EXHIBIT 10.3
SENIOR CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
BETWEEN
HERITAGE WORLDWIDE INC.
AND
THE PURCHASERS LISTED ON
SCHEDULE 1 HERETO
MARCH 26 , 2004
21
TABLE OF CONTENTS
-----------------
ARTICLE I CERTAIN DEFINITIONS 1
----------- ---------------------------------------------------------- --
1.1 Certain Definitions 1
----------- ---------------------------------------------------------- --
ARTICLE II PURCHASE AND SALE OF CONVERTIBLE DEBENTURES 4
----------- ---------------------------------------------------------- --
2.1 Purchase and Sale; Purchase Price 4
----------- ---------------------------------------------------------- --
2.2 Execution and Delivery of Documents; the Closing 4
----------- ---------------------------------------------------------- --
ARTICLE III REPRESENTATIONS AND WARRANTIES 5
----------- ---------------------------------------------------------- --
3.1 Representations, Warranties and Agreements of the Company 5
----------- ---------------------------------------------------------- --
3.2 Representations and Warranties of the Purchaser 7
----------- ---------------------------------------------------------- --
ARTICLE IV OTHER AGREEMENTS OF THE PARTIES 9
----------- ---------------------------------------------------------- --
4.1 Manner of Offering 9
----------- ---------------------------------------------------------- --
4.2 Notice of Certain Events 9
----------- ---------------------------------------------------------- --
4.3 Modification to Disclosure Documents 9
----------- ---------------------------------------------------------- --
4.4 Blue Sky Laws 9
----------- ---------------------------------------------------------- --
4.5 Furnishing of Rule 144(c) Materials 10
----------- ---------------------------------------------------------- --
4.6 Solicitation Materials 10
----------- ---------------------------------------------------------- --
4.7 Prohibition on Certain Actions 10
----------- ---------------------------------------------------------- --
4.8 Listing of Common Stock 10
----------- ---------------------------------------------------------- --
4.9 Conversion Procedures 10
----------- ---------------------------------------------------------- --
4.10. . . . Indemnification 11
----------- ----------------------------------------------------------
4.11 Exclusivity 13
----------- ---------------------------------------------------------- --
4.12 Purchaser's Ownership of Common Stock 13
----------- ---------------------------------------------------------- --
4.13 Purchaser's Rights if Trading in Common Stock is Suspended 13
----------- ---------------------------------------------------------- --
4.14 No Violation of Applicable Law 14
----------- ---------------------------------------------------------- --
4.15 Redemption Restrictions 14
----------- ---------------------------------------------------------- --
4.16 No Other Registration Rights 15
----------- ---------------------------------------------------------- --
4.17 Merger or Consolidation 15
----------- ---------------------------------------------------------- --
4.18 Registration of Underlying Shares 15
----------- ---------------------------------------------------------- --
4.19 Liquidated Damages 16
----------- ---------------------------------------------------------- --
4.20 Changes to Federal and State Security Laws 17
----------- ---------------------------------------------------------- --
4.21 Applicability of Agreements after Closing 17
----------- ----------------------------------------------------------
ARTICLE V REDEMPTION 17
----------- ---------------------------------------------------------- --
5.1 Redemption by the Company 17
----------- ---------------------------------------------------------- --
ARTICLE VI LEGAL FEES AND DEFAULT INTEREST RATE 17
----------- ---------------------------------------------------------- --
ARTICLE VII MISCELLANEOUS 18
----------- ---------------------------------------------------------- --
7.1 Fees and Expenses 18
----------- ---------------------------------------------------------- --
7.2 Entire Agreement; Amendments 18
----------- ---------------------------------------------------------- --
7.3 Notices 18
----------- ---------------------------------------------------------- --
7.4 Amendments; Waivers 19
----------- ---------------------------------------------------------- --
7.5 Headings 19
----------- ---------------------------------------------------------- --
7.6 Successors and Assigns 19
----------- ---------------------------------------------------------- --
7.7 No Third Party Beneficiaries 20
----------- ---------------------------------------------------------- --
7.8 Governing Law; Venue; Service of Process 20
----------- ---------------------------------------------------------- --
22
7.9 Survival 20
----------- ---------------------------------------------------------- --
7.10 Counterpart Signatures 20
----------- ---------------------------------------------------------- --
7.11 Publicity 20
----------- ---------------------------------------------------------- --
7.12 Severability 21
----------- ---------------------------------------------------------- --
7.13 Limitation of Remedies 21
----------- ---------------------------------------------------------- --
LIST OF SCHEDULES:
Schedule 1 Purchaser(s)
Schedule 3.1(a) Subsidiaries
Schedule 3.1(c) Capitalization and Registration Rights
Schedule 3.1(d) Equity and Equity Equivalent Securities
Schedule 3.1(e) Conflicts
Schedule 3.1(f) Consents and Approvals
Schedule 3.1(g) Litigation
Schedule 3.1(h) Defaults and Violations
LIST OF EXHIBITS:
Exhibit A Senior Secured Convertible Debenture
Exhibit G Power of Attorney
Exhibit I Officer's Certificate
Exhibit J Registration Rights Agreement
Exhibit M Escrow Agreement
23
THIS SENIOR CONVERTIBLE DEBENTURE PURCHASE AGREEMENT ("Agreement") is made
---------
and entered into as of March 26, 2004, between Heritage Worldwide, Inc., a
corporation organized and existing under the laws of the State of Delaware (the
"Company"), and the purchasers listed on SCHEDULE 1 hereto (the "Purchasers").
------- ----------
WHEREAS, subject to the terms and conditions set forth in this Agreement, the
Company desires to issue and sell to the Purchasers and the Purchasers desire to
acquire from the Company an aggregate principal amount of up to three million
dollars ($3,000,000) of the Company's Senior Convertible Debentures, due March
25, 2009, at the aggregate price of three million dollars ($3,000,000) in the
form of EXHIBIT A-1 (the " Debentures").
------------ -------------
IN CONSIDERATION of the mutual covenants contained in this Agreement, the
Company and each Purchaser agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 Certain Definitions. As used in this Agreement, and unless the
--------------------
context requires a different meaning, the following terms have the meanings
indicated:
"Affiliate" means, with respect to any Person, any Person that, directly or
---------
indirectly, controls, is controlled by or is under common control with such
Person. For the purposes of this definition, "control" (including, with
---------
correlative meanings, the terms "controlled by" and "under common control with")
------------- -------------------------
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities or by contract or otherwise.
"Agreement" shall have the meaning set forth in the introductory paragraph
---------
of this Agreement.
"Armadillo Shares" means 1,595,745 of the Ordinary Shares of Armadillo
------------------
Investments, Plc.
"Attorney-in-Fact" means Gottbetter & Partners, LLP, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, 12
----------------
▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇; Tel: ▇▇▇-▇▇▇-▇▇▇▇; Fax: ▇▇▇-▇▇▇-▇▇▇▇.
"Business Day" means any day except Saturday, Sunday and any day which
-------------
shall be a 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.
24
"Change of Control" means the acquisition, directly or indirectly, by any
--------------------
Person of ownership of, or the power to direct the exercise of voting power with
respect to, a majority of the issued and outstanding voting shares of the
Company.
"Closing" shall have the meaning set forth in Section 2.2(a).
------- ---------------
"Closing Date" shall have the meaning set forth in Section 2.2(a).
------------- --------------
"Commission" means the Securities and Exchange Commission.
----------
"Common Stock" means shares now or hereafter authorized of the class of
-------------
common stock, par value $.001 per share, of the Company and stock of any other
class into which such shares may hereafter have been reclassified or changed.
"Company" shall have the meaning set forth in the introductory paragraph.
-------
"Control Person" shall have the meaning set forth in Section 4.10(a)(i)
--------------- ------------------
hereof.
"Conversion Date" shall have the meaning set forth in the Debentures.
----------------
"Conversion Price" shall have the meaning set forth in the Debentures.
-----------------
"Debenture Notice" shall have the meaning set forth in Section 4.12 hereof.
---------------- ------------
"Debentures" shall have the meaning set forth in the recital.
----------
"Default" means any event or condition which constitutes an Event of
-------
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Disclosure Documents" means all documents and written materials provided
---------------------
to the Purchaser and/or its representatives in connection with the Company and
this offering.
"Escrow Agent"means Gottbetter & Partners, LLP, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
--------------
▇▇▇▇, ▇▇ ▇▇▇▇▇.
"Event of Default" shall have the meaning set forth in Section 5.1.
------------------ -----------
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
-------------
"Execution Date" means the date of this Agreement first written above.
---------------
"G&P" means Gottbetter & Partners, LLP.
---
25
"Indemnified Party" shall have the meaning set forth in Section 4.10(b)
------------------ ---------------
hereof.
"Indemnifying Party" shall have the meaning set forth in Section 4.10(b)
------------------- ---------------
hereof.
"Limitation on Conversion" shall have the meaning set forth in Section 4.12
------------------------ ------------
hereof.
"Losses" shall have the meaning set forth in Section 4.10(a) hereof.
------ ---------------
"Lump Sum Payment" shall have the meaning set forth in Section 4.23 hereof.
---------------- ------------
"Material" shall mean having a financial consequence in excess of $25,000.
--------
"Material Adverse Effect" shall have the meaning set forth in Section
------------------------- -------
3.1(e).
-
"NASD" means the National Association of Securities Dealers, Inc.
----
"Nasdaq" shall mean the Nasdaq Stock Market, Inc.(R)
------
"Notice of Conversion" shall have the meaning set forth in the Debenture.
----------------------
"Original Issuance Date," shall have the meaning set forth in the
------------------------
Debentures.
---
"OTCBB" shall mean the NASD over-the counter Bulletin Board(R) or similar
-----
organization or agency succeeding to its functions.
"Per Share Market Value" of the Common Stock means on any particular date
------------------------
(a) the last sale price of shares of Common Stock on such date or, if no such
sale takes place on such date, the last sale price on the most recent prior
date, in each case as officially reported on the principal national securities
exchange on which the Common Stock is then listed or admitted to trading, or (b)
if the Common Stock is not then listed or admitted to trading on any national
securities exchange, the closing bid price per share as reported by Nasdaq, or
(c) if the Common Stock is not then listed or admitted to trading on the Nasdaq,
the closing bid price per share of the Common Stock on such date as reported on
the OTCBB or if there is no such price on such date, then the last bid price on
the date nearest preceding such date, or (d) if the Common Stock is not quoted
on the OTCBB, the closing bid price for a share of Common Stock on such date in
the over-the-counter market as reported by the Pinksheets LLC (or similar
organization or agency succeeding to its functions of reporting prices) or if
there is no such price on such date, then the last bid price on the date nearest
preceding such date, or (e) if the Common Stock is not publicly traded, the fair
market value of a share of the Common Stock as determined by an Appraiser (as
defined in and pursuant to the procedures set forth in Section 4(c)(iv) of the
Debentures) selected in good faith by the holders of a majority of the
Debentures; provided, however, that the Company, after receipt of the
-------- -------
determination by such Appraiser, shall have the right to select an additional
Appraiser, in which case, the fair market value shall be equal to the average of
the determinations by each such Appraiser.
26
"Person" means an individual or a corporation, partnership, trust,
------
incorporated or unincorporated association, joint venture, limited liability
--
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Power of Attorney" means the power of attorney in the form of EXHIBIT G
------------------- ---------
annexed hereto.
"Proceeding" means an action, claim, suit, investigation or proceeding
----------
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"Purchase Price" shall have the meaning set forth in Section 2.1(a).
--------------- --------------
"Purchaser" shall have the meaning set forth in the introductory paragraph.
---------
"Redemption Price" shall mean an amount equal to the principal amount of
------------------
the Debentures outstanding that are subject to redemption.
"Registration Rights Agreement" means the Registration Rights Agreement in
------------------------------
the form of EXHIBIT J annexed hereto.
----------
"Reporting Issuer" means a company that is subject to the reporting
-----------------
requirements of Section 13 or 15(d) of the Exchange Act.
-
"Required Approvals" shall have the meaning set forth in Section 3.1(f).
------------------- --------------
"Securities" means the Debentures, the Underlying Shares and the Option
----------
Shares.
"SEC" means the Securities and Exchange Commission.
---
"Securities Act" means the Securities Act of 1933, as amended.
---------------
"Trading Day" means (a) a day on which the Common Stock is quoted on the
------------
Nasdaq, the OTCBB or the principal stock exchange on which the Common Stock has
been listed, or (b) if the Common Stock is not quoted on the Nasdaq, the OTCBB
or any stock exchange, a day on which the Common Stock is quoted in the
over-the-counter market, as reported by the Pinksheets LLC (or any similar
organization or agency succeeding its functions of reporting prices).
"Transaction Documents" means this Agreement and all exhibits and schedules
---------------------
hereto and all other agreements executed pursuant to this Agreement.
"Underlying Shares" means the shares of duly issued Common Stock into which
-----------------
the Debentures are convertible in accordance with the terms hereof and the
Debentures.
27
ARTICLE II
PURCHASE AND SALE OF CONVERTIBLE DEBENTURES
2.1 Purchase and Sale; Purchase Price.
-------------------------------------
(a) Subject to the terms and conditions set forth herein, the Company shall
issue and sell and the Purchasers shall purchase an aggregate principal amount
of up to three million dollars ($3,000,000) (the "Purchase Price") of the
--------------
Debentures. The Debentures shall have the respective rights, preferences and
privileges as set forth in the respective Debentures annexed as EXHIBIT A.
---------
(b) The Purchase Price shall be paid by delivery to the Company of One
Million Five Hundred Ninety Five Thousand Seven Hundred Forty Five (1,595,745)
Ordinary Shares (the "Armadillo Shares") of Armadillo Investments, Plc. The
number of Ordinary Shares to be issued will be based on the conversion rate in
effect as of the close of business on the day preceding the closing of the
transaction. For example, if the effective conversion rate is $1.88/ 1, then
Armadillo will issue $3,000,000/$1.88, or 1,595,745 Ordinary Shares.
2.2 Execution and Delivery of Documents; The Closing.
------------------------------------------------------
(a) The Closing of the purchase and sale of the Debentures (the
"Closing") shall take place simultaneously with the execution and delivery of
--------
this Agreement (the "Closing Date"). On the Closing Date,
-------------
(i) the Company shall deliver to the Purchasers original and duly
executed Debentures and other Transaction Documents registered in the name of
the Purchaser and/or its assigns in the amount set forth in SCHEDULE 1; and
(ii) the Company shall execute and deliver to the Purchaser a
certificate of its President, in the form of EXHIBIT I annexed hereto,
----------
certifying that attached thereto is a copy of resolutions duly adopted by the
Board of Directors of the Company authorizing the Company to execute and deliver
the Transaction Documents and to enter into the transactions contemplated
thereby;
(iii) the Company shall execute and deliver to Purchaser an executed
Power of Attorney in the form annexed hereto as EXHIBIT G;
-----------
28
(iv) the Company and the Purchaser shall execute and deliver to each
other an executed Registration Rights Agreement in the form annexed hereto as
EXHIBIT J;
---------
(v) the Company, the Purchaser and the Escrow Agent shall execute and
deliver to each other an executed copy of Escrow Agreement annexed hereto as
EXHIBIT M; and
----------
(vi) the Purchaser shall deliver to the Company the Armadillo Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations, Warranties and Agreements of the Company. The
-------------------------------------------------------------
Company hereby makes the following representations and warranties to the
Purchasers, all of which shall survive the Closing;
(a) Organization and Qualification. The Company is a corporation, duly
------------------------------
incorporated, validly existing and in good standing under the laws of the State
of Delaware, with the requisite corporate power and authority to own and use its
properties and assets and to carry on its business as currently conducted. The
Company has no subsidiaries other than as set forth on SCHEDULE 3.1(A) attached
hereto (collectively, the "Subsidiaries"). Each of the Subsidiaries is a
------------
corporation, duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, with the full corporate power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Each of the Company and the Subsidiaries is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, would not, individually or
in the aggregate, have a material adverse effect on the results of operations,
assets, prospects, or financial condition of the Company and the Subsidiaries,
taken as a whole (a "Material Adverse Effect").
-------------------------
(b) Authorization, Enforcement. The Company has the requisite corporate
---------------------------
power and authority to enter into and to consummate the transactions
contemplated hereby and by each other Transaction Document and to otherwise to
carry out its obligations hereunder and thereunder. The execution and delivery
of this Agreement and each of the other Transaction Documents to which it is a
party by the Company and the consummation by it of the transactions contemplated
hereby and thereby have been duly authorized by all necessary action on the part
of the Company. Each of this Agreement and each of the other Transaction
Documents to which it is a party has been or will be duly executed by the
Company and when delivered in accordance with the terms hereof or thereof will
29
constitute the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application.
(c) Capitalization. The authorized, issued and outstanding capital stock of
--------------
the Company is set forth on SCHEDULE 3.1(C). No Debentures have been issued as
of the date hereof. No shares of Common Stock are entitled to preemptive or
similar rights, nor is any holder of the Common Stock entitled to preemptive or
similar rights arising out of any agreement or understanding with the Company by
virtue of this Agreement. Except as described in this Agreement, or disclosed
in SCHEDULE 3.1(C), there are no outstanding options, voting agreements or
merger agreements, arrangements, warrants, script, rights to subscribe to,
registration rights, calls or commitments of any character whatsoever relating
to, or, except as a result of the purchase and sale of the Debentures hereunder,
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 other securities, or contracts, commitments, understandings, or
arrangements by which the Company is or may become bound to issue additional
shares of Common Stock or other securities, or securities or rights convertible
or exchangeable into shares of Common Stock or other securities. The Company is
not in violation of any of the provisions of its Certificate of Incorporation,
bylaws or other charter documents.
(d) Issuance of Securities. The Debentures and the Underlying Shares have
------------------------
been duly and validly authorized for issuance, offer and sale pursuant to this
Agreement and, when issued and delivered as provided hereunder or in the
Debentures against payment in accordance with the terms hereof, shall be valid
and binding obligations of the Company enforceable against the Company in
accordance with their respective terms. The Company shall at all times while
the Debentures are outstanding maintain an adequate reserve of shares of Common
Stock to enable it to perform its obligations under this Agreement and the
Debentures except as otherwise permitted in this Agreement or the Debentures.
When issued in accordance with the terms hereof and the Debentures, the
Securities will be duly authorized, validly issued, fully paid and
non-assessable. Except as set forth in SCHEDULE 3.1(D) hereto, there is no
equity, equity equivalent security, debt or equity lines of credit outstanding
that is substantially similar to the Debentures, including any security having a
floating conversion substantially similar to the Debentures.
(e) No Conflicts. The execution, delivery and performance of this Agreement
------------
and the other Transaction Documents by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby do not and will not
(i) conflict with or violate any provision of its Certificate of Incorporation
or bylaws (each as amended through the date hereof) or (ii) be subject to
obtaining any of the consents referred to in Section 3.1(f), conflict with, or
--------------
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company is a party, or (iii) result in a violation of
any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company is
subject (including, but not limited to, those of other countries and the federal
and state securities laws and regulations), or by which any property or asset of
the Company is bound or affected, except in the case of clause (ii), such
30
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect. The business of the Company is not being conducted in violation
in any material respect of any law, ordinance or regulation of any governmental
authority.
(f) Consents and Approvals. Other than the approval of its board of
------------------------
directors and stockholders, which have been obtained, and except as specifically
set forth in SCHEDULE 3.1(F), the Company is not required to obtain any consent,
waiver, authorization or order of, or make any filing or registration with, any
court or other federal, state, local or other governmental authority or other
Person in connection with the execution, delivery and performance by the Company
of this Agreement and each of the other Transaction Documents (together with the
consents, waivers, authorizations, orders, notices and filings referred to in
SCHEDULE 3.1(F), the "Required Approvals").
-------------------
(g) Litigation; Proceedings. Except as specifically disclosed in SCHEDULE
------------------------
3.1(G), there is no action, suit, notice of violation, proceeding or
investigation pending or, to the best knowledge of the Company, threatened
against the Company or any of its properties before or by any court,
governmental or administrative agency or regulatory authority (federal, state,
county, local or foreign) which relates to or challenges the legality, validity
or enforceability of any of the Transaction Documents, the Debentures and the
Underlying Shares. The Company has pending against it a variety of claims and
proceedings arising out of the normal course of its business for goods sold and
delivered and services rendered.
(h) No Default or Violation. Except as set forth in SCHEDULE 3.1(H) hereto,
-----------------------
the Company (i) is not in default under or in vio-lation of any indenture, loan
or credit agreement or any other agreement or instrument to which it is a party
or by which it or any of its properties is bound, except such defaults or
violations as do not have a Material Adverse Effect, (ii) is not in violation of
any order of any court, arbitrator or governmental body, except for such
violations as do not have a Material Adverse Effect, or (iii) is not in
violation of any statute, rule or regulation of any governmental authority which
could (individually or in the aggregate) (x) adversely affect the legality,
validity or enforceability of this Agreement, (y) have a Material Adverse Effect
or (z) adversely impair the Company's ability or obligation to perform fully on
a timely basis its obligations under this Agreement.
(i) Intentionally omitted.
(j) Disclosure Documents. The Disclosure Documents taken as a whole are
---------------------
accurate in all material respects and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
(k) Non-Registered Offering. Neither the Company not any Person acting
-----------------------
on its behalf has taken or will take any action (including, without limitation,
any offering of any securities of the Company under circumstances which would
require the integration of such offering with the offering of the Securities
31
under the Securities Act) which might subject the offering, issuance or sale of
the Securities to the registration requirements of Section 5 of the Securities
Act.
(l) Placing Agent. The Company accepts and agrees that Dungarvon
--------------
Associates, Inc. ("Dungarvon") is acting for the Purchaser and does not regard
any person other than the Purchaser as its customer in relation to this
Agreement, and that it has not made any recommendation to the Company, in
relation to this Agreement and is not advising the Company, with regard to the
suitability or merits of the Armadillo Shares and in particular Dungarvon has no
duties or responsibilities to the Company for the best execution of the
transaction contemplated by this Agreement.
(m) Private Placement Representations. The Company (i) has received and
-------------------------------------
carefully reviewed such information and documentation relating to the Purchaser
that the Company has requested, including, without limitation, the Purchaser's
Confidential Private Offering Memorandum dated January 1, 2004; (ii) has had a
reasonable opportunity to ask questions of and receive answers from the
Purchaser concerning the Armadillo Shares, and all such questions, if any, have
been answered to the full satisfaction of the Company; (iii) has such knowledge
and expertise in financial and business matters that it is capable of evaluating
the merits and risks involved in an investment in the Armadillo Shares; (iii)
understands that Armadillo has determined that the exemption from the
registration provisions of the Securities Act of 1933, as amended (the
"Securities Act"), provided by Section 4(2) of the Securities Act and Rule 506
of Regulation D thereunder is applicable to the offer and sale of the Armadillo
Shares, based, in part, upon the representations, warranties and agreements made
by the Company herein; and (iv) except as set forth herein, no representations
or warranties have been made to the Company by the Purchaser or any agent,
employee or affiliate of the Purchaser and in entering into this transaction the
Company is not relying upon any information, other than the results of
independent investigation by the Company.
The Purchaser acknowledges and agrees that the Company makes no representation
or warranty with respect to itself or the transactions contemplated hereby other
than those specifically set forth in Section 3.1 hereof.
------------
3.2 Representations and Warranties of the Purchasers. Each Purchaser
--------------------------------------------------
hereby represents and warrants to the Company as follows:
(a) Organization; Authority. The Purchaser is a corporation, duly
------------------------
organized, validly existing and in good standing under the laws of the
jurisdiction of its formation with the requisite power and authority to enter
into and to consummate the transactions contemplated hereby and by the other
Transaction Documents and otherwise to carry out its obligations hereunder and
thereunder. The acquisition of the Shares to be purchased by the Purchaser
hereunder has been duly authorized by all necessary action on the part of the
Purchaser. This Agreement has been duly executed and delivered by the Purchaser
and constitutes the valid and legally binding obligation of the Purchaser,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to, or affecting generally
the enforcement of, creditors rights and remedies or by other general principles
of equity.
32
Investment Intent. The Purchaser is acquiring the Debentures to be
------------------
purchased by it hereunder, and will acquire the Underlying Shares relating to
such Debentures, for its own account for investment purposes only and not with a
view to or for distributing or reselling such Debentures or Underlying Shares or
any part thereof or interest therein, without prejudice, however, to such
Purchaser's right, subject to the provisions of this Agreement, at all times to
sell or otherwise dispose of all or any part of such Debentures or Underlying
Shares in compliance with applicable federal and state securities laws.(b)
(c) Experience of Purchaser. The Purchaser, either alone or together with
-------------------------
its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of an investment in the Securities to be acquired by it hereunder, and has
so evaluated the merits and risks of such investment.
(d) Ability of Purchaser to Bear Risk of Investment. The Purchaser is able
------------------------------------------------
to bear the economic risk of an investment in the Securities to be acquired by
it hereunder and, at the pre-sent time, is able to afford a complete loss of
such investment.
(e) Prohibited Transactions. The securities to be acquired by the Purchaser
-----------------------
hereunder are not being acquired, directly or indirectly, with the assets of any
"employee benefit plan," within the meaning of Section 3(3) of the Employment
Retirement Income Security Act of 1974, as amended.
(f) Access to Information. The Purchaser acknowledges receipt of the
-----------------------
Disclosure Documents and further acknowledges that it has been afforded (i) the
opportunity to ask such questions as it has deemed necessary of, and to receive
answers from, representatives of the Company concerning the terms and conditions
of the Securities and the merits and risks of investing in the Securities; (ii)
access to information about the Company and the Company's financial condition,
results of operations, business, properties, management and prospects sufficient
to enable it to evaluate its investment in the Securities; and (iii) the
opportunity to obtain such additional information which the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment and to verify the
accuracy and completeness of the information contained in the Disclosure
Documents.
(g) Reliance. The Purchaser understands and acknowledges that (i) the
--------
Debentures being offered and sold to it hereunder are being offered and sold
without registration under the Securities Act in a private placement that is
exempt from the registration provisions of the Securities Act under section 4(2)
and Regulation S under the Securities Act and (ii) the availability of such
exemption depends in part on, and that the Company will rely upon the accuracy
and truthfulness of, the foregoing representations and such Purchaser hereby
consents to such reliance.
The Company acknowledges and agrees that the Purchaser makes no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 3.2.
------------
33
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 Manner of Offering. The Securities are being issued pursuant to
--------------------
section 4(2) and regulation S of the Securities Act. The Armadillo shares are
being issued pursuant to section 4(2) of the Securities Act..
4.2 Notice of Certain Events. The Company shall, on a continuing
---------------------------
basis, as long as the Purchasers owns any of the Securities, (i) advise the
Purchaser promptly after obtaining knowledge of, and, if requested by the
Purchaser, confirm such advice in writing, of (A) the issuance by any state
securities commission of any stop order suspending the qualification or
exemption from qualification of the Securities, for offering or sale in any
jurisdiction, or the initiation of any proceeding for such purpose by any state
securities commission or other regulatory authority, or (B) any event that makes
any statement of a material fact made by the Company in Section 3.1 or in the
-----------
Disclosure Documents untrue or that requires the making of any additions to or
changes in Section 3.1 or in the Disclosure Documents in order to make the
------------
statements therein, in each case at the time such Disclosure Documents were
delivered to the Purchaser and in the light of the circumstances under which
they were made, not misleading, (ii) use its commercially reasonable best
efforts to prevent the issuance of any stop order or order suspending the
qualification or exemption from qualification of the Securities under any state
securities or Blue Sky laws, and (iii) if at any time any state securities
commission or other regulatory authority shall issue an order suspending the
qualification or exemption from qualification of the Securities under any such
laws, use its commercially reasonable best efforts to obtain the withdrawal or
lifting of such order at the earliest possible time.
4.3 Modification to Disclosure Documents. If any event shall occur as
-------------------------------------
a result of which, in the reasonable judgment of the Company or the Purchaser,
it becomes necessary or advisable to amend or supplement any of the Disclosure
Documents in order to make the statements therein, at the time such Disclosure
Documents were delivered to the Purchaser and in the light of the circumstances
under which they were made, not misleading, or if it becomes necessary to amend
or supplement any of the Disclosure Documents to comply with applicable law, the
Company shall as soon as practicable prepare an appropriate amendment or
supplement to each such document in form and substance reasonably satisfactory
to both the Purchasers and Company so that (i) as so amended or supplemented,
each such document will not include an untrue statement of material fact or omit
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances existing at the time it is delivered to the
Purchaser, not misleading and (ii) the Disclosure Documents will comply with
applicable law in all material respects.
4.4 Blue Sky Laws. The Company shall cooperate with the Purchaser in
---------------
connection with the exemption from registration of the Securities under the
securities or Blue Sky laws of such jurisdictions as the Purchaser may request;
provided, however, that the Company shall be not required in connection
-------- -------
34
therewith to qualify as a foreign corporation where they are not now so
qualified. The Company agrees that it will execute all necessary documents and
pay all necessary state filing or notice fees to enable the Company to sell the
Securities to the Purchaser.
4.5 Furnishing of Rule 144(c) Materials. The Company shall, for so long
------------------------------------
as any of the Securities remain outstanding and during any period in which the
Company is not subject to Section 13 or 15(d) of the Exchange Act, make
available to any registered holder of the Securities ("Holder" or "Holders") in
connection with any sale thereof and any prospective purchaser of such
Securities from such Person, such information in accordance with Rule 144(c)
promulgated under the Securities Act as is required to sell the Securities under
Rule 144 promulgated under the Securities Act.
Solicitation Materials. The Company shall not (i) distribute any offering
-----------------------
materials in connection with the offering and sale of the Debentures or the
Underlying Shares other than the Disclosure Documents and any amendments and
supplements thereto prepared in compliance herewith or (ii) solicit any offer to
buy or sell the Debentures or the Underlying Shares by means of any form of
general solicitation or advertising. 4.6
4.7 Listing of Common Stock. The Company shall use its commercially
--------------------------
reasonable best efforts to maintain the listing of its Common Stock on the OTCBB
or such other exchange on which the Common Stock is then listed until expiration
of each of the periods during which the Debentures may be converted and (b)
shall provide to the Purchasers evidence of such listing.
4.8 Attorney-in-Fact. To effectuate the terms and provisions of this
----------------
Agreement and the Debentures, the Company hereby agrees to give a power of
attorney as is evidenced by EXHIBIT G annexed hereto. All acts done under such
---------
power of attorney are hereby ratified and approved and neither the
Attorney-in-Fact nor any designee or agent thereof shall be liable for any acts
of commission or omission, for any error of judgment or for any mistake of fact
or law, as long as the Attorney-in-Fact is operating within the scope of the
power of attorney and this Agreement and its exhibits. The power of attorney,
being coupled with an interest, shall be irrevocable while any of the Debentures
remain unconverted, or any portion of this Agreement remains unsatisfied. In
addition, the Company shall give the Attorney-in-Fact resolutions executed by
the Board of Directors of the Company which authorize transfers of the
Debentures and future issuances of the Underlying Shares for the Shares and for
the Option Shares, and which resolutions state that they are irrevocable while
any of the Debentures remain unconverted, or any portion of this Agreement
remains unsatisfied.
4.9 Conversion Procedures. The Debentures set forth the procedures,
-----------------------
including the forms of Notice of Conversion to be provided upon conversion and
such other information and instructions as may be reasonably necessary to enable
the Purchaser or its permitted transferee(s) to exercise the right of conversion
smoothly and expeditiously.
35
4.10 Indemnification.
---------------
(a) Indemnification
(i) The Company shall, notwithstanding termination of this Agreement,
indemnify and hold harmless each Purchaser and its officers, directors, agents,
employees and affiliates, each Person who controls the Purchaser (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
(each such Person, a "Control Person") and the officers, directors, agents,
---------------
employees and affiliates of each such Control Person, to the fullest extent
permitted by applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation, costs of preparation
and reasonable attorneys' fees) and expenses (collectively, "Losses"), as
------
incurred, arising out of, or relating to, a breach or breaches of any
representation, warranty, covenant or agreement by the Company under this
Agreement or any other Transaction Document.
(ii) Each Purchaser shall, notwithstanding termination of this Agreement,
indemnify and hold harmless the Company, its officers, directors, agents and
employees, each Control Person of the Company and the officers, directors,
agents and employees of each Control Person, to the fullest extent permitted by
applicable law, from and against any and all Losses, as incurred, arising out
of, or relating to, a breach or breaches of any representation, warranty,
covenant or agreement by the Purchaser under this Agreement or any other
Transaction Documents.
(b) Conduct of Indemnification Proceedings. If any Proceeding shall be
--------------------------------------
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party promptly shall notify the Person
--------------------
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
------------------
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally determined by a court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in, but not control, the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed
to pay such fees and expenses; or (2) the Indemnifying Party shall have failed
promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3)
the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party (in which case, if such Indemnified Party notifies
the Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not have the
36
right to assume the defense of the claim against the Indemnified Party but will
retain the right to control the overall Proceedings out of which the claim arose
and such counsel employed by the Indemnified Party shall be reasonably
acceptable to the Indemnifying Party and shall be at the expense of the
Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending Proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability on claims that are the
subject matter of such Proceeding, provided, however, the Indemnifying Party may
-------- -------
settle or compromise any asserted liability without the consent of the
Indemnitee so long as such settlement or compromise releases the Indemnitee and
does not include any admission or statement of fault against the Indemnitee.
All fees and expenses of the Indemnified Party to which the
Indemnified Party is entitled hereunder (including reasonable fees and expenses
to the extent incurred in connection with investigating or preparing to defend
such Proceeding in a manner not inconsistent with this Section) shall be paid to
the Indemnified Party, as incurred, within ten (10) Business Days of written
notice thereof to the Indemnifying Party.
No right of indemnification under this Section shall be available as to a
particular Indemnified Party if there is a non-appealable final judicial
determination that such Losses arise solely or substantially out of the
negligence or bad faith of such Indemnified Party in performing the obligations
of such Indemnified Party under this Agreement or a breach by such Indemnified
Party of its obligations under this Agreement.
(c) Contribution. If a claim for indemnification under this Section is
------------
unavailable to an Indemnified Party or is insufficient to hold such Indemnified
Party harmless for any Losses in respect of which this Section would apply by
its terms (other than by reason of exceptions provided in this Section), then
each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses in such proportion as is appropriate to reflect the relative
benefits received by the Indemnifying Party on the one hand and the Indemnified
Party on the other and the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions or omissions that resulted in
such Losses as well as any other relevant equitable considerations. The
relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether there was a judicial
determination that such Losses arise in part out of the negligence or bad faith
of the Indemnified Party in performing the obligations of such Indemnified Party
under this Agreement or the Indemnified Party's breach of its obligations under
this Agreement. The amount paid or payable by a party as a result of any Losses
shall be deemed to include any attorneys' or other fees or expenses incurred by
such party in connection with any Proceeding to the extent such party would have
been indemnified for such fees or expenses if the indemnification provided for
in this Section was available to such party.
(d) Non-Exclusivity. The indemnity and contribution agreements contained in
---------------
this Section are in addition to any obligation or liability that the
Indemnifying Parties may have to the Indemnified Parties.
37
4.11 Exclusivity. Until all of the Debentures have been converted into
-----------
common stock or retired (the "Restriction Period"), the Company and its
Affiliates shall not issue or offer any security that is senior or superior to
the Debentures as to payment, liquidation, dividends or collateral, without the
consent of the holders of a majority of the principal amount of the Debentures
then outstanding. The Company may request that the restrictions in this Section
be waived. Except as specifically set forth above, the Company may engage in
any other debt or equity financing during the Restriction Period.
4.12 Purchaser's Ownership of Common Stock. In addition to and not in
--------------------------------------
lieu of the limitations on conversion set forth in the Debentures, the
conversion rights of each Purchaser set forth in the Debentures shall be
limited, solely to the extent required, from time to time, such that, unless the
Purchaser gives written notice 75 days in advance to the Company of the
Purchaser's intention to exceed the Limitation on Conversion as defined herein,
with respect to all or a specified amount of the Debentures and the
corresponding number of the Underlying Shares in no instance shall the Purchaser
(singularly, together with any Persons who in the determination of the
Purchaser, together with the Purchaser, constitute a group as defined in Rule
13d-5 of the Exchange Act) be entitled to convert the Debentures to the extent
such conversion would result in the Purchaser beneficially owning more than five
percent (5%) of the outstanding shares of Common Stock of the Company. For
these purposes, beneficial ownership shall be defined and calculated in
accordance with Rule 13d-3, promulgated under the Exchange Act (the foregoing
being herein referred to as the "Limitation on Conversion"); provided, however,
------------------------ -------- -------
that the Limitation on Conversion shall not apply to any forced or automatic
conversion pursuant to this Agreement or the Debentures; and provided, further
-------- -------
that if the Purchaser shall have declared an Event of Default and, if a cure
period is provided, the Company shall not have properly and fully cured such
Event of Default within any such cure period, the provisions of this Section
shall be null and void from and after such date. The Company shall, promptly
upon its receipt of a Notice of Conversion tendered by the Purchaser (or its
sole designee) for the Debentures, as applicable, notify the Purchaser by
telephone and by facsimile (the "Debenture Notice") of the number of shares of
----------------
Common Stock outstanding on such date and the number of Underlying Shares, which
would be issuable to the Purchaser (or its sole designee, as the case may be) if
the conversion requested in such Notice of Conversion were effected in full and
the number of shares of Common Stock outstanding giving full effect to such
conversion whereupon, in accordance with the Debentures, notwithstanding
anything to the contrary set forth in the Debentures, the Purchaser may, by
notice to the Company within one (1) Business Day of its receipt of the
Debenture Notice by facsimile, revoke such conversion to the extent (in whole or
in part) that such Purchaser determines that such conversion would result in the
ownership by such Purchaser of shares of Common Stock in excess of the
Limitation on Conversion. The Debenture Notice shall begin the 75 day advance
notice required in this Section.
4.13 Purchaser's Rights if Trading in Common Stock is Suspended. If the
--------------------------------------------------------------
Common Stock is listed on any exchange, then at any time after the Closing if
trading in the shares of the Common Stock is suspended (and not reinstated
within thirty (30) Trading Days) on such stock exchange or market upon which the
Common Stock is then listed for trading (other than as a result of the
suspension of trading in securities on such market generally or temporary
suspensions pending the release of material information), or the Common Stock is
delisted from the OTCBB (and not reinstated within thirty (30) Trading Days),
then, at the option of the Purchaser exercisable by giving written notice to the
38
Company (the "Redemption Notice"), the Company shall redeem, as applicable, all
-----------------
of the Debentures then owned by such Purchaser at an aggregate purchase price
equal to the outstanding principal balance of such Debentures.
4.14 No Violation of Applicable Law. Notwithstanding any provision of
-------------------------------
this Agreement to the contrary, if the redemption of the Debentures or the
Underlying Shares otherwise required under this Agreement or the Debentures
would be prohibited by the relevant provisions of Delaware law, such redemption
shall be effected as soon as it is permitted under such law.
4.15 Redemption Restrictions. Notwithstanding any provision of this
------------------------
Agreement to the contrary, if any redemption of the Debentures otherwise
required under this Agreement or the Debentures would be prohibited in the
absence of consent from any lender to the Company, or by the holders of any
class of securities of the Company, the Company shall use its best efforts to
obtain such consent as promptly as practicable after any such redemption is
required. Interest payable by the Company with respect to any such redemption
shall accrue in accordance with the terms of the Debenture until such consent is
obtained. Nothing contained in this Section 4.15 shall be construed as a waiver
------------
by the Purchaser of any rights it may have by virtue of any breach of any
representation or warranty of the Company herein as to the absence of any
requirement to obtain any such consent.
4.16 No Other Registration Rights. During the Restriction Period, the
-------------------------------
Company shall not file any registration statement that provides for the
registration of shares of Common Stock to be sold by security holders of the
Company, other than the Purchasers and/or their respective Affiliates or
assigns, without the prior written consent of the Purchaser or its assigns,
provided, however, that the limitation on the right to file registration
statements contained in this Section 4.16 shall not apply to registration
-------------
statements relating solely to (i) employee benefit plans, notwithstanding the
inclusion of a resale prospectus for securities received under any such employee
benefit plan, or (ii) business combinations not otherwise prohibited by the
terms of this Agreement or the other Transaction Documents.
4.17 Merger or Consolidation. Until the the full conversion of the
-------------------------
Debentures, in the event that the Company and each Subsidiary engages, in a
single transaction or a series of related transactions, that cause it to (i)
consolidate with or merge with or into any other Person, (ii) permit any other
Person to consolidate with or merge into it, or (iii) undergo a Change in
Control, then at the option of the Company exercisable by giving thirty (30)
days written notice to the Purchasers, the Company may demand that the Purchaser
convert all Debentures then held by the Purchasers into Common Stock upon the
terms and conditions set forth in the Debenture. If the Purchaser does not
comply with such demand, the Company may redeem all Debentures held by the
Purchaser at an aggregate purchase price equal to the outstanding principal
balance of such Debentures (the "Redemption Price").
4.18 Liquidated Damages. The Company understands and agrees
-------------------
that a material breach by the Company of any Section of this Agreement or an
Event of Default as contained in this Agreement or any other Transaction
Document will result in substantial economic loss to the Purchaser, which loss
will be extremely difficult to calculate with precision. Therefore, if, for any
39
reason the Company commits such a material breach or fails to cure any Event of
Default within the time, if any, given to cure such Event of Default, as
compensation and liquidated damages for such breach or default, and not as a
---
penalty, the Company agrees to pay the Purchaser an amount equal to the
outstanding principal balance of such Debentures in redemption thereof (the
"Redemption Price").
4.19 Option for Additional Company Shares. The Company hereby
-----------------------------------------
grants to Purchaser an option to acquire that number of shares of the Company's
Common Stock (the "Option Shares"), such option to be exercisable during the
thirty (30) day period commencing on the date Purchaser completes the
conversion of all of the Debenture (the "Conversion Completion Date"), equal to
the difference, if a positive amount, between (a) the number of the Company's
shares of Common Stock into which the original amount of the Debenture would
have been convertible on the Closing Date at a conversion price equal to fifty
percent (50%) of the Fixed Conversion Price, less (b) the aggregate number of
the shares of Common Stock into which the original amount of the Debenture has
actually been converted as of the Conversion Completion Date. The exercise price
for the Option Shares shall be the Fixed Conversion Price. In case of any stock
split, stock dividend, reclassification of the Common Stock, any consolidation
or merger of the Company with or into another person, the sale or transfer of
all or substantially all of the assets of the Company or any compulsory share
exchange pursuant to which the Common Stock is converted into other securities,
cash or property, then each Option Share then outstanding shall have the right
thereafter upon exercise to receive only such shares of stock and other
securities and property receivable upon or deemed to be held by holders of
Common Stock following such stock split, stock dividend, reclassification,
consolidation, merger, sale, transfer or share exchange (except in the event the
property is cash, then the Purchaser shall have the right to exercise the Option
Shares and receive cash in the same manner as other stockholders). In such
event, if appropriate, the exercise price for the Option Shares shall be
proportionately adjusted.
4.20 Notice and Consultation Before Securities Issuances.. Until
----------------------------------------------------
such time as Purchaser shall have sold all of the Underlying Shares, the Company
shall not offer or issue any equity, equity equivalent security or debt that
with a floating conversion price, or any equity lines of credit (the "New
Securities"), without first giving thirty (30) days notice thereof to the
Purchaser and thereafter consulting in good faith with the Purchaser concerning
such issuance. After such consultation between the Company and the Purchaser,
the Company may offer or sell the New Securities on such terms and conditions as
the Company deems appropriate.
4.21 Lock Up. Purchaser agrees not to sell, transfer or assign all or
---------
any part of the Underlying Shares for a period of one and one-half (1 ) years
following the Closing, without the express written consent of the Company, which
consent may be withheld in the Company's sole discretion. Purchaser may convert
the Debenture at any time.
40
ARTICLE V
REDEMPTION
5.1 Redemption by the Company. The company shall be obligated
---------------------------
to redeem all outstanding Debentures for their outstanding principal balance and
the Debentures shall become immediately due and payable upon the occurrence of
any of the following events (each an "Event of Default"): (a) the common stock
of the Company is not registered under Section 12 of the Exchange Act; (b) the
Company is not current in its reporting obligations under Section 13 or 15(d) of
the Exchange Act; or (c) trading in the common stock of the Company has been
suspended, delisted, or otherwise ceased by the Commission or the NASD or other
exchange or the Nasdaq (whether the National Market or otherwise), and trading
is reinstated within thirty (30) Trading Days except for (i) any suspension of
trading of limited duration solely to permit dissemination of material
information regarding the Company, and trading is reinstated promptly after such
dissemination, and (ii) any general suspension of trading for all companies
trading on such exchange or market or OTCBB.
ARTICLE VI
LEGAL FEES AND DEFAULT INTEREST RATE
In the event any party hereto commences legal action to enforce its rights
under this Agreement or any other Transaction Document, the non-prevailing party
shall pay all reasonable costs and expenses (including but not limited to
reasonable attorney's fees, accountant's fees, appraiser's fees and
investigative fees) incurred in enforcing such rights. In the event of an
uncured Event of Default by any party hereunder, interest shall accrue on all
unpaid amounts due the aggrieved party at the rate of ten percent (10%) per
annum, compounded annually.
Whenever the Company is obligated or elects to purchase or redeem the
Purchaser's Debentures under any provision of this Agreement, and the Redemption
Price is not paid to the Purchaser by the tenth (10th) day after the Redemption
Price is due and payable to the Purchaser, the Company shall thereafter pay
interest to the Purchaser on the unpaid portion of the Redemption Price at the
rate of ten percent (10%) per annum, until the Redemption Price is paid in full.
41
ARTICLE VII
MISCELLANEOUS
7.1 Fees and Expenses. Except as set forth in this Agreement each
-------------------
party shall pay the fees and expenses of its advisers, counsel, accountants and
other experts, if any, and all other expenses incurred by such party incident to
the negotiation, preparation, execution, delivery and performance of this
Agreement. The Company shall pay all stamp and similar taxes and duties levied
in connection with the issuance of the Debentures (and, upon conversion, the
Underlying Shares) pursuant hereto. The Purchaser shall be responsible for any
taxes (other than income taxes) payable by the Purchaser that may arise as a
result of the investment hereunder or the transactions contemplated by this
Agreement or any other Transaction Document. The Company agrees to pay a total
Purchaser's counsel $7,500 for legal fees associated with the transactions
contemplated by this Agreement, $5,000 prior to preparation of this Agreement
and the other Transaction Documents, and $2,500 at closing, and the reasonable
disbursements of counsel in connection with the transactions contemplated by
this Agreement. The Company shall pay (i) all costs, expenses, fees and all
taxes incident to and in connection with: (A) the issuance and delivery of the
Securities, (B) the exemption from registration of the Securities for offer and
sale to the Purchaser under the securities or Blue Sky laws of the applicable
jurisdiction, (C) the preparation of certificates for the Securities (including,
without limitation, printing and engraving thereof), and (D) all fees and
expenses of counsel and accountants of the Company.
7.2 Entire Agreement; Amendments. This Agreement, together with all of
-----------------------------
the Exhibits and Schedules annexed hereto, and any other Transaction Document
contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral or
written, with respect to such matters. This Agreement shall be deemed to have
been drafted and negotiated by both parties hereto and no presumptions as to
interpretation, construction or enforceability shall be made by or against
either party in such regard.
7.3 Notices. Any notice, request, demand, waiver, consent, approval, or
-------
other communication which is required or permitted to be given to any party
hereunder shall be in writing and shall be deemed to have been duly given only
if delivered to the party personally or sent to the party by facsimile upon
electronic confirmation and receipt (promptly followed by a hard-copy delivered
in accordance with this Section 7.3) or three days after being mailed by
registered or certified mail (return receipt requested), with postage and
registration or if sent by nationally recognized overnight courier, one day
after being mailed certification fees thereon prepaid, addressed to the party at
its address set forth below:
If to Company: Heritage Worldwide, Inc
▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇▇-▇▇▇-▇▇▇, ▇▇▇▇▇▇
Tel: (▇▇) ▇▇▇-▇▇▇▇▇▇
Fax: (▇▇) ▇▇▇-▇▇▇▇▇▇
42
With a copy to:
Attn:
Tel:
Fax:
If to the Purchaser: See SCHEDULE 1 attached hereto
With copies to: Gottbetter & Partners, LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or such other address as may be designated hereafter by notice given pursuant to
the terms of this Section 7.3.
------------
7.4 Amendments; Waivers. No provision of this Agreement may be waived
--------------------
or amended except in a written instrument signed, in the case of an amendment,
by both the Company and the Purchasers by the consent of the holders of a
majority of the principal balance of the Debentures then outstanding or, in the
case of a waiver, by the party against whom enforce-ment of any such waiver is
sought. No waiver of any default with respect to any provision, condition or
require-ment of this Agreement shall be deemed to be a continuing waiver in the
future or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right accruing to it thereafter.
7.5 Headings. The headings herein are for convenience only, do not
--------
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
7.6 Successors and Assigns. This Agreement shall be binding upon and
-----------------------
inure to the benefit of the parties and their respective successors and
permitted assigns. This Agreement and any of the rights, interests or
obligations hereunder may be assigned by the Purchaser to an accredited investor
without the consent of the Company as long as such assignee agrees to be bound
by this Agreement. This Agreement and any of the rights, interests or
obligations hereunder may not be assigned by the Company without the prior
written consent of the Purchaser.
7.7 No Third Party Beneficiaries. This Agreement is intended for
-------------------------------
the benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
7.8 Governing Law; Venue; Service of Process. The parties hereto
---------------------------------------------
acknowledge that the transactions contemplated by this Agreement and the
43
exhibits hereto bear a reasonable relation to the State of New York. The
parties hereto agree that the internal laws of the State of New York shall
govern this Agreement and the exhibits hereto, including, but not limited to,
all issues related to usury. Any action to enforce the terms of this Agreement
or any of its exhibits shall be brought exclusively in the state and/or federal
courts situated in the County and State of New York. Service of process in any
action by the Purchaser to enforce the terms of this Agreement may be made by
serving a copy of the summons and complaint, in addition to any other relevant
documents, by commercial overnight courier to the Company at its principal
address set forth in this Agreement.
7.9 Survival. The agreements and covenants of the parties contained in
--------
this Agreement shall survive the Closing (or any earlier termination of this
Agreement).
7.10 Counterpart Signatures. This Agreement may be executed in two or
-----------------------
more counterparts, all of which when taken together shall be considered one and
the same agreement and shall become effective when counterparts have been signed
by each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
7.11 Publicity. The Company and the Purchasers shall consult with
---------
each other in issuing any press releases or otherwise making public statements
with respect to the transactions contemplated hereby and neither party shall
issue any such press release or otherwise make any such public statement without
the prior written consent of the other, which consent shall not be unreasonably
withheld or delayed, unless counsel for the disclosing party deems such public
statement to be required by applicable federal and/or state securities laws.
Except as otherwise required by applicable law or regulation, the Company will
not disclose to any third party (excluding its legal counsel, accountants and
representatives) the names of the Purchaser.
7.12 Severability. In case any one or more of the provisions of this
------------
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affected or impaired thereby and the parties will attempt to agree
upon a valid and enforceable provision which shall be a reasonable substitute
therefore, and upon so agreeing, shall incorporate such substitute provision in
this Agreement.
7.13 Limitation of Remedies. With respect to claims by the Company or
-----------------------
the Purchaser or any person acting by or through the Company or the Purchaser
for remedies at law or at equity relating to or arising out of a breach of this
Agreement, liability, if any, shall, in no event, include loss of profits or
incidental, indirect, exemplary, punitive, special or consequential damages of
any kind.
7.14 Successors and Assigns. This Agreement shall become effective when
----------------------
it is executed by the parties and shall thereafter be binding upon and ensure to
the benefit of the parties hereto and their permitted successors and assigns.
This agreement and any of the rights, interests or obligations hereunder may be
assigned by the Purchaser without the consent of the Company.
[SIGNATURE PAGE FOLLOWS]
44
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first indicated above.
Company:
HERITAGE WORLDWIDE, INC.
By:
---------------------
Name:
---------------------
Title:
---------------------
Purchaser:
Armadillo Investments, Plc.
By:
---------------------
Name:
---------------------
Title:
---------------------
45
Schedule 1
Purchaser(s)
------------
Name and Address of Purchaser Full Amount of Debentures to be Purchased
----------------------------- -----------------------------------------
Armadillo Investments Plc.
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇,▇▇▇,▇▇▇
▇▇▇▇▇▇
▇▇▇▇ ▇▇▇
46