Exhibit B
SERIES D CONVERTIBLE PREFERRED
STOCK AND WARRANT PURCHASE AGREEMENT
THIS SERIES D CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
dated as of May 2, 2000 (this "Agreement"), between ▇▇▇▇▇▇
INDUSTRIES INC., a Florida corporation (the "Company"), and the
investors identified on Schedule I attached hereto (collectively,
the "Investors").
WHEREAS, the Company wishes to issue and sell to the
Investors an aggregate of 20,000 shares (the "Series D Preferred
Shares") of the authorized but unissued shares of Series D
Convertible Preferred Stock, $1.00 par value, of the Company (the
"Series D Preferred Stock") at a purchase price of $100 per
share; and
WHEREAS, together with the issuance and sale of the Series D
Preferred Stock, the Company wishes to issue and sell to the
Investors warrants (the "Warrants") to purchase an aggregate of
363,636 shares of the Company's Common Stock (as defined below),
at an exercise price of $5.50 per share, subject to adjustment;
and
WHEREAS, the Investors wish to purchase the Series D
Preferred Shares and Warrants upon the terms and subject to the
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing premises
and the covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Certain Definitions. As used in this Agreement, the
following terms shall have the following respective meanings:
"Closing" and "Closing Date" shall have the meanings
ascribed to such terms in Section 1.3 herein.
"Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering
the Securities Act.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
"Material Adverse Effect" means any adverse effect on the
business, operations, properties, prospects, or financial
condition of the entity with respect to which such term is used
and which is material to such entity and other entities
controlled by such entity taken as a whole, and any material
adverse effect on the transactions contemplated under this
Agreement or any other agreement or document contemplated hereby
or thereby.
"Registrable Securities" shall mean (A) the shares (together
with the shares issued or issuable upon exercise of the Warrants,
the "Common Shares") of the Company's common stock, par value
$.001 per share (the "Common Stock"), issued or issuable upon
conversion of the Series D Preferred Shares, and upon conversion
of any additional shares of Series D Preferred Stock issued as a
dividend on the Series D Preferred Stock (which for all purposes
of this Agreement shall be deemed included in the Series D
Preferred Shares), (B) the Common Shares issued or issuable upon
exercise of the Warrants, and (C) any securities of the Company
or securities of any successor corporation issuable upon the
conversion or exercise of any warrant, right or other security
that is issued as a dividend or other distribution with respect
to, in exchange for, or in replacement of the Series D Preferred
Shares, which in any case (i) have not been resold pursuant to an
effective registration statement or pursuant to Rule 144 under
the Securities Act and (ii) may not be resold pursuant to Rule
144 under the Securities Act. For purposes of this Agreement,
securities will be considered ineligible for resale pursuant to
Rule 144 under the Securities Act unless the Company's transfer
agent has accepted an instruction from the Company specifying
that such securities are eligible for sale pursuant to Rule 144.
The term "holder of Registrable Securities" includes any person
who holds securities which are convertible into or exercisable
for Registrable Securities.
The terms "register", "registered" and "registration" shall
refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act and
applicable rules and regulations thereunder, and the declaration
or ordering of the effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses to be
incurred by the Company in connection with the Investor's
registration rights under this Agreement, including, without
limitation, all registration and filing fees, printing expenses,
fees and disbursements of counsel for the Company and its
independent certified public accountants, blue sky fees and
expenses, reasonable fees and disbursements of counsel for the
Investors for a "due diligence" examination of the Company and
review of the Registration Statement and related documents, and
the expense of any special audits incident to or required by any
such registration (but excluding the compensation of regular
employees of the Company, which shall be paid in any event by the
Company).
"Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable
Securities and all fees and disbursements of counsel for the
Investors not included within "Registration Expenses."
"Registration Statement" shall have the meaning set forth in
Section 4.1(a) herein.
"Regulation D" shall mean Regulation D as promulgated
pursuant to the Securities Act, and as subsequently amended.
"Securities Act" or "Act" shall mean the Securities Act of
1933, as amended.
ARTICLE I
Purchase and Sale of Series D Preferred Shares and Warrants
Section 1.1 Authorization of the Series D Preferred
Shares and Warrants. The Company has authorized the sale and
issuance to the Investors of an aggregate of (i) 20,000 shares of
its Series D Convertible Preferred Stock having the rights,
restrictions, privileges and preferences set forth in the
Articles of Amendment to Company's Articles of Incorporation, as
amended, in the form attached hereto as Exhibit A (as amended,
the "Articles"), which have been filed with the Secretary of
State of the State of Florida and (ii) the Warrants in the form
of the Warrant Certificate (the "Warrant Certificate") attached
hereto as Exhibit B to purchase an aggregate of 363,636 Common
Shares.
Section 1.2 Issuance, Sale and Delivery of the Series D
Preferred Shares and Warrants. Subject to the terms and
conditions hereof and in reliance upon the representations,
warranties, covenants and agreements contained herein, the
Company hereby agrees to issue and sell to the Investors,
respectively, and the Investors, respectively, hereby agree to
purchase from the Company at the Closing (as hereinafter
defined), (i) an aggregate of 20,000 Series D Preferred Shares
and (ii) Warrants to purchase an aggregate of 363,636 shares of
Common Stock, in each case under clauses (i) and (ii) preceding
allocated among the Investors as set forth in Schedule I attached
hereto and for a Purchase Price (the "Purchase Price") calculated
as the product obtained by multiplying $100 by each Series D
Preferred Share acquired (95.5% of which shall be allocated to
the Series D Preferred Shares acquired and the remainder to the
Warrants acquired).
Section 1.3 The Closing.
(a) The closing of the purchase and sale of the
Series D Preferred Shares and Warrants (the "Closing"), shall
take place at the offices of ▇▇▇▇▇▇▇▇▇ Traurig, P.A., ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ at 10:00 a.m., local time
on May 2, 2000 (the "Closing Date") or at such other time and
place and/or on such other date as shall be mutually agreed upon
by the Company and the Investors.
(b) On the Closing Date, the Company shall issue
and countersign, or cause to be issued and countersigned by its
transfer agent, for delivery upon the order of the Investors,
certificates representing the number of Series D Preferred Shares
and Warrants being purchased by the Investors, respectively,
registered in the names of each of the Investors or their
respective nominees, or deposit such Series D Preferred Shares
and Warrants into an account or accounts designated by the
Investors, respectively, and the Investors, respectively, shall
deliver to the Company the Purchase Price for such Series D
Preferred Shares and Warrants by wire transfer in immediately
available funds to an account designated in writing prior to
Closing by the Company. In addition, each party shall deliver
all documents, instruments and writings required to be delivered
by such party pursuant to this Agreement at or prior to the
Closing.
1.4 Replacement of Certificates. Without limiting any
provisions contained in the Warrant Certificate or the Articles,
upon receipt of evidence reasonably satisfactory to the Company
of the loss, theft, destruction or mutilation of any certificate
representing Series D Preferred Shares or Warrants and, if
requested by the Company in the case of such loss, theft or
destruction, upon delivery of any indemnity bond or other
agreement or security reasonably satisfactory to the Company or,
in the case of such mutilation, upon surrender and cancellation
of such instrument without the delivery of any indemnity bond or
other agreement or security, the Company will issue and deliver,
in lieu of such lost, stolen, destroyed or mutilated instrument,
a new instrument of like tenor and amount.
ARTICLE II
Representations and Warranties
Section 2.1 Representations and Warranties of the
Company. The Company hereby makes the following representations
and warranties to the Investors, and each of them:
(a) Organization and Qualification; Material
Adverse Effect. Each of the Company and its Subsidiary (as
defined below) is a corporation duly incorporated and existing in
good standing under the laws of its jurisdiction of incorporation
and each of the Company and the Subsidiary have the requisite
corporate power to own its properties and to carry on its
business as now being conducted. The Company owns 100% of the
outstanding capital stock of SystemOne Technologies Inc., a
Florida corporation (the "Subsidiary"). The Company does not
have any other direct or indirect subsidiaries. Each of the
Company and the Subsidiary is duly qualified as a foreign
corporation to do business and is in good standing in every
jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary other
than those in which the failure so to qualify would not have a
Material Adverse Effect.
(b) Authorization; Enforcement. (i) The Company
has the requisite corporate power and authority to enter into and
perform this Agreement and to issue, sell and deliver the Series
D Preferred Shares and Warrants in accordance with the terms
hereof, and the Common Shares issuable upon conversion or
exercise, as the case may be, of the Series D Preferred Shares
and Warrants, (ii) the execution and delivery of this Agreement,
each of the Warrant Certificates and the Shareholders Agreement
with the Investors, among others (collectively, the "Principal
Agreements") by the Company and the consummation by it of the
transactions contemplated hereby and thereby, including the
issuance, sale and delivery of the Series D Preferred Shares and
Warrants, and the Common Shares issuable upon conversion or
exercise, as the case may be, thereof, have been duly authorized
by all necessary corporate action, and no further consent or
authorization of the Company or its Board of Directors or
shareholders is required, (iii) this Agreement and the other
Principal Agreements have been duly executed and delivered by the
Company, and (iv) this Agreement and the other Principal
Agreements constitute the valid and binding obligations of the
Company enforceable against the Company in accordance with their
respective 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 capital stock
of the Company consists of (i) 25,000,000 shares of Common Stock,
and (ii) 1,500,000 shares of preferred stock ("Preferred Stock"),
of which (A) 150,000 shares have been designated Series B
Convertible Preferred Stock, (B) 150,000 shares have been
designated Series C Convertible Preferred Stock and (C) 150,000
shares have been designated Series D Convertible Preferred Stock.
As of the date hereof and at Closing (and without reference to
the Series D Preferred Shares), 4,742,923 shares of Common Stock
are and will be issued and outstanding, 53,106 shares of Series B
Convertible Preferred Stock are and will be issued and
outstanding, 70,947 shares of Series C Convertible Preferred
Stock are and will be issued and outstanding and no shares of
Series D Convertible Preferred Stock or other preferred stock are
or will be issued and outstanding, respectively. All of the
outstanding shares of the Common Stock, Series B Convertible
Preferred Stock and Series C Convertible Preferred Stock, and the
capital stock of the Subsidiary have been validly issued and are
fully paid and non-assessable. No shares of Common Stock or
Preferred Stock are entitled to preemptive rights. As of the
date hereof and at Closing, the following additional securities
are and will be issued and outstanding: (i) options to purchase
an aggregate of 684,908 shares of Common Stock, (ii) warrants to
purchase 488,636 shares of Common Stock, including the Warrants
issued pursuant to the terms of this Agreement and (iii)
subordinated debentures convertible into an aggregate of
1,017,589 shares of Common Stock. There are no other scrip,
rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights exchangeable or
convertible into, any shares of capital stock of the Company or
the Subsidiary, or contracts, commitments, understandings or
arrangements by which the Company or the Subsidiary is or may
become bound to issue additional shares of capital stock of the
Company or the Subsidiary or options, warrants, scrip, rights to
subscribe to, or commitments to purchase or acquire, any shares,
or securities or rights convertible into shares, of capital stock
of the Company or the Subsidiary (except as contemplated by this
Agreement). No event has occurred prior to the date hereof
which, subsequent to the date hereof, will cause any adjustment
in any conversion or exercise price or ratio with respect to any
such securities pursuant to any anti-dilution provisions
thereunder, nor as a result of any such event, will the number of
shares of capital stock issuable upon such conversion or such
exercise, as the case may be, be subject to adjustment. No such
conversion or exercise price or ratio will be subject to
adjustment as a consequence of the consummation of the
transactions contemplated by the Agreement, nor, as a consequence
of such consummation, will the numbers of shares of capital stock
issuable upon such conversion or such exercise, as the case may
be, be subject to adjustment, except that as a consequence of
consummation of the Closing hereunder, the Series B Convertible
Preferred Stock and Series C Convertible Preferred Stock will be
adjusted as hereinafter set forth. The Company has furnished or
made available to the Investors true and correct copies of the
Articles and its bylaws (the "Bylaws"), as in effect on the date
hereof.
(d) Issuance of Series D Preferred Shares,
Warrants and Common Shares. The issuance of the Series D
Preferred Shares and Warrants have been duly authorized and, when
paid for or issued in accordance with the terms hereof, the (i)
Series D Preferred Shares shall be validly issued, fully paid and
non-assessable and entitled to the rights and preferences set
forth in the Articles and not subject to any preemptive rights or
adverse claims and (ii) the Warrants shall be validly issued,
fully paid and non-assessable and entitled to the rights set
forth in the Warrant Certificate. The Common Shares have been
duly authorized and reserved for issuance and, upon conversion or
exercise, as the case may be, in accordance with the terms of the
Articles or Warrants, as the case may be, will be validly issued,
fully paid and non-assessable, free and clear of any mortgage,
deed of trust, pledge, lien or other charge or encumbrance
created by the Company and not subject to any preemptive rights
or adverse claims, and the holders shall be entitled to all
rights and preferences accorded to a holder of Common Stock.
(e) No Conflicts. The execution, delivery and
performance of this Agreement and the other Principal Agreements
by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not and will not
(i) result in a violation of the Articles or Bylaws or of the
articles of incorporation or bylaws of the Subsidiary or (ii)
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, patent, patent
license or instrument to which the Company or the Subsidiary is a
party, or result in a violation of any federal, state, local or
foreign law, rule, regulation, order, judgment or decree
(including Federal and state securities laws and regulations)
applicable to the Company or the Subsidiary or by which any
property or asset of the Company or the Subsidiary is bound or
affected (except for such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse
Effect); provided that, for purposes of such representation as to
Federal, state, local or foreign law, rule or regulation, no
representation is made herein with respect to any of the same
applicable solely to the Investors and not to the Company or the
Subsidiary. Neither the business of the Company nor of the
Subsidiary is being conducted in violation of any law, ordinance
or regulation of any governmental entity, except for violations
which either singly or in the aggregate do not and will not have
a Material Adverse Effect. The Company is not required under
Federal, state, local or foreign law, rule or regulation to
obtain any consent, authorization or order of, or to make any
filing or registration with, any court or governmental agency in
order for it to execute, deliver or perform any of its
obligations under this Agreement or to issue, sell and deliver
the Series D Preferred Shares and Warrants in accordance with the
terms hereof and issue the Common Shares upon conversion thereof,
except for the registration provisions provided for herein,
provided that, for purposes of the representation made in this
sentence, the Company is assuming and relying upon the accuracy
of the relevant representations and agreements of the Investors
herein.
(f) SEC Documents; Financial Statements. The
Common Stock of the Company is registered pursuant to Section
12(g) of the Exchange Act and the Company has timely filed all
reports, schedules, forms, statements and other documents
required to be filed by it with the Commission pursuant to the
reporting requirements of the Exchange Act, including material
filed pursuant to Section 13(a) or 15(d), in addition to one or
more registration statements and amendments thereto heretofore
filed by the Company with the Commission (all of the foregoing
including filings incorporated by reference therein being
referred to herein as the "SEC Documents"). The Company has
delivered or made available to the Investors true and complete
copies of all SEC Documents (including, without limitation, proxy
information and solicitation materials and registration
statements) filed with the Commission since September 27, 1996
and all annual SEC Documents filed with the Commission since
September 27, 1996. Without limiting any other representation or
warranty herein, the Company has not provided the Investors with
any information which, according to applicable law, rule or
regulation, should have been disclosed publicly by the Company
but which has not been so disclosed. As of their respective
dates, the SEC Documents (as amended by any amendments filed
prior to the date of this Agreement or the Closing Date and
provided to the Investor) complied in all material respects with
the requirements of the Securities Act and the Exchange Act and
the rules and regulations of the Commission promulgated
thereunder and other federal, state and local laws, rules and
regulations applicable to such SEC Documents, and none of the SEC
Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
The financial statements of the Company included in the SEC
Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and
regulations of the Commission or other applicable rules and
regulations with respect thereto. Such financial statements have
been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods
involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto or (ii) in the case of
unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements) and fairly
present in all material respects the financial position of the
Company as of the dates thereof and the results of operations and
cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
(g) Principal Exchange/Market. The principal
market on which the Common Stock is currently traded is Nasdaq.
(h) No Material Adverse Change. Since March 31,
2000, the date through which the most recent annual report of the
Company on Form 10-KSB has been prepared and filed with the
Commission, a copy of which is included in the SEC Documents, no
event which had or is likely to have a Material Adverse Effect
has occurred or exists with respect to the Company or the
Subsidiary.
(i) No Undisclosed Liabilities. Neither the
Company nor the Subsidiary has any liabilities or obligations not
disclosed in the SEC Documents, other than those liabilities
incurred in the ordinary course of its respective business since
December 31, 1999 or liabilities or obligations, individually or
in the aggregate, which do not or would not have a Material
Adverse Effect on the Company or the Subsidiary, taken as a
whole.
(j) No Undisclosed Events or Circumstances. No
event or circumstance has occurred or exists with respect to the
Company, the Subsidiary or their respective business, properties,
prospects, operations or financial condition, which, under
applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly
announced or disclosed.
(k) No General Solicitation. None of the
Company, the Subsidiary or, to the Company's knowledge, any of
their respective affiliates or any person acting on its or their
behalf has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection
with the offer or sale of the Series D Preferred Shares and
Warrants.
(l) No Integrated Offering. None of the Company,
the Subsidiary, or, to the Company's knowledge, any of their
respective Affiliates (as defined pursuant to the Securities Act)
or any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would
require registration of the Series D Preferred Shares and/or
Warrants under the Securities Act, and the offer and sale of the
Series D Preferred Shares and Warrants hereunder, and the
issuance of the Common Shares upon conversion or exercise, as the
case may be, thereof, is exempt from the registration
requirements of the Securities Act.
(m) Intellectual Property. Each of the Company
and the Subsidiary owns or has licenses to use certain patents,
copyrights and trademarks ("intellectual property") associated
with its respective business. Each of the Company and the
Subsidiary has all intellectual property rights which are needed
to conduct its respective business as it is now being conducted
or as proposed to be conducted as disclosed in the SEC Documents.
The Company has no reason to believe that the intellectual
property rights owned by the Company or the Subsidiary are
invalid or unenforceable or that the use of such intellectual
property by the Company or the Subsidiary infringes upon or
conflicts with any right of any third party, and neither the
Company nor the Subsidiary has received notice of any such
infringement or conflict. The Company has no knowledge of any
infringement of the Company's or the Subsidiary's intellectual
property by any third party.
(n) No Litigation. Except as set forth in the
SEC Documents delivered to the Investors prior to the date of
this Agreement ("Pre-Agreement SEC Documents") no litigation or
claim (including those for unpaid taxes) against the Company or
the Subsidiary is pending or, to the Company's knowledge,
threatened, and no other event has occurred, which if determined
adversely would be likely to have a Material Adverse Effect on
the Company or the Subsidiary, taken as a whole; and the Company
believes that the legal proceedings described in the Pre-
Agreement SEC Documents will not have a Material Adverse Effect
on the Company or the Subsidiary, taken as a whole. No
litigation or claim is pending or to the Company's knowledge,
threatened against the Company or the Subsidiary which, if
determined adversely would be likely to adversely affect the
transactions contemplated hereby.
(o) Brokers. The Company has taken no action
which would give rise to any claim by any person for brokerage
commissions, finder's fees or similar payments relating to this
Agreement or the transactions contemplated hereby.
(p) Taxes. The Company and the Subsidiary have
filed or caused to be filed all federal, state, municipal and
other tax returns, reports and declarations required to be filed
by them, respectively, so as to prevent any valid lien, charge or
encumbrance of any nature on their respective assets or
properties and have paid or shall pay all taxes which have been
or shall become due with respect to the periods covered by said
returns or pursuant to any assessment received by them in
connection therewith.
(q) Employee Benefit Plans. All pension, profit-
sharing, bonus, incentive, welfare and other employee benefit
plans in which the employees of the Company or the Subsidiary
participate comply in all material respects with all applicable
requirements of the Department of Labor and the Internal Revenue
Service promulgated under the Employee Retirement Income Security
Act of 1974, as amended, and all other applicable law. Without
limiting the foregoing, all required contributions under such
plans have been made, the respective fund or funds established
under such plans are funded in accordance with all applicable
laws, and no past service funding liability exists thereunder.
(r) Environmental Laws. Neither the consummation
of the transactions contemplated by this Agreement nor, to the
Company's knowledge, any real property utilized by the Company or
the Subsidiary, nor, to the Company's knowledge, any condition
thereon violates any Environmental Laws (as hereinafter defined),
other than any such violations which would not have a Material
Adverse Effect on the Company and the Subsidiary, taken as a
whole, and no provisions of any Environmental Laws or regulations
in any way affect the consummation of the transactions
contemplated by this Agreement. For purposes hereof,
"Environmental Laws" shall mean any and all federal, national,
state, or local laws, statutes, ordinances, rules, regulations,
orders or determinations of any federal, national, state, or
local governmental authority pertaining to health or the
environment.
(s) Qualified Small Business. The Company
covenants that so long as any shares of Series B Preferred Stock,
Series C Preferred Stock, or Series D Preferred Stock or shares
of Common Stock into which such preferred shares are converted,
are held by an Investor (or a transferee in whose hands such
shares or Common Stock are eligible to qualify as "Qualified
Small Business Stock" as defined in section 1202(c) of the
Internal Revenue Code of 1986, as amended (the "Code")), it will
use its commercially reasonable efforts (including complying with
any applicable filing or reporting requirements imposed by the
Code on issuers of "Qualified Small Business Stock") to cause
such shares to qualify as "Qualified Small Business Stock";
provided, however, that "commercially reasonable efforts" as used
in this Section 2.1(s), without limitation, shall not be
construed to require the Company, in its sole discretion, to
acquire or operate its business in a manner that would adversely
affect its business, limit its future prospects or alter the
timing or manner of resource allocation related to its planned
operations or financing activities or otherwise to (i) engage in
any business,(ii) cease to engage in any business or (iii)
acquire or dispose of any asset or assets. Further, the Company
covenants and agrees, on the reasonable request of any Investor,
to conduct a commercially reasonable investigation into the
question of whether the shares of preferred stock (and the shares
of Common Stock issued or issuable upon conversion thereof) held
by the Investors, remain "Qualified Small Business Stock" within
the meaning of the Code, and to thereafter deliver to such
Investor a duly executed Certificate of Representations in the
form attached hereto as Exhibit C (the "QSBS Certificate").
(t) Disclosure. No representation or warranty
made under any provisions of this Agreement, and none of the
information furnished by the Company set forth herein or in any
document delivered to the Investors, or any authorized
representative of the Investors pursuant to this Agreement,
contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements herein or
therein not misleading.
Section 2.2 Representations and Warranties of the
Investors. The Investors, severally, hereby make the following
representations and warranties to the Company:
(a) Authorization; Enforcement. (i) Such
Investor has the requisite power and authority to enter into and
perform this Agreement and to purchase the Series D Preferred
Shares and Warrants being issued and sold hereunder, (ii) the
execution and delivery of this Agreement by such Investor and the
consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary limited
duration company or limited partnership action, as required, and
(iii) this Agreement constitutes the valid and binding obligation
of such Investor enforceable against it 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.
(b) No Conflicts. The execution, delivery and
performance of this Agreement and the consummation by such
Investor of the transactions contemplated hereby and thereby do
not and will not (i) result in a violation of any of such
Investor's organizational documents, (ii) conflict with any
agreement, indenture, or instrument to which such Investor is a
party, or (iii) result in a violation of any law, rule, or
regulation or any order, judgment or decree of any court or
governmental agency applicable to the Investor. Such Investor is
not required to obtain any consent or authorization of any
governmental agency in order for them to perform each of its
obligations under this Agreement.
(c) Investment Representation. Such Investor is
purchasing the Series D Preferred Shares and Warrants for its own
account and not with a view to distribution in violation of any
securities laws. Such Investor does not have any present
intention to sell the Series D Preferred Shares or Warrants and
such Investor does not have any present arrangement (whether or
not legally binding) to sell the Series D Preferred Shares or
Warrants to or through any person or entity; provided, however,
that by its representations herein, such Investor does not agree
to hold the Series D Preferred Shares and Warrants for any
minimum or other specific term and reserves the right to dispose
of the Series D Preferred Shares and/or the Warrants at any time
in accordance with Federal and state securities laws applicable
to such disposition.
(d) Accredited Investor. Such Investor is an
"accredited investor" as defined in Rule 501 promulgated under
the Securities Act. Such Investor has such knowledge and
experience in financial and business matters in general and
investments in particular, so that such Investor is able to
evaluate the merits and risks of an investment in the Series D
Preferred Shares and Warrants and to protect its own interests in
connection with such investment. In addition (but without
limiting the effect of the Company's representations and
warranties contained herein), such Investor has received such
information as it considers necessary or appropriate for deciding
whether to purchase the Series D Preferred Shares and Warrants
pursuant hereto.
(e) Rule 144. Such Investor understands that
there is no public trading market for the Series D Preferred
Shares or the Warrants, that none is expected to develop, and
that the Series D Preferred Shares and Warrants must be held
indefinitely until the Series D Preferred Shares, the Warrants,
the Common Shares or other securities issued or issuable upon
conversion thereof are registered under the Securities Act or an
exemption from registration is available. Such Investor has been
advised or is aware of the provisions of Rule 144 promulgated
under the Securities Act.
(f) Brokers. Such Investor has not taken any
action which would give rise to any claim by any person for
brokerage commissions, finder's fees or similar payments by the
Company relating to this Agreement or the transactions
contemplated hereby.
(g) Reliance by the Company. Such Investor
understands that the Series D Preferred Shares and Warrants are
being offered and sold in reliance on a transactional exemption
from the registration requirements of Federal and state
securities laws and that the Company is relying upon the truth
and accuracy of the representations, warranties, agreements,
acknowledgments and understandings such Investor set forth herein
in order to determine the applicability of such exemptions and
the suitability of the Investors to acquire the Series D
Preferred Shares and Warrants.
ARTICLE III
Covenants
Section 3.1 Registration and Listing. Until the later of
(i) such time as no Series D Preferred Shares and Warrants are
outstanding or (ii) the expiration of the Effectiveness Period
(as hereinafter defined in Section 4.3), the Company will cause
the Common Stock to continue to be registered under Section 12(g)
of the Exchange Act, will comply in all respects, with its
reporting and filing obligations under the Exchange Act, and will
not take any action or file any document (whether or not
permitted by the Exchange Act or the rules thereunder) to
terminate or suspend such reporting and filing obligations. The
Company shall take further action as any holder of Registrable
Securities may reasonably request, all to the extent required
from time to time to enable such holder to sell Registrable
Securities without registration under the Securities Act within
the limitation of the exemptions provided by (i) Rule 144 under
the Securities Act, as such rule may be amended from time to
time, or (ii) any similar rule or regulation hereafter adopted by
the Commission. Upon the request of any holder of Registrable
Securities, the Company shall deliver to such holder a written
statement as to whether it has complied with such information and
requirements. Until the later of (i) such time as no Series D
Preferred Shares and Warrants are outstanding or (ii) the
expiration of the Effectiveness Period, the Company shall use its
best efforts to continue the listing or trading of the Common
Shares on Nasdaq, the Nasdaq National Market or a principal
exchange and comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of Nasdaq
and any exchange or market on which the Common Shares are then
traded.
Section 3.2 Certificates on Conversion. Upon any
conversion or exercise, as the case may be (automatic or
optional), of Series D Preferred Shares and/or Warrants, the
Company shall issue and deliver to the appropriate Investor (or
the then holder) within three (3) days of the date of conversion
or exercise, as the case may be, a new certificate or
certificates for the Series D Preferred Shares or Warrants, as
the case may be, which has not yet been converted or exercised
but which are evidenced in part by the certificate(s) submitted
to the Company in connection with such conversion or exercise
(with the number of and denomination of such new certificate(s)
designated by such Investor or holder).
Section 3.3 Replacement Certificates. Without limiting
any provisions contained in the Warrant Certificate or the
Articles, the certificate(s) representing the Series D Preferred
Shares and Warrants held by the Investors (or then holders) may
be exchanged by the Investors (or such holders) at any time and
from time to time for certificates with different denominations
representing an equal aggregate number of Series D Preferred
Shares or Warrants, as the case may be, as reasonably requested
by the Investors (or such holders) upon surrendering the same.
No service charge will be made for such registration, transfer or
exchange.
Section 3.4 Securities Compliance. The Company shall
notify the Commission and Nasdaq, in accordance with their
requirements, of the transactions contemplated by this Agreement,
and shall take all other necessary action and proceedings as may
be required and permitted by applicable law, rule and regulation,
for the legal and valid issuance of the Series D Preferred Shares
and Warrants hereunder and the Common Shares issuable upon
conversion thereof to the Investors or subsequent holders.
Section 3.5 Notices. The Company agrees to provide the
Investors (or any subsequent holders of Series D Preferred Shares
and Warrants) with copies of all notices and information,
including without limitation notices and proxy statements in
connection with any meetings, that are provided to the holders of
Common Stock, contemporaneously with the delivery of such notices
or information to such Common Stock holders.
Section 3.6 Reservation of Stock Issuable Upon
Conversion. The Company shall at all times reserve and keep
available out of its authorized but unissued Common Stock, solely
for the purpose of effecting the conversion of the Series D
Preferred Shares and conversion or exercise of the Warrants, such
number of shares of its Common Stock as shall from time to time
be sufficient to effect the conversion of all outstanding Series
D Preferred Shares and exercise of the Warrants, and if at any
time the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of all the then
outstanding Series D Preferred Shares and exercise of the
Warrants, the Company will take such corporate action as may, in
the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose, including without
limitation engaging in best efforts to obtain the requisite
shareholder approval.
ARTICLE IV
Registration
Section 4.1 Registration Requirements. The Company shall
use its reasonable business efforts to effect the registration of
the Registrable Securities (including without limitation the
execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable blue sky or other
state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act) as would permit or
facilitate the resale or distribution of all the Registrable
Securities in the manner (including manner of sale) and in all
states reasonably requested by the holder thereof (each a
"Holder"). Such reasonable best efforts by the Company shall
include the following:
(a) the Company shall, as expeditiously as
reasonably possible after the Closing Date:
(i) Prepare and file a registration
statement with the Commission pursuant to Rule 415
under the Securities Act on such appropriate
registration form of the Commission as shall be
reasonably selected by the Company covering the
Registrable Securities ("Registration Statement")
within 45 days following the Closing Date. Thereafter
the Company shall use its reasonable business efforts
to cause such Registration Statement to be declared
effective by the Commission within 90 days following
the Closing Date. In the event that such Registration
Statement is not declared effective within 90 days
following the Closing Date, there shall be a 30 day
grace period. The Company shall use its reasonable
best efforts to cause the Registration Statement to
become effective during this 30 day grace period, if
applicable. In the event that such Registration
Statement has not been declared effective within 120
days from the Closing Date, then the Company shall,
until the Registration Statement is declared effective,
pay in cash to the Investors, and each of them, an
amount equal to 2% of the aggregate Liquidation Value
of the Series D Preferred Shares (the "Liquidated
Damages") held by the Investors for each 30 day period,
or part thereof, beginning on the 121st day following
the Closing Date (the "Default Period") that the
Registration Statement has not been declared effective;
provided, however, that the Default Period shall
terminate and Liquidated Damages shall cease to accrue
on the date upon which all such Registrable Securities
may be immediately sold under Rule 144 in the
reasonable opinion of counsel to the Company (provided
that the Company's transfer agent has accepted an
instruction from the Company to such effect). If any
applicable Default Period is less than 30 days such
cash payment shall be on a pro rata basis. Such cash
payment shall be calculated by the Company on the
earlier of (i) the effective date of such Registration
Statement or (ii) the last day of each Default Period,
and a check in lawful money of the United States of
America shall be sent within three (3) business days of
such calculation to each of the Investors at the
addresses set forth on the signature page hereof.
Following the initial effective date of such
Registration Statement, Liquidated Damages shall also
be payable to each of the Investors by the Company for
periods (in excess of the time period in which the
Company is required to file a Current Report on Form 8-
K) during which the Registration Statement does not
remain effective; provided, however, that such
Liquidated Damages shall not be payable by the Company
in the event that all such Registrable Securities may
be immediately sold by the Investors pursuant to Rule
144. Notwithstanding the foregoing, if the Default
Period commences from the failure of the Company to
cause to become effective the Registration Statement
solely by reason of the failure of any Investor to
provide such information as (i) the Company may
reasonably request from such Investor to be included in
the Registration Statement or (ii) the Commission or
Nasdaq may request in connection with such Registration
Statement, the Company shall not be required to pay
such Liquidated Damages to such Investor during the
period of delay attributable to such Investor's
failure. The Company and the Investors hereby
acknowledge and agree that it may be difficult, if not
impossible, to determine with any reasonable accuracy
the actual damages arising from the failure to secure
effectiveness of the Registration Statement by the time
hereinbefore specified, or to maintain the Registration
Statement thereafter, and that the amount of the
Liquidated Damages is a reasonable estimate thereof,
provided that payment thereof shall in no manner be
construed as impairing the right of the Investors, and
each of them, to require specific performance of this
Agreement.
(ii) Prepare and file with the Commission
such amendments and supplements to such Registration
Statement and the prospectus used in connection with
such Registration Statement as may be necessary to
comply with the provisions of the Act with respect to
the disposition of all securities covered by such
Registration Statement and notify each of the Investors
of the filing and effectiveness of such Registration
Statement and any amendments or supplements.
(iii) Furnish to each of the Investors
such number of copies of a current prospectus
conforming with the requirements of the Act, copies of
the Registration Statement, any amendment or supplement
thereto and any documents incorporated by reference
therein and such other documents as each of the
Investors may reasonably require in order to facilitate
the disposition of Registrable Securities owned by each
of the Investors.
(iv) Use its best efforts to register and
qualify the securities covered by such Registration
Statement under such other securities or "Blue Sky"
laws of such jurisdictions as shall be reasonably
requested by each of the Investors; provided that the
Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or
to file a general consent to service of process in any
such states or jurisdictions.
(v) Notify each of the Investors immediately
of the happening of any event as a result of which the
prospectus (including any supplement thereto or
thereof) included in such Registration Statement, as
then in effect, includes an untrue statement of
material fact or omits to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading in light of the
circumstances then existing, and use its best efforts
to promptly update and/or correct such prospectus.
(vi) Notify each of the Investors immediately
of the issuance by the Commission or any state
securities commission or agency of any stop order
suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that
purpose. The Company shall use its reasonable best
efforts to prevent the issuance of any stop order and,
if any stop order is issued, to obtain the lifting
thereof at the earliest possible time.
(vii) Permit a single firm of counsel,
designated by the Investors, to review the Registration
Statement and all amendments and supplements thereto
within a reasonable period of time prior to each
filing, and shall not file any document in a form to
which such counsel reasonably objects.
(viii) Use its reasonable business efforts
to list the Registrable Securities covered by such
Registration Statement with all securities exchange(s)
and/or markets on which the Common Stock is then
listed, and prepare and file any required filings with
the National Association of Securities Dealers, Inc. or
any exchange or market where the Common Shares are
traded.
(ix) Otherwise use its reasonable business
efforts to comply with all applicable rules and
regulations of the SEC and make available to its
security holders, as soon as reasonably practicable,
earnings statements covering a period of twelve months
beginning with three months after the effective date of
the Registration Statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the
Securities Act.
(b) The Company shall make available for
inspection by the Investors and their representative(s), any
underwriter participating in any disposition pursuant to a
Registration Statement, and any attorney or accountant retained
by the Investors or underwriter, all financial and other records
customary for purposes of the Investors' due diligence
examination of the Company and all SEC Documents filed subsequent
to the Closing Date, pertinent corporate documents and properties
of the Company, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any
such representative, underwriter, attorney or accountant in
connection with such Registration Statement, provided that such
parties agree to keep such information confidential.
Section 4.2 Expenses of Registration. All Registration
Expenses incurred in connection with any registration,
qualification or compliance with registration pursuant to this
Section 4 shall be borne by the Company, and all Selling Expenses
of any Investor shall be borne by such Investor.
Section 4.3 Registration Period. In the case of the
registration effected by the Company pursuant to this Section 4,
the Company will use its reasonable business efforts to keep such
registration effective (the "Effectiveness Period") until the
earliest to occur of (a) the later of two years from the Closing
Date or two years from the date of exercise of the last Warrant
to be exercised prior to the expiration thereof, provided that,
without limiting any provision of Section 4.1(a)(i), the Company
may suspend the effectiveness of the Registration Statement if
the Board of Directors determines, upon advice of counsel, that
in order to maintain effectiveness of the Registration Statement,
the Company would be required to disclose a significant corporate
development which disclosure would have a material effect on the
Company; provided, however, that the period of time which such
Registration Statement is required to be effective shall be
increased by the number of days that the Registration Statement's
effectiveness was suspended, if any, (b) the date on which the
Investors have completed the sale or distribution described in
the Registration Statement relating thereto, or (c) the date on
which such Registrable Securities may be sold under Rule 144(k)
in the reasonable opinion of counsel to the Company (provided
that the Company's transfer agent has accepted an instruction
from the Company to such effect).
Section 4.4 Indemnification.
(a) Company Indemnity. The Company will
indemnify each holder of Registrable Securities, each of its
officers, directors and partners, and each person controlling
such holder of Registrable Securities, within the meaning of
Section 15 of the Securities Act and the rules and regulations
thereunder with respect to which registration, qualification or
compliance has been effected pursuant to this Agreement, and each
underwriter, if any, and each person who controls, within the
meaning of Section 15 of the Securities Act and the rules and
regulations thereunder, any underwriter, against all claims,
losses, damages and liabilities (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus,
offering circular or other document (including any related
registration statement, notification or the like) incident to any
such registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or any violation by the Company of the
Securities Act or any state securities law or in either case, any
rule or regulation thereunder applicable to the Company and
relating to action or inaction required of the Company in
connection with any such registration, qualification or
compliance, and will reimburse each holder of Registrable
Securities, each of its officers, directors and partners, and
each person controlling such holder of Registrable Securities,
each such underwriter and each person who controls any such
underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating and defending any such
claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to a holder of
Registrable Securities to the extent that any such claim, loss,
damage, liability or expense arises out of or is based on any
untrue statement or omission based upon written information
relating to such holder or underwriter and furnished to the
Company by such holder or the underwriter (if any) therefor and
stated to be specifically for use therein. The indemnity
agreement contained in this Section 4.4(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the
consent of the Company (which consent will not be unreasonably
withheld).
(b) Holder Indemnity. Each holder of Registrable
Securities will, severally and not jointly, if Registrable
Securities held by it are included in the securities as to which
such registration, qualification or compliance is being effected,
indemnify the Company, each of its directors, officers, partners,
and each underwriter, if any, of the Company's securities covered
by such a registration statement, each person who controls the
Company or such underwriter within the meaning of Section 15 of
the Securities Act and the rules and regulations thereunder, each
other holder of Registrable Securities (if any), and each of
their directors, officers and partners, and each person
controlling such other holder(s) of Registrable Securities
against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus,
offering circular or other document, or any omission (or alleged
omission) to state therein a material fact required to be stated
therein or necessary to make the statement therein not
misleading, in each case only insofar as such untrue statement or
alleged untrue statement or omission relates to such holder of
Registrable Securities, and will reimburse the Company and such
other holder(s) of Registrable Securities and their directors,
officers and partners, underwriters or control persons for any
legal or any other expenses reasonably incurred in connection
with investigating and defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information
furnished to the Company by such holder of Registrable Securities
and stated to be specifically for use therein, and provided that
the maximum amount for which such holder of Registrable
Securities shall be liable under this indemnity shall not exceed
the net proceeds received by such holder of Registrable
Securities from the sale of the Registrable Securities. The
indemnity agreement contained in this Section 4.4(b) shall not
apply to amounts paid in settlement of any such claims, losses,
damages or liabilities if such settlement is effected without the
consent of such holder of Registrable Securities (which consent
shall not be unreasonably withheld).
(c) Procedure. Each party entitled to
indemnification under this Article (the "Indemnified Party")
shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party
to assume the defense of any such claim in any litigation
resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the
Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the
failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its
obligations under this Article except to the extent that the
Indemnifying Party is materially and adversely affected by such
failure to provide notice. No Indemnifying Party, in the defense
of any such claim or litigation, shall, except with the consent
of each Indemnified Party, consent to entry of any judgment or
enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation. Each
Indemnified Party shall furnish such information regarding itself
or the claim in question as an Indemnifying Party may reasonably
request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation
resulting therefrom.
Section 4.5 Contribution. If the indemnification
provided for in Section 4 herein is unavailable to the
Indemnified Parties in respect of any losses, claims, damages or
liabilities referred to herein (other than by reason of the
exceptions provided therein), then each such 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, claims, damages or liabilities as between
the Company on the one hand and any holder of Registrable
Securities on the other, in such proportion as is appropriate to
reflect the relative fault of the Company and of such holder of
Registrable Securities in connection with the statements or
omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable
considerations. The relative fault of the Company on the one
hand and of any holder of Registrable Securities on the other
shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to
information supplied by the Company or by such holder.
In no event shall the obligation of any Indemnifying Party
to contribute under this Section 4.5 exceed the amount that such
Indemnifying Party would have been obligated to pay by way of
indemnification if the indemnification provided for under Section
4.4(a) or 4.4(b) hereof had been available under the
circumstances.
The Company and the Investors agree that it would not be
just and equitable if contribution pursuant to this Section 4.5
were determined by pro rata allocation (even if the holders or
the underwriters were treated as one entity for such purpose) or
by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately
preceding paragraphs. The amount paid or payable by an
Indemnified Party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraphs
shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this
section, no holder of Registrable Securities or underwriter shall
be required to contribute any amount in excess of the amount by
which (i) in the case of any holder, the net proceeds received by
such holder from the sale of Registrable Securities or (ii) in
the case of an underwriter, the total price at which the
Registrable Securities purchased by it and distributed to the
public were offered to the public exceeds, in any such case, the
amount of any damages that such holder or underwriter has
otherwise been required to pay by reason of such untrue or
alleged untrue statement, omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such
fraudulent misrepresentation.
ARTICLE V
Conditions
Section 5.1 Conditions Precedent to the Obligation of the
Company to Issue and Sell the Series D Preferred Shares and
Warrants. The obligation hereunder of the Company to issue and
sell the Series D Preferred Shares and Warrants to the Investors
is subject to the satisfaction, at or before any Closing Date, of
each of the conditions set forth below. These conditions are for
the Company's sole benefit and may be waived by the Company at
any time in its sole discretion.
(a) Accuracy of the Investors' Representations
and Warranties. The representations and warranties of the
Investors shall be true and correct in all material respects as
of the date when made and as of the Closing Date as though made
at that time (except for representations and warranties that
speak as of a particular date) and the Investors shall deliver to
the Company a certificate executed by an executive officer of
each such Investor to such effect.
(b) Performance by the Investors. Each of the
Investors shall have performed all agreements and satisfied all
conditions required to be performed or satisfied by the Investors
at or prior to any Closing Date and each of the Investors shall
deliver to the Company a certificate executed by an executive
officer of each such Investor to such effect.
(c) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this
Agreement.
Section 5.2 Conditions Precedent to the Obligation of the
Investors to Purchase the Series D Preferred Shares and Warrants.
The obligation hereunder of each of the Investors to acquire and
pay for the Series D Preferred Shares and Warrants is subject to
the satisfaction, at or before any Closing Date, of each of the
conditions set forth below. These conditions are for the
Investors' sole benefit and may be waived by the Investors at any
time in their sole discretion.
(a) Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company
shall be true and correct in all material respects as of the date
when made and as of the Closing Date as though made at that time
(except for representations and warranties that speak as of a
particular date) and the Company shall deliver to the Investors a
certificate executed by the Company's president and the Company's
chief executive officer to such effect.
(b) Performance by the Company. The Company
shall have performed all agreements and satisfied all conditions
required to be performed or satisfied by the Company at or prior
to any Closing Date and the Company shall deliver to the
Investors a certificate executed by the Company's president and
the Company's chief executive officer to such effect.
(c) Nasdaq. From the date hereof to any Closing
Date, trading in the Company's Common Stock shall not have been
suspended by the Commission or Nasdaq, and trading in securities
generally as reported by Nasdaq, shall not have been suspended or
limited, and the Common Stock shall not have been delisted from
any exchange or market where they are currently listed.
(d) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated or endorsed by any court or
governmental authority or competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this
Agreement.
(e) Opinion of Counsel. At the Closing, each of
the Investors shall have received an opinion of counsel to the
Company in substantially the form attached hereto as Exhibit D
and such other opinions, certificates and documents as each of
the Investors or its counsel shall reasonably require incident to
the Closing.
(f) Shareholders' Agreement. Each of the Company
and ▇▇▇▇▇▇ ▇▇▇▇▇▇, the Company's Chairman and President, and all
Investors shall have executed that certain Shareholders'
Agreement of even date herewith, the form of which is attached
hereto as Exhibit E.
(g) Secretary's Certificate. The Company shall
have delivered to each of the Investors a certificate in form and
substance reasonably satisfactory to each of the Investors,
executed by the Secretary of the Company on behalf of the
Company, certifying as to the incumbency of signing officers,
Charter, Bylaws, good standing and authorizing resolutions of the
Company, including the appointment of the Investors' nominees to
the Company's Board of Directors.
(h) Consents. All consents, acknowledgements,
approvals, permits and orders with respect to the transactions
contemplated hereby shall have been obtained.
(i) All dividends on the Series B Convertible
Preferred Stock and on the Series C Convertible Preferred Stock
accrued through and including December 31, 1999 shall have been
paid in full.
(j) Any and all adjustments to the Series B
Convertible Preferred Stock and to the Series C Convertible
Preferred Stock arising from events and circumstances through and
including Closing (including, without limitation, the
transactions contemplated in this Agreement) shall have been
effectuated and noticed to the holders of such securities.
(k) Other Certificates. Each of the Investors
shall have received such additional certificates, instruments and
other documents, in form and substance satisfactory to the each
of the Investors and counsel for the Investors as they shall have
reasonably requested in connection with the transactions
contemplated hereunder.
ARTICLE VI
Legend on Stock
Section 6.1. Certificates. Each certificate representing
the Series D Preferred Shares and, if appropriate, securities
issued upon conversion thereof, shall be stamped or otherwise
imprinted with a legend substantially in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. THEY MAY NOT BE SOLD OR
OFFERED FOR SALE EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SAID
ACT AND ANY APPLICABLE STATE SECURITIES LAW OR
AN APPLICABLE EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS.
Any Common Stock issued pursuant to conversion of the Series
D Preferred Shares shall bear a legend in the same form as the
legend on the Series D Preferred Shares.
ARTICLE VII
Termination
Section 7.1 Termination by Mutual Consent. This
Agreement may be terminated at any time prior to the Closing Date
by the mutual written consent of the Company and the Investors.
Section 7.2 Other Termination. This Agreement may be
terminated by action of the Board of Directors of the Company or
by the Investors at any time if the Closing shall not have been
consummated by May 31, 2000.
ARTICLE VIII
Miscellaneous
Section 8.1 Fees and Expenses. The Company shall pay the
fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by the Company
incident to the negotiation, preparation, execution, delivery and
performance of this Agreement, and shall promptly pay, or
reimburse the Investors for, all out-of-pocket fees and expenses
incurred by it, including, without limitation, the reasonable
fees and disbursements of its counsel, not to exceed an aggregate
of $20,000, in connection with such activities, and any other
documents or instruments required hereunder or thereunder,
whether or not the transactions contemplated hereunder are
consummated. The Company shall pay all stamp and other taxes and
duties levied in connection with the issuance of the Series D
Preferred Shares and Warrants pursuant hereto.
Section 8.2 Default.
(a) It shall constitute an Event of Default if
the Company shall fail to perform its obligations hereunder or
shall fail to perform its obligations to any holder of the Series
D Preferred Shares, as provided for in the Company's Articles of
Incorporation including the provisions set forth in Schedule II
hereto, and Warrants. If an Event of Default shall occur, the
Investors shall be entitled, to immediately commence legal action
to recover damages in respect of such default and/or to seek
injunctive relief.
(b) The Company and the Investors acknowledge and
agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent or cure breaches of the
provisions of this Agreement and to enforce specifically the
terms and provisions hereof, this being in addition to any other
remedy to which either of them may be entitled by law or equity.
(c) Each of the Company and the Investors
(i) hereby irrevocably submit to the jurisdiction of the United
States District Court for the Southern District of Florida for
the purposes of any suit, action or proceeding arising out of or
relating to this Agreement and (ii) hereby waive, and agree not
to assert in any such suit, action or proceeding, any claim that
it is not personally subject to the jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient
forum or that the venue of the suit, action or proceeding is
improper. Each of the Company and the Investors consent to
process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agree that such service
shall constitute good and sufficient service of process and
notice thereof. Nothing in this paragraph shall affect or limit
any right to serve process in any other manner permitted by law.
Section 8.3 Consent of Holders of Series B and Series C
Convertible Preferred Stock. The undersigned holders of Series B
Convertible Preferred Stock and Series C Convertible Preferred
Stock, as applicable, without limiting any rights to adjustment
of the foregoing securities arising from the issuance of any
Series D Preferred Stock or Warrants, hereby consent to the
issuance of Series D Preferred Stock and the Warrants and all
related transactions as contemplated by this Agreement.
Section 8.4 Entire Agreement; Amendment. This Agreement
together with the agreements and documents executed in connection
herewith and therewith, contains the entire understanding of the
parties with respect to the matters covered hereby and thereby
and, except as specifically set forth herein or therein, neither
the Company nor the Investors make any representation, warranty,
covenant or undertaking with respect to such matters. No
provision of this Agreement may be waived or amended other than
by a written instrument signed by the party against whom
enforcement of any such amendment or waiver is sought.
Section 8.5 Notices. Any notice or other communication
required or permitted to be given hereunder shall be in writing
and shall be effective upon actual receipt of such mailing. The
addresses for such communications shall be:
to the Company: ▇▇▇▇▇▇ Industries Inc.
▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief
Executive Officer
with copies to: ▇▇▇▇▇▇▇▇▇ Traurig, P.A.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
to the Investors: At the addresses set forth on the
signature page of this Agreement,
with copies to the Investor's
counsel if specified in writing by
such Investor.
with a copy to: Krugman & Kailes LLP
Park ▇▇ ▇▇▇▇ - ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Any party hereto may from time to time change its address for
notices by giving at least 10 days written notice of such changed
address to the other parties hereto.
Section 8.6 Indemnity. Each party shall indemnify each
other party against any loss, cost or damages (including
reasonable attorney's fees but excluding consequential damages)
incurred as a result of such parties' breach of any
representation, warranty, covenant or agreement in this
Agreement.
Section 8.7 Waivers. No waiver by any party of any
default with respect to any provision, condition or requirement
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 any party
to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter.
Section 8.8 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.
Section 8.9 Successors and Assigns. Except as otherwise
provided herein, this Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted
assigns. The parties hereto may amend this Agreement without
notice to or the consent of any third party.
Section 8.10 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.
Section 8.11 Governing Law. This Agreement shall be
governed by and construed and enforced in accordance with the
internal laws of the State of Florida.
Section 8.12 Survival. The representations and warranties
and the agreements and covenants of the Company and the Investors
contained herein shall survive the Closing.
Section 8.13 Execution. This Agreement may be executed in
two or more counterparts, all of which 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 any signature is delivered by
facsimile transmission, the party using such means of delivery
shall cause the manually executed signature page(s) to be
physically delivered to the other party within five days of the
execution hereof.
Section 8.14 Publicity. The Company agrees that it will
not disclose, and will not include in any public announcement,
the name of any of the Investors without their consent, unless
and until such disclosure is required by law or applicable
regulation, and then only to the extent of such requirement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
THE COMPANY:
▇▇▇▇▇▇ INDUSTRIES, INC.
By: s/▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Executive Officer
THE INVESTORS:
ENVIRONMENTAL OPPORTUNITIES FUND
II, L.P.
By: Fund II Mgt. Co., LLC
Its General Partner
Per: s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Manager
ENVIRONMENTAL OPPORTUNITIES
FUND II (INSTITUTIONAL), L.P.
By: Fund II Mgt. Co., LLC
Its General Partner
Per: s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Manager
Address:
▇/▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ Tower
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
HANSEATIC AMERICAS LDC
By: Hansabel Partners LLC
By: Hanseatic Corporation
By: s/▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President
Address:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
SCHEDULE I
LIST OF INVESTORS
Investor
Number of
Series D
Preferred
Shares
Warrants
Purchase
Price
Hanseatic Americas LDC. . . . . .
10,000
181,818
$1,000,000
Environmental Opportunities
Fund II, L.P.. . . . . . . . . .
2,140
38,909
$ 214,000
Environmental Opportunities Fund
II (Institutional), L.P.. . . . .
7,860
142,909
$ 786,000
20,000
363,636
$2,000,000
(..continued)