EXHIBIT 10.19
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SECURITIES PURCHASE AGREEMENT
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THIS SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of November
___, 2002, by and among ADVANCED COMMUNICATIONS TECHNOLOGIES, INC., a Florida
corporation, with headquarters located at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the "COMPANY"), and the BUYERS listed on Schedule I
attached hereto (individually, a "BUYER" or collectively "Buyers").
WITNESSETH:
WHEREAS, the Company and the Buyer(s) are executing and delivering this
Agreement in reliance upon an exemption from securities registration pursuant to
Section 4(2) and/or Rule 506 of Regulation D ("REGULATION D") as promulgated by
the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 ACT");
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Buyer(s),
as provided herein, and the Buyer(s) shall purchase up to Two Hundred Fifty
Thousand Dollars ($250,000) of ten percent (10%) secured convertible debentures
substantially in the form attached hereto as Exhibit A (the "SECURED CONVERTIBLE
DEBENTURES"), which shall be convertible into shares of the Company's common
stock, no par value per share (the "COMMON STOCK") (as converted, the
"CONVERSION SHARES"), for a total purchase price of up to Two Hundred Fifty
Thousand Dollars ($250,000) (the "PURCHASE PRICE"), in the respective amounts
set forth opposite each Buyer(s) name on Schedule I (the "SUBSCRIPTION AMOUNT");
the parties hereto acknowledging that of the Purchase Price, One Hundred Twenty
Five Thousand Dollars ($125,000) is additional debt financing, and One Hundred
Twenty Five Thousand Dollars ($125,000) is the roll-over of penalties and
interest arising from that certain Convertible Debenture in the original
principal amount of One Million Dollars ($1,000,000) issued by the Company to
the Buyer in January 2002; and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering an Investor
Registration Rights Agreement substantially in the form attached hereto as
EXHIBIT B (the "INVESTOR REGISTRATION RIGHTS AGREEMENT") pursuant to which the
Company has agreed to provide certain registration rights under the 1933 Act and
the rules and regulations promulgated there under, and applicable state
securities laws; and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Security Agreement
substantially in the form attached hereto as EXHIBIT C (the "SECURITY
AGREEMENT") pursuant to which the Company has agreed to provide the Buyer(s) a
security interest in the Pledged Collateral (as this term is defined in the
Security Agreement dated the date hereof); and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, certain shareholders of the Company are delivering to Cornell Capital
Partners LP ("CORNELL") irrevocable proxies representing 20,789,025 shares of
Common Stock copies of which are attached hereto.
WHEREAS, the aggregate proceeds of the sale of the Secured Convertible
Debentures contemplated hereby shall be held in escrow pursuant to the terms of
an Escrow Agreement contemporaneously executed by the parties with the execution
and delivery of this Agreement substantially in the form of the Escrow Agreement
attached hereto as Exhibit D (the "Escrow Agreement").
NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement the Company and the Buyer(s)hereby agree
as follows:
1. PURCHASE AND SALE OF SECURED CONVERTIBLE DEBENTURES.
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(a) PURCHASE OF SECURED CONVERTIBLE DEBENTURES. Subject to the
satisfaction (or waiver) of the terms and conditions of this Agreement, each
Buyer agrees, severally and not jointly, to purchase at Closing (as defined
herein below) and the Company agrees to sell and issue to each Buyer, severally
and not jointly, at Closing, Secured Convertible Debentures in amounts
corresponding with the Subscription Amount set forth opposite each Buyer's name
on Schedule I hereto. Upon execution hereof by a Buyer, the Buyer shall wire
transfer the Subscription Amount set forth opposite his name on Schedule I in
same-day funds or a check payable to "Wachovia Bank, N.A., as Escrow Agent for
Advanced Communications Technologies, Inc./Cornell Capital Partners, LP," which
Subscription Amount shall be held in escrow pursuant to the terms of the Escrow
Agreement (as hereinafter defined) and disbursed in accordance therewith.
Notwithstanding the foregoing, a Buyer may withdraw his Subscription Amount and
terminate this Agreement as to such Buyer at any time after the execution hereof
and prior to Closing (as hereinafter defined).
(b) CLOSING DATE. The closing of the purchase and sale of the Secured
Convertible Debentures (the "CLOSING") shall take place at 10:00 a.m. Eastern
Standard Time on November 22, 2002 (the "CLOSING DATE"), subject to notification
of satisfaction (or waiver) of the conditions to the Closing set forth in
Sections 6 and 7 below (or such later date as is mutually agreed to by the
Company and the Buyer(s)). The Closing shall occur on the Closing Date at the
offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇, ▇▇▇▇▇, ▇▇
▇▇▇▇▇ (or such other place as is mutually agreed to by the Company and the
Buyer(s)).
(c) ESCROW ARRANGEMENTS; FORM OF PAYMENT. Upon execution hereof by
Buyer(s) and pending Closing, the aggregate proceeds of the sale of the Secured
Convertible Debentures, shall be deposited in a non-interest bearing escrow
account with Wachovia Bank, N.A., as escrow agent ("ESCROW AGENT"), pursuant to
the terms of an escrow agreement between the Company, the Buyer(s) and the
Escrow Agent in the form attached hereto as EXHIBIT D. Subject to the
satisfaction of the terms and conditions of this Agreement, on the Closing Date,
(i) the Escrow Agent shall deliver to the Company in accordance with the terms
of the Escrow Agreement such aggregate proceeds for the Secured Convertible
Debentures to be issued and sold to such Buyer(s) at the Closing minus the fees
and costs of ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP in the amount of $47,500, by wire
transfer of immediately available funds in accordance with the Company's written
wire instructions, and (ii) the Company shall deliver to each Buyer, Secured
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Convertible Debentures which such Buyer(s) is purchasing in amounts indicated
opposite such Buyer's name on Schedule I, duly executed on behalf of the
Company.
(d) RIGHT OF REDEMPTION. Until February 22, 2003, the Company shall
have the right to redeem, upon written notice to the Buyer, the subscription
amount of each Buyer at a redemption price of one hundred twenty percent (120%)
of the subscription amount. After February 22, 2003, the Company shall have the
right to redeem, upon written notice to the Buyer, the subscription amount of
each Buyer at a redemption price of one hundred fifty percent (150%) of the
subscription amount.
(e) CONVERSION OF SECURED CONVERTIBLE DEBENTURES. In the event the
Company has not repurchased Two Hundred Fifty Thousand Dollars ($250,000) of the
Secured Convertible Debentures from the Buyer(s) on or before December 31, 2002,
or in the event of an earlier breach by the Company of this Agreement or any
other agreement with the Buyer(s), the Buyer(s) shall be entitled to convert the
Secured Convertible Debentures into shares of Common Stock of the Company at a
conversion price of $.001 per share (the "CONVERSION PRICE"). The Secured
Convertible Debentures shall automatically convert into shares of Common Stock
at the Conversion Price on the second (2nd) anniversary of the date hereof.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
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Each Buyer represents and warrants, severally and not jointly, that:
(a) INVESTMENT PURPOSE. Each Buyer is acquiring the Secured
Convertible Debentures and, upon conversion of the Secured Convertible
Debentures, the Buyer will acquire the Conversion Shares then issuable, for its
own account for investment only and not with a view towards, or for resale in
connection with, the public sale or distribution thereof, except pursuant to
sales registered or exempted under the 1933 Act; provided, however, that by
making the representations herein, such Buyer reserves the right to dispose of
the Conversion Shares at any time in accordance with or pursuant to an effective
registration statement covering such Conversion Shares or an available exemption
under the 1933 Act.
(b) ACCREDITED INVESTOR STATUS. Each Buyer is an "ACCREDITED
INVESTOR" as that term is defined in Rule 501(a)(3) of Regulation D.
(c) RELIANCE ON EXEMPTIONS. Each Buyer understands that the Secured
Convertible Debentures are being offered and sold to it in reliance on specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying in part upon the truth and
accuracy of, and such Buyer's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of such Buyer set forth herein in
order to determine the availability of such exemptions and the eligibility of
such Buyer to acquire such securities.
(d) INFORMATION. Each Buyer and its advisors (and his or, its
counsel), if any, have been furnished with all materials relating to the
business, finances and operations of the Company and information he deemed
material to making an informed investment decision regarding his purchase of the
Secured Convertible Debentures and the Conversion Shares, which have been
requested by such Buyer. Each Buyer and its advisors, if any, have been afforded
the opportunity to ask questions of the Company and its management. Neither such
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inquiries nor any other due diligence investigations conducted by such Buyer or
its advisors, if any, or its representatives shall modify, amend or affect such
Buyer's right to rely on the Company's representations and warranties contained
in Section 3 below. Each Buyer understands that its investment in the Secured
Convertible Debentures and the Conversion Shares involves a high degree of risk.
Each Buyer is in a position regarding the Company, which, based upon employment,
family relationship or economic bargaining power, enabled and enables such Buyer
to obtain information from the Company in order to evaluate the merits and risks
of this investment. Each Buyer has sought such accounting, legal and tax advice,
as it has considered necessary to make an informed investment decision with
respect to its acquisition of the Secured Convertible Debentures and the
Conversion Shares.
(e) NO GOVERNMENTAL REVIEW. Each Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Secured
Convertible Debentures or the Conversion Shares, or the fairness or suitability
of the investment in the Secured Convertible Debentures or the Conversion
Shares, nor have such authorities passed upon or endorsed the merits of the
offering of the Secured Convertible Debentures or the Conversion Shares.
(f) TRANSFER OR RESALE. Each Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Secured Convertible
Debentures have not been and are not being registered under the 1933 Act or any
state securities laws, and may not be offered for sale, sold, assigned or
transferred unless (A) subsequently registered thereunder, or (B) such Buyer
shall have delivered to the Company an opinion of counsel, in a generally
acceptable form, to the effect that such securities to be sold, assigned or
transferred may be sold, assigned or transferred pursuant to an exemption from
such registration requirements; (ii) any sale of such securities made in
reliance on Rule 144 under the 1933 Act (or a successor rule thereto) ("RULE
144") may be made only in accordance with the terms of Rule 144 and further, if
Rule 144 is not applicable, any resale of such securities under circumstances in
which the seller (or the person through whom the sale is made) may be deemed to
be an underwriter (as that term is defined in the ▇▇▇▇ ▇▇▇) may require
compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC there under; and (iii) neither the Company nor any other
person is under any obligation to register such securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption there under. The Company reserves the right to place stop transfer
instructions against the shares and certificates for the Conversion Shares.
(g) LEGENDS. Each Buyer understands that the certificates or other
instruments representing the Secured Convertible Debentures and or the
Conversion Shares shall bear a restrictive legend in substantially the following
form (and a stop transfer order may be placed against transfer of such stock
certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED SOLELY FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TOWARD RESALE AND MAY NOT BE
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OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE
SECURITIES LAWS.
The legend set forth above shall be removed and the Company within two (2)
business days shall issue a certificate without such legend to the holder of the
Conversion Shares upon which it is stamped, if, unless otherwise required by
state securities laws, (i) in connection with a sale transaction, provided the
Conversion Shares are registered under the 1933 Act or (ii) in connection with a
sale transaction, after such holder provides the Company with an opinion of
counsel, in form reasonably acceptable to the Company and its counsel, to the
effect that a public sale, assignment or transfer of the Conversion Shares may
be made without registration under the 1933 Act.
(h) AUTHORIZATION, ENFORCEMENT. This Agreement has been duly and
validly authorized, executed and delivered on behalf of such Buyer and is a
valid and binding agreement of such Buyer enforceable in accordance with its
terms, except as such enforceability may be limited by general principles of
equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies.
(i) RECEIPT OF DOCUMENTS. Each Buyer and his or its counsel has
received and read in their entirety: (i) this Agreement and each representation,
warranty and covenant set forth herein, the Investor Registration Rights
Agreement, the Security Agreement and the Escrow Agreement; (ii) all due
diligence and other information necessary to verify the accuracy and
completeness of such representations, warranties and covenants; (iii) the
Company's Form 10-KSB for the fiscal year ended June 30, 2001; and (iv) answers
to all questions each Buyer submitted to the Company regarding an investment in
the Company; and each Buyer has relied on the information contained therein and
has not been furnished any other documents, literature, memorandum or
prospectus. Each Buyer acknowledges that he is aware that the Company has
received a comment letter from the SEC requiring an amendment of the Company's
Form 10-KSB for the fiscal year ended June 30, 2001 and further acknowledges
that they are entering into this Agreement and purchasing the Secured
Convertible Debentures prior to the filing of such amendment. In addition, each
Buyer is aware that the Company has not filed its Form 10-KSB for the fiscal
year ended June 30,2002 and has not filed its Form 10-QSB for the quarter ended
September 30, 2002 and further acknowledges that they are entering into this
Agreement and purchasing the Secured Convertible Debentures prior to the filing
of such documents.
(j) DUE FORMATION OF CORPORATE AND OTHER BUYERS. If the Buyer(s) is a
corporation, trust, partnership or other entity that is not an individual
person, it has been formed and validly exists and has not been organized for the
specific purpose of purchasing the Secured Convertible Debentures and is not
prohibited from doing so.
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(k) NO LEGAL ADVICE FROM THE COMPANY. Each Buyer acknowledges, that
it had the opportunity to review this Agreement and the transactions
contemplated by this Agreement with his or its own legal counsel and investment
and tax advisors. Each Buyer is relying solely on such counsel and advisors and
not on any statements or representations of the Company or any of its
representatives or agents for legal, tax or investment advice with respect to
this investment, the transactions contemplated by this Agreement or the
securities laws of any jurisdiction.
(l) NOTIFICATION OF TERMINATION OF LICENSE. Each Buyer acknowledges
that is has been informed that the Company has received notification of
termination of the certain License and Distribution Agreement dated July 5, 2000
between the Company and Advanced Communications Technologies (Australia) Pty.,
Ltd.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
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The Company represents and warrants to each of the Buyers that, except as
set forth in the SEC Documents (as defined herein):
(a) ORGANIZATION AND QUALIFICATION. The Company and its subsidiaries
are corporations duly organized and validly existing in good standing under the
laws of the jurisdiction in which they are incorporated, and have the requisite
corporate power to own their properties and to carry on their business as now
being conducted. Each of the Company and its subsidiaries 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 by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the Company and its
subsidiaries taken as a whole.
(b) AUTHORIZATION, ENFORCEMENT, COMPLIANCE WITH OTHER INSTRUMENTS.
(i) The Company has the requisite corporate power and authority to enter into
and perform this Agreement, the Investor Registration Rights Agreement, the
Secured Convertible Debentures, the Escrow Agreement, the Security Agreement and
any related agreements, and to issue the Secured Convertible Debentures and the
Conversion Shares in accordance with the terms hereof and thereof, (ii) the
execution and delivery of this Agreement, the Investor Registration Rights
Agreement, the Escrow Agreement, the Security Agreement and any related
agreements by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including, without limitation, the issuance of
the Secured Convertible Debentures and the Conversion Shares, have been duly
authorized by the Company's Board of Directors and except for shareholder
approval of an increase in the authorized Common Stock of the Company, no
further consent or authorization is required by the Company, its Board of
Directors or its stockholders, (iii) this Agreement and the Investor
Registration Rights Agreement, the Secured Convertible Debentures, the Escrow
Agreement, the Security Agreement and any related agreements have been duly
executed and delivered by the Company, (iv) this Agreement, the Investor
Registration Rights Agreement, the Secured Convertible Debentures, the Escrow
Agreement, the Security Agreement and any related agreements constitute the
valid and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
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reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies.
(c) CAPITALIZATION. The authorized capital stock of the Company
consists of 200,000,000 shares of Common Stock, no par value per share, and
25,000,000 shares of Series A Preferred Stock, no par value per share ("SERIES A
PREFERRED STOCK"). As of the date hereof, the Company had approximately
118,852,622 shares of Common Stock issued and outstanding. None of the shares of
Series A Preferred Stock are issued and outstanding. All of such outstanding
shares have been validly issued and are fully paid and nonassessable. Except as
set forth in the SEC Documents, no shares of Common Stock are subject to
preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company. Except as set forth in the SEC Documents,
as of the date of this Agreement, (i) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company or any of its subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, except for those certain warrants for
6,440,500 shares of Common Stock of the Company exercisable at a price of $0.30
per share, (ii) there are no outstanding debt securities, except for that
certain Convertible Debenture in the original principal amount of $1,000,000
issued by the Company in January 2002 in favor of the Buyer, and (iii) there are
no agreements or arrangements under which the Company or any of its subsidiaries
is obligated to register the sale of any of their securities under the 1933 Act
(except pursuant to the Investor Registration Rights Agreement). Except as set
forth in the SEC Documents, there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Secured Convertible Debentures as described in this Agreement. The Company
has furnished to the Buyer true and correct copies of the Company's Certificate
of Incorporation, as amended and as in effect on the date hereof (the
"CERTIFICATE OF INCORPORATION"), and the Company's By-laws, as in effect on the
date hereof (the "BY-LAWS"), and the terms of all securities convertible into or
exercisable for Common Stock and the material rights of the holders thereof in
respect thereto other than stock options issued to employees and consultants.
(d) ISSUANCE OF SECURITIES. The Secured Convertible Debentures are
duly authorized and, upon issuance in accordance with the terms hereof, shall be
duly issued, fully paid and nonassessable, are free from all taxes, liens and
charges with respect to the issue thereof. Subject to the limit on the number of
available authorized shares of Common Stock, the Conversion Shares issuable upon
conversion of the Secured Convertible Debentures have been duly authorized and
reserved for issuance. Upon conversion or exercise in accordance with the
Secured Convertible Debentures the Conversion Shares will be duly issued, fully
paid and nonassessable.
(e) NO CONFLICTS. The execution, delivery and performance of this
Agreement, the Investor Registration Rights Agreement, the Secured Convertible
Debentures, the Escrow Agreement and the Security Agreement by the Company and
the consummation by the Company of the transactions contemplated hereby will not
(i) result in a violation of the Articles of Incorporation, any certificate of
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designations of any outstanding series of preferred stock of the Company or the
By-laws 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 or instrument to which the Company or any of its
subsidiaries is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws)
applicable to the Company or any of its subsidiaries or by which any property or
asset of the Company or any of its subsidiaries is bound or affected. Neither
the Company nor its subsidiaries is in violation of any term of or in default
under its Articles of Incorporation or By-laws or their organizational charter
or by-laws, respectively, or any material contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or any statute,
rule or regulation applicable to the Company or its subsidiaries. The business
of the Company and its subsidiaries is not being conducted, and shall not be
conducted in violation of any material law, ordinance, or regulation of any
governmental entity. Except as specifically contemplated by this Agreement and
as required under the 1933 Act and any applicable state securities laws, the
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency in order
for it to execute, deliver or perform any of its obligations under or
contemplated by this Agreement or the Investor Registration Rights Agreement in
accordance with the terms hereof or thereof. All consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected on or prior to
the date hereof. The Company and its subsidiaries are unaware of any facts or
circumstance, which might give rise to any of the foregoing. The Buyer, by
executing this Agreement, hereby consents to the Company entering into this
Agreement and all agreements to be entered into in connection herewith, and
consents to the transactions contemplated hereby and thereby.
(f) SEC DOCUMENTS; FINANCIAL STATEMENTS. Since January 1, 2001, the
company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC under the Securities Exchange Act of
1934, as amended (the "1934 ACT") (all of the foregoing filed prior to the date
hereof or amended after the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
reference therein, being hereinafter referred to as the "SEC DOCUMENTS"). The
Company has delivered to the Buyers or their representatives, or made available
through the SEC's website at ▇▇▇▇://▇▇▇.▇▇▇., true and complete copies of the
SEC Documents, except for such amendment as may be required by the SEC's comment
letter to the Company's Form 10-KSB for the fiscal year ended June 30, 2001. The
Company has delivered to the Buyer(s) true and complete copies of the financial
statements for the year ended June 30, 2001 (the "FINANCIAL STATEMENTS"). Such
Financial Statements have been prepared in accordance with generally accepted
accounting principles, consistently applied, 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 exclude 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 its operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal year-end
audit adjustments). No other information provided by or on behalf of the Company
to the Buyer including, without limitation, information referred to in this
Agreement, contains any untrue statement of a material fact or omits to state
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any material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(g) 10(b)-5. Except for the required amendments, the SEC Documents do
not include any untrue statements of material fact, nor do they omit to state
any material fact required to be stated therein necessary to make the statements
made, in light of the circumstances under which they are made, not misleading.
(h) ABSENCE OF LITIGATION. Except as set forth in the SEC Documents,
there is no action, suit, proceeding, inquiry or investigation before or by any
court, public board, government agency, self-regulatory organization or body
pending against or affecting the Company, the Common Stock or any of the
Company's subsidiaries, wherein an unfavorable decision, ruling or finding would
(i) have a material adverse effect on the transactions contemplated hereby (ii)
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under, this Agreement or any of the
documents contemplated herein, or (iii) except as expressly disclosed in the SEC
Documents, have a material adverse effect on the business, operations,
properties, financial condition or results of operation of the Company and its
subsidiaries taken as a whole.
(i) ACKNOWLEDGMENT REGARDING BUYER'S PURCHASE OF THE SECURED
CONVERTIBLE DEBENTURES. The Company acknowledges and agrees that the Buyer(s) is
acting solely in the capacity of an arm's length purchaser with respect to this
Agreement and the transactions contemplated hereby. The Company further
acknowledges that the Buyer(s) is not acting as a financial advisor or fiduciary
of the Company (or in any similar capacity) with respect to this Agreement and
the transactions contemplated hereby and any advice given by the Buyer(s) or any
of their respective representatives or agents in connection with this Agreement
and the transactions contemplated hereby is merely incidental to such Buyer's
purchase of the Secured Convertible Debentures or the Conversion Shares. The
Company further represents to the Buyer(s) that the Company's decision to enter
into this Agreement has been based solely on the independent evaluation by the
Company and its representatives.
(j) NO GENERAL SOLICITATION. Neither the Company, nor any of its
affiliates, nor 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 under the ▇▇▇▇ ▇▇▇) in connection with the offer or sale of the
Secured Convertible Debentures or the Conversion Shares.
(k) NO INTEGRATED OFFERING. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of the
Secured Convertible Debentures or the Conversion Shares under the 1933 Act or
cause this offering of the Secured Convertible Debentures or the Conversion
Shares to be integrated with prior offerings by the Company for purposes of the
1933 Act.
(l) EMPLOYEE RELATIONS. Neither the Company nor any of its
subsidiaries is involved in any labor dispute nor, to the knowledge of the
Company or any of its subsidiaries, is any such dispute threatened. None of the
Company's or its subsidiaries' employees is a member of a union and the Company
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and its subsidiaries believe that their relations with their employees are good.
(m) INTELLECTUAL PROPERTY RIGHTS. The Company and its subsidiaries
own or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service ▇▇▇▇ registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. The Company and its subsidiaries do not have any
knowledge of any infringement by the Company or its subsidiaries of trademark,
trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service ▇▇▇▇ registrations, trade secret or other
similar rights of others, and, to the knowledge of the Company there is no
claim, action or proceeding being made or brought against, or to the Company's
knowledge, being threatened against, the Company or its subsidiaries regarding
trademark, trade name, patents, patent rights, invention, copyright, license,
service names, service marks, service ▇▇▇▇ registrations, trade secret or other
infringement; and the Company and its subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.
(n) ENVIRONMENTAL LAWS. The Company and its subsidiaries are (i) in
compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval.
(o) TITLE. Any real property and facilities held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its subsidiaries.
(p) REGULATORY PERMITS. The Company and its subsidiaries possess all
material certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company nor any such subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.
(q) INTERNAL ACCOUNTING CONTROLS. The Company and each of its
subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, and (iii) the recorded amounts for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(r) NO MATERIAL ADVERSE BREACHES, ETC. Except as set forth in the SEC
Documents, neither the Company nor any of its subsidiaries is subject to any
charter, corporate or other legal restriction, or any judgment, decree, order,
10
rule or regulation which in the judgment of the Company's officers has or is
expected in the future to have a material adverse effect on the business,
properties, operations, financial condition, results of operations or prospects
of the Company or its subsidiaries. Except as set forth in the SEC Documents,
neither the Company nor any of its subsidiaries is in breach of any contract or
agreement which breach, in the judgment of the Company's officers, has or is
expected to have a material adverse effect on the business, properties,
operations, financial condition, results of operations or prospects of the
Company or its subsidiaries.
(s) TAX STATUS. The Company and each of its subsidiaries has made and
filed all federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject and (unless and
only to the extent that the Company and each of its subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
(t) CERTAIN TRANSACTIONS. Except for arm's length transactions
pursuant to which the Company makes payments in the ordinary course of business
upon terms no less favorable than the Company could obtain from third parties,
none of the officers, directors, or employees of the Company is presently a
party to any transaction with the Company (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director,
trustee or partner.
(u) FEES AND RIGHTS OF FIRST REFUSAL. Except as set forth in the SEC
Documents, the Company is not obligated to offer the securities offered
hereunder on a right of first refusal basis or otherwise to any third parties
including, but not limited to, current or former shareholders of the Company,
underwriters, brokers, agents or other third parties.
4. COVENANTS.
---------
(a) BEST EFFORTS. Each party shall use its best efforts timely to
satisfy each of the conditions to be satisfied by it as provided in Sections 6
and 7 of this Agreement.
(b) FORM D. If required, the Company agrees to file a Form D with
respect to the Secured Convertible Debentures as required under Regulation D and
to provide a copy thereof to each Buyer promptly after such filing. The Company
shall, on or before the Closing Date, take such action as the Company shall
reasonably determine is necessary to qualify the Secured Convertible Debentures,
or obtain an exemption for the Secured Convertible Debentures for sale to the
11
Buyers at the Closing pursuant to this Agreement under applicable securities or
"Blue Sky" laws of the states of the United States, and shall provide evidence
of any such action so taken to the Buyers on or prior to the Closing Date.
(c) REPORTING STATUS. Until the earlier of (i) the date as of which
the Buyer(s) may sell all of the Conversion Shares without restriction pursuant
to Rule 144(k) promulgated under the 1933 Act (or successor thereto), or (ii)
the date on which (A) the Buyer(s) shall have sold all the Conversion Shares and
(B) none of the Secured Convertible Debentures are outstanding (the
"REGISTRATION PERIOD"), the Company shall file in a timely manner all reports
required to be filed with the SEC pursuant to the 1934 Act and the regulations
of the SEC there under, and the Company shall not terminate its status as an
issuer required to file reports under the 1934 Act even if the 1934 Act or the
rules and regulations there under would otherwise permit such termination.
(d) USE OF PROCEEDS. The Company will use the proceeds from the sale
of the Secured Convertible Debentures for general corporate and working capital
purposes.
(e) RESERVATION OF SHARES. Subject to the limit on the Company's
authorized Common Stock, the Company shall take all action reasonably necessary
to at all times have authorized, and reserved for the purpose of issuance, such
number of shares of Common Stock as shall be necessary to effect the issuance of
the Conversion Shares. If at any time the Company does not have available such
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all of the Conversion Shares of the Company shall call and hold a
special meeting of the shareholders within ninety (90) days of such occurrence,
for the sole purpose of increasing the number of shares authorized. The
Company's management shall recommend to the shareholders to vote in favor of
increasing the number of shares of Common Stock authorized. Management shall
also vote all of its shares in favor of increasing the number of authorized
shares of Common Stock.
(f) LISTINGS OR QUOTATION. The Company shall promptly secure the
listing or quotation of the Conversion Shares upon each national securities
exchange, automated quotation system or The National Association of Securities
Dealers Inc.'s Over-The-Counter Bulletin Board or other market, if any, upon
which shares of Common Stock are then listed or quoted (subject to official
notice of issuance) and shall use its best efforts to maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all Conversion
Shares from time to time issuable under the terms of this Agreement.
(g) FEES AND EXPENSES. Each of the Company and the Buyer(s) shall pay
all costs and expenses incurred by such party in connection with the
negotiation, investigation, preparation, execution and delivery of this
Agreement, the Escrow Agreement, and the Investor Registration Rights Agreement.
The Buyer(s) shall be entitled to a ten percent (10%) discount on the Purchase
Price.
(h) CORPORATE EXISTENCE. So long as any of the Secured Convertible
Debentures remain outstanding, the Company shall not directly or indirectly
consummate any merger, reorganization, restructuring, consolidation, sale of all
or substantially all of the Company's assets or any similar transaction or
related transactions (each such transaction, a "SALE OF THE COMPANY") unless,
12
prior to the consummation of a Sale of the Company, the Company makes
appropriate provision to insure that, upon the consummation of such Sale of the
Company, each of the holders of the Secured Convertible Debentures will
thereafter have the right to acquire and receive such shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for the number of shares of Common Stock immediately theretofore acquirable and
receivable upon the conversion of such holder's Secured Convertible Debentures
had such Sale of the Company not taken place. In any such case, the Company will
make appropriate provision with respect to such holders' rights and interests to
insure that the provisions of this Section 4(h) will thereafter be applicable to
the Secured Convertible Debentures.
(i) TRANSACTIONS WITH AFFILIATES. So long as any Secured Convertible
Debentures are outstanding, the Company shall not, and shall cause each of its
subsidiaries not to, enter into, amend, modify or supplement, or permit any
subsidiary to enter into, amend, modify or supplement any agreement,
transaction, commitment, or arrangement with any of its or any subsidiary's
officers, directors, person who were officers or directors at any time during
the previous two (2) years, stockholders who beneficially own five percent (5%)
or more of the Common Stock, or Affiliates (as defined below) or with any
individual related by blood, marriage, or adoption to any such individual or
with any entity in which any such entity or individual owns a five percent (5%)
or more beneficial interest (each a "RELATED PARTY"), except for (a) customary
employment arrangements and benefit programs on reasonable terms, (b) any
investment in an Affiliate of the Company, (c) any agreement, transaction,
commitment, or arrangement on an arms-length basis on terms no less favorable
than terms which would have been obtainable from a person other than such
Related Party, (d) any agreement transaction, commitment, or arrangement which
is approved by a majority of the disinterested directors of the Company, for
purposes hereof, any director who is also an officer of the Company or any
subsidiary of the Company shall not be a disinterested director with respect to
any such agreement, transaction, commitment, or arrangement. "AFFILIATE" for
purposes hereof means, with respect to any person or entity, another person or
entity that, directly or indirectly, (i) has a ten percent (10%) or more equity
interest in that person or entity, (ii) has ten percent (10%) or more common
ownership with that person or entity, (iii) controls that person or entity, or
(iv) shares common control with that person or entity. "CONTROL" or "CONTROLS"
for purposes hereof means that a person or entity has the power, direct or
indirect, to conduct or govern the policies of another person or entity.
(j) TRANSFER AGENT. The Company covenants and agrees that, in the
event that the Company's agency relationship with the transfer agent should be
terminated for any reason prior to a date which is two (2) years after the
Closing Date, the Company shall immediately appoint a new transfer agent.
(k) RESTRICTION ON ISSUANCE OF THE COMMON STOCK. So long as any
Secured Convertible Debentures are outstanding, the Company shall not, without
the prior written consent of the Buyer(s): (i) issue or sell shares of Common
Stock or Preferred Stock, (ii) issue any warrant, option, right, contract, call,
or other security instrument granting the holder thereof, the right to acquire
Common Stock, or (iii) file any registration statement on Form S-8.
13
(l) Within three (3) business days of the date hereof the Company
shall file its Form 10-KSB for the fiscal year ended June 30, 2002 and an
amendment of its Form 10-KSB for the fiscal year ended June 30, 2001.
(m) The Company agrees to file a Proxy Statement or Information
Statement increasing its authorized Common Stock from 200,000,000 shares to
2,000,000,000 shares.
5. TRANSFER AGENT INSTRUCTIONS.
---------------------------
The Company shall issue irrevocable instructions in the form attached
hereto as EXHIBIT E to its transfer agent irrevocably appointing ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
LLP as its agent for purpose of having certificates issued, registered in the
name of the Buyer(s) or its respective nominee(s), for the Conversion Shares
representing such amounts of Secured Convertible Debentures as specified from
time to time by the Buyer(s) to the Company upon conversion of the Secured
Convertible Debentures (the "IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"). ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP shall be paid a cash fee of Fifty Dollars ($50) for every occasion
they act pursuant to the Irrevocable Transfer Agent Instructions. The Company
shall not change its transfer agent without the express written consent of the
Buyer(s), which may be withheld by the Buyer(s) in its sole discretion. Prior to
registration of the Conversion Shares under the 1933 Act, all such certificates
shall bear the restrictive legend specified in Section 2(g) of this Agreement.
The Company warrants that no instruction other than the Irrevocable Transfer
Agent Instructions referred to in this Section 5, and stop transfer instructions
to give effect to Section 2(f) hereof (in the case of the Conversion Shares
prior to registration of such shares under the ▇▇▇▇ ▇▇▇) will be given by the
Company to its transfer agent and that the Conversion Shares shall otherwise be
freely transferable on the books and records of the Company as and to the extent
provided in this Agreement and the Investor Registration Rights Agreement.
Nothing in this Section 5 shall affect in any way the Buyer's obligations and
agreement to comply with all applicable securities laws upon resale of
Conversion Shares. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Buyer by vitiating the
intent and purpose of the transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Section 5 will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section 5, that the
Buyer(s) shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
----------------------------------------------
The obligation of the Company hereunder to issue and sell the Secured
Convertible Debentures to the Buyer(s) at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion:
(a) Each Buyer shall have executed this Agreement, the Escrow
Agreement, the Investor Registration Rights Agreement and the Security Agreement
and delivered the same to the Company.
14
(b) The Buyer(s) shall have delivered to the Escrow Agent the
Purchase Price for the Secured Convertible Debentures in respective amounts as
set forth next to each Buyer as outlined on Schedule I attached hereto and the
Escrow Agent shall have delivered such funds to the Company by wire transfer of
immediately available U.S. funds pursuant to the wire instructions provided by
the Company.
(c) The representations and warranties of the Buyer(s) 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 specific date), and the Buyer(s) shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Buyer(s) at or prior to the Closing Date.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
------------------------------------------------
The obligation of the Buyer(s) hereunder to purchase the Secured
Convertible Debentures at the Closing is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions, provided that
these conditions are for the Buyer's sole benefit and may be waived by the
Buyer(s) at any time in its sole discretion:
(a) The Company shall have executed this Agreement, the Secured
Convertible Debenture the Escrow Agreement, the Irrevocable Transfer
Instructions, the Investor Registration Rights Agreement, and the Security
Agreement and delivered the same to the Buyer(s).
(b) The Company shall have filed a form UCC -1 with regard to the
Pledged Property and Pledged Collateral as detailed in the Security Agreement
dated the date hereof and provided proof of such filing to the Buyer(s).
(c) The Common Stock shall be authorized for quotation on The
National Association of Securities Dealers, Inc. OTC Bulletin Board, and trading
in the Common Stock shall not have been suspended for any reason.
(d) The representations and warranties of the Company shall be true
and correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality in Section
3 above, in which case, such representations and warranties shall be true and
correct without further qualification) 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 specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date. The Buyer shall
have received a certificate, executed by the President of the Company, dated as
of the Closing Date, to the foregoing effect and as to such other matters as may
be reasonably requested by the Buyer including, without limitation an update as
of the Closing Date regarding the representation contained in Section 3(c)
above.
15
(e) The Company shall have executed and delivered to the Buyer(s) the
Secured Convertible Debentures in the respective amounts set forth opposite each
Buyer(s) name on Schedule I attached hereto.
(f) Subsequent to the availability of authorized but unissued shares
of Common Stock, as of the Closing Date, the Company shall have reserved out of
its authorized and unissued Common Stock, solely for the purpose of effecting
the conversion of the Secured Convertible Debentures, shares of Common Stock to
effect the conversion of all of the Conversion Shares then outstanding.
(g) The Irrevocable Transfer Agent Instructions, in form and
substance satisfactory to the Buyer, shall have been delivered to and
acknowledged in writing by the Company's transfer agent.
8. INDEMNIFICATION.
---------------
(a) In consideration of the Buyer's execution and delivery of this
Agreement and acquiring the Secured Convertible Debentures and the Conversion
Shares hereunder, and in addition to all of the Company's other obligations
under this Agreement, the Company shall defend, protect, indemnify and hold
harmless the Buyer(s) and each other holder of the Secured Convertible
Debentures and the Conversion Shares, and all of their officers, directors,
employees and agents (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement) (collectively,
the "BUYER 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 Buyer
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 Buyer 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,
the Secured Convertible Debentures or the Investor Registration Rights
Agreement, the Security Agreement or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in this Agreement, the Secured
Convertible Debenture, the Investor Registration Rights Agreement or any other
certificate, instrument or document contemplated hereby or thereby, or (c) any
cause of action, suit or claim brought or made against such Buyer Indemnitee and
arising out of or resulting from the execution, delivery, performance or
enforcement of this Agreement or any other instrument, document or agreement
executed pursuant hereto by any of the Buyer Indemnities, any transaction
financed or to be financed in whole or in part, directly or indirectly, with the
proceeds of the issuance of the Secured Convertible Debentures or the status of
the Buyer or holder of the Secured Convertible Debentures or the Conversion
Shares, as a Buyer of Secured Convertible Debentures 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, which is permissible under
applicable law.
(b) In consideration of the Company's execution and delivery of this
Agreement, and in addition to all of the Buyer's other obligations under this
Agreement, the Buyer shall defend, protect, indemnify and hold harmless the
16
Company and all of its officers, directors, employees and agents (including,
without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the "Company Indemnitees") from
and against any and all Indemnified Liabilities incurred by the Company
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
Buyer(s) in this Agreement, the Investor Registration Rights Agreement or any
other certificate, instrument or document contemplated hereby or thereby
executed by the Buyer, (b) any breach of any covenant, agreement or obligation
of the Buyer(s) contained in this Agreement, the Investor Registration Rights
Agreement or any other certificate, instrument or document contemplated hereby
or thereby executed by the Buyer, or (c) any cause of action, suit or claim
brought or made against such Company Indemnitee based on material
misrepresentations or due to a material breach and arising out of or resulting
from the execution, delivery, performance or enforcement of this Agreement, the
Investor Registration Rights Agreement or any other instrument, document or
agreement executed pursuant hereto by any of the Company Indemnities. To the
extent that the foregoing undertaking by each Buyer may be unenforceable for any
reason, each Buyer shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities, which is permissible under
applicable law.
9. GOVERNING LAW: MISCELLANEOUS.
----------------------------
(a) GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Florida without regard
to the principles of conflict of laws. The parties further agree that any action
between them shall be heard in ▇▇▇▇▇▇ County, New Jersey, and expressly consent
to the jurisdiction and venue of the Superior Court of New Jersey, sitting in
▇▇▇▇▇▇ County and the United States District Court for the District of New
Jersey sitting in Newark, New Jersey for the adjudication of any civil action
asserted pursuant to this Paragraph.
(b) COUNTERPARTS. This Agreement may be executed in two or more
identical 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. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof.
(c) HEADINGS. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) SEVERABILITY. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
(e) ENTIRE AGREEMENT, AMENDMENTS. This Agreement supersedes all other
prior oral or written agreements between the Buyer(s), the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
17
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by an instrument in writing signed
by the party to be charged with enforcement.
(f) NOTICES. Any notices, consents, waivers, or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon confirmation of receipt, when sent by facsimile;
(iii) three (3) days after being sent by U.S. certified mail, return receipt
requested, or (iv) one (1) day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
If to the Company, to: Advanced Communications Technologies, Inc.
c/o Danson Partners, LLC
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, President and
Chief Financial Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ - ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Escrow Agent: Wachovia Bank, N. A.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
If to the Buyer(s), to its address and facsimile number on Schedule I, with
copies to the Buyer's counsel as set forth on Schedule I. Each party shall
provide five (5) days' prior written notice to the other party of any change in
address or facsimile number.
18
(g) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns.
Neither the Company nor any Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other party
hereto.
(h) 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.
(i) SURVIVAL. Unless this Agreement is terminated under Section 9(l),
the representations and warranties of the Company and the Buyers contained in
Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and 9,
and the indemnification provisions set forth in Section 8, shall survive the
Closing for a period of one (1) year following the date on which the Secured
Convertible Debentures are converted in full. The Buyer(s) shall be responsible
only for its own representations, warranties, agreements and covenants
hereunder.
(j) PUBLICITY. The Company and the Buyer(s) shall have the right to
approve, before issuance any press release or any other public statement with
respect to the transactions contemplated hereby made by any party; provided,
however, that the Company shall be entitled, without the prior approval of the
Buyer(s), to issue any press release or other public disclosure with respect to
such transactions required under applicable securities or other laws or
regulations (the Company shall use its best efforts to consult the Buyer(s) in
connection with any such press release or other public disclosure prior to its
release and Buyer(s) shall be provided with a copy thereof upon release
thereof).
(k) FURTHER ASSURANCES. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(l) TERMINATION. In the event that the Closing shall not have
occurred with respect to the Buyers on or before five (5) business days from the
date hereof due to the Company's or the Buyer's failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the non-breaching party's
failure to waive such unsatisfied condition(s)), the non-breaching party shall
have the option to terminate this Agreement with respect to such breaching party
at the close of business on such date without liability of any party to any
other party; provided, however, that if this Agreement is terminated pursuant to
this Section 9(l), the Company shall remain obligated to reimburse the Buyer(s)
for the expenses described in Section 4(g) above.
(m) NO STRICT CONSTRUCTION. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
[REMAINDER PAGE INTENTIONALLY LEFT BLANK]
19
IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY:
ADVANCED COMMUNICATIONS
TECHNOLOGIES, INC.
By:
--------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: President and Chief Financial Officer
BUYER:
CORNELL CAPITAL PARTNERS, LP
BY: YORKVILLE ADVISORS, LLC
ITS: GENERAL PARTNER
By:
--------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Portfolio Manager
20
EXHIBIT A
FORM OF SECURED CONVERTIBLE DEBENTURE
-------------------------------------
21
EXHIBIT B
FORM OF INVESTOR REGISTRATION RIGHTS AGREEMENT
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B-1
EXHIBIT C
FORM OF SECURITY AGREEMENT
--------------------------
C-1
EXHIBIT D
FORM OF ESCROW AGREEMENT
------------------------
D-1
EXHIBIT E
TRANSFER AGENT INSTRUCTIONS
---------------------------
E-1
SCHEDULE I
----------
SCHEDULE OF BUYERS
------------------
Amount of
Name Signature Address/Facsimile Number of Buyer Subscription
------------------- ---------------------- ----------------------------------- --------------
SCHEDULE I-1