EXHIBIT 4.10
SERIES D
FORM OF SPA
SERIES D CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
among
the Investors listed on Schedule A
and
Global Maintech Corporation
January 19, 2000
SCHEDULES:
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A: List of Investors
4.3: Options and Warrants
4.14: Litigation
4.25: Private Placements
EXHIBITS:
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A: Certificate of Designation
B: Escrow Agreement
C: Registration Rights Agreement
D: Common Stock Purchase Warrant
E: Opinion of Counsel
F: Instruction Letter to Transfer Agent, including forms of Notice of
Conversion, Exercise and Effectiveness of Registration Statement
SERIES D CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
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THIS SERIES D CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT, dated as of
January 19, 2000 (the "Agreement"), among the entities listed on Schedule A
attached hereto (collectively referred to as the "Investors") and GLOBAL
MAINTECH CORPORATION, a corporation organized and existing under the laws of the
State of Minnesota (NASD OTC Electronic Bulletin Board symbol "GLBM", the
"Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to certain of the
Investors (the "New Investors"), and the New Investors shall purchase up to (a)
700 shares of Preferred Stock (as defined below), and (b) 21,000 shares of the
Common Stock (the "New Investor Shares"); and
WHEREAS, the Company shall issue to certain of the Investors (the "Note
Investors"), an aggregate of 300 shares of Preferred Stock and 9,000 shares of
Common Stock (the "Note Investor Shares") upon conversion of convertible
promissory notes issued by the Company to the Note Investors in an aggregate
principal amount of $300,000 (the "Notes"); and
WHEREAS, the Company shall issue to certain of the Investors (the "Prior
Investors"), an aggregate of 1,600 shares of Preferred Stock in exchange of all
shares of Series C Convertible Preferred Stock (the "Series C Preferred Stock")
issued to such Prior Investors on or about March 24, 1999, warrants to purchase
up to 20,000 Warrant Shares in exchange of all warrants issued to such Prior
Investors on or about March 24, 1999 (the "Exchange Warrants"); and
WHEREAS, the Company shall issue for adequate consideration certain shares
of Common Stock as payment in full for all penalties and fees accrued due to the
Company's failure to file a registration statement in regard to the shares of
Common Stock into which the Series C Preferred Stock were convertible (the
"Prior Investor Shares" and collectively with the New Investor Shares and Note
Investor Shares, the "New Common Shares") to the Prior Investors; and
WHEREAS, such investments will be made in reliance upon the provisions of
Section 4(2) ("Section 4(2)") and Regulation D ("Regulation D") of the United
States Securities Act of 1933, as amended, and the regulations promulgated
thereunder (the "Securities Act"), and/or upon such other exemption from the
registration requirements of the Securities Act as may be available with respect
to any or all of the investments in the Preferred Stock and the Common Stock to
be made hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
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Certain Definitions
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Section 1.1 "Additional Shares" shall have that meaning set forth in
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Section 2.5 below.
Section 1.2 "Bid Price" shall mean the closing bid price (as reported by
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Bloomberg L.P.) of the Common Stock on the Principal Market.
Section 1.3 "Business Day" means any day except Saturday, Sunday and any
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day which shall be a Federal legal holiday or a day on which banking
institutions in the State of New York are authorized or required by law or other
government actions to close.
Section 1.4 "Capital Shares" shall mean the Common Stock and any shares
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of any other class of common stock whether now or hereafter authorized, having
the right to participate in the distribution of earnings and assets of the
Company.
Section 1.5 "Capital Shares Equivalents" shall mean any securities,
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rights, or obligations that are convertible into or exchangeable for, or giving
any right to subscribe for, any Capital Shares of the Company or any warrants,
options or other rights to subscribe for or purchase Capital Shares or any such
convertible or exchangeable securities.
Section 1.6 "Certificate of Designation" shall mean the Company's
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Certificate of Designation setting forth all of the rights, privileges and
preferences of the Preferred Stock, as annexed hereto as Exhibit A and made a
part hereof.
Section 1.7 "Closing" shall mean the closing of a purchase and sale of
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the Preferred Stock, the New Common Shares and the Warrants pursuant to Article
II below.
Section 1.8 "Closing Date" shall mean the Subscription Date.
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Section 1.9 "Common Stock" shall mean the Company's common stock, no par
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value per share.
Section 1.10 "Damages" shall mean any loss, claim, damage, liability,
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costs and expenses which shall include, but not be limited to, reasonable
attorney's fees, disbursements, costs and expenses of expert witnesses and
investigation.
Section 1.11 "Effective Date" shall mean the date on which the SEC first
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declares effective a Registration Statement registering the resale of (a) 200%
of the Underlying Shares (as of the date the Registration Statement is filed)
and 100% of (b)(i) the Warrant Shares issued to the Investors and (ii) the New
Common Shares issued to the Investors, as set forth in Section 2.7 below.
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Section 1.12 "Escrow Agent" shall mean the law firm of ▇▇▇▇▇▇ ▇▇▇▇▇▇
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Flattau & Klimpl, LLP, pursuant to the terms of the Escrow Agreement attached as
Exhibit B.
Section 1.13 "Exchange Act" shall mean the Securities Exchange Act of
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1934, as amended, and the rules and regulations promulgated thereunder.
Section 1.14 "Legend" shall have the meaning set forth in Article VIII
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below.
Section 1.15 "Material Adverse Effect" shall mean any effect on the
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business, operations, properties, Bid Price, trading volume of the Common Stock,
prospects or financial condition of the Company that is material and adverse to
the Company and its subsidiaries and affiliates, taken as a whole, and/or any
condition, circumstance, or situation that would prohibit or otherwise in any
material respect interfere with the ability of the Company to enter into and
perform any of its obligations under this Agreement, the Registration Rights
Agreement, the Escrow Agreement, the Certificate of Designation or the Warrants
in any material respect.
Section 1.16 "NASD" shall mean the National Association of Securities
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Dealers, Inc.
Section 1.17 "Outstanding" when used with reference to shares of Common
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Stock, Preferred Stock, or Capital Shares (collectively the "Shares"), shall
mean, at any date as of which the number of such Shares is to be determined, all
issued and outstanding Shares, and shall include all such Shares issuable in
respect of outstanding scrip or any certificates representing fractional
interests in such Shares; provided, however, that Outstanding shall not mean
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any such Shares then directly or indirectly owned or held by or for the account
of the Company.
Section 1.18 "Person" shall mean an individual, a corporation, a
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partnership, an association, a limited liability company, a trust or other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
Section 1.19 "Preferred Stock" shall mean the Company's Series D
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Preferred Stock with the rights, privileges and preferences, as set forth in the
Certificate of Designation.
Section 1.20 "Prime Rate" shall mean the rate of interest per annum
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publicly announced from time to time by the principal New York City office of
the Chase Manhattan bank, or its successor, as its prime rate (which rate shall
change when and as such prime rate changes).
Section 1.21 "Principal Market" shall mean the NASD OTC Electronic
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Bulletin Board, the Nasdaq National Market, the Nasdaq Small Cap Market, the
American Stock Exchange, or the New York Stock Exchange, whichever is at the
time the principal trading exchange or market for the Common Stock.
Section 1.22 "Purchase Price" shall mean $1,000,000 (with $300,000
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allocated to the exchange of the Notes).
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Section 1.23 "Registrable Securities" shall mean the New Common Shares,
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Underlying Shares, the Additional Shares and the Warrant Shares (i) in respect
of which the Registration Statement (covering these securities) has not been
declared effective by the SEC, (ii) which have not been otherwise transferred to
holders who may trade such shares without restriction under the Securities Act,
or (iii) the sales of which, in the opinion of counsel to the Company, are
subject to any time, volume or manner of sale limitations pursuant to Rule
144(k) (or any similar provision then in effect) under the Securities Act.
Section 1.24 "Registration Rights Agreement" shall mean the agreement
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regarding the filing of the Registration Statement for the resale of the
Registrable Securities, entered into between the Company and the Investors on
the Subscription Date annexed hereto as Exhibit C.
Section 1.25 "Registration Statement" shall mean a registration statement
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on Form SB-2 or such other appropriate registration statement, for the
registration of the resale by the Investors of the Registrable Securities under
the Securities Act.
Section 1.26 "Regulation D" shall have the meaning set forth in the
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recitals of this Agreement.
Section 1.27 "SEC" shall mean the Securities and Exchange Commission.
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Section 1.28 "Section 4(2)" shall have the meaning set forth in the
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recitals of this Agreement.
Section 1.29 "Securities" shall mean the New Common Shares, Underlying
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Shares, the Additional Shares and the Warrant Shares.
Section 1.30 "Securities Act" shall have the meaning set forth in the
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recitals of this Agreement.
Section 1.31 "SEC Documents" shall mean the Company's latest Form 10-KSB
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(and all amendments thereto) as of the time in question, all Form 10-QSBs and
Form 8-Ks filed thereafter, and the Proxy Statement for its latest fiscal year
as of the time in question until such time as the Company no longer has an
obligation to maintain the effectiveness of a Registration Statement as set
forth in the Registration Rights Agreement.
Section 1.32 "Subscription Date" shall mean the date on which this
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Agreement and all Exhibits and attachments hereto are executed and delivered by
the parties hereto and all of the conditions relating to the issuance of the
Preferred Stock, the New Common Shares and the Warrants shall have been
fulfilled.
Section 1.33 "Trading Day" shall mean any day during which the Principal
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Market shall be open for business.
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Section 1.34 "Underlying Shares" shall mean all shares of Common Stock or
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other securities issued or issuable pursuant to conversion of the Preferred
Stock.
Section 1.35 "Warrants" shall mean the Exchange Warrants substantially in
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the form of the Common Stock Purchase Warrant annexed hereto as Exhibit D.
Section 1.36 "Warrant Shares" shall mean all shares of Common Stock or
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other securities issued or issuable pursuant to the exercise of the Warrants.
ARTICLE II
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Purchase and Sale of the Preferred Stock, the New Common Shares and the Warrants
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Section 2.1 Closing. On the Closing Date, the Company will (a)(i) sell
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and the New Investors will buy shares of Preferred Stock, (ii) issue shares of
Preferred Stock to the Prior Investors in exchange of the Series C Preferred
Stock, and (iii) issue shares of Preferred Stock to the Note Investors upon
conversion of the Notes, pursuant to the terms and conditions of this Agreement
(including the satisfaction or waiver in writing of the conditions set forth in
Section 2.6 below) up to an aggregate of 2,600 shares of Preferred Stock based
on U.S.$1,000 per share, and (b) issue New Common Shares to the Investors on a
pro rata basis as set forth on Schedule A hereto and (c) issue Warrants to
purchase that number of Warrant Shares as set forth in Section 2.4 below, for
the Purchase Price and in exchange of the Series C Preferred Stock and the
related warrants and upon conversion of the Notes.
Section 2.2 Form of Payment. The Investors shall pay the Purchase Price
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by delivering good funds in United States Dollars by wire transfer to the Escrow
Agent, exchanging the Series C Preferred Stock for shares of Preferred Stock,
Exchange Warrants and New Common Shares and converting their Notes into shares
of Preferred Stock and New Common Shares, against delivery of the Series C
Preferred Stock and related warrants. The parties have entered into an Escrow
Agreement annexed hereto as Exhibit B.
Section 2.3 [Intentionally Omitted]
Section 2.4 New Common Shares and Warrants. The Company will issue to
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the Investors (pro rata in proportion to the number of shares of Preferred Stock
purchased (or received for the exchange of the Series C Stock)) on the Closing
Date 30,000 New Common Shares per $1,000,000 funded to the Company pursuant to
the terms hereunder (pro rata amongst the Investors based upon each Investor's
portion of the Purchase Price or portion of the exchanged Series C Stock). All
of the New Common Shares shall be delivered by the Company to the Escrow Agent,
and delivered to the Investors pursuant to the terms of this Agreement and the
Escrow Agreement. All of the New Common Shares shall be registered for resale
pursuant to the Registration Rights Agreement. Furthermore, the Company will
issue to the Prior Investors (pro rata in proportion to the number of shares of
Preferred Stock received for the exchange of the Series C Stock) on the Closing
Date Exchange Warrants to purchase 20,000 shares of Common Stock.
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Section 2.5 Additional Shares. In the event that a "blackout period"
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occurs which is defined as any period in which the effectiveness of the
Registration Statement is suspended for a reason other than a suspension of the
Registration Statement arising in the event the Company possesses material non-
public information, and the Bid Price on the Trading Day immediately preceding
such "blackout period" (the "Old Bid Price") is greater than the Bid Price on
the first Trading Day following such "blackout period" (the "New Bid Price"),
the Company shall issue to the Investors the number of additional shares of
Common Stock equal to the difference between (y) the product of (i) the number
of Securities held by the Investors during such "blackout period" that are or
were not otherwise freely tradable and (ii) the Old Bid Price, divided by the
New Bid Price and (z) the number of Securities held by the Investors during such
"blackout period" that were not otherwise freely tradable during such Blackout
Period (the "Blackout Shares").
Section 2.6 Liquidated Damages. In addition to any other provisions for
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liquidated damages in this Agreement or any Exhibit annexed hereto, in the event
that the Company does not deliver unlegended, freely tradable Common Stock in
connection with the sale of such Common Stock by the Investor(s) as set forth in
Article VIII below within six (6) Business Days of surrender by the Investor(s)
of the Common Stock certificate in accordance with the terms and conditions set
forth in Article VIII below (such date of receipt is referred to as the "Receipt
Date"), the Company shall pay to the Investor(s), in immediately available
funds, upon demand, as liquidated damages for such failure and not as a penalty,
for every day after the Receipt Date for the first ten days (the "Ten-Day
Period"), one percent of the product of (i) the number of shares of Common Stock
undelivered and (ii) the Bid Price on the Receipt Date, and two percent of the
product of (i) the number of shares of Common Stock undelivered and (ii) the Bid
Price on the Receipt Date, for every day after the Ten-Day Period that the
unlegended shares of Common Stock are not delivered. The parties hereto
acknowledge and agree that the sums payable pursuant to the Registration Rights
Agreement and as set forth above, and the obligation to issue Registrable
Securities under Section 2.5 above, shall constitute liquidated damages and not
penalties. The parties further acknowledge that the amount of loss or damages
likely to be incurred in the event of a failure to deliver unlegended, freely
tradable shares of Common Stock cannot be precisely estimated, and the parties
are sophisticated business parties and have been represented by sophisticated
and able legal and financial counsel and negotiated this Agreement at arm's
length. Notwithstanding the above, in the event that the Company does not
deliver unlegended Common Stock in connection with the sale of such Common Stock
by the Investor(s) as set forth in Article VIII below within six (6) Business
Days of the Receipt Date, the Company shall also pay to the Investor(s), in
immediately available funds, interest (at the then current Prime Rate), based
upon the product of (i) the number of undelivered unlegended freely tradable
shares, and (ii) the Bid Price of the Common Stock on the Receipt Date,
undelivered for every day thereafter that the unlegended shares of Common Stock
are not delivered. Any and all payments required pursuant to this paragraph
shall be payable only in cash, and any payment hereunder shall not relieve the
Company of its delivery obligations under this Section.
Section 2.7 Conditions to Closing.
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(a) Conditions to the Company's Obligation to Sell. Each of the
Investors understands that the Company's obligation to sell the Preferred Stock,
the New Common Shares and the Warrants is subject to the satisfaction (or
written waiver) on the Closing Date, of each of the following conditions:
(i) delivery by each Investor of a copy of this Agreement and
each Exhibit annexed hereto to which it is a party
(substantially in the form annexed hereto), in each case
executed by a duly authorized signatory of such Investor;
(ii) delivery into escrow by the Investors of clear funds for
the Purchase Price (as more fully set forth in the Escrow
Agreement attached hereto as Exhibit B), the original
Series C Preferred Stock certificates and related warrants
for exchange and the original Notes for conversion into
shares of Preferred Stock; and
(iii) all representations and warranties of the Investors
contained herein shall remain true and correct in all
material respects as of the Closing Date.
Notwithstanding the foregoing, the Company may close on the cash Purchase
Price whether or not the Notes, the original Series C Preferred Stock and the
related warrants have been delivered to the Escrow Agent.
(b) Conditions to Investors' Obligation to Purchase. The Company
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understands that the Investors' obligation to purchase the Preferred Stock, the
New Common Shares and the Warrants is subject to the satisfaction (or written
waiver) on the Closing Date, of each of the following conditions:
(i) delivery by the Company of a copy of this Agreement and
each Exhibit annexed hereto to which it is a party
(substantially in the form annexed hereto), in each case
executed by a duly authorized officer of the Company;
(ii) all representations and warranties of the Company
contained herein shall remain true and correct in all
material respects as of the Closing Date;
(iii) the Company shall have obtained all permits and
qualifications required by any state for the offer and
sale of the Preferred Stock, the New Common Shares and the
Warrants, or shall have the availability of exemptions
therefrom;
(iv) the sale and issuance of the Preferred Stock and the New
Common Shares, and the proposed issuance of the Additional
Shares, the
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Underlying Shares, the Warrants and the Warrant Shares
shall be legally permitted by all laws and regulations to
which the Investors and the Company are subject, and all
duly executed Exhibits hereto for the sale of the
Securities;
(v) delivery of the original Preferred Stock, the New Common
Shares and the Warrants as described herein;
(vi) receipt by the Investors of an opinion of counsel of the
Company as set forth in Exhibit E attached hereto;
(vii) receipt by the Investors of executed instructions to the
Transfer Agent as set forth in Exhibit F annexed hereto;
(viii) written proof that the Certificate of Designation has been
filed with the Secretary of State of the State of
Minnesota, and remains in full force and effect as of the
Closing Date;
(ix) the Company shall not be in default of any material
covenant representation, and/or warranty contained in this
Agreement or any Exhibit annexed hereto; and
(x) payment of all fees by the Company as set forth in Section
12.7 below and the Escrow Agreement.
ARTICLE III
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Representations and Warranties of the Investors
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Each of the Investors severally (as to itself) and not jointly represents
and warrants to the Company that:
Section 3.1 Intent. Without limiting its ability to resell the
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Securities pursuant to an effective registration statement or an exemption from
registration, each of the Investors is entering into this Agreement for its own
account and has no present arrangement (whether or not legally binding) at any
time to sell the Securities to or through any person or entity; provided,
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however, that by making the representations herein, the Investors do not agree
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to hold the Securities for any minimum or other specific term and reserves the
right to dispose of the Securities at any time in accordance with federal and
state securities laws applicable to such disposition.
Section 3.2 Sophisticated Investors. Each of the Investors is a
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sophisticated investor (as described in Rule 506(b)(2)(ii) of Regulation D) and
an accredited investor (as defined in Rule 501 of Regulation D), and each of the
Investors has such experience in business and financial matters that it is
capable of evaluating the merits and risks of an investment in the
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Preferred Stock and the Securities. Each of the Investors acknowledges that an
investment in the Common Stock is speculative and involves a high degree of risk
and can afford the complete loss of their investment.
Section 3.3 Authority. This Agreement has been duly authorized and
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validly executed and delivered by each of the Investors and assuming the due
execution and delivery hereof and acceptance thereof by the Company, will
constitute the legal, valid and binding obligations of the Investors,
enforceable against each of them in accordance with its terms, subject to
applicable bankruptcy, insolvency, or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by other
equitable principles of general application. The decision to invest and the
execution and delivery of this Agreement by the Investors, the performance by
the Investors of their obligations hereunder and the consummation by the
Investors of the transactions contemplated hereby have been duly authorized and
requires no other proceedings on the part of the Investors. The undersigned
signatory has all right, power and authority to execute and deliver this
Agreement on behalf of each Investor.
Section 3.4 Not an Affiliate. None of the Investors is an officer,
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director or "affiliate" (as that term is defined in Rule 405 of the Securities
Act) of the Company.
Section 3.5 Organization and Standing. Each of the Investors is duly
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organized, validly existing, and in good standing under the laws of the
countries and/or states of their incorporation or organization and has all
requisite power and authority to purchase the Securities.
Section 3.6 [Intentionally Omitted]
Section 3.7 Disclosure; Access to Information. Each of the Investors has
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received all documents, records, books and other information pertaining to
Investor's investment in the Company that have been requested by Investors,
including the opportunity to ask questions of, and receive answers from, the
Company. The Company is subject to the periodic reporting requirements of the
Exchange Act, and each of the Investors has reviewed or received copies of any
such reports that have been requested by it. Each of the Investors represents
that it has reviewed the Company's Form 10-KSB for the year ended December 31,
1998, Form 10-QSB's, and Form 8-K's filed for the twelve months prior to the
Subscription Date and is aware that the Company is in negotiations to sell its
▇▇▇▇▇▇ ▇▇▇▇ Technologies, Inc. subsidiary ("BHT") and possibly other assets.
Section 3.8 Manner of Sale. At no time were any of the Investors
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presented with or solicited by or through any leaflet, public promotional
meeting, television advertisement or any other form of general solicitation or
advertising in connection with the offer and sale of the Preferred Stock and the
Securities.
Section 3.9 Registration or Exemption Requirements. Each of the
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Investors acknowledge and understand that the limited private offering and sale
of the Preferred Stock and the Securities pursuant to this Agreement has not
been reviewed or approved by the SEC or by any state securities commission,
authority or agency, and is not registered under the Securities
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Act or under the securities or "blue sky" laws, rules or regulations of any
state. Each of the Investors acknowledges, understands and agrees that the
Preferred Stock and the Securities are being offered and sold hereunder pursuant
to (i) a private placement exemption to the registration provisions of the
Securities Act pursuant to Section 4(2) of such Securities Act and Regulation D
promulgated under such Securities Act, and (ii) a similar exemption from the
registration provisions of applicable state securities laws.
Section 3.10 No Legal, Tax or Investment Advice. Each of the Investors
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understands that nothing in this Agreement or any other materials presented to
the Investors in connection with the purchase and sale of the Preferred Stock,
the New Common Shares and the Warrants constitutes legal, tax or investment
advice. The Investors have relied on, and have consulted with, such legal, tax
and investment advisors as they, in their sole discretion, have deemed necessary
or appropriate in connection with their purchase of the Preferred Stock, the New
Common Shares and the Warrants.
Section 3.11 No Violation. Each of the Investors agrees that it will not
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enter into any position in the Common Stock that in any manner would violate any
provision of the Exchange Act. Each of the Investors further agrees that as of
the Closing Date it does not maintain a short position in the Common Stock, and
does not have any current intention of entering into any short position in
connection with the Common Stock.
Section 3.12 Registered Broker-Dealer. None of the Investors is a
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registered broker-dealer or an affiliate of a registered broker-dealer.
ARTICLE IV
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Representations and Warranties of the Company
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The Company represents and warrants to the Investors that:
Section 4.1 Organization of the Company. The Company is a corporation
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duly incorporated and existing in good standing under the laws of the State of
Minnesota and has all requisite corporate authority to own its properties and to
carry on its business as now being conducted except as described in the SEC
Documents. The Company is duly qualified as a foreign corporation to do business
and is in good standing in every jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification necessary,
other than those (individually or in the aggregate) in which the failure so to
qualify would not reasonably be expected to have a Material Adverse Effect. The
Company is not in violation of any material terms of its Articles of
Incorporation (as defined below) or Bylaws (as defined below).
Section 4.2 Authority. (i) The Company has the requisite corporate power
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and authority to enter into and perform its obligations under this Agreement,
and all Exhibits annexed hereto, and to issue the Preferred Stock, the New
Common Shares, the Warrants, the Underlying Shares, the Additional Shares, and
the Warrant Shares, (ii) the execution, issuance and delivery
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of this Agreement, and all Exhibits annexed hereto, by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action and no further consent or
authorization of the Company or its Board of Directors is necessary, and (iii)
this Agreement, and all Exhibits annexed hereto, have been duly executed and
delivered by the Company and constitute valid and binding obligations of the
Company enforceable against the Company in accordance with their terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency, or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application.
Upon their issuance and delivery pursuant to this Agreement, the Preferred
Stock, the New Common Shares, the Warrants and the Securities issuable will be
validly issued, fully paid and nonassessable and will be free of any liens or
encumbrances other than those created hereunder or by the actions of the
Investors; provided, however, that the aforementioned securities are subject to
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restrictions on transfer under state and/or federal securities laws. The
issuance and sale of the Preferred Stock, the New Common Shares, the Warrants
and the Securities hereunder will not give rise to any preemptive right or right
of first refusal or right of participation on behalf of any Person.
Section 4.3 Capitalization. As of September 30, 1999, the authorized
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capital stock of the Company consists of 10,711,724 shares, no par value, of
which 887,980 shares are designated as Series A Convertible Preferred Stock (the
"Series A Stock"), 123,077 shares are designated as Series B Convertible
Preferred Stock (the "Series B Stock"), and 1,675 shares are designated as
Series C Convertible Preferred Stock (the "Series C Stock") and 9,698,992 shares
are divisible into such other classes and series as the Board of Directors may
from time to time designate. As of September 30, 1999, there were 4,821,187
shares of Common Stock issued and outstanding; 129,176 shares of Series A Stock
issued and outstanding; 51,792 shares of Series B Stock issued and outstanding;
and 1,675 shares of Series C Stock issued and outstanding. All of the
outstanding shares of the Company's capital stock have been duly and validly
authorized and issued and are fully paid and nonassessable. No shares of Common
Stock are entitled to preemptive or similar rights. Except as specifically
disclosed in the SEC Documents and Schedule 4.3 hereto, there are no outstanding
options, warrants, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or, except as a result of the purchase and sale of the
Preferred Stock, the New Common Shares and the Warrants, securities, rights or
obligations convertible into or exchangeable for, or giving any Person any right
to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company or any
subsidiary is or may become bound to issue additional shares of Common Stock or
securities or rights convertible or exchangeable into shares of Common Stock.
Except as specifically disclosed on Schedule 4.3, to the knowledge of the
Company, no Person or group of Persons beneficially owns (as determined pursuant
to Rule 13d-3 promulgated under the Exchange Act) or has the right to acquire by
agreement with or by obligation binding upon the Company beneficial ownership of
in excess of five percent of the Common Stock.
Section 4.4 Common Stock. The Company has registered its Common Stock
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pursuant to Section 12(g) of the Exchange Act and is in full compliance with all
reporting requirements of
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the Exchange Act, and such Common Stock is currently listed or quoted on the
NASD OTC Electronic Bulletin Board.
Section 4.5 SEC Documents. The Company has delivered or made available
-------------
to the Investors true and complete copies of the SEC Documents filed by the
Company with the SEC during the twelve (12) months immediately preceding the
Subscription Date (including, without limitation, proxy information and
solicitation materials). The Company has not provided to any of the Investors
any information that, according to applicable law, rule or regulation, should
have been disclosed publicly prior to the date hereof by the Company, but which
has not been so disclosed. The SEC Documents comply in all material respects
with the requirements of the Securities Act or the Exchange Act, as the case may
be, and rules and regulations of the SEC promulgated thereunder and none of the
SEC Documents contain any untrue statement of a material fact or omit 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. The financial statements of the Company included in the SEC
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC or other
applicable rules and regulations with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis 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 not include
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 operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
Section 4.6 Valid Issuances. When issued and paid for in accordance
---------------
with the terms hereof, the Preferred Stock, the New Common Shares, the
Underlying Shares, the Warrants, the Warrant Shares and the Additional Shares,
will be duly and validly issued, fully paid, and nonassessable. Neither the
issuance of the Preferred Stock, the New Common Shares, the Underlying Shares,
the Warrants, the Warrant Shares or the Additional Shares, nor the Company's
performance of its obligations under this Agreement, and all Exhibits annexed
hereto, will (i) result in the creation or imposition by the Company of any
liens, charges, claims or other encumbrances upon the Warrants, the Preferred
Stock, the New Common Shares, the Warrant Shares, the Additional Shares, or the
Underlying Shares, issued or issuable hereunder, or any of the assets of the
Company, or (ii) entitle the holders of Outstanding Capital Shares to preemptive
or other rights to subscribe to or acquire any Capital Shares or other
securities of the Company.
Section 4.7 No General Solicitation or Advertising in Regard to this
--------------------------------------------------------
Transaction. Neither the Company nor any of its affiliates nor any distributor
-----------
or any person acting on its or their behalf (i) has conducted or will conduct
any general solicitation (as that term is used in Rule 502(c) of Regulation D)
or general advertising in connection with the offer and sale of the Preferred
Stock, the New Common Shares, the Additional Shares, the Underlying Shares, the
Warrants, or the Warrant Shares, or (ii) has made any offers or sales of any
security or solicited
12
any offers to buy any security under any circumstances that would require
registration of the Preferred Stock, the New Common Shares, the Additional
Shares, the Underlying Shares, the Warrants, or the Warrant Shares under the
Securities Act.
Section 4.8 Corporate Documents. The Company has furnished or made
-------------------
available to each of the Investors true and correct copies of the Company's
articles of incorporation, as amended and in effect on the date hereof (the
"Articles of Incorporation"), and the Company's by-laws, as amended and in
effect on the date hereof (the "By-Laws").
Section 4.9 No Conflicts. The execution, delivery and performance of
------------
this Agreement (including all Exhibits annexed hereto) by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby,
including, without limitation, the issuance of the Preferred Stock, the New
Common Shares, the Underlying Shares, the Warrants, the Warrant Shares and the
Additional Shares, do not and will not (i) result in a violation of the
Company's Articles of Incorporation or By-Laws or (ii) conflict with, or
constitute a material default (or an event that 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 agreement, patent, patent
license, indenture, instrument or any "lock-up" or similar provision of any
underwriting or similar agreement to which the Company is a party, or (iii)
result in a violation of any federal, state or local law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or by which any property or asset of the
Company is bound or affected, nor is the Company otherwise in violation of, in
conflict with, or in default under, any of the foregoing except as would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. The business of the Company is not being conducted in violation
of any law, ordinance or regulation of any governmental entity, except for
possible violations that either singly or in the aggregate would not reasonably
be expected to have a Material Adverse Effect. Except for the filing of a Form D
within 15 days after the Closing Date (which the Company agrees it will file),
the Company is not required under federal, state or local law, rule or
regulation to obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement or issue
and sell the Preferred Stock, the New Common Shares or the Warrants, in
accordance with the terms hereof; provided, that, for purposes of the
representation made in this sentence, the Company is assuming and relying upon
the accuracy of the relevant representations and agreements of the Investors
herein.
Section 4.10 No Material Adverse Change. Since September 30, 1999, no
--------------------------
Material Adverse Effect has occurred or exists with respect to the Company,
except as disclosed in the SEC Documents, or as publicly announced.
Section 4.11 No Undisclosed Liabilities. The Company has no liabilities
--------------------------
or obligations, known or unknown, absolute or otherwise, which are not disclosed
in the SEC Documents or otherwise publicly announced, other than those set forth
in the Company's financial statements or as incurred in the ordinary course of
the Company's businesses since September 30, 1999, and
-13-
which, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect.
Section 4.12 No Undisclosed Events or Circumstances. Since September 30,
--------------------------------------
1999, no event or circumstance has occurred or exists with respect to the
Company or its businesses, properties, prospects, operations or financial
condition, that, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company, but which
has not been so publicly announced or disclosed in the SEC Documents.
Section 4.13 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, other than pursuant to this Agreement, under circumstances
that would require registration of the Common Stock under the Securities Act, or
cause the offering of the Preferred Stock, the New Common Shares and the
Warrants pursuant to this Agreement to be integrated with future offerings by
the Company for purposes of the Securities Act, the Nasdaq Stock Market, Inc.
marketplace rules, or any applicable stockholder approval provisions, except as
set forth in the SEC Documents.
Section 4.14 Litigation and Other Proceedings. Except as may be set forth
--------------------------------
in the SEC Documents and Schedule 4.14 annexed hereto, there are no lawsuits or
proceedings pending or to the knowledge of the Company threatened, against the
Company, nor has the Company received any written or oral notice of any such
action, suit, proceeding or investigation, which would reasonably be expected to
have a Material Adverse Effect. Except as set forth in the SEC Documents, no
judgment, order, writ, injunction or decree or award has been issued by or, so
far as is known by the Company, requested of any court, arbitrator or
governmental agency which would be reasonably expected to result in a Material
Adverse Effect.
Section 4.15 Accuracy of Reports and Information. The Company is in
-----------------------------------
compliance, to the extent applicable, with all reporting obligations under
either Section 12(b), 12(g) or 15(d) of the Exchange Act. The Company has
registered its Common Stock pursuant to Section 12 of the Exchange Act and the
Common Stock is listed and trades on the NASD OTC Electronic Bulletin Board. The
Company has complied in all material respects and to the extent applicable with
all reporting obligations, under either Section 13(a) or 15(d) of the Exchange
Act for a period of at least twelve (12) months immediately preceding the offer
and sale of the Preferred Stock, the New Common Shares and the Warrants.
Section 4.16 Acknowledgment of Dilution. The Company is aware and
--------------------------
acknowledges that issuance of Common Stock upon the conversion of the Preferred
Stock, the New Common Shares and/or exercise of the Warrants, may result in
dilution of the outstanding shares of Common Stock, which dilution may be
substantial under certain market conditions. The Company further acknowledges
that its obligation to issue the Additional Shares in accordance with the terms
herein, the Underlying Shares in accordance with the Certificate of Designation,
and the Warrant Shares in accordance with the Warrants is unconditional and
absolute regardless of the effect of any such dilution.
-14-
Section 4.17 Employee Relations. The Company is not involved in any
------------------
labor dispute, nor, to the knowledge of the Company, is any such dispute
threatened which could reasonably be expected to have a Material Adverse Effect.
None of the Company's employees is a member of a union and the Company believes
that its relations with its employees are good.
Section 4.18 Environmental Laws. The Company is (i) in compliance with
------------------
any and all 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 and which the Company know is
applicable to them ("Environmental Laws"), (ii) has received all material
permits, licenses or other approvals required under applicable Environmental
Laws to conduct its business, and (iii) is in compliance with all terms and
conditions of any such permit, license or approval.
Section 4.19 Insurance. The Company is 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 is engaged. The Company has no reason to believe that it
will not be able to renew its existing insurance coverage as and when such
coverage expires, or obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not materially and
adversely affect the condition, financial or otherwise, or the earnings,
business or operation, of the Company.
Section 4.20 Board Approval. The board of directors of the Company has
--------------
concluded, in its good faith business judgment, that the issuances of the
securities of the Company in connection with this Agreement are in the best
interests of the Company.
Section 4.21 Integration. Except in connection with the Company's
-----------
proposed sale of ▇▇▇▇▇▇ ▇▇▇▇ Technologies, Inc. and the sale of $3,000,000 of
Series E Preferred Stock on terms acceptable to the Investors, the Company shall
not and shall use its best efforts to ensure that no affiliate shall sell, offer
for sale or solicit offers to buy or otherwise negotiate in respect of any
security of the Company that would be integrated with the offer or sale of the
Preferred Stock, the New Common Shares and the Warrants in a manner that would
require the registration under the Securities Act of the issue, offer or sale of
the Preferred Stock, New Common Shares and Warrants to the Investors. The
Preferred Stock, the New Common Shares and the Warrants are being offered and
sold pursuant to the terms hereunder, are not being offered and sold as part of
a previously commenced private placement of securities.
Section 4.22 Patents and Trademarks. The Company has, or has rights to
----------------------
use, all patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, licenses, trade secrets and other
intellectual property rights which are necessary for use in connection with its
business or which the failure to so have would have a Material Adverse Effect
(collectively, the "Intellectual Property Rights"). To the best knowledge of the
Company, none of the Intellectual Property Rights infringe on any rights of any
other Person, and the Company either owns or has duly licensed or otherwise
acquired all necessary rights with respect to the Intellectual Property Rights.
The Company has not received any notice from any
-15-
third party of any claim of infringement by the Company of any of the
Intellectual Property Rights, and has no reason to believe there is any basis
for any such claim. To the best knowledge of the Company, there is no existing
infringement by another Person on any of the Intellectual Property Rights.
Section 4.23 Use of Proceeds. The net proceeds from this offering will
---------------
be used for working capital purposes, and not for the repayment of any judgment.
Section 4.24 Subsidiaries. Except as disclosed in the SEC Documents, the
------------
Company does not presently own or control, directly or indirectly, any interest
in any other corporation, partnership, association or other business entity.
Section 4.25 No Private Placements. Except as set forth on Schedule 4.25
---------------------
annexed hereto, the Company has not conducted a private placement of its Common
Stock or of any debt or equity instrument convertible into Common Stock within
one year prior to the Closing Date. Except as set forth on Schedule 4.25 annexed
hereto and as disclosed in the SEC Documents, there are no outstanding
securities issued by the Company that are entitled to registration rights under
the Securities Act. Except as set forth on Schedule 4.25 there are no
outstanding securities issued by the Company that are directly or indirectly
convertible into, exercisable into, or exchangeable for, shares of Common Stock,
that have anti-dilution or similar rights that would be affected by the issuance
of the Preferred Stock, the New Common Shares, the Underlying Shares, the
Additional Shares, the Warrants, or the Warrant Shares.
Section 4.26 No Brokers. Except for its arrangement with a placement
----------
agent, the Company has taken no action which would give rise to any claim by any
person for brokerage commissions, finder's fees or similar payments by the
Company or any Investor relating to this Agreement or the transactions
contemplated hereby.
Section 4.27 Permits; Compliance. The Company and each of its
-------------------
subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its properties and to
carry on its business as it is now being conducted (collectively, the "Company
Permits"), and there is no action pending or, to the knowledge of the Company,
threatened regarding the suspension or cancellation of any of the Company
Permits except for such Company Permits, the failure of which to possess, or the
cancellation, or suspension of which, would not, individually or in the
aggregate, have a Material Adverse Effect. To the Company's knowledge, neither
the Company nor any of its subsidiaries is in material conflict with, or in
material default or material violation of, any of the Company Permits. Since
January 1, 1999 neither the Company nor any of its subsidiaries has received any
notification with respect to possible material conflicts, material defaults or
material violations of applicable laws.
Section 4.28 Taxes. All federal, state, city and other tax returns,
-----
reports and declarations required to be filed by or on behalf of the Company
have been filed and such returns are complete and accurate and disclose all
taxes (whether based upon income, operations,
-16-
purchases, sales, payroll, licenses, compensation, business, capital, properties
or assets or otherwise) required to be paid in the periods covered thereby.
ARTICLE V
---------
Covenants of the Investors
--------------------------
Section 5.1 4.99% Limitation. The number of shares of Common Stock
----------------
which may be acquired by any of the Investors pursuant to the terms of this
Agreement shall not exceed the number of such shares which, when aggregated with
all other shares of Common Stock then owned by any of the Investors, would
result in any of the Investors owning more than 4.99% of the then issued and
outstanding Common Stock at any one time.
The preceding paragraph shall not interfere with any Investor's right to
convert Preferred Stock over time which in the aggregate totals more than 4.99%
of the then outstanding shares of Common Stock so long as such Investor does not
own more than 4.99% of the then outstanding Common Stock at any given time. The
foregoing limitation shall not apply to the Automatic Conversion provision
contained in the Certificate of Designation.
ARTICLE VI
----------
Covenants of the Company
------------------------
Section 6.1 Registration Rights. The Company shall cause the Registration
-------------------
Rights Agreement to remain in full force and effect so long as any Registrable
Securities remain outstanding and the Company shall comply in all material
respects with the terms thereof.
Section 6.2 Reservation of Common Stock. As of the date hereof, the
---------------------------
Company has authorized and reserved and the Company shall continue to reserve
and keep available at all times, free of preemptive rights, shares of Common
Stock for the purpose of enabling the Company to satisfy any obligation to issue
the New Common Shares, Additional Shares, Underlying Shares and Warrant Shares;
such amount of shares of Common Stock to be reserved shall be calculated based
upon the Purchase Price therefor under the terms of this Agreement, the
Certificate of Designation, and Warrants. The number of shares so reserved shall
be increased or decreased to reflect potential increases or decreases in the
Common Stock that the Company may thereafter be so obligated to issue by reason
of adjustments to the Preferred Stock, the New Common Shares and the Warrants.
Section 6.3 Listing of Common Stock. If the Principal Market requires
-----------------------
the Company to file a listing application or an additional shares listing
application for the Common Stock listed on such Principal Market (the date the
Company becomes subject to such requirement is hereinafter referred to as the
"Requirement Date"), the Company shall (a) not later than the fifth Business Day
following the Requirement Date prepare and file with the Principal Market (as
well as any other national securities exchange, market or trading facility on
which the Common Stock is then listed) an additional shares listing application
covering at least the sum of (i) two times
-17-
the number of Underlying Shares as would be issuable upon a conversion in full
of (and as payment of dividends in respect of) the shares of Preferred Stock,
assuming such conversion occurred on the Closing Date, and (ii)(x) the New
Common Shares and (y) the Warrant Shares issuable upon exercise in full of the
Warrants, (b) take all steps necessary to cause such shares to be approved for
listing on the Principal Market (as well as on any other national securities
exchange, market or trading facility on which the Common Stock is then listed)
as soon as possible thereafter, and (c) provide to the Investors evidence of
such listing, and the Company shall maintain the listing of its Common Stock on
such exchange or market for so long as the Registrable Securities, the Preferred
Stock, the New Common Shares and/or the Warrants are owned by the Investors. In
addition, if at any time the number of (i) shares of Common Stock issuable on
conversion of all then outstanding shares of Preferred Stock, on account of
accrued and unpaid dividends thereon, (ii) shares of Common Stock issuable upon
exercise in full of the Warrants and the number of New Common Shares issued on
the Closing Date is greater than the number of shares of Common Stock
theretofore listed with the Principal Market (and any such other national
securities exchange, market or trading facility), the Company shall promptly
take such action (including the actions described in the preceding sentence), if
required pursuant to the rules and regulations of the Principal Market, to file
an additional shares listing application with the Principal Market (and any such
other national securities exchange, market or trading facility) covering at
least a number of shares equal to the sum of (x) 200% of (A) the number of
Underlying Shares as would then be issuable upon a conversion in full of the
shares of Preferred Stock, and (B) the number of Underlying Shares as would be
issuable as payment of dividends on the Preferred Stock, (y) the number of
Warrant Shares as would be issuable upon exercise in full of the Warrants, and
(z) the number of New Common Shares issued on the Closing Date. The Company
warrants that it (i) has not received any notice, oral or written, affecting its
continued listing on the NASD OTC Electronic Bulletin Board, and (ii) is in full
compliance with the requirements for continued listing on the NASD OTC
Electronic Bulletin Board. The Company will take no action which would impact
its continued listing or the eligibility of the Company for such listing. The
Company will comply with the listing and trading requirements of its Common
Stock on the NASD OTC Electronic Bulletin Board (and of any then Principal
Market) and will comply in all respects with the Company's reporting, filing and
other obligations under the bylaws or rules of the Principal Market. In the
event the Company receives notification from Nasdaq or any other controlling
entity stating that the Company is not in compliance with the listing
qualifications of such Principal Market, the Company will immediately thereafter
give written notice to each Investor and take all action necessary to bring the
Company within compliance with all applicable listing standards of the Principal
Market.
Section 6.4 Exchange Act Registration. The Company will maintain the
-------------------------
registration of its Common Stock under Section 12 of the Exchange Act, will
comply in all respects with its reporting and filing obligations under the
Exchange Act, and will not take any action or file any document (whether or not
permitted by Exchange Act or the rules thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing obligations
under the Exchange Act.
-18-
Section 6.5 Legends. The securities to be sold by the Company pursuant
-------
to this Agreement shall be free of legends, except as set forth in Article VIII.
Section 6.6 Corporate Existence. The Company will take all steps
-------------------
necessary to preserve and continue the corporate existence of the Company.
Section 6.7 Notice of Certain Events Affecting Registration. The Company
-----------------------------------------------
will immediately notify each of the Investors upon the occurrence of any of the
following events in respect of a registration statement or related prospectus in
respect of an offering of Registrable Securities: (i) receipt of any request for
additional information by the SEC or any other federal or state governmental
authority during the period of effectiveness of the Registration Statement for
amendments or supplements to the Registration Statement or related prospectus;
(ii) the issuance by the SEC or any other federal or state governmental
authority of any stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose; (iii) receipt
of any notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable Securities for sale in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose; (iv) the happening of any event that makes any statement made in the
Registration Statement or related prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in the Registration Statement, related
prospectus or documents so that, in the case of the Registration Statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the related prospectus, it will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and (v) the Company's reasonable determination that a post-effective
amendment to the Registration Statement would be appropriate. The Company will
promptly provide each of the Investors with copies of all correspondence
received by the Company with regard to any of the events described in the
preceding sentence and make available to the Investors any written responses to
the SEC and any such supplement or amendment to the related prospectus.
Section 6.8 Consolidation; Merger. For so long as the Preferred Stock,
---------------------
the New Common Shares, the Warrants, and/or the Registrable Securities are owned
by any Investor, the Company shall not, at any time after the date hereof,
effect any merger or consolidation of the Company with or into, or a transfer of
all or substantially all of the assets of the Company to, another entity (a
"Consolidation Event") unless the resulting successor or acquiring entity (if
not the Company) assumes by written instrument the obligation to deliver to the
Investors such shares of stock and/or securities as the Investors are entitled
to receive pursuant to this Agreement.
Section 6.9 Issuance of New Common Shares, Underlying Shares and Warrant
------------------------------------------------------------
Shares. The issuance of the New Common Shares, Underlying Shares and
------
the Warrant Shares pursuant to exercise of the Warrants, and the conversion of
the Preferred Stock, shall be made in accordance
-19-
with the provisions and requirements of Section 4(2) of the Securities Act or
Regulation D and any applicable state securities law.
Section 6.10 Legal Opinion. The Company's independent counsel shall
-------------
deliver to the Investors upon execution of this Agreement, an opinion in the
form of Exhibit E annexed hereto. The Company will obtain for the Investors, at
the Company's expense, any and all opinions of counsel which may be reasonably
required in order to convert the Preferred Stock and/or exercise the Warrants,
including, but not limited to, obtaining for the Investors an opinion of
counsel, subject only to receipt of a notice of conversion (the "Notice of
Conversion") in the form of Exhibit G, and/or subject only to a receipt of a
notice of exercise in the form annexed to the Warrant, directing the Transfer
Agent to remove the legend from the certificate.
Section 6.11 20% Rule Limitation. If and when required by the Principal
-------------------
Market or otherwise on the market or exchange on which the Company's Common
Stock is then listed, the Company shall call a meeting of its shareholders, to
be held no later than 60 calendar days after becoming subject to such
requirement, seeking shareholder approval of the below market issuances of
shares of Common Stock (and securities convertible into and exercisable for
Common Stock) to the Investors of 20% or more of the number of shares of Common
Stock outstanding as of the Subscription Date. In the event that the
aforementioned proposal is not so approved within such 60 calendar day period,
the Company shall seek a waiver from the Principal Market for such below market
issuances. In the event the Company does not receive such waiver within the
earlier of ten calendar days after the aforementioned shareholders meeting, or
70 calendar days after becoming subject to such requirement, the Company will
repurchase from the Investors based on the Redemption Price (as defined in the
Certificate of Designation) that number of shares of Preferred Stock which would
result in the Company issuing, in the aggregate, 20% or more of the outstanding
Common Stock as of the Subscription Date.
Section 6.12 Restrictions on Future Financings. The Company agrees that
---------------------------------
it will not, without the prior written consent of all of the Investors, enter
into any subsequent or further offer or sale of Common Stock, or any securities
or other instruments convertible into shares of Common Stock, with any party
that is not a party to this Agreement, until the Registration Statement has been
effective for 60 calendar days. This restriction shall not apply to: (a) the
issuance of securities (other than for cash) in connection with a merger,
consolidation, sale of assets, or other disposition, (b) the exchange of Capital
Shares for assets, stock, or joint venture interest, (c) an offering of any of
the Company's securities at then current market prices with no repricing or
reset provisions, (d) any employee benefit plan or (e) one offering of the
Company's proposed Series E Preferred Stock, on terms acceptable to the
Investors, for a total consideration of less than $3,000,000; provided, however,
that any action contemplated under this Section is subject to the condition that
registration rights, if any, in connection with such action shall not require
the filing by the Company of a registration statement of such shares prior to 60
calendar days after the Effective Date.
-20-
Section 6.13 Conversion of Preferred Stock. The Company will permit
-----------------------------
the Investors to exercise their right to convert the Preferred Stock by
telecopying an executed and completed Notice of Conversion to the Company as is
set forth in the Certificate of Designation.
Section 6.14 Exercise of Warrants. The Company will permit the Investors
--------------------
to exercise their right to purchase shares of Common Stock pursuant to the
Warrants by telecopying an executed and completed Notice of Exercise to the
Company as is set forth in the Warrants.
Section 6.15 Restriction on Future Issuances of Preferred Stock. The
--------------------------------------------------
Company agrees that except as provided for in this Agreement, it will not issue
any additional share or shares of Preferred Stock.
Section 6.16 Increase in Authorized Shares. At such time as the Company
-----------------------------
would be, if a notice of conversion or exercise (as the case may be) were to be
delivered on such date, precluded from (a) converting in full all of the shares
of Preferred Stock that remain unconverted at such date (and paying any accrued
but unpaid dividends in respect thereof in shares of Common Stock), or (b)
honoring the exercise in full of the Warrants, due to the unavailability of a
sufficient number of shares of authorized but unissued or re-acquired Common
Stock, the Board of Directors of the Company shall promptly (and in any case
within 60 calendar days from such date) hold a shareholders meeting in which the
shareholders would vote for authorization to amend the Company's Articles of
Incorporation to increase the number of shares of Common Stock which the Company
is authorized to issue to at least a number of shares equal to the sum of (i)
all shares of Common Stock then outstanding, (ii) the number of shares of Common
Stock issuable on account of all outstanding warrants, options and convertible
securities (other than the Preferred Stock and the Warrants) and on account of
all shares reserved under any stock option, stock purchase, warrant or similar
plan, (iii) 200% of the number of Underlying Shares as would then be issuable
upon a conversion in full of the then outstanding shares of Preferred Stock and
as payment of all future dividends thereon in shares of Common Stock in
accordance with the terms of this Agreement and the Certificate of Designation,
and (iv) such number of Warrant Shares as would then be issuable upon the
exercise in full of the Warrants. In connection therewith, the Board of
Directors shall (x) adopt proper resolutions authorizing such increase, (y)
recommend to its shareholders, and otherwise use its best efforts to promptly
and duly obtain shareholder approval to carry out such resolutions and (z)
within five Business Days of obtaining such shareholder authorization, file an
appropriate amendment to the Company's Articles of Incorporation to evidence
such increase.
Section 6.17 Notice of Breaches. The Company shall give prompt written
------------------
notice to each of the Investors of any breach by it of any representation,
covenant, warranty or other agreement contained in this Agreement or any Exhibit
annexed hereto, as well as any events or occurrences arising after the date
hereof, which would reasonably be likely to cause any representation, covenant,
or warranty or other agreement of the Company, contained in this Agreement or
any Exhibit annexed hereto, to be incorrect or breached as of such Closing Date.
However, no disclosure by the Company pursuant to this Section shall be deemed
to cure any breach of any representation, warranty or other agreement contained
in this Agreement or any
-21-
Exhibit annexed hereto. Notwithstanding the generality of the foregoing, the
Company shall promptly notify each Investor of any notice or claim (written or
oral) that it receives from any lender of the Company to the effect that the
consummation of the transactions contemplated by this Agreement or any Exhibit
annexed hereto, violates or would violate any written agreement or understanding
between such lender and the Company, and the Company shall promptly furnish by
facsimile to each Investor a copy of any written statement in support of or
relating to such claim or notice.
Section 6.18 Transfer of Intellectual Property Rights. Except in the
----------------------------------------
ordinary course of the Company's business consistent with past practice or in
connection with the sale of all or substantially all of the assets of the
Company, the Company shall not transfer, sell or otherwise dispose of, any
Intellectual Property Rights, except that the Company may do so in connection
with the proposed sale of BHT or other assets constituting less than 5% of the
Company's total assets based on the value of such assets as disclosed in the
Company's most recently filed SEC Documents, or allow the Intellectual Property
Rights to become subject to any Liens, or fail to renew such Intellectual
Property Rights (if renewable and would otherwise expire).
Section 6.19 Notices. The Company agrees to provide all holders of the
-------
Preferred Stock and the Warrants with copies of all notices and information,
including, without limitation, notices and proxy statements in connection with
any meetings, that are provided to the holders of shares of Common Stock,
contemporaneously with the delivery of such notices or information to such
Common Stock holders.
ARTICLE VII
-----------
Due Diligence Review; Non-Disclosure Of Non-Public Information
--------------------------------------------------------------
Section 7.1 Due Diligence Review. The Company shall make available for
--------------------
inspection and review by the Investors, advisors to and representatives of the
Investors (who may or may not be affiliated with the Investors), and any
underwriter participating in any disposition of the Registrable Securities on
behalf of the Investors pursuant to the Registration Statement, any such
registration statement or amendment or supplement thereto or any blue sky, NASD
or other filing, all financial and other records, all SEC Documents and other
filings with the SEC, and all other corporate documents and properties of the
Company as may be reasonably necessary for the purpose of such review, and cause
the Company's officers, directors and employees to supply all such information
reasonably requested by any of the Investors or any such representative, advisor
or underwriter in connection with such Registration Statement (including,
without limitation, in response to all questions and other inquiries reasonably
made or submitted by any of them), prior to and from time to time after the
filing and effectiveness of the Registration Statement for the sole purpose of
enabling the Investors and such representatives, advisors and underwriters and
their respective accountants and attorneys to conduct initial and ongoing due
diligence with respect to the Company and the accuracy of the Registration
Statement.
Section 7.2 Non-Disclosure of Non-Public Information.
----------------------------------------
-22-
(a) The Company shall not disclose non-public information to the
Investors, or advisors to or representatives of, the Investors unless prior to
disclosure of such information the Company identifies such information as being
non-public information and provides each Investor, and its advisors and
representatives with the opportunity to accept or refuse to accept such non-
public information for review. The Company may, as a condition to disclosing any
non-public information hereunder, require each of the Investors advisors and
representatives to enter into a confidentiality agreement in form reasonably
satisfactory to the Company and the Investors.
(b) Nothing herein shall require the Company to disclose non-
public information to any of the Investors or their advisors or representatives,
and the Company represents that it does not disseminate non-public information
to any investors who purchase stock in the Company in a public offering, to
money managers or to securities analysts, provided, however, that
notwithstanding anything herein to the contrary, the Company will, as
hereinabove provided, immediately notify the advisors and representatives of the
Investors and, if any, underwriters, of any event or the existence of any
circumstance (without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting non-public information
(whether or not requested of the Company specifically or generally during the
course of due diligence by such persons or entities), which, if not disclosed in
the prospectus included in the Registration Statement would cause such
prospectus to include a material misstatement or to omit a material fact
required to be stated therein in order to make the statements, therein, in light
of the circumstances in which they were made, not misleading. Nothing contained
in this Section shall be construed to mean that such persons or entities other
than the Investors (without the written consent of the Investors prior to
disclosure of such information) may not obtain non-public information in the
course of conducting due diligence in accordance with the terms of this
Agreement and nothing herein shall prevent any such persons or entities from
notifying the Company of their opinion that based on such due diligence by such
persons or entities, that the Registration Statement contains an untrue
statement of a material fact or omits a material fact required to be stated in
the Registration Statement or necessary to make the statements contained
therein, in light of the circumstances in which they were made, not misleading.
ARTICLE VIII
------------
Legends
-------
Section 8.1 Legends. The Investors agree to the imprinting, so long as is
-------
required by this Section, of the following legend (or such substantially similar
legend as is acceptable to the Investors and their counsel, the parties agreeing
that any unacceptable legended securities shall be replaced promptly by and at
the Company's cost, the "Legend") on the securities:
[FOR PREFERRED STOCK AND WARRANTS] NEITHER THESE SECURITIES NOR THE
SECURITIES INTO WHICH THESE SECURITIES MAY BE [CONVERTIBLE OR EXERCISABLE]
HAVE BEEN REGISTERED WITH THE SECURITIES
-23-
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
[ONLY FOR NEW COMMON SHARES, UNDERLYING SHARES, ADDITIONAL SHARES
AND WARRANT SHARES TO THE EXTENT THE RESALE THEREOF IS NOT COVERED BY AN
EFFECTIVE REGISTRATION STATEMENT AT THE TIME OF CONVERSION, ISSUANCE OR
EXERCISE] THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS.
The New Common Shares, Underlying Shares, Additional Shares and/or Warrant
Shares shall not contain the legend set forth above or any other restrictive
legend (other than as pursuant to the Registration Statement) if the conversion
of the Preferred Stock, exercise of the Warrants or other issuances of the New
Common Shares, the Underlying Shares, the Additional Shares, and/or the Warrant
Shares, as the case may be, occurs at any time while a Registration Statement is
effective under the Securities Act or, in the event there is not an effective
Registration Statement at such time, if in the opinion of counsel to the Company
such legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the staff of
the SEC). The Company agrees that it will provide the Investors, upon request,
with a certificate or certificates representing New Common Shares, Underlying
Shares, Additional Shares and/or Warrant Shares, free from such legend at such
time as such legend is no longer required hereunder. The Company may not take
any action or make any notation on its records or give instructions to any
transfer agent of the Company which enlarge the restrictions of transfer set
forth in this Section.
Upon the execution and delivery hereof, the Company is issuing to the
transfer agent for its Common Stock (and to any substitute or replacement
transfer agent for its Common Stock upon the Company's appointment of any such
substitute or replacement transfer agent) instructions in substantially the form
of Exhibit F hereto. Such instructions shall be irrevocable by the Company from
and after the date hereof or from and after the issuance thereof to any such
-24-
substitute or replacement transfer agent, as the case may be, except as
otherwise expressly provided in the Registration Rights Agreement. It is the
intent and purpose of such instructions, as provided therein, to require the
transfer agent for the Common Stock from time to time upon transfer of
Registrable Securities by the Investors to issue certificates evidencing such
Registrable Securities free of the Legend during the following periods and under
the following circumstances and except as provided below, without consultation
by the transfer agent with the Company or its counsel and without the need for
any further advice or instruction or documentation to the transfer agent by or
from the Company or its counsel or the Investors:
(a) at any time after the Effective Date, upon surrender of one
or more certificates evidencing the Warrants, the Preferred Stock, the New
Common Shares, the Underlying Shares or the Warrant Shares that bear the
aforementioned Legend, to the extent accompanied by a notice requesting the
issuance of new certificates free of the aforementioned legend to replace those
surrendered; provided that (i) the Registration Statement shall then be
effective; (ii) the Investor(s) confirm to the transfer agent that it has sold,
pledged or otherwise transferred or agreed to sell, pledge or otherwise transfer
such Common Stock in a bona fide transaction to a third party that is not an
affiliate of the Company; and (iii) the Investor(s) confirm to the transfer
agent that the Investor(s) have complied with the prospectus delivery
requirement; or
(b) at any time upon any surrender of one or more certificates
evidencing Registrable Securities, that bear the aforementioned Legend, to the
extent accompanied by a notice requesting the issuance of new certificates free
of such legend to replace those surrendered and containing representations that
(i) the Investor(s) is permitted to dispose of such Registrable Securities,
without limitation as to amount or manner of sale pursuant to Rule 144(k) under
the Securities Act (or any other similar exemption as may then be in effect), or
(ii) the Investor(s) has sold, pledged or otherwise transferred or agreed to
sell, pledge or otherwise transfer such Registrable Securities, in a manner
other than pursuant to an effective registration statement, to a transferee who
will upon such transfer be entitled to freely tradable securities. The Company
shall have counsel provide any and all opinions necessary for the sale under
Rule 144 (or such other applicable exemption).
Any of the notices referred to above in this Section may be sent by
facsimile to the Company's transfer agent.
Section 8.2 No Other Legend or Stock Transfer Restrictions. No legend
----------------------------------------------
other than the one specified in this Article (or pursuant to the Registration
Statement) has been or shall be placed on the share certificates representing
the Common Stock, and no instructions or "stop transfer orders," so called,
"stock transfer restrictions," or other restrictions have been or shall be given
to the Company's transfer agent with respect thereto other than as expressly set
forth in this Article.
-25-
Section 8.3 Investor's Compliance. Nothing in this Article shall affect
---------------------
in any way any of the Investors' obligations under any agreement to comply with
all applicable securities laws upon resale of the Common Stock.
ARTICLE IX
----------
Choice of Law
-------------
Section 9.1 Choice of Law; Venue; Jurisdiction. This Agreement will be
----------------------------------
construed and enforced in accordance with and governed exclusively by the laws
of the State of New York, except for matters arising under the Securities Act,
without reference to principles of conflicts of law. Each of the parties
consents to the exclusive jurisdiction of the U.S. District Court sitting in the
Southern District of the State of New York sitting in Manhattan in connection
with any dispute arising under this Agreement and hereby waives, to the maximum
extent permitted by law, any objection, including any objection based on forum
-----
non conveniens, to the bringing of any such proceeding in such jurisdictions.
--- ----------
Each party hereby agrees that if another party to this Agreement obtains a
judgment against it in such a proceeding, the party which obtained such judgment
may enforce same by summary judgment in the courts of any country having
jurisdiction over the party against whom such judgment was obtained, and each
party hereby waives any defenses available to it under local law and agrees to
the enforcement of such a judgment. Each party to this Agreement irrevocably
consents to the service of process in any such proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to such party
at its address set forth herein. Nothing herein shall affect the right of any
party to serve process in any other manner permitted by law. Each party waives
its right to a trial by jury. In the event that any Investor, or any person
claimed to be affiliated or associated with such Investor becomes involved in
any capacity in any action, proceeding or investigation brought by or against
any such person, including shareholders of the Company, in connection with or as
a result of any matter referred to in this Agreement or any exhibit annexed
hereto, the Company shall reimburse such Investor and/or those claimed to be
affiliated or associated with such Investor for its legal fees and expenses and
other expenses (including the cost of any investigation and preparation)
incurred in connection therewith, as those fees and expenses are incurred,
provided, however, that if at the conclusion of such action, proceeding or
investigation it shall be finally judicially determined by a court of competent
jurisdiction, without availability of an appeal, that indemnity for such fees
and expenses is contrary to law, or that such Investor is not the prevailing
party then in that event, such Investor and/or any other person having received
such advances of fees and/or expenses shall reimburse the Company in full for
the sums advanced.
ARTICLE X
---------
Assignment; Entire Agreement, Amendment; Termination
----------------------------------------------------
Section 10.1 Assignment. The Investor's interest in this Agreement and
----------
its ownership of the Preferred Stock and the Warrants may be assigned or
transferred at any time, in whole or
-26-
in part, to any other person or entity (including any affiliate of the
Investors) who agrees to, and truthfully can, make the representations and
warranties contained in Article III, and who agrees to be bound by the covenants
of Article V. The provisions of this Agreement shall inure to the benefit of,
and be enforceable by, any transferee of any of the shares of the Preferred
Stock and/or the Warrants purchased or acquired by the Investors hereunder with
respect to the Common Stock held by such person.
Section 10.2 Termination. This Agreement shall terminate upon the
-----------
earliest of (i) the date that all the Registrable Securities have been sold by
the Investors pursuant to the Registration Statement; or (ii) five years after
the Closing Date.
ARTICLE XI
----------
Notices
-------
Section 11.1 Notices. All notices, demands, requests, consents,
-------
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a Business Day during normal business hours where such notice is to
be received), or the first Business Day following such delivery (if delivered
other than on a Business Day during normal business hours where such notice is
to be received) or (b) on the second Business Day following the date of mailing
by reputable courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to the Company:
Global Maintech Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Investors, at the addresses listed on Schedule A.
Either party hereto may from time to time change its address or facsimile
number for notices under this Section 11.1 by giving at least ten calendar days'
prior written notice of such changed address or facsimile number to the other
party hereto.
-27-
Section 11.2 Indemnification. The Company agrees to indemnify and hold
---------------
harmless each of the Investors and each officer, director of the Investors or
person, if any, who controls the Investors within the meaning of the Securities
Act against any losses, claims, damages or liabilities, joint or several (which
shall, for all purposes of this Agreement, include, but not be limited to, all
costs of defense and investigation and all attorneys' fees), to which the
Investors may become subject, under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon the breach by the Company of any term of this
Agreement, the Certificate of Designation, the Escrow Agreement or the
Registration Rights Agreement. This indemnity agreement will be in addition to
any liability which the Company may otherwise have.
Each Investor severally (and not jointly) agrees that it will indemnify and
hold harmless the Company, and each officer, director of the Company or person,
if any, who controls the Company within the meaning of the Securities Act,
against any losses, claims, damages or liabilities (which shall, for all
purposes of this Agreement, include, but not be limited to, all costs of defense
and investigation and all attorneys' fees) to which the Company or any such
officer, director or controlling person may become subject under the Securities
Act or otherwise, insofar as such losses claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon the breach by such
Person of any term of this Agreement, the Certificate of Designation, the Escrow
Agreement and the Registration Rights Agreement. This indemnity agreement will
be in addition to any liability which the Investors or any subsequent assignee
may otherwise have.
Promptly after receipt by an indemnified party under this Section of notice
of the commencement of any action, such indemnified party will, if a claim in
respect thereof is to be made against the indemnifying party under this Section,
notify the indemnifying party of the commencement thereof; but the omission so
to notify the indemnifying party will not relieve the indemnifying party from
any liability which it may have to any indemnified party otherwise than as to
the particular item as to which indemnification is then being sought solely
pursuant to this Section. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party similarly
notified, assume the defense thereof, subject to the provisions herein stated
and after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation, unless the
indemnifying party shall not pursue the action to its final conclusion. The
indemnified party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with counsel reasonably
satisfactory to the indemnified party; provided that if the indemnified party is
one of the Investors, the fees and expenses of such counsel shall be at the
expense of the indemnifying party if (i) the employment of such counsel has been
specifically authorized in writing by the
-28-
indemnifying party, or (ii) the named parties to any such action (including any
impleaded parties) include both the Investors and the indemnifying party and the
Investors shall have been advised by such counsel that there may be one or more
legal defenses available to the indemnifying party different from or in conflict
with any legal defenses which may be available to the Investors (in which case
the indemnifying party shall not have the right to assume the defense of such
action on behalf of the Investors, it being understood, however, that the
indemnifying party shall, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable only for the reasonable
fees and expenses of one separate firm of attorneys for the Investor(s), which
firm shall be designated in writing by the Investor(s)). No settlement of any
action against an indemnified party shall be made without the prior written
consent of the indemnified party, which consent shall not be unreasonably
withheld.
Section 11.3 Contribution. In order to provide for just and equitable
------------
contribution under the Securities Act in any case in which (i) the indemnified
party makes a claim for indemnification pursuant to Section 11.2 hereof but is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that the express provisions of Section 11.2 hereof
provide for indemnification in such case, or (ii) contribution under the
Securities Act may be required on the part of any indemnified party, then the
Company and the applicable Investor shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (which shall, for
all purposes of this Agreement, include, but not be limited to, all costs of
defense and investigation and all attorneys' fees), in either such case (after
contribution from others) on the basis of relative fault as well as any other
relevant equitable considerations. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above in Section 11.2 shall be deemed to include
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contributions from any person who was
not guilty of such fraudulent misrepresentation.
Section 11.4 Remedies, Characterizations, Other Obligations, Breaches and
------------------------------------------------------------
Injunctive Relief. The remedies provided in this Agreement, the Registration
-----------------
Rights Agreement and the Certificate of Designation shall be cumulative and in
addition to all other remedies available under this Agreement, the Registration
Rights Agreement and the Certificate of Designation, at law or in equity
(including a decree of specific performance and/or other injunctive relief), no
remedy contained herein shall be deemed a waiver of compliance with the
provisions giving rise to such remedy and nothing herein shall limit a holder's
right to pursue actual damages for any failure by the Company to comply with the
terms of this Agreement, the Registration Rights Agreement and the Certificate
of Designation. Amounts set forth or provided for herein and therein with
respect to payments, conversion and the like (and the computation thereof) shall
be the amounts to be received by the Investors thereof and shall not, except as
expressly provided herein, be subject to any other obligation of the Company (or
the performance thereof). The
-29-
Company acknowledges that a breach by it of its obligations hereunder and
thereunder will cause irreparable harm to the holders of the Preferred Stock and
that the remedy at law for any such breach may be inadequate. Furthermore, the
Company agrees that, in the event of any breach or threatened breach of Sections
6.12, 6.13, 6.14, 6.15, 8.1 or 12.6 herein or Section V of the Certificate of
Designation, the holders of the Preferred Stock shall be entitled, in addition
to all other available remedies, to an injunction restraining any breach or
threatened breach, without the necessity of showing economic loss and without
any bond or other security being required.
ARTICLE XII
-----------
Miscellaneous
-------------
Section 12.1 Counterparts; Facsimile; Amendments. This Agreement may be
-----------------------------------
executed in multiple counterparts, each of which may be executed by less than
all of the parties and shall be deemed to be an original instrument which shall
be enforceable against the parties actually executing such counterparts and all
of which together shall constitute one and the same instrument. Except as
otherwise stated herein, in lieu of the original documents, a facsimile
transmission or copy of the original documents shall be as effective and
enforceable as the original. This Agreement may be amended only by a writing
executed by the Company, all of the Investors.
Section 12.2 Entire Agreement. This Agreement, the Exhibits or
----------------
Attachments hereto, which include, but are not limited to the Certificate of
Designation, the Warrant, the Escrow Agreement, and the Registration Rights
Agreement, set forth the entire agreement and understanding of the parties
relating to the subject matter hereof and supersedes all prior and
contemporaneous agreements, negotiations and understandings between the parties,
both oral and written relating to the subject matter hereof. The terms and
conditions of all Exhibits and Attachments to this Agreement are incorporated
herein by this reference and shall constitute part of this Agreement as is fully
set forth herein.
Section 12.3 Survival; Severability. The representations, warranties,
----------------------
covenants and agreements of the parties hereto shall survive the Closing
hereunder. In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that such severability shall be ineffective if it materially
changes the economic benefit of this Agreement to any party.
Section 12.4 Title and Subtitles. The titles and subtitles used in this
-------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
Section 12.5 Reporting Entity for the Common Stock. The reporting entity
-------------------------------------
relied upon for the determination of the trading price or trading volume of the
Common Stock on any given Trading Day for the purposes of this Agreement and all
Exhibits shall be Bloomberg, L.P. or any
-30-
successor thereto. The written mutual consent of the Investors and the Company
shall be required to employ any other reporting entity.
Section 12.6 Replacement of Certificates. Upon (i) receipt of evidence
---------------------------
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of a certificate representing the Preferred Stock, the New Common
Shares, the Warrants, the Underlying Shares, the Additional Shares, or the
Warrant Shares, and (ii) in the case of any such loss, theft or destruction of
such certificate, upon delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or (iii) in the case of any such
mutilation, on surrender and cancellation of such certificate, the Company at
its expense will execute and deliver, in lieu thereof, a new certificate of like
tenor.
Section 12.7 Fees and Expenses. Each of the parties shall pay its own
-----------------
fees and expenses (including the fees of any attorneys, accountants, appraisers
or others engaged by such party) in connection with this Agreement and the
transactions contemplated hereby, except that the Company shall pay on the
Subscription Date $40,000 in cash, out of escrow, to ▇▇▇▇▇▇ ▇▇▇▇▇▇ Flattau &
Klimpl, LLP for legal fees in connection with the preparation and negotiation of
the Notes, this Agreement, the Certificate of Designation, the Registration
Rights Agreement, the Warrants and related documents contemplated hereunder.
Section 12.8 Noncircumvention. The Company and the Investors agree that
----------------
they shall not circumvent this Agreement and the Company and the Investors agree
that they will not circumvent the provisions of this Agreement or the Escrow
Agreement and the Company's obligation for the payment of fees to the Escrow
Agent.
Section 12.9 Publicity. The Company and the Investors shall consult with
---------
each other in issuing any press releases or otherwise making public statements
with respect to the transactions contemplated hereby and no party shall issue
any such press release or otherwise make any such public statement without the
prior written consent of the other parties, which consent shall not be
unreasonably withheld or delayed, except that no prior consent shall be required
if such disclosure is required by law, in which such case the disclosing party
shall provide the other parties with prior notice of such public statement.
Notwithstanding the foregoing, the Company shall not publicly disclose the name
of the Investors without the prior written consent of the Investors, except to
the extent required by law, in which case the Company shall provide the
Investors with prior written notice of such public disclosure.
Section 12.10 No Group. It is hereby agreed and acknowledged by the
--------
parties hereto that each Investor is acting individually and for its own account
in purchasing the Preferred Stock, the New Common Shares and the Warrants, with
no agreement to act together for the purpose of acquiring, holding, voting or
disposing of any equity securities or otherwise.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGE FOLLOWS]
-31-
IN WITNESS WHEREOF, the parties hereto have caused this Series D
Convertible Preferred Stock Purchase Agreement to be executed by the
undersigned, thereunto duly authorized, as of the date first set forth above.
GLOBAL MAINTECH CORPORATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
Chief Financial Officer and Secretary
ESQUIRE TRADE & FINANCE INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Director
AUSTINVEST ANSTALT BALZERS
By: /s/ ▇▇. ▇▇▇▇▇▇ Grill
-------------------------------------------
▇▇. ▇▇▇▇▇▇ Grill, Director
ASSANZON DEVELOPMENT CORPORATION
By /s/
---------------------------------------------_
NESHER INC.
By: /s/
--------------------------------------------
-32-
GARROS, LTD.
By: /s/
----------------------------------------
AMRO INTERNATIONAL
By: /s/
----------------------------------------
-33-
SCHEDULE A
----------
PRIOR INVESTORS:
1. Esquire Trade & Finance Inc.
Trident ▇▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
Facsimile: 41-41-760-1031
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Director
Initial Investment Amount: $500,000
No. of Shares of Preferred Stock: 500
No. of New Common Shares: 28,125
2. Austinvest Anstalt Balzers
Landstrasse 938
9494 Furstentums
Balzers, Liechtenstein
Attention: ▇▇. ▇▇▇▇▇▇ Grill
Facsimile: 431-534-532-895
Initial Investment Amount: $500,000
No. of Shares of Preferred Stock: 500
No. of New Common Shares: 28,125
3. Nesher, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇ ▇▇▇
▇▇▇-▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Attention: ▇▇▇▇▇ Grin
Facsimile: 01197236050756
Initial Investment Amount: $100,000
No. of Shares of Preferred Stock: 100
No. of New Common Shares: 5,625
4. Assanzon Development Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇-▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇
Attention:
Facsimile:
Initial Investment Amount: $500,000
No. of Shares of Preferred Stock: 500
No. of New Common Shares: 28,125
NOTE INVESTORS
1. Garros, Ltd.
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Islands
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇-▇▇▇-▇▇▇▇
Initial Investment Amount: $150,000
No. of Shares of Preferred Stock: 150
No. of New Common Shares: 4,500
2. Austinvest Anstalt Balzers
Landstrasse 938
9494 Furstentums
Balzers, Liechtenstein
Attention: ▇▇. ▇▇▇▇▇▇ Grill
Facsimile: 431-534-532-895
Initial Investment Amount: $75,000
No. of Shares of Preferred Stock: 75
No. of New Common Shares: 2,250
3. Esquire Trade & Finance Inc.
Trident ▇▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
Facsimile: 41-41-760-1031
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Director
Initial Investment Amount: $75,000
No. of Shares of Preferred Stock: 75
No. of New Common Shares: 2,250
NEW INVESTORS
1. Amro International
Ultra Finance
Grossmuenster ▇▇▇▇▇, ▇▇. ▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ CH8022
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Investment Amount: $500,000
No. of Shares of Preferred Stock: 500
No. of New Common Shares: 15,000
2. Garros, Ltd.
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Islands
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇-▇▇▇-▇▇▇▇
Investment Amount: $200,000
No. of Shares of Preferred Stock: 200
No. of New Common Shares: 6,000
SCHEDULE 4.3
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5% BENEFICIAL OWNERS
--------------------
1. One Person (or group of Persons) has recently exceeded (or is
about to exceed) a 5% beneficial ownership of shares of the Company's Common
Stock outstanding that has not been previously disclosed. In November 1999 the
Company sold Common Stock in the amount of $500,000 at $4.00 per share to
Liviakis Financial Communications, Inc., ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
(collectively, "Liviakis Group") and entered into an amendment to its Consulting
Agreement with Liviakis Financial Communications, Inc. The shares of Common
Stock have not been issued for these transactions but when such issuances occur,
the Company expects the Liviakis Group's beneficial ownership of the Company's
Common Stock to exceed 5%. Attorneys for the Liviakis Group presently are
preparing the necessary forms for filing the required SEC documents.
SCHEDULE 4.14
-------------
LITIGATION
----------
SCHEDULE 4.25
--------------
PRIVATE PLACEMENTS
------------------
1. Common Stock issued at $4.00 per share. Total shares issued were
125,000 for gross proceeds of $500,000.00. The transaction closed on November
17, 1999.