THIS AGREEMENT, AND THE SECURITIES ISSUABLE HEREUNDER (THE "SECURITIES"), HAVE
NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), NOR HAVE THEY BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF
ANY U.S. STATE OR TERRITORY. THE SECURITIES ARE BEING OFFERED AND SOLD PURSUANT
TO REGULATION S OF THE U.S. SECURITIES AND EXCHANGE COMMISSION UNDER THE ACT.
THE SECURITIES ARE "RESTRICTED SECURITIES," AND MAY NOT BE OFFERED OR SOLD IN
THE UNITED STATES OR TO A U.S. PERSON (AS DEFINED IN REGULATION S) UNLESS THE
SECURITIES ARE REGISTERED UNDER THE ACT, OR PURSUANT TO REGULATION S, OR
PURSUANT TO OTHER AVAILABLE EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE
ACT. A HOLDER OF ANY OF THE SECURITIES MAY NOT ENGAGE IN HEDGING TRANSACTION
WITH REGARD TO SUCH SECURITIES UNLESS IN COMPLIANCE WITH THE ACT.
SECURITIES PURCHASE AGREEMENT
ss.1. Parties
1.1. This Agreement is made and entered into as of June 27, 2000 (the
"Effective Date"), at ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇, by and between ▇▇▇▇▇▇▇▇▇▇▇.▇▇▇,
Inc. and Thomson Kernaghan & Co. Ltd. as Agent, and the Purchasers executing
this Agreement.
ss.2. Definition and Accounting Terms
2.1. Definitions. As used in this Agreement:
(a) "Affiliate" means any Person (i) that directly or indirectly
controls, or is controlled by, or is under common control with another
Person or a subsidiary of such other Person; or (ii) that directly or
indirectly beneficially owns or holds ten percent (10%) or more of any
class of voting stock of another Person or a subsidiary of such other
Person; or (iii) ten percent (10%) or more of the voting stock of which is
directly or indirectly beneficially owned or held by another Person or a
subsidiary of such other Person.
(b) "Agent" means Thomson Kernaghan & Col. Ltd., a corporation
incorporated under the laws of Ontario, for itself and as agent for the
Purchasers.
(c) "Agent's Fee" shall have the meaning ascribed in paragraph
10.12 of this Agreement.
(d) "Agent's Principal Office" means the Agent's principal office
at ▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇.
(e) "Agent's Warrants" shall have the meaning ascribed in
paragraph 6.2(a) of this Agreement.
(f) "Agreement" means this Securities Purchase Agreement, as
amended, supplemented or modified from time to time.
(g) "Capital Lease" means all leases that have been or should be
capitalized on the books of the lessee in accordance with GAAP.
(h) "Certificate of Designations" shall mean the Company's
certificate of designations of the rights and preferences of the Series A
Convertible Preferred Stock, in the form set forth in Exhibit A-1 to this
Agreement.
(i) "Closing Bid Price" shall mean the closing bid price of the
Common Stock on a Trading Day reported by Bloomburg L.P.
(j) "Closing Date" means, August __, 2000, with respect to the
initial sale of Preferred Shares pursuant to this Agreement.
(k) "Code" means the U.S. Internal Revenue Code of 1986, as
amended from time to time, and the regulations and published
interpretations thereof.
(l) "Collateral" means all property that is subject to the Lien
granted by the Security Agreement;
(m) "Collateral Shares" shall have the meaning ascribed in
paragraph 3.6 of this Agreement.
(n) "Common Stock" means the Company's common stock, U.S.$.001 par
value.
(o) "Commonly Controlled Entity" means an entity, whether or not
incorporated, that is under common control with the Company, within the
meaning of Section 414(b) or 414(c) of the Code.
(p) "Company" means ▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc., a corporation
incorporated under the laws of the U.S. state of Nevada.
(q) "Control" (whether or not capitalized) means the possession,
directly or indirectly, of the power to direct or cause the direction of
the management and policies of a Person, whether through the ownership of
voting securities, by contract, or otherwise.
(r) "Conversion Shares" means the shares of Common Stock into
which the Preferred Shares are convertible.
(s) "Debt" means (i) indebtedness or liability for borrowed money;
(ii) obligations evidenced by bonds, Preferred Shares, or other similar
instruments; (iii) obligations for the deferred purchase price of property
or services (including trade obligations); (iv) obligations under Capital
Leases; (v) obligations under letters of credit; (vi) obligations under
acceptance facilities; (vii) all guaranties, endorsements (other than for
collection or deposit in the ordinary course of business), and other
contingent obligations to purchase, to provide funds for payment, to supply
funds to invest in any Person or entity, or otherwise to assure a creditor
against loss; and (viii) all obligations secured by any Liens, whether or
not the obligations have been assumed.
(t) "Default" means any of the events specified in paragraph 9.1,
whether or not any requirement for the giving of notice, the lapse of time,
or both, or any other condition has been satisfied.
(u) "▇▇▇▇▇" means the computer system maintained by the SEC for
the receipt, acceptance, review and dissemination of documents submitted to
it in electronic format.
(v) "Effective Date" means the date set forth in paragraph 1.1 of
this Agreement.
(x) "Escrow Agreement" shall have the meaning ascribed in
paragraph 6.2(d) of this Agreement.
(y) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations and published
interpretations thereof.
(z) "Event of Default" means any of the events specified in
Section 9.01, provided that any requirement for the giving of notice, the
lapse of time, or both, or any other condition, has been satisfied.
(aa) "Exchange Act" means the United States of America.
Securities Exchange Act of 1934, as amended.
(bb) "GAAP" means generally accepted accounting principles in
the U.S.
(cc) "Holder" mean the holder of a Preferred Share.
(dd) "Purchasers' Warrants" shall have the meaning ascribed in
paragraph 6.2(a) of this Agreement.
(ee) "Lien" means any mortgage, deed of trust, pledge, security
interest, hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or other), or preference, priority, or other security agreement
or preferential arrangement, charge or encumbrance of any kind or nature
whatsoever (including without limitation any conditional sale or other
title retention agreement, any financing lease having substantially the
same economic effect as any of the foregoing, and the filing of any
financing statement, charge or similar notice under the law of any
jurisdiction to evidence any of the foregoing.
(ff) Multiemployer Plan" means a Plan described in
Section 4001(a)(3) of ERISA.
(ee) "PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
(ff) "Person" means an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association,
joint venture, governmental authority, or other entity of whatever nature.
(gg) "Plan" means any pension plan which is covered by Title IV of
ERISA and in respect of which the Company or a Commonly Controlled Entity
is an "employer" as defined in Section 3(5) of ERISA.
(hh) "Preferred Shares" means the Company's Series A Convertible
Preferred Stock described in the Certificate of Designations.
(ii) "Prohibited Transaction" means any transaction set forth in
Section 406 of ERISA or Section 4975 of the Code.
(jj) "Purchase Price" means, with respect to the Preferred Shares,
an amount equal to the "Liquidation Preference" ($5,000) of each share set
forth in the Certificate of Designations.
(kk) "Purchaser" means each Person that executes a signature page
of this Agreement as a Purchaser.
(ll) "Registration Rights Agreement" shall have the meaning
ascribed in paragraph 6.2(c) of this Agreement.
(mm) "Reportable Event" means any of the events set forth in
Section 4043 of ERISA.
(nn) "SEC" means the U.S. Securities and Exchange Commission.
(oo) "SEC Documents" means all forms, statements, reports and
other documents and information that the Company has filed and in the
future may file with the SEC.
(pp) "Securities Act" means the U.S. Securities Act of 1933, as
amended.
(qq) "Security Agreement" means a Security Agreement in
substantially the form of Exhibit B to be delivered by the Company under
the terms of this Agreement.
(rr) "Subsidiary" means a corporation of which shares of stock
having ordinary voting power (other than stock having such power only by
reason of the happening of a contingency) to elect a majority of the board
of directors or other managers of that corporation are at the time owned,
or the management of which is otherwise controlled, directly or indirectly
through one or more intermediaries, or both, by the Company.
(ss) "Termination Date" means the date on which the Company files
a registration statement as described in the Registration Rights Agreement.
(tt) "Trading Day" means any day, other than a Saturday or Sunday,
on which the New York Stock Exchange is open for business.
(uu) "Transaction Documents" means this Agreement, the Preferred
Shares, the Purchasers' Warrants, the Agent's Warrant, and the Registration
Rights Agreement.
(vv) "U.S." means the United States of America.
(ww) "Warrant Shares" means the shares of Common Stock issuable
upon exercise of the Warrants.
(xx) "Warrants" means the Purchasers' Warrants and the Agent's
Warrants.
2.2. Singular and Plural Terms. As used in this Agreement, terms
defined in the singular have the same meaning when used in the plural, and terms
defined in the plural have the same meaning when used in the singular.
2.3. Accounting Terms. All accounting terms not specifically defined in
this Agreement shall be construed in accordance with GAAP. All financial data
submitted pursuant to this Agreement shall be prepared in accordance with GAAP
except that, unless audited financial statements are specifically required by
this Agreement, such financial date need not be audited.
2.4. Currency. All currency described or otherwise referred to
in the Transaction Documents is the currency of the United States of America.
ss.3. Purchase and Sale of Securities
3.1. Preferred Shares Purchase. The Company agrees to sell to each
Purchaser, and each Purchaser severally (and not jointly) agrees on the terms
and conditions set forth in this Agreement to purchase from the Company the
number of Preferred Shares set forth after such Purchaser's name on the
signature pages to this Agreement. The Company agrees to sell up to five hundred
(500) Preferred Shares during the period from the date of this Agreement up to
but not including the Termination Date. The Company is not obligated to sell any
Preferred Shares unless not less than two hundred (200) Preferred Shares are
sold. The Purchase Price for each Preferred Share shall be an amount equal to
its Liquidation Preference ($5,000) as set forth in the Certificate of
Designations.
(a) Initial Purchase. On the date that the Company executes this
Agreement (the "Initial Closing Date"), each Purchaser shall purchase the number
of Preferred Shares set forth after its signature on the signature page of this
Agreement. The Company hereby acknowledges that on the Effective Date the Agent
advanced and delivered to the Company the sum of U.S.$500,000 as an advance on
the purchase price of 200 Preferred Shares.
(b) Subsequent Purchases. The Purchasers may, in their sole and
absolute discretion, up to but not including the Termination Date, purchase
additional Preferred Shares, but the Purchasers shall be under no obligation to
do so. The Company shall give the Agent at least ten (10) Trading Days' notice
of any request for the sale of additional Preferred Shares, specifying the date
and amount thereof. If the Company does not receive written notice from the
Agent within five (5) Trading Days that the Purchasers have agreed to purchase
additional Preferred Shares, then the Purchasers shall be deemed to have denied
that request.
3.2. Notice and Manner of Purchase. The Company shall give the Agent
written wiring instructions for the disbursement of proceeds from the sale of
the Preferred Shares, specifying the name, address and ABA routing number for
the Bank, and the Company's account number to be credited with the Purchase of
Preferred Shares proceeds.
3.3. Dividends. The Company shall pay dividends on the outstanding
Preferred Shares at the rate and times, and in the manner, specified in the
Certificate of Designations.
3.4. The Preferred Shares. The certificates for the Preferred Shares
shall be in substantially the form of Exhibit A-2 attached to this Agreement
with blanks appropriately filled in, registered in either the Agent's name, as
nominee, or in the name of the Purchaser, as the Agent shall specify. The
Preferred Shares evidencing the Initial Purchase of Preferred Shares are
referred to as the "Initial Preferred Shares." The Preferred Shares shall be
convertible into Common Stock on the terms set forth in the Certificate of
Designations.
3.5. Redemption. The Company shallnot have the ▇▇▇▇▇▇▇ power to
redeem the Preferred Shares,either in whole or in part.
3.6. Collateral. As security for the Company's prompt and full
performance of its obligations under this Agreement and the other Transaction
Documents, the Company shall issue, assign, pledge and deliver to the Agent, for
the benefit of the Agent and the Purchasers, Two Hundred Twenty Five Thousand
shares of Common Stock ("Collateral Shares") for each 200 Preferred Shares or
portion thereof issued and outstanding pursuant to this Agreement.
3.7. Method of Payment. The Company shall make each payment required by
the terms of this Agreement or the Certificate of Designations at the Agent's
Principal Office not later than 2:00 P.M., Toronto time on the date when due in
lawful U.S. currency and in immediately available funds. Whenever any payment is
required to be made under this Agreement or under the Preferred Shares shall be
stated to be due on a day other than a Trading Day, such payment shall be made
on the next succeeding Trading Day, and such extension of time shall in such
case be included in the computation of dividends due on the Preferred Shares.
3.8. Use of Proceeds. The Company shall use the proceeds of the sale of
the Preferred Shares solely for the following purposes: (a) to pay the Agent's
Fee; (b) to pay the fees and expenses of the Agent's counsel and Company counsel
in the negotiation and preparation of this Agreement; and (c) for the Company's
working capital purposes. The Company hereby authorizes the Agent to withhold
the amounts necessary to pay the Agent's Fee and such fees and expenses of its
counsel from the proceeds of the sale of the Preferred Shares.
ss.4. Conditions Precedent.
4.1. Condition Precedent to Initial Purchase. The obligation of the
Purchasers to make the initial purchase of Preferred Shares is subject to the
condition precedent that the Agent shall have received on or before the Closing
Day of the purchase each of the following, in form and substance satisfactory to
the Agent and its counsel:
(a) Preferred Shares. Certificates for the Preferred Shares
being purchased, duly executed by the Company;
(b) Security Agreement. The Security Agreement and Collateral
Shares.
(b) Evidence of all corporate action by the Company. Certified (as
of the Closing Date) copies of all corporate action taken by the Company,
including resolutions of its Board of Directors, authorizing the execution,
delivery, and performance of the Transaction Documents and each other
document to be delivered pursuant to this Agreement;
(d) Incumbency and signature certificate of the Company. A
certificate (dated as of the Closing Date) of the Secretary of the Company
certifying the names and true signatures of the officers of the Company
authorized to sign the Transaction Documents and any other documents to be
delivered by the Company under this Agreement;
(e) Purchasers' Warrants. A Purchasers' Warrant for each
Purchaser;
(f) Agent's Warrant. The Agent's Warrant;
(g) Registration Rights Agreement. The Registration Rights
Agreement; and
(i) Opinion of counsel for the Company. A favorable opinion of
counsel for the Company, in substantially the form of Exhibit C hereto, and
as to such other matters as the Agent may reasonably request.
4.2. Conditions Precedent to the Purchase of all Preferred Shares. Any
obligation of the Purchasers to purchase Preferred Shares (including the initial
purchase) shall be subject to the further conditions precedent that on the date
of each such Purchase of Preferred Shares:
(a) The following statements shall be true and the Agent shall
have received a certificate signed by a duly authorized officer of the
Company, dated the Closing Date of such purchase, stating that (i) the
representations and warranties contained in Section 5.1 of this Agreement,
and in Section 4.01 of the Security Agreement are correct on and as of the
Closing Date of such purchase as though made on and as of such date; and
(ii) no Default or Event of Default has occurred and is continuing, or
would result from such purchase;
(b) The Agent shall have received a detailed statement specifying
how the Company will use the proceeds from the purchase, reasonably
satisfactory to the Agent, certified by the Company's chief financial
officer and chief executive officer;
(c) The Agent shall have received Preferred Shares and Purchasers'
Warrants with respect to the Purchase of Preferred Shares and
(d) The Agent shall have received such other approvals, opinions,
or documents as the Agent may reasonably request.
ss.5. Representations and Warranties.
5.1. Company's Representations and Warranties. The Company represents
and warrants to the Purchasers that:
(a) Incorporation, Good Standing, and Due Qualification. Except as
set forth in Schedule 5.1(a), the Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation; has the corporate power and authority to
own its assets and to transact the business in which it is now engaged and
proposes to be engaged in; and is duly qualified as a foreign corporation
and in good standing under the laws of each other jurisdiction in which
such qualification is required. The Company has no Subsidiaries.
(b) Capitalization. The capital stock of the Company consists of
50,000,000 shares of common stock and 5,000,000 shares of preferred stock.
No shares of prefered stock have been issued prior to the transactions
contemplated by this Agreement. Schedule 5.1(b) sets forth the current
capitalization of the Company.
(c) Corporate Power and Authority. The execution, delivery and
performance by the Company of the Transaction Documents have been duly
authorized by all necessary corporate action and do not and will not (i)
require any consent or approval of its shareholders; (ii) contravene its
charter or bylaws; (iii) violate any provision of any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or
award presently in effect having applicability to the Company or any
Subsidiary; (iv) result in a breach of or constitute a default under any
indenture or purchase of Preferred Shares or credit agreement or any other
agreement, lease or instrument to which the Company or any Subsidiary is a
party or by which it or its properties may be bound or affected; (v) except
as provided in this Agreement, result in or require the creation or
imposition of any Lien upon or with respect to any to the properties now
owned or hereafter acquired by the Company or any Subsidiary; and (vi)
cause the Company to be in default under any such law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award, or any
such indenture, agreement, lease or instrument to which it is subject.
(d) Legally Enforceable Agreement. This Agreement is, and each of
the other Transaction Documents when delivered under this Agreement will
be, legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms, except to
the extent that such enforcement may be limited by applicable bankruptcy,
insolvency and other similar laws affecting creditors' rights generally and
other equitable remedies.
(e) Financial Statements. Each financial statement of the Company
contained in the SEC Documents filed as of the Effective Date is complete
and correct, and fairly presents the financial condition of the Company and
its Subsidiaries as at the dates set forth therein and the results of the
operations of the Company and its Subsidiaries for the periods covered by
such statements, all in accordance with GAAP consistently applied (subject
to year-end adjustments in the case of the interim financial statements).
Since July 31, 2000, there has been no material adverse change in the
condition (financial or otherwise), business, or operations of the Company
or any Subsidiary. There are no liabilities of the Company or any
Subsidiary, fixed or contingent, which are material but are not reflected
in the SEC Documents publicly available on ▇▇▇▇▇, other than liabilities
arising in the ordinary course of business since July 31, 2000.
(f) Full Disclosure. No SEC Document filed as of the Effective
Date, and no information, exhibit or report furnished by the Company to the
Agent or any Purchaser in connection with the negotiation of this Agreement
(including any schedule or exhibit attached hereto) contains any material
misstatement of fact or omitted to state a material fact or any fact
necessary to make the statement contained therein not materially
misleading.
(g) Labor Disputes and Acts of God. Neither the business nor the
properties of the Company or any Subsidiary are affected by any fire,
explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or of the public enemy, or
other casualty (whether or not covered by insurance) materially and
adversely affecting such business properties or the operation of the
Company or such Subsidiary.
(h) Other Agreements. Except as set forth in the SEC Documents
publicly available on ▇▇▇▇▇ or on Schedule 5.1 (h), neither the Company nor
any Subsidiary is a party to any indenture, purchase of Preferred Shares,
or credit agreement, or to any lease or other agreement or instrument, or
subject to any charter or corporate restriction which could have a material
adverse effect on the business, properties, assets, operations, or
conditions, financial or otherwise, of the Company or such Subsidiary, or
on the Company's ability to perform its obligations under the Transaction
Documents. Neither the Company nor any Subsidiary is in material default in
any respect in the performance, observance, or fulfillment of any of the
obligations, covenants, or conditions contained in any agreement or
instrument material to its business to which it is a party.
(i) Litigation. Except as set forth in the SEC Documents publicly
available on ▇▇▇▇▇ or on Schedule 5.1(i), there is no pending or threatened
action or proceeding against or affecting the Company or any Subsidiary
before any court, governmental agency, or arbitrator which may, in any one
case or in the aggregate, materially adversely affect the financial
condition, operations, properties, or business of the Company or such
Subsidiary, or the ability of the Company to perform its obligations under
the Transaction Documents.
(j) No Defaults on Outstanding Judgments or Orders. Each of the
Company and its Subsidiaries has satisfied all judgments (if any), and is
not in default with respect to any judgment, writ, injunction, decree,
rule, or regulation of any court, arbitrator, or federal, state, municipal,
or other governmental authority, commission, board, bureau, agency or
instrumentality, domestic or foreign.
(k) Ownership and Liens. Except as set forth in the SEC Documents
or Schedule 5.1(k), each of the Company and its Subsidiaries has title to,
or valid leasehold interests in, all of its properties and assets, real and
personal, including without limitation, all patents, trademarks and other
intellectual property, and including the properties and assets and
leasehold interest reflected in the financial statements referred to in
paragraph 5.1(e) of this Agreement (other than any properties or assets
disposed of in the ordinary course of business), and none of the properties
and assets owned by the Company or any Subsidiary, and none of its
leasehold interests, is subject to any Lien, except such as may be
permitted pursuant to paragraph 7.1(a) of this Agreement.
(l) ERISA. Each of the Company and its Subsidiaries is in
compliance in all material respects with all applicable provisions of
ERISA. Neither a Reportable Event nor a Prohibited Transaction has occurred
and is continuing with respect to any Plan; no notice of intent to
terminate a Plan has been filed, nor has any Plan been terminated; no
circumstances exist which constitute grounds entitling the PBGC to
institute proceedings to terminate, or appoint a trustee to administer, a
Plan, nor has the PBGC instituted any such proceedings; neither the Company
nor any Commonly Controlled Entity has completely or partially withdrawn
from a Multiemployer Plan; the Company and each Commonly Controlled Entity
have met their minimum funding requirements under ERISA with respect to all
of their Plans, and the present value of all vested benefits under each
Plan does not exceed the fair market value of all Plan assets allocable to
such benefits, as determined on the most recent valuation date of the Plan
and in accordance with the provisions of ERISA; and neither the Company nor
the Parent nor any Commonly Controlled Entity has incurred any liability to
the PBGC under ERISA.
(m) Operation of Business. The Company and its Subsidiaries
possess all material licenses, permits, franchises, patents, copyrights,
trademarks, and trade names, or rights thereto, to conduct their respective
businesses substantially as now conducted and as presently proposed to be
conducted, and neither the Company nor any Subsidiary is in violation of
any valid rights of others with respect to any of the foregoing.
(n) Taxes. The Company and each Subsidiary have filed all tax
returns (federal, state, and local) required to be filed and have paid all
taxes, assessments, and governmental charges and levies thereon due and
payable as of the date hereof, including any interest and penalties.
(o) Debt. Schedule 5.1(o) is a complete and correct list of all
credit agreements, indentures, purchase agreements, guaranties, Capital
Leases, and other investments, agreements, and arrangements presently in
effect providing for or relating to extensions of credit (including
agreements and arrangements for the issuance of letters of credit or for
acceptance financing) in respect of which the Company is in any manner
directly or contingently obligated; and the maximum principal or face
amounts of the credit in question, which are outstanding and which can be
outstanding, are correctly stated, and all Liens of any nature given or
agreed to be given as security therefor are correctly described or
indicated in the SEC Documents or Schedule 5.1(o).
(p) Environment. The Company and it Subsidiaries have duly
complied with, and its businesses, operations, assets, equipment, property,
leaseholds, or other facilities are in compliance with, the provisions of
all federal, state, and local environmental, health, and safety laws, codes
and ordinances, and all rules and regulations promulgated thereunder.
Neither the Company nor any Subsidiary has received notice of, nor knows
of, or suspects facts which might constitute any violations of any federal,
state, or local environmental, health, or safety laws, codes or ordinances,
and any rules or regulations promulgated thereunder with respect to its
businesses, operations, assets, equipment, property, leaseholds, or other
facilities. Except in accordance with a valid governmental permit, license,
certificate, or approval listed in Schedule 5.1(p), there has been no
emission, spill, release, or discharge into or upon (1) the air; (2) soils;
or any improvements located thereon; (3) surface water or groundwater; or
(4) the sewer, septic system or waste treatment, storage or disposal system
servicing the premises of any toxic or hazardous substances or wastes at or
from the premises; and accordingly the premises of the Company and its
Subsidiaries are free of all such toxic or hazardous substances or wastes.
There has been no complaint, order, directive, claim, citation, or notice
by any governmental authority or any person or entity with respect to (1)
air emissions; (2) spills, releases or discharges to soils or improvements
located thereon, surface water, groundwater or the sewer, septic system or
waste treatment, storage or disposal systems servicing the premises; (3)
noise emissions; (4) solid or liquid waste disposal; (5) the use,
generation, storage, transportation, or disposal of toxic or hazardous
substances or waste; or (6) other environmental, health, or safety matters
affecting the Company or its business, operations, assets, equipment,
property, leaseholds, or other facilities. Neither the Company nor its
Subsidiaries have any indebtedness, obligation, or liability, absolute or
contingent, matured or not matured, with respect to the storage, treatment,
cleanup, or disposal of any solid wastes, hazardous wastes or other toxic
or hazardous substances (including without limitation any such
indebtedness, obligation, or liability with respect to any current
regulation, law, or statute regarding such storage, treatment, cleanup, or
disposal) which is not shown on Schedule 5.1(p).
(q) Registration and Listing of Common Stock. The Company is a
reporting company and has continuously been a reporting company since
August, 1986. The Common Stock is registered under the Exchange Act and
listed on the OTC Bulletin Board. Since June , 2000, the Company has
filed in an timely manner all SEC Documents required of it by the
ExchangeAct, the rules and regulations of the SEC, and the rules and
regulations of the OTC Bulletin Board.
(r) No U.S. Offering. The Company has not offered any of the
Preferred Shares, the Conversion Shares, the Warrants or the Warrant Shares
to a U.S. Person (as defined in SEC Rule 902(k)) or to a person in the
United States.
(s) Offshore Transaction. The negotiations for and the issuance of
the Preferred Shares and the Warrants to the Agent has been made in an
offshore transaction as defined in SEC Rule 902(h).
(t) No Directed Selling Efforts. The Company has not engaged in
any directed selling efforts, as defined in SEC Rule 902(c), with respect
to the Preferred Shares and the Warrants.
(u) Category 3 Securities. The Company has complied with all of
the conditions required of it under SEC Rules 903(a) and (b)(3) with
respect to the issuance of the Preferred Shares and Warrants.
(v) Exemption of Preferred Shares and Warrants from Registration.
The Company's issuance of the Preferred Shares and the Warrants is exempt
from the registration requirements of Section 5 of theSecurities Act
pursuant to the provisions of Section 4(2)of the Act and SEC Regulation S.
5.2. Purchasers' Representations and Warranties. Each Purchaser
severally represents and warrants to the Company, only with respect to itself
that:
(a) Accredited Investor. It is an accredited investor as that term
is defined in Rule 501(a)(3) of Regulation D of the SEC.
(b) Non-U. S. Persons. It is not a U.S. Person as defined in SEC
Rule 902(k).
(c) It has complied with all of the conditions required of it by
SEC Regulation S and SEC Rule 903(b)(3) to be complied with by it in
connection with the transactions contemplated by this Agreement.
5.3. Agent's Representations and Warranties. The Agent represents and
warrants to the Company that:
(a) It has not offered any Preferred Shares to any U.S. Person, or
to any Person that is not an accredited investor.
(b) It has complied with all of the conditions required of it by
SEC Regulation S and SEC Rules 903(a) and (b)(3) to be complied with by it
in connection with the transactions contemplated by this Agreement
ss.6. Affirmative Covenants.
6.1. Financial and Operational Covenants. So long as any of the
Preferred Shares shall remain unpaid or unconverted,and until all of the
Warrants have been fully exe the Company will:
(a) Maintenance of Existence. Preserve and maintain, and cause
each Subsidiary to preserve and maintain, its corporate existence and good
standing in the jurisdiction of its incorporation, and qualify and remain
qualified as a foreign corporation in each jurisdiction in which such
qualification is required.
(b) Maintenance of Records. Keep, and cause each Subsidiary to
keep, adequate records and books of account, in which complete entries will
be made in accordance with GAAP consistently applied, reflecting all
material financial transactions of the Company and each Subsidiary.
(c) Maintenance of Properties. Maintain, keep and preserve, and
cause each Subsidiary to maintain, keep and preserve, all of its properties
(tangible and intangible) necessary or useful in the proper conduct of its
business in good working order and condition, ordinary wear and tear
excepted.
(d) Conduct of Business. Continue, and cause each Subsidiary to
continue, to engage in an efficient and economical manner in a business of
the same general type as conducted by it on the date of this Agreement.
(e) Maintenance of Insurance. Maintain, and cause each Subsidiary
to maintain, insurance with financially sound and reputable insurance
companies or associations in such amounts and covering such risks as are
usually carried by companies engaged in the same or a similar business and
similarly situated, which insurance may provide for reasonable
deductibility from its coverage.
(f) Compliance With Laws. Comply, and cause each Subsidiary to
comply, with all applicable laws, codes, regulations, rules, ordinances and
orders, including without limitation paying before the same become
delinquent all taxes, assessments and governmental charges imposed upon it
or upon its property.
(g) Right of Inspection. At any reasonable time and from time to
time, permit the Agent or any Purchaser, or any of their agents or
representatives, to examine and make copies of and abstracts from the
records and books of account of, and visit the properties of, the Company,
and to discuss its affairs, finances and accounts with any of its officers,
directors and independent accountants.
(h) Reporting Requirements. Furnish to the Agent at the times
specified below, so long as the dissemination of such information to the
Agent at such times complies with the rules and regulations of the SEC then
in force, otherwise delivery will be made as soon as practicable after SEC
rules and regulations authorize such delivery:
(i) Quarterly Financial Statements. The Company's reports on
Form 10-Q or 10-QSB contemporaneously with their filing with the SEC.
(ii) Annual Financial Statements. The Company's annual reports
on Form 10-K or 10-KSB contemporaneously with their filing with the
SEC.
(iii) Management Letters. Promptly upon receipt thereof,
copies of any reports submitted to the Company or any Subsidiary by
independent accountants in connection with their examination of the
financial statements of the Company.
(iv) Certificate of No Default. Within twenty-five (25) days
after the end of each month a certificate of the Company's chief
financial officer certifying that to the best of his or her knowledge
no Default or Event of Default has occurred and is continuing or, if a
Default or Event of Default has occurred and is continuing, a statement
as to the nature thereof and the action that is proposed to be taken
with respect thereto.
(v) Notice of Litigation. Promptly after the commencement
thereof, notice of all actions, suits and proceedings before any court
or governmental department, commission, board, bureau, agency, or
instrumentality (domestic or foreign) or arbitrator, affecting the
Company, which, if determined adversely to the Company, could have a
material adverse effect on the financial condition, properties or
operations of the Company.
(vi) Notice of Defaults and Events of Default. As soon as
possible and in any event within ten (10) days after the occurrence of
each material Default or material Event of Default, a written notice
setting forth the details of such Default or Event of Default and the
action that is proposed to be taken by the Company with respect
thereto.
(vii) ERISA reports. As soon as possible, and in any event
within thirty (30) days after the Company knows or has reason to know
that any circumstances exist that constitute grounds entitling the PBGC
to institute proceedings to terminate a Plan subject to ERISA with
respect to the Company or any Commonly Controlled Entity, and promptly
but in any event within two (2) Trading Days of receipt by the Company
or any Commonly Controlled Entity of notice that the PBGC intends to
terminate a Plan or appoint a trustee to administer the same, and
promptly but in any event within five (5) Trading Days of the receipt
of notice concerning the imposition of withdrawal liability with
respect to the Company or any Commonly Controlled Entity, the Company
will deliver to the Agent a certificate of the chief financial officer
of the Company setting forth all relevant details and the action which
the Company proposes to take with respect thereto.
(vii) Reports to Other Creditors. Promptly after the
furnishing thereof, copies of any statement or report furnished by the
Company or any Subsidiary to any other party pursuant to the terms of
any indenture, purchase of Preferred Shares, credit or similar
agreement and not otherwise required to be furnished to the Agent
pursuant to any other clause of this Agreement.
(viii) Other Regulatory Reports and Filings. Promptly after
the sending or filing thereof, copies of all proxy statements,
financial statements and reports that the Company or any Subsidiary
sends to its shareholders, and copies of all regular, periodic and
special reports, and all registration statements that the Company files
with the securities regulatory authorities of any country, province or
state, or with any securities exchange.
(ix) General Information. Such other information respecting
the condition or operations, financial or otherwise, of the Company as
the Agent or any Purchaser may from time to time reasonably request.
(i) Environment, Health and Safety. Be and remain, and cause each
Subsidiary to be and remain, in compliance with the provisions of all
federal, state, and local environmental, health, and safety laws, codes and
ordinances, and all rules and regulations issued thereunder; notify the
Agent immediately of any notice of a hazardous discharge or environmental
complaint received from any governmental agency or any other party; notify
the Agent immediately of any hazardous discharge from or affecting its
premises; immediately contain and remove the same, in compliance with all
applicable laws; promptly pay any fine or penalty assessed in connection
therewith; permit the Agent to inspect the premises, to conduct tests
thereon, and to inspect all books, correspondence, and records pertaining
thereto; and at the Agent's request, and at the Company's expense, provide
a report of a qualified environmental engineer, satisfactory in scope,
form, and content to the Agent, and such other and further assurances
reasonably satisfactory to the Agent that the condition has been corrected.
(j) The Company's Reporting and Listing Status. The Company shall
be and remain a reporting company under the Exchange Act, and shall file in
a timely manner all SEC Documents required by the Exchange Act or SEC
regulations to be filed by a reporting company; and the Company shall cause
its Common Stock to continuously be quoted on the OTC Bulletin Board,
listed on a Nasdaq market, or national securities exchange. The Company
shall apply for listing on the Nasdaq Small Cap Market as soon as it meets
the published requirements for listing thereon.
6.2. Additional Covenants. The Company hereby further covenants and agrees
with the Agent that:
(a) Warrants. Contemporaneously with the execution of this
Agreement, the Company (i) shall issue and deliver to each Purchaser a
warrant in the form of Exhibit D hereto (each a "Purchasers' Warrant") to
purchase the number of shares of Common Stock determined by dividing thirty
percent (30%) of the principal amount of the Initial Preferred Shares
issued to that Purchaser by 130% of the Closing Bid Price on the Trading
Day immediately preceding the Closing Date (the "Warrant Exercise Price");
and (ii) shall issue and deliver to the Agent a warrant in the form of
Exhibit E hereto (the "Agent's Warrant") to purchase 10% of the number of
shares of Common Stock into which the Initial Preferred Shares would be
convertible if the Conversion Date were the Closing Date, at an exercise
price of $4.50 per share. Contemporaneously with the delivery of any
additional Preferred Shares under this Agreement, the Company shall (i)
issue and deliver to each Purchaser making a purchase of Preferred Shares,
an additional Purchasers' Warrant to purchase the number of shares of
Common Stock determined by dividing thirty percent (30%) of the principal
amount of the Preferred Share issued to that Purchaser by the Warrant
Exercise Price, and (ii) shall issue and deliver to the Agent an additional
Agent's Warrant to purchase 10% of the number of shares of Common Stock
into which those Preferred Shares would be convertible if the Conversion
Date were the date on which those Preferred Shares were being issued.
(b) Adequate Available Shares of Common Stock. The Company shall
at all times keep an adequate number of duly authorized shares of Common
Stock reserved and available for issuance upon the conversion of Preferred
Shares and the exercise of Warrants. If at any time the Company does not
have such an adequate number of shares of Common Stock reserved and
available for issuance, then the Company shall immediately call and within
30 days hold a special meeting of its shareholders for the sole purpose of
increasing the number of the Company's authorized shares of Common Stock.
The Company shall cause its directors, officers, and employees who are
holders of Common Stock to vote their shares in favor of such increase in
the Company's number of authorized shares of Common Stock.
(c) Registration of Common Stock Underlying Preferred Shares and
Warrants. Contemporaneously with the execution of this Agreement, the
Company shall execute and deliver to the Agent a registration rights
agreement in the form of Exhibit F hereto. (the "Registration Rights
Agreement"). The Company shall register the shares of Common Stock issuance
upon conversion of Preferred Stock and pursuant to the warrants in
accordance with the provisions of the Registration Rights Agreement.
6.3. The Purchasers' and Agent's Covenants. The Purchasers' and the
Agent severally agree (i) not to offer, sell or otherwise dispose of any
securities issued to them respectively, except in compliance with the provisions
of Regulation S, or pursuant to registration under the Securities Act, or
pursuant to an available exemption from such registration; and (ii) not to
engage in hedging transactions with regard to such securities unless in
compliance with the Securities Act.
ss.7. Negative Covenants.
7.1. So long as any of the Preferred Shares remains unpaid, or the
Agent shall be obligated to make Purchase of Preferred Shares under this
Agreement, the Company will not:
(a) Liens. Create, incur, assume, or suffer to exist, or permit
any Subsidiary to create, incur, assume, or suffer to exist, any Lien upon
or with respect to any of its properties, now owned or hereafter acquired,
except:
(1) Liens in favor of the Purchasers;
(2) Liens for taxes or assessments or other government charges
or levies if not yet due and payable or, if due and payable, if they
are being contested in good faith by appropriate proceedings and for
which appropriate reserves are maintained;
(3) Liens imposed by law, such as mechanics', materialmen's,
landlords', warehousemen's, and carriers' Liens, and other similar
Liens, securing obligations incurred in the ordinary course of business
which are not past due for more than thirty (30) days or which are
being contested in good faith by appropriate proceedings and for which
appropriate reserves have been established;
(4) Liens under workers' compensation, unemployment insurance,
Social Security, or similar legislation;
(5) Liens, deposits, or pledges to secure the performance of
bids, tenders, contracts (other than contracts for the payment of
money), leases (permitted under the terms of this Agreement), public or
statutory obligations, surety, stay, appeal, indemnity, performance, or
other similar bonds, or other similar obligations arising in the
ordinary course of business;
(6) Liens disclosed in the SEC Documents or on Schedule
5.1(o);
(7) Judgment and other similar Liens arising in connection
with court proceedings, provided the execution or other enforcement of
such Liens is effectively stayed and the claims secured thereby are
being actively contested in good faith and by appropriate proceedings;
(8) Easements, rights-of-way, restrictions, and other similar
encumbrances which, in the aggregate, do not materially interfere with
the occupation, use, and enjoyment by the Company or any Subsidiary of
the property or assets encumbered thereby in the normal course of its
business or materially impair the value of the property subject
thereto; and
(9) Liens securing obligations of a Subsidiary to the Company
or another Subsidiary
(b) Debt. Create, incur, assume, or suffer to exist, or permit any
Subsidiary to create, incur, assume, or suffer to exist, any Debt, except:
(1) Debt of the Company under this Agreement or with respect
to the Preferred Shares;
(2) Debt described in the SEC Documents or Schedule 5.1(o),
but no voluntary prepayments, renewals, extensions, refinancings, or
increases in the amounts thereof;
(3) Debt of the Company subordinated on terms satisfactory to
the Agent and consistent with to the Company's obligations under this
Agreement and the Preferred Shares;
(4) Debt of the Company to any Subsidiary or of any Subsidiary
to the Company or another Subsidiary; and
(5) Accounts payable to trade creditors for goods or services
which are not aged more than sixty (60) days from the billing date and
current operating liabilities (other than for borrowed money) which are
not more than ten (10) days past due, in each case incurred in the
ordinary course of business, as presently conducted, and paid within
the specified time, unless contested in good faith and by appropriate
proceedings.
(c) Mergers, Etc. Wind up, liquidate or dissolve itself,
reorganize, merge or consolidate with or into, or convey, sell, assign,
transfer, lease, or otherwise dispose of (whether in one transaction or in
a series of transactions) all or substantially all of its assets (whether
now owned or hereafter acquired) to any Person, or acquire all or
substantially all of the assets or the business of any Person, and the
Company shall not permit any Subsidiary to do so, except that (1) any
Subsidiary may merge into or transfer assets to the Company, and (2) any
Subsidiary may merge into or consolidate with or transfer assets to any
other Subsidiary.
(d) Leases. Create, incur, assume, or suffer to exist, or permit
any Subsidiary to create, incur, assume, or suffer to exist, any material
obligation as lessee for the rental or hire of any real or personal
property, except: (i) Capital Leases created pursuant to existing lease
financing agreements disclosed in the SEC Documents or on Schedule 5.1(o);
(ii) leases existing on the date of this Agreement and any extensions or
renewals thereof; (iii) leases between the Company and any Subsidiary or
between any Subsidiaries; and (iv) leases necessary to carry on the normal
business operations of the Company.
(e) Sale and Leaseback. Sell, transfer, or otherwise dispose of,
or permit any Subsidiary to sell, transfer, or otherwise dispose of, any
real or personal property to any Person and thereafter directly or
indirectly lease back the same or similar property.
(f) Dividends. Except with respect to the Preferred Stock declare
or pay any dividends; or purchase, redeem, retire, or otherwise acquire for
value any of its capital stock now or hereafter outstanding; or make any
distribution of assets to its stockholders as such whether in cash, assets,
or obligations of the Company; or allocate or otherwise set apart any sum
for the payment of any dividend or distribution on, or for the purchase,
redemption, or retirement of any shares of its capital stock; or make any
other distribution by reduction of capital or otherwise in respect of any
shares of its capital stock; or permit any of its Subsidiaries to do any of
the foregoing or to purchase or otherwise acquire for value any stock of
the Company or another Subsidiary.
(g) Sale of Assets. Sell, lease, assign, transfer, or otherwise
dispose of, or permit any Subsidiary to sell, lease, assign, transfer, or
otherwise dispose of, any of its now owned or hereafter acquired assets
(including, without limitation, shares of stock and indebtedness of
Subsidiaries, receivables, and leasehold interests), except: (1) inventory
disposed of in the ordinary course of business; (2) the sale or other
disposition of assets no longer used or useful in the conduct of its
business; and (3) that any Subsidiary may sell, lease, assign, or otherwise
transfer its assets to the Company.
(h) Investments. (i) Make, or permit any Subsidiary to make, any
purchase of Preferred Shares or advance to any Person, or (ii) purchase or
otherwise acquire, or permit any Subsidiary to purchase or otherwise
acquire, any capital stock, assets, obligations, or other securities of,
make any capital contribution to, or otherwise invest in or acquire any
interest in any Person, or participate as a partner or joint venturer with
any other Person, except: (1) direct obligations of the U.S. or any agency
thereof with maturities of one year or less from the date of acquisition;
(2) commercial paper of a domestic issuer rated at least "A_1" by Standard
& Poor's Corporation or "P_1" by ▇▇▇▇▇'▇ Investors Service, Inc.; (3)
certificates of deposit with maturities of one year or less from the date
of acquisition issued by any commercial bank having capital and surplus in
excess of One Hundred Million U.S. Dollars (US$100,000,000); and (4) stock,
obligations, or securities received in settlement of debts (created in the
ordinary course of business) owing to the Company or any Subsidiary.
(i) Guaranties, Etc. Assume, guaranty, endorse, or otherwise be or
become directly or contingently responsible or liable, or permit any
Subsidiary to assume, guaranty, endorse, or otherwise be or become directly
or contingently responsible or liable (including, but not limited to, an
agreement to purchase any obligation, stock, assets, goods, or services, or
to supply or advance any funds, assets, goods, or services, or an agreement
to maintain or cause such Person to maintain a minimum working capital or
net worth, or otherwise to assure the creditors of any Person against
loss), for obligations of any Person, except guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in
the ordinary course of business.
(j) Transactions With Affiliates. Enter into any transaction,
including, without limitation, the purchase, sale, or exchange of property
or the rendering of any service, with any Affiliate, or permit any
Subsidiary to enter into any transaction, including, without limitation,
the purchase, sale, or exchange of property or the rendering of any
service, with any Affiliate, except in the ordinary course of and pursuant
to the reasonable requirements of the Company's or such Subsidiary's
business and upon fair and reasonable terms no less favorable to the
Company or such Subsidiary than would be obtained in a comparable arm's
length transaction with a Person who is not an Affiliate.
(k) Capital Expenditures. Purchase or otherwise acquire, or permit
any Subsidiary to purchase or otherwise acquire, any material capital
assets, without the Agent's prior written consent.
(l) Issue Securities. Issue, or permit any Subsidiary to issue,
any common stock or other equity securities, or any other stock, option,
warrant, right or other instrument that is convertible into or exercisable
or exchangeable for common stock or other equity securities, except for (i)
securities issued pursuant to, or as contemplated by, this Agreement, (ii)
securities of a Subsidiary that are issued to the Company; and (iii)
securities sold and options granted to directors, officers and employees of
the Company pursuant to bona fide employee benefit plans; provided,
however, that the Company may issue such securities with the prior written
consent of the Purchasers, which consent the Purchasers agree not to
unreasonably withhold.
ss.9. Events of Default
9.1. Events of Default. If any of the following events shall occur:
(a) The Company should fail to pay any sums due the Agent or any
Purchaser under this Agreement or any other Transaction Document by or
within 10 days after the date that it is due and payable;
(b) Any representation or warranty made or deemed made by the
Company in this Agreement or any other Transaction Document, or which is
contained in any certificate, document, opinion, or financial or other
statement furnished at any time under or in connection with any Transaction
Document, shall prove to have been incorrect, incomplete, or misleading in
any material respect on or as of the date made or deemed made;
(c) The Company shall fail to perform or observe any term,
covenant, or agreement contained in this Agreement or any other Transaction
Document to be performed or observed by it ;
(d) The Company or any Subsidiary shall (i) fail to pay any
indebtedness for borrowed money) of the Company or such Subsidiary, as the
case may be, or any interest or premium thereon, when due (whether by
scheduled maturity, required prepayment, acceleration, demand, or
otherwise), or (ii) fail to perform or observe any material term, covenant,
or condition on its part to be performed or observed under any agreement or
instrument relating to any such indebtedness, when required to be performed
or observed, if the effect of such failure to perform or observe is to
accelerate, or to permit the acceleration of, after the giving of notice or
passage of time, or both, the maturity of such indebtedness, whether or not
such failure to perform or observe shall be waived by the holder of such
indebtedness; or any such indebtedness shall be declared to be due and
payable, or required to be prepaid (other than by a regularly scheduled
required prepayment), prior to the stated maturity thereof;
(e) The Company or any Subsidiary (i) shall generally not pay, or
shall be unable to pay, or shall admit in writing its inability to pay its
debts as such debts become due; or (ii) shall make an assignment for the
benefit of creditors, or petition or apply to any tribunal for the
appointment of a custodian, receiver, or trustee for it or a substantial
part of its assets; or (iii) shall commence any proceeding under any
bankruptcy, reorganization, arrangement, readjustment of debt, dissolution,
or liquidation law or statute of any jurisdiction, whether now or hereafter
in effect; or (iv) shall have had any such petition or application filed or
any such proceeding commenced against it in which an order for relief is
entered or an adjudication or appointment is made, and which remains
undismissed for a period of thirty (30) days or more; or (v) shall take any
corporate action indicating its consent to, approval of, or acquiescence in
any such petition, application, proceeding, or order for relief or the
appointment of a custodian, receiver, or trustee for all or any substantial
part of its properties; or (vi) shall suffer any such custodianship,
receivership, or trusteeship to continue undischarged for a period of
thirty (30) days or more;
(f) One or more judgments, decrees, or orders for the payment of
money shall be rendered against the Company or any Subsidiary and such
judgments, decrees, or orders shall continue unsatisfied and in effect for
a period of thirty (30) consecutive days without being vacated, discharged,
satisfied, appealed or stayed;
(g) The Security Agreement shall at any time after its execution
and delivery and for any reason cease (i) to create a valid and perfected
security interest in and to the property purported to be subject to such
Security Agreement, and in the priority disclosed on Schedule 5.1(o); or
(ii) to be in full force and effect or shall be declared null and void, or
the validity or enforceability thereof shall be contested by the Company,
or the Company shall deny it has any further liability or obligation under
the Security Agreement, or the Company shall fail to perform any of its
material obligations under the Security Agreement;
(h) Any of the following events shall occur or exist with respect
to the Company or any Commonly Controlled Entity under ERISA: any
Reportable Event shall occur; complete or partial withdrawal from any
Multiemployer Plan shall take place; any Prohibited Transaction shall
occur; a notice of intent to terminate a Plan shall be filed, or a Plan
shall be terminated; or circumstances shall exist which constitute grounds
entitling the PBGC to institute proceedings to terminate a Plan, or the
PBGC shall institute such proceedings; and in each case above, such event
or condition, together with all other events or conditions, if any, could
subject the Company to any tax, penalty, or other liability which in the
aggregate may exceed Ten Thousand Dollars ($10,000); or
(i) If the Agent receives its first notice of a hazardous
discharge or an environmental complaint regarding the Company or a
Subsidiary from a source other than the Company, and the Agent does not
receive notice (which may be given in oral form, provided same is followed
with all due dispatch by written notice given by Certified Mail, Return
Receipt Requested) of such hazardous discharge or environmental complaint
from the Company within twenty-four (24) hours of the time the Agent first
receives said notice from a source other than the Company; or if any
federal, state, or local agency asserts or creates a Lien upon any or all
of the assets, equipment, property, leaseholds, or other facilities of the
Company or a Subsidiary by reason of the occurrence of a hazardous
discharge or an environmental complaint; or if any federal, state, or local
agency asserts a claim against the Company, a Subsidiary, or its respective
assets, equipment, property, leaseholds, or other facilities for damages or
cleanup costs relating to a hazardous discharge or an environmental
complaint; provided, however, that such claim shall not constitute a
default if, within five (5) Trading Days of the occurrence giving rise to
the claim, (i) the Company can prove to the Agent's satisfaction that the
Company has commenced and is diligently pursuing either: (a) a cure or
correction of the event which constitutes the basis for the claim, and
continues diligently to pursue such cure or correction to completion or (b)
proceedings for an injunction, a restraining order, or other appropriate
emergent relief preventing such agency or agencies from asserting such
claim, which relief is granted within ten (10) Trading Days of the
occurrence giving rise to the claim and the injunction, order, or emergent
relief is not thereafter resolved or reversed on appeal; and (ii) in either
of the foregoing events, the Company has posted a bond, letter of credit,
or other security satisfactory in form, substance, and amount to both the
Agent and the agency or entity asserting the claim to secure the proper and
complete cure or correction of the event which constitutes the basis for
the claim;
(j) A change of Control of the Company or any Subsidiary occurs,
including without limitation any Person shall acquire securities
representing 25% or more of the voting securities of the Company;
then, and in any such event, the Agent may, by notice to the Company, (i)
declare it obligations and those of the Purchasers under this Agreement to be
terminated, whereupon the same shall forthwith terminate, and (ii) declare any
and all amounts payable under this Agreement and any Transaction Document to be
forthwith due and payable, whereupon all such amounts shall become and be
forthwith due and payable, without presentment, demand, protest, or further
notice of any kind, all of which are hereby expressly waived by the Company.
9.2. Agent's Right to Setoff. Upon the occurrence and during the
continuance of any Event of Default, the Agent is hereby authorized at any time
and from time to time, without notice to the Company (any such notice being
expressly waived by the Company), to set off and apply any and all funds,
deposits and accounts at any time held and other indebtedness at any time owing
by the Agent to or for the credit or the account of the Company against any and
all of the obligations of the Company now or hereafter existing under this
Agreement or any other Transaction Document, irrespective of whether or not the
Agent shall have made any demand under this Agreement or such other Transaction
Document and although such obligations may be unmatured. The Agent agrees
promptly to notify the Company after any such setoff and application, provided
that the failure to give such notice shall not affect the validity of such
setoff and application. The rights of the Agent under this Section 9.2 are in
addition to other rights and remedies (including, without limitation, other
rights of setoff) that the Agent may have.
ss.10. Miscellaneous.
10.1. Amendments, Etc. No amendment, modification, termination, or
waiver of any provision of any Transaction Document to which the Company is a
party, nor consent to any departure by the Company from any Transaction Document
to which it is a party, shall in any event be effective unless the same shall be
in writing and signed by the Agent, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
10.2. Notices, Etc. All notices given under this Agreement and under
the other Transaction Documents shall be in writing, addressed to the parties as
set forth below, or to such other address as a party may specify by notice given
in accordance with this paragraph, and shall be effective on the earliest of (i)
the date received, or (ii) if given by facsimile transmittal on the date given
if transmitted before 5:00 p.m. the recipient's time, otherwise it is effective
the next day, or (iii) on the second Trading Day after delivery to a major
international air delivery or air courier service (such as Federal Express or
Network Couriers):
If to the Agent:
Thomson Kernaghan & Co. Ltd.
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. V.P.
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company:
▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc.
2708 Alternate ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇. ▇▇▇▇▇▇, President
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
If to the Purchasers
c/o Thomson Kernaghan & Co. Ltd.
as Agent
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▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇. V.P.
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
With a copy (that does not constitute
notice) to:
Johnson, Blakely, Pope, Bokor, ▇▇▇▇▇▇ & ▇▇▇▇▇, P.A.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
In either case, with a copy (that does not
constitute notice) to:
▇▇▇▇ ▇. ▇▇▇▇
Attorney at Law
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
10.3. No Waiver. No failure or delay on the part of the Agent or any
Purchaser in exercising any right, power, or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any such right,
power, or remedy preclude any other or further exercise thereof or the exercise
of any other right, power, or remedy hereunder. The rights and remedies provided
herein are cumulative, and are not exclusive of any other rights, powers,
privileges, or remedies, now or hereafter existing, at law or in equity or
otherwise.
10.4. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Company, the Agent, the Purchasers and their
respective successors and assigns, except that the Company may not assign or
transfer any of its rights under any Transaction Document to which the Company
is a party without the prior written consent of the Agent and the Purchasers.
10.5 Costs, Expenses, and Taxes. The Company agrees to pay on demand
all costs and expenses incurred by the Agent and the Purchasers in connection
with the preparation, execution, delivery, filing, and administration of the
Transaction Documents, and of any amendment, modification, or supplement to the
Transaction Documents, including, without limitation, the fees and out-of-pocket
expenses of counsel for the Agent and the Purchasers incurred in connection with
advising the Agent or the Purchasers as to theirs rights and responsibilities
hereunder. The Company also agrees to pay all such costs and expenses, including
court costs, incurred in connection with construction or enforcement of the
Transaction Documents, or any amendment, modification, or supplement thereto,
whether by negotiation, legal proceedings, or otherwise. In addition, the
Company shall pay any and all stamp and other taxes and fees payable or
determined to be payable in connection with the execution, delivery, filing, and
recording of any of the Transaction Documents and the other documents to be
delivered under any such Transaction Documents, and agree to hold the Agent
harmless from and against any and all liabilities with respect to or resulting
from any delay in paying or omission to pay such taxes and fees.
This provision shall survive termination of this Agreement.
10.6. Integration. This Agreement and the Transaction Documents contain
the entire agreement between the parties relating to the subject matter hereof
and supersede all oral statements and prior writings with respect thereto.
10.7. Indemnity. The Company shall defend, protect, indemnify, and hold
harmless the Agent and each Purchaser, and all of their respective officers,
directors, employees, and agents (including, without limitation, those retained
in connection with the transactions contemplated by this Agreement)
(collectively, the "Indemnitees") from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities, and
damages, and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements (the
"Indemnified Liabilities"), incurred by the Indemnitees or any of them as a
result of, or arising out of, or relating to (a) any misrepresentation or breach
of any representation or warranty made by the Company in this Agreement or any
other Transaction Document, or any other certificate, instrument, or document
contemplated hereby or thereby; or (b) any breach of any covenant, agreement, or
obligation of the Company contained in this Agreement or any other Transaction
Document; or (c) the activities of the Company or any Subsidiary, each of their
respective predecessors in interest or third parties with whom they or any of
them have or had a contractual relationship, or arising directly or indirectly
from the violation of any environmental protection, health, or safety law,
whether such claims are asserted by any governmental agency or any other person;
or (d) any cause of action, suit, or claim brought or made against such
Indemnitee and arising out of or resulting from the execution, delivery,
performance, or enforcement of this Agreement or any Transaction Document, or
any other instrument, document, or agreement executed pursuant hereto or thereto
by any of the Indemnities, any transaction financed or to be financed in whole
or in part, directly or indirectly, with the proceeds of the Purchase of
Preferred Shares or from the exercise of the Warrants, or the status of the
Agent or any Purchaser or holder of any of the Preferred Shares, Warrants,
Conversion Shares or Warrant Shares, or as a stockholder in the Company. To the
extent that the foregoing undertaking by the Company may be unenforceable for
any reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities that is permissible under
applicable law. This indemnity shall survive termination of this Agreement.
10.8. Governing Law. This Agreement and the Preferred Share shall be
governed by, and construed in accordance with, the laws of the Province of
Ontario, Canada; provided, however, if any provision of this Agreement is
unenforceable under Ontario law, but is enforceable under the laws of the U.S.
State of Florida, then Florida law shall govern the construction and enforcement
of that provision.
10.9. Severability of Provisions. Any provision of any Transaction
Document which is prohibited or unenforceable in any jurisdiction (after
applying the provisions of paragraph 10.8 of this Agreement to that provision)
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions of such
Transaction Document or affecting the validity or enforceability of such
provision in any other jurisdiction.
10.10 Headings. Section and paragraph headings in the Transaction
Documents are included for the convenience of reference only and shall not
constitute a part of the applicable Transaction Documents for any other purpose.
10.11. Dispute Resolution. The parties agree that the courts of
the Province of Ontario, Canada, shall have jurisdiction and venue for the
adjudication of any civil action between or among any of them arising out of
relating to this Agreement or any other Transaction Document. The parties hereby
irrevocably consent to such jurisdiction and venue, and hereby irrevocably waive
any claim of forum non conveniens or right to change venue.
10.12. Agent's Fee. In addition to the Agent's Warrant, the Company
shall pay Thomson Kernaghan & Co. Limited a fee for its services as Agent (the
"Agent's Fee") in an amount equal to ten percent (10%) of the aggregate
principal amount of all Purchase of Preferred Shares, payable pro rata upon the
disbursement of each Purchase of Preferred Shares.
[Signature pages follow]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the Effective
Date.
The Agent:
Thomson Kernaghan & Co. Ltd.
By ________________________________
Name ______________________________
Title _______________________________
Date signed _________________________
The Company:
▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
By ________________________________
Name ______________________________
Title _______________________________
Date signed _________________________
The Purchasers:
By ________________________________
Name ______________________________
Title _______________________________
Date signed _________________________
By ________________________________
Name ______________________________
Title _______________________________
Date signed _________________________
EXHIBIT A-1
CERTIFICATE OF DESIGNATIONS
EXHIBIT A-2
FORM OF SERIES A PREFERRED SHARE CERTIFICATE
EXHIBIT B
SECURITY AGREEMENT
EXHIBIT C
OPINION OF COMPANY'S COUNSEL
[JOHNSON, BLAKELY, POPE, BOKOR, RUPPELL & ▇▇▇▇▇, P.A. TO PROVIDE]
EXHIBIT D
PURCHASERS' WARRANT
EXHIBIT E
AGENT'S WARRANT
EXHIBIT F
REGISTRATION RIGHTS AGREEMENT
SCHEDULE 5.1(a)
The Company is currently in the process of registering as a foreign
corporation authorized to transact business in the State of Florida.
SCHEDULE 5.1(d)
The Company makes no representations or warranties regarding enforceability
of any of the Transaction Documents under the laws of any jurisdiction other
than the U.S.
SCHEDULE 5.1(e)
1. The Company makes no representation or warranty regarding the financial
statements or SEC Documents prior to and through the Form 10-QSB for
the period ended April 31, 2000.
2. The Company is in the process of updating the SEC filings and to date has
filed the following Form 8-K's:
Filed: July 5, 2000
July 25, 2000
August 8, 2000
3. All SEC Documents and financial statements are subject to updating and
adjustment for the Form 10-KSB relating to the fiscal year ending July
31, 2000.
SCHEDULE 5.1(f)
1. See Schedule 5.1(e)
2. The SEC Documents filed to date do not contain a full and complete
description of the operations of the Company to reflect the business of
the Company after its merger with Transformation Processing, Inc.
("TI") or and acquisition of Premier in conformity with the rules and
regulations of the SEC. The Company intends to file a Form 10-KSB for
the fiscal year ended July 31, 2000 in accordance with the rules and
regulations of the SEC.
SCHEDULE 5.1(i)
None
SCHEDULE 5.1(k)
1. Liabilities and debts as described in the SEC Documents.
2. See the attached loan and debt schedule.
3. Loans and other credit arrangements that may be entered into with
commercial lending institutions on an arms length basis and which
may grant a security interest in the Company's assets.
SCHEDULE 5.1(m)
See the attached correspondence from counsel regarding domain
name infringement allegations.
The Company has not obtained a registered trademark or tradename for
"▇▇▇▇▇▇▇▇▇▇▇.▇▇▇".
SCHEDULE 5.1(o)
See SEC Documents
See attached schedule