1
EXHIBIT 10.18
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of December 29,
1999 (this "Agreement"), is entered into by and between iBIZ TECHNOLOGY CORP., a
Florida corporation (the "Company"), and Globe United Holdings, Inc., a British
Virgin Islands corporation (the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Company and the Purchaser are executing and
delivering this Agreement in reliance upon the exemptions from registration
provided by Regulation D ("Regulation D") promulgated by the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act"), and/or Section 4(2) of the Securities Act;
WHEREAS, the Purchaser wishes to purchase, and the Company
wishes to issue and sell, for an aggregate purchase price of $1,000,000 upon the
terms and conditions of this Agreement, $1,000,000 aggregate principal amount
(the "Debentures") of the Company's 7% Convertible Debentures which Debentures
shall be in the form attached as Exhibit A, and warrants (the "Warrants") to
purchase 200,000 shares of the Company's Common Stock, par value $.001 per share
(the "Common Stock"); and
WHEREAS, the Debentures are convertible into shares of the
Company's Common Stock on the terms set forth therein, and the Warrants (which
shall be in substantially the form attached as Exhibit B) may be exercised for
the purchase of Common Stock, on the terms set forth therein.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE
a. PURCHASE OF DEBENTURES. Purchaser hereby agrees to
purchase from the Company, and the Company hereby agrees to issue and
sell to the Purchaser, the Debentures and the Warrants for an aggregate
purchase price of $1,000,000 which shall be payable on the date hereof
in next day funds.
b. CLOSINGS. The Debentures and Warrants to be
purchased by Purchaser hereunder, in definitive form, and in such
denominations as
2
Purchaser or its representative, if any, may request upon at least
forty-eight hours' prior notice to the Company, shall be delivered by
or on behalf of the Company for the account of Purchaser, against
payment by the Purchaser of the aggregate purchase price of $1,000,000
therefor by wire transfer to an account of the Company, all at the
offices of ▇▇▇▇▇▇, Halberstain & ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, New York time on the date hereof, or at such
other time and date as Purchasers or their representative, if any, and
the Company may agree upon in writing, such date being referred to
herein as the "Closing Date."
2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION
The Purchaser represents and warrants to, and covenants and
agrees with, the Company as follows:
a. The Purchaser is (i) experienced in making
investments of the kind described in this Agreement and the related
documents, (ii) able, by reason of the business and financial
experience of its management, to protect its own interests in
connection with the transactions described in this Agreement and the
related documents, and (iii) able to afford the entire loss of its
investment in the Debentures and Warrants.
b. All subsequent offers and sales of the Debentures
and Warrants and the Common Stock issuable upon conversion or exercise
of, or in lieu of interest payments on, the Debentures and Warrants, it
shall have purchased shall be made pursuant to an effective
registration statement under the Securities Act or pursuant to an
applicable exemption from such registration.
c. The Purchaser understands that the Debentures and
the Warrants are being offered and sold to it in reliance upon
exemptions from the registration requirements of the United States
federal securities laws, and that the Company is relying upon the truth
and accuracy of the Purchaser's representations and warranties, and the
Purchaser's compliance with its agreements, each as set forth herein,
in order to determine the availability of such exemptions and the
eligibility of the Purchaser to acquire the Debentures and the
Warrants.
d. The Purchaser: (A) has been provided with
sufficient information with respect to the business of the Company and
such documents relating to the Company as the Purchaser has requested
and Purchaser has carefully reviewed the same including, without
limitation, the Company's Form 10-SB (the "Form 10") filed with the
Securities and Exchange
2
3
Commission on October 13, 1999 (the "Commission") as amended by
Amendment No. 1 filed with the Commission on December 1, 1999 and
Amendment No. 2 filed with the Commission on December 15, 1999, (B) has
been provided with such additional information with respect to the
Company and its business and financial condition as the Purchaser, or
the Purchaser's agent or attorney, has requested, and (C) has had
access to management of the Company and the opportunity to discuss the
information provided by management of the Company and any questions
that the Purchaser had with respect thereto have been answered to the
full satisfaction of the Purchaser.
e. The Purchaser has the requisite corporate power
and authority to enter into this Agreement and the registration rights
agreement, dated as of the date hereof, between the Company and the
Purchaser (the "Registration Rights Agreement").
f. This Agreement and the Registration Rights
Agreement and the transactions contemplated hereby and thereby, have
been duly and validly authorized by the Purchaser; and such agreements,
when executed and delivered by each of the Purchaser and the Company
will each be a valid and binding agreement of the Purchaser,
enforceable in accordance with their respective terms, except to the
extent that enforcement of each such agreement may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws now or hereafter in effect relating to
creditors' rights generally and to general principles of equity.
3. REPRESENTATIONS OF THE COMPANY
The Company represents and warrants to the Purchaser that:
a. ORGANIZATION. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Florida. Each of the Company's subsidiaries, if any, is a
corporation duly organized, validly existing and in good standing under
the laws of its respective jurisdiction. Each of the Company and its
subsidiaries, if any, is duly qualified as a foreign corporation in all
jurisdictions in which the failure to so qualify would have a material
adverse effect on the Company and its subsidiaries taken as a whole.
Schedule 3a lists all subsidiaries of the Company and, except as noted
therein, all of the outstanding capital stock of all such subsidiaries
is owned of record and beneficially by the Company.
b. CAPITALIZATION. On the date hereof, the authorized
capital of the Company consists of 100,000,000 shares of Common Stock,
par value $.001 per share, of which 26,671,380 shares are issued and
outstanding. Schedule 3b sets forth all of the options, warrants and
convertible securities of the Company, and any other rights to acquire
securities of the Company
3
4
(collectively, the "Derivative Securities") which are outstanding on
the date hereof, including in each case (i) the name and class of such
Derivative Securities, (ii) the issue date of such Derivative
Securities, (iii) the number of shares of Common Stock of the Company
into which such Derivative Securities are convertible as of the date
hereof, (iv) the conversion or exercise price or prices of such
Derivative Securities as of the date hereof, (v) the expiration date of
any conversion or exercise rights held by the owners of such Derivative
Securities and (vi) any registration rights associated with such
Derivative Securities. Schedule 3b also sets forth all registration
rights associated with the Common Stock.
c. CONCERNING THE COMMON STOCK AND THE WARRANTS. The
Debentures and Warrants, and Common Stock issuable upon conversion of,
or in lieu of interest payments on, the Debentures, and upon exercise
of the Warrants so issued, when issued, shall be duly and validly
issued, fully paid and non-assessable, will not be subject to
preemptive rights and will not subject the holder thereof to personal
liability by reason of being such a holder. There are currently no
preemptive rights of any stockholder of the Company, as such, to
acquire the Debentures or the Warrants, or the Common Stock issuable to
the Purchaser pursuant to the terms of the Debentures or the Warrants.
d. REPORTING COMPANY STATUS. The Company files
reports with the Commission pursuant to Section 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). The Company has
duly filed all materials and documents required to be filed pursuant to
all reporting obligations under either Section 13(a) or 15(d) of the
Exchange Act. The Common Stock is listed and traded on the OTC Bulletin
Board ("OTC"), and, except as described in Schedule 3m the Company is
not aware of any pending or contemplated action or proceeding of any
kind to suspend the trading of the Common Stock.
e. AUTHORIZED SHARES. The Company has available a
sufficient number of authorized and unissued shares of Common Stock as
may be necessary to effect the conversion of the Debentures and the
exercise of the Warrants. The Company understands and acknowledges the
potentially dilutive effect to the Common Stock of the issuance of
shares of Common Stock upon the conversion of the Debentures and the
exercise of the Warrants. The Company further acknowledges that its
obligation to issue shares of Common Stock upon conversion of the
Debentures and upon exercise of the Warrants is absolute and
unconditional regardless of the dilutive effect that such issuance may
have on the ownership interests of other stockholders of the Company
and notwithstanding the commencement of any case under 11 U.S.C.
Section 101 et seq. (the "Bankruptcy Code"). In the event the Company
becomes a debtor under the Bankruptcy Code, the Company hereby waives
to
4
5
the fullest extent permitted any rights to relief it may have under 11
U.S.C. Section 362 in respect of the conversion of the Debentures and
the exercise of the Warrants. At the direction of Purchaser, the
Company agrees, without cost or expense to the Purchaser, to take or
consent to any and all action necessary to effectuate relief under 11
U.S.C. Section 362.
f. LEGALITY. The Company has the requisite corporate
power and authority to enter into this Agreement and the Registration
Rights Agreement, and to issue and deliver the Debentures, the Warrants
and the Common Stock issuable upon conversion of, or in lieu of
interest payments on the Debentures and the exercise of the Warrants.
g. TRANSACTION AGREEMENTS. This Agreement, the
Registration Rights Agreement, the Debentures and the Warrants
(collectively, the "Primary Documents"), and the transactions
contemplated hereby and thereby, have been duly and validly authorized
by the Company; this Agreement has been duly executed and delivered by
the Company and this Agreement is, and the other Primary Documents,
when executed and delivered by the Company, will each be, a valid and
binding agreement of the Company, enforceable in accordance with their
respective terms, except to the extent that enforcement of each of the
Primary Documents may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws
now or hereafter in effect relating to creditors' rights generally and
to general principles of equity.
h. NON-CONTRAVENTION. The execution and delivery of
this Agreement and each of the other Primary Documents, and the
consummation by the Company of the transactions contemplated by this
Agreement and each of the other Primary Documents, does not and will
not conflict with or result in a breach by the Company of any of the
terms or provisions of, or constitute a default under, the Articles of
Incorporation or By-laws of the Company, or any indenture, mortgage,
deed of trust or other agreement or instrument to which the Company or
any of its subsidiaries is a party or by which they or any of their
properties or assets are bound, or any existing applicable law, rule,
or regulation or any applicable decree, judgment or order of any court
or United States or foreign federal or state regulatory body,
administrative agency, or any other governmental body having
jurisdiction over the Company, its subsidiaries, or any of their
properties or assets. Except as set forth on Schedule 3(h), neither the
filing of the registration statement required to be filed by the
Company pursuant to the Registration Rights Agreement nor the offering
or sale of the Debentures or the Warrants as contemplated by this
Agreement gives rise to any rights, other than those which have been
waived or satisfied on or prior to the date hereof, for or relating to
the registration of any shares of the Common Stock. Schedule 3(h)(1)
hereto lists all material
5
6
agreements and instruments to which the Company or any of its
subsidiaries is a party or by which any of their properties or assets
are bound.
i. APPROVALS. No authorization, approval or consent
of any court, governmental body, regulatory agency, self-regulatory
organization, stock exchange or market or the stockholders of the
Company is required to be obtained by the Company for the entry into or
the performance of this Agreement and the other Primary Documents.
j. SEC FILINGS. None of the reports or documents
filed by the Company with the Commission contained, at the time they
were filed, any untrue statement of a material fact or omitted to state
any material fact required to be stated therein, or necessary to make
the statements made therein, in light of the circumstances under which
they were made, not misleading.
k. STABILIZATION. Neither the Company, nor, to the
knowledge of the Company, any of its affiliates, has taken or may take,
directly or indirectly, any action designed to cause or result in, or
which has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of the
shares of Common Stock.
l. ABSENCE OF CERTAIN CHANGES. Except as disclosed in
the Company's public filings with the Commission, since the filing of
Amendment No. 2 to the Form 10, there has been no material adverse
change nor any material adverse development in the business,
properties, operations, financial condition, prospects, outstanding
securities or results of operations of the Company.
m. FULL DISCLOSURE. Other than as set forth in
Schedule 3m, there is no fact known to the Company that has not been
disclosed in writing to the Purchaser (i) that could reasonably be
expected to have an adverse effect upon the condition (financial or
otherwise) or the earnings, business affairs, properties or assets of
the Company or (ii) that could reasonably be expected to materially and
adversely affect the ability of the Company to perform the obligations
set forth in the Primary Documents.
n. TITLE TO PROPERTIES; LIENS AND ENCUMBRANCES. The
Company has good and marketable title to all of its material properties
and assets, both real and personal, and has good title to all its
leasehold interests, in each case subject only to mortgages, pledges,
liens, security interests, conditional sale agreements, encumbrances or
charges created in the ordinary course of business.
6
7
o. PATENTS AND OTHER PROPRIETARY RIGHTS. The Company
has sufficient title and ownership of all patents, trademarks, service
marks, trade names, internet domain names, copyrights, trade secrets,
information, proprietary rights and processes necessary for the conduct
of its business as now conducted and as proposed to be conducted, and
such business does not and would not conflict with or constitute an
infringement on the rights of others.
p. PERMITS. The Company has all franchises, permits,
licenses and any similar authority necessary for the conduct of its
business as now conducted, the lack of which would materially and
adversely affect the business or financial condition of the Company.
The Company is not in default in any respect under any of such
franchises, permits, licenses or similar authority.
q. ABSENCE OF LITIGATION. Except as disclosed in the
Company's public filings with the Commission, there is no action, suit,
proceeding, inquiry or investigation before or by any court, public
board or body pending or, to the knowledge of the Company or any of its
subsidiaries, threatened against or affecting the Company or any of its
subsidiaries, in which an unfavorable decision, ruling or finding would
have an adverse effect on the properties, business, condition
(financial or other) or results of operations of the Company and its
subsidiaries, taken as a whole, or the transactions contemplated by the
Primary Documents, or which would adversely affect the validity or
enforceability of, or the authority or ability of the Company to
perform its obligations under, the Primary Documents.
r. NO DEFAULT. Each of the Company and its
subsidiaries is not in default in the performance or observance of any
obligation, covenant or condition contained in any indenture, mortgage,
deed of trust or other instrument or agreement to which it is a party
or by which it or its property may be bound which default could result
in a material adverse effect on the Company.
s. TRANSACTIONS WITH AFFILIATES. Except as disclosed
in the Company's public filings with the Commission, there are no
agreements, understandings or proposed transactions between the Company
and any of its officers, directors or affiliates that, had they existed
on the date Amendment No. 2 to the Form 10 was filed, would have been
required to be disclosed in the Company's Form 10 or an amendment
thereto.
t. EMPLOYMENT MATTERS. The Company is in compliance
in all respects with all presently applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended, including
the regulations and published interpretations thereunder ("ERISA");___
no
7
8
"reportable event" (as defined in ERISA) has occurred with respect to
any "pension plan" (as defined in ERISA) for which the Company would
have any liability; the Company has not incurred and does not expect to
incur liability under (i) Title IV of ERISA with respect to termination
of, or withdrawal from, any "pension plan" or (ii) Sections 412 or 4971
of the Internal Revenue Code of 1986, as amended, including the
regulations and published interpretations thereunder (the "Code"); and
each "pension plan" for which the Company would have any liability that
is intended to be qualified under Section 401(a) of the Code is so
qualified in all material respects and nothing has occurred, whether by
action or by failure to act, which would cause the loss of such
qualification.
u. INSURANCE. The Company maintains property and
casualty, general liability, personal injury and other similar types of
insurance that is adequate, consistent with industry standards and the
Company's historical claims experience. The Company has not received
notice from, and has no knowledge of any threat by, any insurer (that
has issued any insurance policy to the Company) that such insurer
intends to deny coverage under or cancel, discontinue or not renew any
insurance policy covering the Company or any of its Subsidiaries
presently in force.
v. TAXES. All applicable tax returns required to be
filed by the Company and each of its subsidiaries have been prepared
and filed in compliance with all applicable laws, or if not yet filed
have been granted extensions of the filing dates which extensions have
not expired, and all taxes, assessments, fees and other governmental
charges upon the Company, its subsidiaries, or upon any of their
respective properties, income or franchises, shown in such returns and
on assessments received by the Company or its subsidiaries to be due
and payable have been paid, or adequate reserves therefor have been set
up if any of such taxes are being contested in good faith; or if any of
such tax returns have not been filed or if any such taxes have not been
paid or so reserved for, the failure to so file or to pay would not in
the aggregate have a material adverse effect on the business or
financial condition of the Company and its subsidiaries, taken as a
whole. The Company is disputing certain tax penalties and interest
thereon as set forth on Schedule 3v hereto.
w. FOREIGN CORRUPT PRACTICES ACT. Neither the Company
nor any of its directors, officers or other employees has (i) used any
Company funds for any unlawful contribution, endorsement, gift,
entertainment or other unlawful expense relating to any political
activity; (ii) made any direct or indirect unlawful payment of Company
funds to any foreign or domestic government official or employee; (iii)
violated or is in violation of any provision of the Foreign Corrupt
Practices Act of 1977, as amended; or (iv)
8
9
made any bribe, rebate, payoff, influence payment, kickback or other
similar payment to any person.
x. INTERNAL CONTROLS. The Company maintains a system
of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain accountability for assets; (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
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
y. INVESTMENT COMPANY ACT. The Company is not
conducting, and will not conduct, its business in a manner which would
cause it to become, an "investment company," as defined in Section 3(a)
of the Investment Company Act of 1940, as amended.
z. BROKERAGE FEES. Other than an amount equal to
$100,000 payable by the Company as a placement fee, the Company has not
incurred any liability for any consulting fees or agent's commissions
in connection with the offer and sale of the transactions contemplated
by this Agreement.
aa. PRIVATE OFFERING. Subject to the accuracy of the
Purchaser's representations and warranties set forth in Section 2
hereof, (i) the offer, sale and issuance of the Debentures and the
Warrants, (ii) the issuance of Common Stock in lieu of interest
payments on the Debentures and the Warrants and (iii) the conversion
and/or exercise of such securities into shares of Common Stock, each as
contemplated by this Agreement, are exempt from the registration
requirements of the Securities Act. The Company agrees that neither the
Company nor anyone acting on its behalf will offer any of the
Debentures and the Warrants, or any similar securities for issuance or
sale, or solicit any offer to acquire any of the same from anyone so as
to render the issuance and sale of such securities subject to the
registration requirements of the Securities Act. The Company has not
offered or sold the Debentures or the Warrants by any form of general
solicitation or general advertising, as such terms are used in Rule
502(c) under the Securities Act.
bb. FULL DISCLOSURE. The representations and
warranties of the Company set forth in this Agreement (and the
schedules thereto) do not contain, any untrue statement of a material
fact or omit any material fact necessary to make the statements
contained herein, in light of the circumstances under which they were
made, not misleading.
9
10
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS
a. TRANSFER RESTRICTIONS. The Purchaser acknowledges
that, except as provided in the Registration Rights Agreement, (1) none
of the Debentures, the Warrants or the Common Stock issuable upon
conversion of, or in lieu of interest payments on, the Debentures or
upon exercise of the Warrants, have been, or are being, registered
under the Securities Act, and such securities may not be transferred
unless (A) subsequently registered thereunder or (B) they are
transferred pursuant to an exemption from such registration; and (2)
any sale of the Debentures, the Warrants or the Common Stock issuable
upon conversion or exchange thereof (the "Securities") made in reliance
upon Rule 144 under the Securities Act may be made only in accordance
with the terms of said Rule. The provisions of Section 4(a) and 4(b)
hereof, together with the rights of the Purchaser under this Agreement
and the other Primary Documents, shall be binding upon any subsequent
transferee of the Debentures and the Warrants.
b. RESTRICTIVE LEGEND. The Purchaser acknowledges and
agrees that, until such time as the Securities shall have been
registered under the Securities Act or the Purchaser demonstrates to
the reasonable satisfaction of the Company that such registration shall
no longer be required, such Securities shall bear a restrictive legend
in substantially the following form:
THESE SECURITIES (INCLUDING ANY UNDERLYING SECURITIES) HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT OR AN OPINION OF COUNSEL OR OTHER EVIDENCE REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION SHALL NO
LONGER BE REQUIRED.
c. FILINGS. The Company undertakes and agrees that it
will make all required filings in connection with the sale of the
Securities to the Purchaser as required by United States laws and
regulations, or by any domestic securities exchange or trading market,
and if applicable, the filing of a notice on Form D (at such time and
in such manner as required by the Rules and Regulations of the
Commission), and to provide copies thereof to the Purchaser promptly
after such filing or filings.
10
11
d. NASDAQ LISTING. The Company undertakes and agrees
that it will file an application with the NASDAQ market within 30 days
after meeting the criteria required by the NASD Bylaws for listing to
list the Company's Common Stock (including, but not limited to, all of
the shares of Common Stock issuable upon conversion of, or in lieu of
interest payments on, the Debentures, and upon exercise of the
Warrants) on the NASDAQ Small-Cap Market. The Company further agrees
and covenants that, once the Company's Common Stock becomes listed on
the NASDAQ Small-Cap Market it will not seek to have the trading of its
Common Stock through the NASDAQ Small-Cap Market suspended or
terminated, will use its best efforts to maintain its eligibility for
trading on the NASDAQ Small-Cap Market (including, the filing of a
listing application with NASDAQ to list all of the shares of Common
Stock issuable upon conversion of, or in lieu of interest payments on,
the Debentures and upon the exercise of the Warrants) and, if such
trading of its Common Stock is suspended or terminated, will use its
best efforts to requalify its Common Stock or otherwise cause such
trading to resume.
e. REPORTING STATUS. So long as the Purchaser
beneficially owns any of the Securities or any Debentures and any
shares of Common Stock issuable upon conversion thereof (collectively
with the Securities, the "Collective Securities"), the Company shall
timely file all reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act and shall not
terminate its status as an issuer required to file reports under the
Exchange Act even if the Exchange Act or the rules and regulations
thereunder would permit such termination.
f. STATE SECURITIES FILINGS. The Company shall from
time to time promptly take such action as the Purchaser or any of its
representatives, if applicable, may request to qualify the Collective
Securities for offering and sale under the securities laws (other than
United States federal securities laws) of the jurisdictions in the
United States as shall be so identified to the Company, and to comply
with such laws so as to permit the continuance of sales therein.
g. USE OF PROCEEDS. The Company will use all of the
net proceeds from the issuance of the Debentures and the Warrants to
make investments in the Company's subsidiaries and for working capital.
h. RESERVATION OF COMMON STOCK. The Company will at
all times have authorized and reserved for the purpose of issuance a
sufficient number of shares of Common Stock to provide for the
conversion of the Debentures and the exercise of the Warrants. The
Company will use its best efforts at all times to maintain a number of
shares of Common Stock so
11
12
reserved for issuance that is no less than two (2) times the maximum
number that could be issuable upon the conversion of the Debentures and
the exercise in full of the Warrants.
i. SALES OF ADDITIONAL SHARES. The Company shall not,
directly or indirectly, without the prior written consent of the
Purchaser, offer, sell, offer to sell, contract to sell or otherwise
dispose of any shares of its capital stock or any security or other
instrument convertible into or exchangeable for shares of Common Stock,
in each case for a period commencing on the date hereof and ending on
the earlier of (i) one hundred eighty (180) days after the date on
which a registration statement relating to Common Stock issuable upon
conversion of any of the Warrants and the Debentures, is declared
effective by the Securities and Exchange Commission or (ii) the date on
which Purchaser shall have converted all of the Debentures into Common
Stock (the "Lock-Up Period"), except that the Company (i) may issue
securities for the aggregate consideration of at least $7.5 million in
connection with a bona fide, firm commitment, underwritten public
offering under the Securities Act; and (ii) may issue shares of Common
Stock upon the exercise or conversion of currently outstanding options,
warrants and other convertible securities; (iii) may issue options to
purchase up to 1,000,000 shares of its Common Stock to its directors,
officers and employees in connection with its existing stock option
plans. In addition, the Company agrees that it will not cause any
shares of its capital stock that are issued in connection with a
transaction of the type contemplated by such clause (or upon the
conversion or exercise of other securities that are issued in
connection with such transaction) or that were issued in connection
with any financing, acquisition or other transaction that occurred
prior to the date of this agreement to be covered by a registration
statement that is declared effective by the Commission until the later
to occur of (A) the expiration of the Lock-Up Period or (B) the
registration statement filed by the Company pursuant to its obligations
under the Registration Rights Agreement has been effective under the
Securities Act for a period of at least one-hundred and eighty (180)
days.
j. RIGHT OF FIRST REFUSAL. Subject to Section 4(i),
if during the 18 month period following the Lock-Up Period the Company
shall desire to sell, offer to sell, contract to sell or otherwise
dispose of any shares of its capital stock or any security or other
instrument convertible into or exchangeable for shares of Common Stock
(collectively, the "Offered Securities") to a prospective investor (the
"Prospective Investor"), the Company shall notify (the "Offer Notice")
the Purchasers in accordance with Section 11 hereof of the terms (the
"Third Party Terms") on which the Company proposes to sell, contract to
sell or otherwise dispose of the Offered Securities to the Prospective
Investor. If, within the 5 business day period following the
Purchaser's receipt of the Offer Notice, the Purchaser desires to
12
13
purchase all and not less than all of the Offered Securities on the
Third Party Terms, the Company shall be required to sell the Offered
Securities (or any portion thereof so desired by the Purchasers) to the
Purchaser and the Company shall not be permitted to sell such Offered
Securities to the Prospective Investor.
k. ADDITIONAL REGISTRATION STATEMENTS. At any time
during the period ending on the first date that follows a period of 180
consecutive days following the effectiveness of the Registration
Statement (as defined in the Registration Rights Agreement) during
which there has been no Blackout Event (as defined in the Registration
Rights Agreement) relating to such Registration Statement, the Company
agrees that it will not cause any registration statement (other than
the Registration Statement) to be declared effective by the Commission.
l. STOCKHOLDER APPROVAL. The Company agrees to use
its best efforts (including obtaining any vote of its stockholders
required by applicable law or Nasdaq Bylaws) to authorize and approve
the issuance of the Common Stock issuable upon conversion of the
Debentures and upon exercise of the Warrants, to the extent that such
conversion or issuance results in the issuance of 20% or more of the
Company's outstanding Common Stock; provided, however, that the failure
to obtain any such stockholder approval shall not limit any of
Purchaser's rights hereunder or pursuant to any Primary Document.
m. OWNERSHIP. At no time shall the Purchaser
(including its officers, directors and affiliates) maintain in the
aggregate beneficial ownership (as defined for purposes of Section 16
of the Securities Exchange Act of 1934, as amended) of shares of Common
Stock in excess of 4.9% of the Company's outstanding Common Stock
unless the Purchaser gives the Company at least sixty-one days notice
that it intends to increase its ownership percentage.
n. RETURN OF DEBENTURES ON CONVERSION AND WARRANTS ON
EXERCISE. (i) Upon any conversion by Purchaser of less than all of the
aggregate principal amount of Debentures then outstanding, the Company
shall issue and deliver to Purchaser within three (3) days of the
Conversion Date (as defined herein), a new certificate or certificates
for, as applicable, the total principal amount of Debentures which
Purchaser has not yet elected to convert (with the number of and
denomination of such new certificate(s) designated by Purchaser).
(ii) Upon any partial exercise by Purchaser of
Warrants, the Company shall issue and deliver to Purchaser within three
(3) days of the date on which such Warrants are exercised, a new
Warrant or Warrants
13
14
representing the number of adjusted shares of Common Stock covered
thereby, in accordance with the terms thereof.
o. REPLACEMENT DEBENTURES AND STOCK PURCHASE
WARRANTS. (i) The certificate(s) representing the Debentures held by
Purchaser shall be exchangeable, at the option of Purchaser, at any
time and from time to time at the office of Company, for certificates
with different denominations representing, as applicable, an equal
aggregate principal amount of Debentures, as requested by Purchaser
upon surrendering the same. No service charge will be made for such
registration or transfer or exchange.
(ii) The Warrants will be exchangeable, at the option
of Purchaser, at any time and from time to time at the office of the
Company, for other Warrants of different denominations entitling the
holder thereof to purchase in the aggregate the same number of shares
of Common Stock as are purchasable under such Warrants. No service
charge will be made for such transfer or exchange.
p. DIVIDENDS OR DISTRIBUTIONS; PURCHASES OF EQUITY
SECURITIES. So long as any portion of the Warrants or the Debentures
remain outstanding, the Company agrees that it shall not (a) declare or
pay any dividends or make any distributions to any holder or holders of
Common Stock, or (b) purchase or otherwise acquire for value, directly
or indirectly, any shares of Common Stock or equity security of the
Company.
q. NO SENIOR INDEBTEDNESS. Other than indebtedness
relating to a credit line in the aggregate principal amount not in
excess of $1,000,000, until the expiration of the Lock-up Period, the
Company agrees that neither the Company nor any direct or indirect
subsidiary of the Company shall create, incur, assume, guarantee,
secure or in any manner become liable in respect of any indebtedness,
or permit any liens, claims or encumbrances to exist against the
Company or any direct or indirect subsidiary of the Company or any of
their assets, unless junior to the Debentures in all respects.
r. NO AMENDMENT OF CURRENTLY OUTSTANDING DEBENTURES.
So long as any portion of the Debentures or the Warrants remain
outstanding, the Company covenants and agrees that the Company shall
not, without the consent of the Purchaser, amend any of the terms of
any currently outstanding debentures.
5. TRANSFER AGENT INSTRUCTIONS
a. The Company warrants that no instruction, other
than the instructions referred to in this Section 5 hereof prior to the
registration and sale under the Securities Act of the Common Stock
issuable upon conversion of the
14
15
Debentures or upon exercise of the Warrants, will be given by the
Company to the transfer agent and that the shares of Common Stock
issuable upon conversion of, or in lieu of interest payments on, the
Debentures or upon exercise of the Warrants, shall otherwise be freely
transferable on the books and records of the Company as and to the
extent provided in this Agreement, the Registration Rights Agreement
and applicable law. Nothing in this Section shall affect in any way the
Purchaser's obligations and agreement to comply with all applicable
securities laws upon resale of the Collective Securities. If the
Purchaser provides the Company with an opinion of counsel that
registration of a resale by the Purchaser of any of the Collective
Securities in accordance with Section 4(a) of this Agreement is not
required under the Securities Act, the Company shall permit the
transfer of the Collective Securities and, in the case of the Common
Stock, promptly instruct the Company's transfer agent to issue one or
more certificates for Common Stock without legend in such names and in
such denominations as specified by the Purchaser.
b. Purchaser shall exercise its right to convert the
Debentures or to exercise the Warrants, by faxing an executed and
completed Notice of Conversion or Form of Election to Purchase, as
applicable, to the Company, and delivering within three (3) business
days thereafter, the original Notice of Conversion (and the related
original certificates representing the Debentures) or Form of Election
to Purchase (and the related original Warrants) to the Company by hand
delivery or by express courier, duly endorsed. Each date on which a
Notice of Conversion or Form of Election to Purchase is faxed in
accordance with the provisions hereof shall be deemed a "Conversion
Date." The Company will transmit the certificates representing the
Common Stock issuable upon conversion of any Debentures or upon
exercise of any Warrants (together with the certificates representing
the Debentures not so converted or the Warrants not so exercised) to
the Purchaser via express courier as soon as practicable, but in all
events no later than three (3) business days of the Conversion Date
relating to Debentures or Warrants (each such delivery date, together
with the Interest Delivery Date referred to in paragraph c below, is
referred to herein as a "Delivery Date"). For purposes of this
Agreement, any conversion of the Debentures or the exercise of the
Warrants shall be deemed to have been made immediately prior to the
close of business on the Conversion Date.
c. The Company will transmit the certificates
representing the Common Stock issuable in lieu of any dividends payable
on any Debentures, to the Purchaser via express courier as soon as
practicable, but in all events no later than three (3) business days
after the interest (or dividend) payment date applicable to which such
Common Stock is delivered (the "Interest Delivery Date").
15
16
d. In lieu of delivering physical certificates
representing the Common Stock issuable upon the conversion of, or in
lieu of interest payments (or dividends) on, the Debentures, or upon
the exercise of the Warrants, provided the Company's transfer agent is
participating in the Depositary Trust Company (" DTC ") Fast Automated
Securities Transfer program, on the written request of the Purchaser,
who shall have previously instructed the Purchaser's prime broker to
confirm such request to the Company's transfer agent, the Company shall
cause its transfer agent to electronically transmit such Common Stock
to the Purchaser by crediting the account of the Purchaser's prime
broker with DTC through its Deposit Withdrawal Agent Commission
("DWAC") system no later than the applicable Delivery Date.
e. The Company understands that a delay in the
issuance of Common Stock beyond the applicable Delivery Date could
result in an economic loss to the Purchaser. As compensation to the
Purchaser for such loss, the Company agrees to pay to the Purchaser for
late issuance of Common Stock upon conversion of, or in lieu of
interest payments (or dividend payments) on, the Debentures, or upon
exercise of the Warrants, the sum of $1,000 per day for each (i) 10,000
shares of Common Stock purchased upon the exercise of Warrants, or (ii)
10,000 shares of Common Stock purchased upon conversion of Debentures.
The Company shall pay any payments that are payable to the Purchaser
pursuant to this Section 5 in immediately available funds upon demand.
Nothing herein shall limit the Purchaser's right to pursue actual
damages for the Company's failure to so issue and deliver Common Stock
to the Purchaser. Furthermore, in addition to any other remedies which
may be available to the Purchaser, in the event that the Company fails
for any reason to effect delivery of such Common Stock within five (5)
business days after the relevant Delivery Date, the Purchaser will be
entitled to revoke the relevant Notice of Conversion or Form of
Election to Purchase by delivering a notice to such effect to the
Company, whereupon the Company and the Purchaser shall each be restored
to their respective positions immediately prior to delivery of such
Notice of Conversion or Form of Election to Purchase. For purposes of
this Section 5, "business day" shall mean any day in which the
financial markets of New York are officially open for the conduct of
business therein.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO ISSUE THE DEBENTURES
AND WARRANTS
The Purchaser understands that the Company's obligation to
issue the Debentures and the Warrants on the Closing Date to the Purchaser
pursuant to this Agreement is conditioned upon:
a. The accuracy on the Closing Date of the
representations and warranties of the Purchaser contained in this
Agreement as if made on the
16
17
Closing Date and the performance by the Purchasers on or before the
Closing Date of all covenants and agreements of the Purchasers required
to be performed on or before the Closing Date.
b. The absence or inapplicability of any and all
laws, rules or regulations prohibiting or restricting the transactions
contemplated hereby, or requiring any consent or approval which
shall not have been obtained.
7. CONDITIONS TO THE PURCHASERS' OBLIGATION TO PURCHASE THE
DEBENTURES AND THE WARRANTS
The Company understands that the Purchaser's obligation to
purchase the Debentures and the Warrants on the Closing Date is conditioned
upon:
a. The accuracy on the Closing Date of the
representations and warranties of the Company contained in this
Agreement as if made on the Closing Date, and the performance by the
Company on or before the Closing Date of all covenants and agreements
of the Company required to be performed on or before the Closing Date.
b. On the Closing Date, the Purchaser shall have
received an opinion of counsel for the Company, dated the Closing Date,
in substantially the form as attached in Exhibit D.
c. The Company shall have executed and delivered to
the Purchaser (i) a signed counterpart to the Registration Rights
Agreement, (ii) the Debentures and (iii) the Warrants.
d. On the Closing Date, the Purchaser shall have
received a certificate executed by the President or the Chairman of the
Company and by the Chief Financial Officer of the Company, stating that
all of the representations and warranties of the Company set forth in
this Agreement are accurate as of the Closing Date and that the Company
has performed all of its covenants and agreements required to be
performed under this Agreement on or before the Closing Date.
e. On the Closing Date, the Purchaser shall have
received from the Company such other certificates and documents as it
or its representatives, if applicable, shall reasonably request, and
all proceedings taken by the Company in connection with the Primary
Documents contemplated by this Agreement and the other Primary
Documents and all documents and papers relating to such Primary
Documents shall be satisfactory to the Purchaser.
17
18
f. On or prior to the Closing Date, there shall not
have occurred any of the following: (i) a suspension or material
limitation in the trading of securities generally on the New York Stock
Exchange, NASDAQ or the NASDAQ Bulletin Board; (ii) a general
moratorium on commercial banking activities in New York declared by the
applicable banking authorities; (iii) the outbreak or escalation of
hostilities involving the United States, or the declaration by the
United States of a national emergency or war; or (iv) a change in
international, political, financial or economic conditions, if the
effect of any such event, in the judgment of the Purchasers, makes it
impracticable or inadvisable to proceed with the purchase of the
Debentures and the Warrants on the terms and in the manner contemplated
in this Agreement and in the other Primary Documents.
g. The Company shall have delivered to the Purchaser
reimbursement of the Purchaser's out-of-pocket costs and expenses
incurred in connection with the transactions contemplated by this
Agreement (including fees and disbursements of the Purchaser's legal
counsel in an amount not to exceed $17,500).
8. INDEMNIFICATION
A. Indemnification of Purchaser by the Company.
The Company hereby agrees to indemnify and hold harmless the
Purchaser, its affiliates and their respective officers, directors, partners,
shareholders, employees and members (collectively, the "Buyer Indemnitees"),
from and against any and all losses, claims, damages, judgments, penalties,
liabilities and deficiencies (collectively, "Losses"), and agrees to reimburse
the Buyer Indemnitees for all out-of-pocket expenses (including the fees and
expenses of legal counsel), in each case promptly as incurred by the Buyer
Indemnitees and to the extent arising out of or in connection with:
1. any misrepresentation, omission of fact or breach of any of
the Company's representations or warranties contained in this Agreement, the
annexes, schedules or exhibits hereto or any instrument, agreement or
certificate entered into or delivered by the Company pursuant to this Agreement;
or
2. any failure by the Company to perform any of its covenants,
agreements, undertakings or obligations set forth in this Agreement, the
annexes, schedules or exhibits hereto or any instrument, agreement or
certificate entered into or delivered by the Company pursuant to this Agreement.
18
19
B. Indemnification of the Company by Purchaser.
Purchaser hereby agrees to indemnify and hold harmless the
Company, its affiliates and their respective officers, directors, partners and
members (collectively, the "Company Indemnitees"), from and against any and all
Losses, and agrees to reimburse the Company Indemnitees for all out-of-pocket
expenses (including the fees and expenses of legal counsel), to the extent
arising out of or in connection with any breach of any of Purchaser's
representations or warranties contained in this Agreement, the annexes,
schedules or exhibits hereto or any instrument, agreement or certificate entered
into or delivered by Purchaser pursuant to this Agreement.
C. Third Party Claims. Promptly after receipt by either party
hereto seeking indemnification pursuant to this Section 8 (an "Indemnified
Party") of written notice of any investigation, claim, proceeding or other
action in respect of which indemnification is being sought (each, a "Claim"),
the Indemnified Party promptly shall notify the party against whom
indemnification pursuant to this Section 8 is being sought (the "Indemnifying
Party") of the commencement thereof; but the omission to so notify the
Indemnifying Party shall not relieve it from any liability that it otherwise may
have to the Indemnified Party, except to the extent that the Indemnifying Party
is materially prejudiced and forfeits substantive rights and defenses by reason
of such failure. In connection with any Claim as to which both the Indemnifying
Party and the Indemnified Party are parties, the Indemnifying Party shall be
entitled to assume the defense thereof. Notwithstanding the assumption of the
defense of any Claim by the indemnifying Party, the Indemnified Party shall have
the right to employ separate legal counsel and to participate in the defense of
such Claim, and the Indemnifying Party shall bear the reasonable fees,
out-of-pocket costs and expenses of such separate legal counsel to the
Indemnified Party if (and only if): (x) the Indemnifying Party shall have agreed
to pay such fees, out-of-pocket costs and expenses, (y) the Indemnified Party
and the Indemnifying Party reasonably shall have concluded that representation
of the Indemnified Party by the Indemnifying Party by the same legal counsel
would not be appropriate due to actual or, as reasonably determined by legal
counsel to the Indemnified Party, potentially differing interests between such
parties in the conduct of the defense of such Claim, or if there may be legal
defenses available to the Indemnified Party that are in addition to or disparate
from those available to the Indemnifying Party, or (z) the Indemnifying Party
shall have failed to employ legal counsel reasonably satisfactory to the
Indemnified Party within a reasonable period of time after notice of the
commencement of such Claim. If the Indemnified Party employs separate legal
counsel in circumstances other than as described in clauses (x), (y) or (z)
above, the fees, costs and expenses of such legal counsel shall be borne
exclusively by the Indemnified Party. Except as provided above, the Indemnifying
Party shall not, in connection with any Claim in the same jurisdiction, be
liable for the fees and expenses of more than one firm of legal counsel for the
Indemnified Party (together with appropriate local counsel). The Indemnifying
Party shall not, without the prior written consent of the Indemnified
19
20
Party (which consent shall not unreasonably be withheld), settle or
compromise any Claim or consent to the entry of any judgment that does
not include an unconditional release of the Indemnified Party from all
liabilities with respect to such Claim or judgment.
D. Other Claims.
In the event one party hereunder should have a claim for
indemnification that does not involve a claim or demand being asserted by a
third party, the Indemnified Party promptly shall deliver notice of such claim
to the Indemnifying Party. If the Indemnified Party disputes the claim, such
dispute shall be resolved by mutual agreement of the Indemnified Party and the
Indemnifying Party or by binding arbitration conducted in accordance with the
procedures and rules of the American Arbitration Association. Judgment upon any
award rendered by any arbitrators may be entered in any court having competent
jurisdiction thereof.
9. EXPENSES
The Company covenants and agrees with the Purchaser that the
Company will pay or cause to be paid the following: (a) the fees, disbursements
and expenses of the Purchaser's counsel in connection with the issuance of the
Collective Securities payable on the Closing Date (not to exceed $17,500), (b)
all expenses in connection with registration or qualification of the Collective
Securities for offering and sale under state securities laws as provided in
Section 4(f) hereof, and (c) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section, including the fees and disbursements of the
Company's counsel, accountants and other professional advisors, if any. If the
Company fails to satisfy its obligations or to satisfy any condition set forth
in this Agreement, as a result of which the Collective Securities are not
delivered to the Purchaser on the terms and conditions set forth herein, the
Company shall reimburse the Purchaser for any out-of-pocket expenses incurred in
making preparations for the purchase, sale and delivery of the Collective
Securities not so delivered.
10. GOVERNING LAW; MISCELLANEOUS
This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York, without regard to principles
of conflict of laws. Each of the parties consents to the jurisdiction of the
federal courts whose districts encompass any part of the City of New York or the
state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement or any of the
transactions contemplated hereby, and hereby waives, to the maximum extent
permitted by law, any objection, including any objections based on forum non
conveniens, to the bringing of any such proceeding in such jurisdictions. This
Agreement may be signed in one or more counterparts, each
20
21
of which shall be deemed an original. The headings of this Agreement are for
convenience of reference only and shall not form part of, or affect the
interpretation of this Agreement. This Agreement and each of the Primary
Documents have been entered into freely by each of the parties, following
consultation with their respective counsel, and shall be interpreted fairly in
accordance with its respective terms, without any construction in favor of or
against either party. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or unenforceability of this Agreement in any other jurisdiction. This
Agreement shall inure to the benefit of, and be binding upon the successors and
assigns of each of the parties hereto, including any transferees of the Warrants
and the Debentures. This Agreement may be amended only by an instrument in
writing signed by the party to be charged with enforcement. This Agreement
supersedes all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof.
11. NOTICES
Any notice required or permitted hereunder shall be given in
writing (unless otherwise specified herein) and shall be effective upon personal
delivery, via facsimile (upon receipt of confirmation of error-free
transmission) or two business days following deposit of such notice with an
internationally recognized courier service, with postage prepaid and addressed
to each of the other parties thereunto entitled at the following addresses, or
at such other addresses as a party may designate by five days advance written
notice to each of the other parties hereto.
COMPANY: iBiz Technology Corp
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Att.: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, President
Tel.: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
WITH A COPY TO:
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Att: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esq.
Tel.: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
21
22
PURCHASER: Globe United Holdings, Inc.
Akara Building
Wickhams Cay #1
Road Town Tortola
British Virgin Islands
WITH A COPY TO:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
Tel.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
12. SURVIVAL
The agreements, covenants representations and warranties of
the Company and the Purchaser shall survive the execution and delivery of this
Agreement and the delivery of the Securities hereunder.
IN WITNESS WHEREOF, this Securities Purchase Agreement has
been duly executed by each of the undersigned.
iBIZ TECHNOLOGY CORP
By:_____________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
President
GLOBE UNITED HOLDINGS, INC.
By:_____________________
Title: Authorized Person
22
23
EXHIBIT INDEX
EXHIBIT A FORM OF DEBENTURE
EXHIBIT B FORM OF WARRANTS
EXHIBIT C FORM OF REGISTRATION RIGHTS
AGREEMENT
EXHIBIT D OPINION OF COUNSEL
23