the
financial statements of the Company for the period ending May
31, 1999, Ardara shall have the right, exercisable by written
notice to the Company, delivered within 60 days following the
receipt by it of a copy of such financial statements, to
purchase additional New Senior Notes for an aggregate
additional purchase price of up to $600,000, upon the same
terms and conditions as set out in the New Senior Notes. The
completion of the transaction of purchase and sale shall take
place within 30 days following the receipt of such written
notice from Ardara and on the same basis, mutatis mutandis, as
the completion of the New Subsequent Closing.
3. The Closings The provisions of Section 2 of the Initial Purchase Agreement
are hereby incorporated by reference into this Restructured Purchase Agreement,
mutatis mutandis, with the intent that such provisions shall apply to this
Restructured Purchase Agreement, subject to the following qualifications and
amendments.
3.1 Initial Closing and Initial Closing Date The defined term "Initial
Closing" in Section 2.1 of the Initial Purchase Agreement shall be deemed to
mean the initial closing of the sale and purchase of the New Senior Notes
pursuant to this Restructured Purchase Agreement (the "New Initial Closing"),
which has taken place simultaneously with the execution of this Agreement at the
offices of the Purchasers' Solicitors; and the defined term "Initial Closing
Date" in Section 2.1 of the Initial Purchase Agreement shall be deemed to mean
the date of
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closing of the New Initial Closing (the "New Initial Closing Date"), being the
date of this Restructured Purchase Agreement.
3.2 Ratios The reference in Section 2.1 of the Initial Purchase
Agreement to " two sevenths (2/7)" shall be deemed to refer to the Applicable
Percentage. Any references in Section 2 of the Initial Purchase Agreement to
"one-half (1/2) of " or "fifty per cent (50%) of " are deemed deleted.
3.3 Dates The references in Subsection 2.2(d) and (f) of the Initial
Purchase Agreement to "December 31, 1998" and "November 30, 1998", respectively,
shall be deemed, in each case, to refer to July 31, 1999.
3.4 Subsequent Closing Any reference in Section 2 of the Initial
Purchase Agreement to "each Pre-Approved Transaction" shall be deemed to refer
to a Pre-Approved Transaction.
4. Further Deeming Provisions
4.1 Conforming References For the purposes of any portions of the
Initial Purchase Agreement which are expressly incorporated by reference herein,
all references in the Initial Purchase Agreement to the "Senior Notes", the
"Warrants", the "Class A Stock", the "Advisory Fee", the "Projections", the
"Initial Aggregate Purchase Price", the "Subsequent Aggregate Purchase Price",
the "Initial Closing", the "Initial Closing Date", the "Subsequent Closing(s)",
the "Subsequent Closing Date" and the "Disclosure Schedule" shall be deemed to
refer to the New Senior Notes, the New Warrants, the Class B Stock, the New
Advisory Fee, the New Projections, the New Initial Aggregate Purchase Price, the
New Subsequent Aggregate Purchase Price, the New Initial Closing, the New
Initial Closing Date, the New Subsequent Closing, the New Subsequent Closing
Date and the New Disclosure Schedule, respectively, except as expressly
otherwise provided herein.
4.2 "this Agreement" Except as expressly otherwise provided herein, any
references in Sections 2 to and including 8 of the Initial Purchase Agreement to
"this Agreement" shall be deemed to refer to this Restructured Purchase
Agreement.
4.3 "Certificate" The term "Certificate" in Section 3.1 of the Initial
Purchase Agreement shall be deemed to include the Restructured Articles of
Amendment.
5. Representations and Warranties of the Company The Company hereby repeats the
representations and warranties given by the Company in Section 3 of the Initial
Purchase Agreement, mutatis mutandis, each of which is hereby incorporated by
reference into this Restructured Purchase Agreement, with the intent that such
representations and warranties read as of the date of and apply to this
Restructured Purchase Agreement, subject to the following qualifications and
amendments:
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(a) Subsections 3.3(a)(b) and (c) of the Initial Purchase
Agreement are hereby amended to read as follows: (a) an
unlimited number of Common Shares, 5,465,348 of which shares
are issued and outstanding, 5,147,058 Common Shares which,
subject to adjustment, have been authorized to be issued upon
conversion of the Class A Stock and exercise of the Warrants,
and 2,930,671 Common Shares which, subject to adjustment, have
been authorized and reserved for issuance upon conversion of
the Class B Stock and exercise of the New Warrants, (b) an
unlimited number of Class A Stock, none of which are issued
and outstanding, but 2,573,529 shares of Class A Stock ,
subject to adjustment, have been authorized and reserved for
issuance upon conversion of the Senior Notes pursuant to the
Initial Purchase Agreement, (c) an unlimited number of Class B
Stock, none of which are issued and outstanding, but 967,890
shares of Class B Stock, subject to adjustment, have been
authorized to be issued upon conversion of the New Senior
Notes pursuant to this Restructured Purchase Agreement.
6. Representations, Warranties and Covenants of the Purchasers and ICP Each
Purchaser and ICP hereby severally represents, warrants and covenants to the
Company in the same manner as the representations, warranties and covenants set
out in Section 4 of the Initial Purchase Agreement, mutatis mutandis, each of
which representations, warranties and covenants is hereby incorporated by
reference into this Restructured Purchase Agreement, with the intent that such
representations, warranties and covenants shall apply to this Restructured
Purchase Agreement.
7. Conditions Precedent to Closing The provisions of Section 5 of the Initial
Purchase Agreement (save and except Subsection 5.7 thereof) are hereby
incorporated by reference into this Restructured Purchase Agreement, mutatis
mutandis, with the intent that such provisions shall apply to this Restructured
Purchase Agreement, subject to the following qualifications and amendments:
7.1 Exhibits The references in Section 5.1 of the Initial Purchase
Agreement to Exhibits F and G, shall be deemed to refer to Exhibits H and I ,
respectively, to this Restructured Purchase Agreement.
7.2 Telecom Corporation of Chicago, Inc. The reference in Section 5.6
of the Initial Purchase Agreement to "The Wholesale Group, Inc." shall be deemed
to refer to Telecom Corporation of Chicago, Inc.
7.3 Founders' Loans A new Subsection 5.13 shall be added, as follows:
5.13 Each of the Founders shall have entered into an
agreement amending the terms of his Loan Agreement with the
Company, pursuant to which he agrees that Advances (as defined
therein) shall, notwithstanding any
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provision to the contrary in the Loan Agreement, not commence
until May 31, 1999 or such later date as the non-management
directors of the Company shall, by majority vote, determine,
based on the cash position of the Company and its financial
performance.
8. Certain Covenants of the Company The provisions of Section 6 of the Initial
Purchase Agreement are hereby incorporated by reference into this Restructured
Purchase Agreement, mutatis mutandis, with the intent that such provisions shall
apply to this Restructured Purchase Agreement, subject to the following
qualifications and amendments.
8.1 Acquisition Committee For the purposes of Section 6.11 of the
Initial Purchase Agreement, the parties hereto confirm and agree that: (i) the
Acquisition Committee has been constituted and the members thereof are Messrs
▇▇▇▇▇▇ ▇▇▇▇ and ▇▇ ▇▇▇▇▇ representing the Founders, Messrs ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and
▇▇▇▇▇ ▇▇▇▇ representing the Purchasers, and ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, who shall
participate as a non-voting member; (ii) the last sentence of Section 6.11 is
hereby amended to read as follows: To recommend approval of any acquisition or
joint venture to the Board of Directors, a majority of the members of the
Acquisition Committee must recommend such approval and, in the event of a
deadlock, the matter shall be referred to the Board of Directors for a decision;
and (iii) the Acquisition Committee has recommended and approved the terms for
acquisition of each of Telecom Corporation of Chicago, Inc. and Eastern
Equipment Brokers, Inc., as more particularly set out in the New Disclosure
Schedule. The provisions of Section 6.11 of the Initial Purchase Agreement are
deemed amended accordingly.
9. Registration Rights The provisions of Section 7 of the Initial Purchase
Agreement are hereby incorporated by reference into this Restructured Purchase
Agreement, mutatis mutandis, with the intent that such provisions shall apply to
this Restructured Purchase Agreement.
10. Miscellaneous The provisions of Section 8 of the Initial Purchase Agreement
are hereby incorporated by reference into this Restructured Purchase Agreement,
mutatis mutandis, with the intent that such provisions shall apply to this
Restructured Purchase Agreement, subject to the following qualifications and
amendments:
10.1 Expenses. Subsection 8.6 of the Initial Purchase Agreement is
hereby deemed deleted. The parties hereby agree that the Company shall bear its
own legal and other expenses in connection with the transactions contemplated by
this Restructured Purchase Agreement and the Initial Purchase Agreement and all
out-of-pocket expenses incurred by ICP on behalf of the Purchasers in respect of
each of such agreements to a maximum of $2,000 and all legal expenses incurred
by ICP on behalf of the Purchasers in connection therewith.
10.2 Notices. Subsection 8.7 of the Initial Purchase Agreement is
hereby amended by deleting therefrom the reference to and address of BP and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇.
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10.3 Brokers Subsection 8.8 of the Initial Purchase Agreement is hereby
deemed amended, for the purposes of this Restructured Purchase Agreement, by
deleting therefrom the reference to "▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Associates, Inc.", such
that Subsection 8.8 shall be deemed to commence with the words: "the Company and
ICP represent..."
10.4 Definitions The definitions set out in Section 8.19 of the Initial
Purchase Agreement are deemed to be amended, where applicable, in accordance
with the terms of this Restructured Purchase Agreement.
10.5 Exhibits The following exhibits are attached to and form a
substantive part of this Restructured Purchase Agreement
Exhibit A - Purchasers
Exhibit B - Initial Purchase Agreement (pre-amendment)
Exhibit C - Initial Purchase Amending Agreement
Exhibit D - New Senior Note
Exhibit E - Restructured Articles Of Amendment
Exhibit F1 - New Common Share ($1.50) Warrant
Exhibit F2 - New Common Share ($2.00) Warrant
Exhibit G - New Projections
Exhibit H - Opinion Of Company's Counsel
Exhibit I - Opinion Of Company's U.S. Special Counsel
Exhibit J - New Disclosure Schedule
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Restructured Purchase Agreement as an instrument as of the date first above
written.
Officeland Inc.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇
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Title: President
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International Capital Partners, Inc.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
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Title: Chairman
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