SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of the date of acceptance set
forth below, is entered into by and between VOXCOM HOLDINGS, INC., a Nevada
corporation, with headquarters located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇,
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the "Company"), and each entity named on a signature page
hereto (each, a "Buyer").
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in accordance with and in reliance upon the exemption from securities
registration afforded, inter alia, by Rule 506 under Regulation D ("Regulation
D") as promulgated by the United States Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "1933 Act"), and/or
Section 4(2) of the 1933 Act; and
WHEREAS, the Buyer wishes to purchase, upon the terms and subject to the
conditions of this Agreement, shares of Series B Convertible Preferred Stock,
$0.0001 par value per share (the "Convertible Preferred Stock"), of the Company,
which which will be convertible into shares of Common Stock, $0.0001 par value
per share, of the Company (the "Common Stock"), upon the terms and subject to
the conditions of such Convertible Preferred Stock, and subject to acceptance of
this Agreement by the Company;
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. Purchase; Certain Definitions. (i) The undersigned hereby agrees to
purchase from the Company shares of the Convertible Preferred Stock in the
amount set forth on the signature page of this Agreement (the "Preferred
Stock"), out of a total offering of $3,500,000 of such Convertible Preferred
Stock, and having the terms and conditions set forth in the Certificate of
Designations, Preferences and Rights of Preferred Stock relating to the Series B
Preferred Stock of the Company attached hereto as Annex I (the "Certificate of
Designations"). The purchase price for the Preferred Stock shall be as set forth
on the signature page hereto and shall be payable in United States Dollars.
(ii) As used herein, the term "Securities" means the Preferred Stock and
the Common Stock issuable upon conversion of the Preferred Stock.
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(iii) As used herein, the term "Purchase Price" means the purchase price
for the Preferred Stock.
(iv) As used herein, the term "Closing Date" means the date of the closing
of the purchase and sale of the Preferred Stock, as provided herein.
(v) As used herein, the term "Market Price of the Common Stock" means (x)
the average closing bid price of the Common Stock for the five (5) trading days
ending on the trading day immediately before the date indicated in the relevant
provision hereof as reported by Bloomberg, LP or, if not so reported, as
reported on the over-the-counter market or (y) if the Common Stock is listed on
a stock exchange, the closing price on such exchange on the date indicated in
the relevant provision hereof, as reported in The Wall Street Journal.
(vi) As used herein, the term "Effective Date" means the effective date of
the Registration Statement covering the Registrable Securities (as those terms
are defined in the Registration Rights Agreement defined below).
b. Form of Payment; Delivery of Preferred Stock.
(i) The Buyer shall pay the Purchase Price for the Preferred Stock by
delivering immediately available good funds in United States Dollars to the
escrow agent (the "Escrow Agent") identified in the Joint Escrow Instructions
attached hereto as Annex II (the "Joint Escrow Instructions") on the date prior
to the Closing Date.
(ii) No later than the relevant Closing Date, but in any event promptly
following payment by the Buyer to the Escrow Agent of the relevant Purchase
Price, the Company shall deliver one or more certificates representing the
Preferred Stock, duly executed by or on behalf of the Company (collectively, the
"Certificate"), to the Escrow Agent.
(iii) By signing this Agreement, each of the Buyer and the Company, subject
to acceptance by the Escrow Agent, agrees to all of the terms and conditions of,
and becomes a party to, the Joint Escrow Instructions, all of the provisions of
which are incorporated herein by this reference as if set forth in full.
c. Method of Payment. Payment into escrow of the Purchase Price shall be
made by wire transfer of funds to:
Bank of New York
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
ABA# ▇▇▇▇▇▇▇▇▇
For credit to the account of ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Esqs.
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Account No.: [To be provided to the Buyer by ▇▇▇▇▇▇▇ & Prager]
Reference: Voxcom Holdings, Inc. Transaction
Not later than 5:00 p.m., New York time, on the date which is two (2) New York
Stock Exchange trading days after the Company shall have accepted this Agreement
and returned a signed counterpart of this Agreement to the Escrow Agent by
facsimile, the Buyer shall deposit with the Escrow Agent the Purchase Price for
the Preferred Stock in currently available funds. Time is of the essence with
respect to such payment, and failure by the Buyer to make such payment, shall
allow the Company to cancel this Agreement.
d. Escrow Property. The Purchase Price and the Certificate delivered to the
Escrow Agent as contemplated by Sections 1(b) and (c) hereof are referred to as
the "Escrow Property."
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees with, the
Company as follows:
a. Without limiting Buyer's right to sell the Common Stock pursuant to the
Registration Statement, the Buyer is purchasing the Preferred Stock and will be
acquiring the shares of Common Stock issuable upon conversion of the Preferred
Stock (the "Converted Shares") for its own account for investment only or as
agent for other "accredited investors" (as that term is used in paragraph 2(b)
below) and not with a view towards the public sale or distribution thereof and
not with a view to or for sale in connection with any distribution thereof.
b. The Buyer is (i) an "accredited investor" as that term is defined in
Rule 501 of the General Rules and Regulations under the 1933 Act by reason of
Rule 501(a)(3), (ii) experienced in making investments of the kind described in
this Agreement and the related documents, (iii) able, by reason of the business
and financial experience of its officers (if an entity) and professional
advisors (who are not affiliated with or compensated in any way by the Company
or any of its affiliates or selling agents), to protect its own interests in
connection with the transactions described in this Agreement, and the related
documents, and (iv) able to afford the entire loss of its investment in the
Securities.
c. All subsequent offers and sales of the Preferred Stock and the shares of
Common Stock representing the Converted Shares (such Common Stock sometimes
referred to as the "Shares") by the Buyer shall be made pursuant to registration
of the Shares under the 1933 Act or pursuant to an exemption from registration.
d. The Buyer understands that the Preferred Stock are being offered and
sold to it in reliance on specific exemptions from the registration requirements
of United States federal and
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state securities laws and that the Company is relying upon the truth and
accuracy of, and the Buyer's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of the Buyer set forth herein in
order to determine the availability of such exemptions and the eligibility of
the Buyer to acquire the Preferred Stock.
e. The Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Preferred Stock and the offer of
the Shares which have been requested by the Buyer, including Annex V hereto. The
Buyer and its advisors, if any, have been afforded the opportunity to ask
questions of the Company and have received complete and satisfactory answers to
any such inquiries. Without limiting the generality of the foregoing, the Buyer
has also had the opportunity to obtain and to review the Company's Form 10SB, as
filed with the SEC on May 15, 1998 (the "Company's SEC Documents").
f. The Buyer understands that its investment in the Securities involves a
high degree of risk.
g. The 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 Securities.
h. This Agreement has been duly and validly authorized, executed and
delivered on behalf of the Buyer and is a valid and binding agreement of the
Buyer enforceable in accordance with its terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors' rights generally.
i. Notwithstanding the provisions hereof or of the Preferred Stock, in no
event (except if the Company is in default under any of the terms of the
Certificate of Designations or any of the Transaction Agreements, as defined
below and the Buyer has asserted such default) shall the holder be entitled to
convert any Preferred Stock to the extent that, after such conversion, the sum
of (1) the number of shares of Common Stock beneficially owned by the Buyer and
its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of the
Preferred Stock), and (2) the number of shares of Common Stock issuable upon the
conversion of the Preferred Stock with respect to which the determination of
this proviso is being made, would result in beneficial ownership by the Buyer
and its affiliates of more than 9.99% of the outstanding shares of Common Stock
(after taking into account the shares to be issued to the Buyer upon such
conversion). For purposes of the proviso to the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), except as
otherwise provided in clause (1) of such proviso. The Buyer further agrees that
if the Buyer transfers or assigns any of the Preferred Stock to a party who or
which would not be considered an affiliate, such transfer or assignment shall be
made subject to the transferee's or assignee's specific agreement
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to be bound the provisions of this Section 2(i) as if such transferee or
assignee were a signatory to this Agreement.
j. So long as the Company is in compliance in all material respects with
its obligations to the Buyer under this Agreement and the other Transaction
Agreements, and so long as the Buyer owns any of the Preferred Shares, the Buyer
will not engage in any open market Short Sales of the Common Stock, other than
upon conversions of the Preferred Shares. As used herein, "Short Sale" has the
meaning provided in Rule 3b-3 under the 1934 Act.
3. COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants to the Buyer that, except as provided
in Annex V hereto:
a. Concerning the Preferred Stock and the Shares. The Preferred Stock has
been duly authorized, and when issued, will be duly and validly issued, fully
paid and non-assessable and will not subject the holder thereof to personal
liability by reason of being such holder. There are no preemptive rights of any
stockholder of the Company, as such, to acquire the Preferred Stock or the
Shares.
b. Reporting Company Status. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada and
has the requisite corporate power to own its properties and to carry on its
business as now being conducted. The Company is duly qualified as a foreign
corporation to do business and is in good standing in each jurisdiction where
the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have a material adverse effect on the business, operations
or condition (financial or otherwise) of the Company, individually, or together
with its subsidiaries, taken as a whole. The Company has registered its Common
Stock pursuant to Section 12 of the 1934 Act, and the Common Stock is listed and
traded on The NASDAQ/Bulletin Board Market. The Company has received no notice,
either oral or written, with respect to the continued eligibility of the Common
Stock for such listing, and the Company has maintained all requirements for the
continuation of such listing.
c. Authorized Shares. The Company has sufficient authorized and unissued
Shares as may be reasonably necessary to effect the conversion of the Preferred
Stock. The Converted Shares have been duly authorized and, when issued upon
conversion of, or as interest on, the Preferred Stock in accordance with the
terms of the Certificate of Designations will be duly and validly issued, fully
paid and non-assessable and will not subject the holder thereof to personal
liability by reason of being such holder.
d. Securities Purchase Agreement; Registration Rights Agreement and Stock.
This Agreement and the Registration Rights Agreement, the form of which is
attached hereto as Annex IV (the "Registration Rights Agreement"), and the
transactions contemplated thereby,
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have been duly and validly authorized by the Company, this Agreement has been
duly executed and delivered by the Company and this Agreement is, and the
Registration Rights Agreement, when executed and delivered by the Company, will
be, valid and binding agreements of the Company enforceable in accordance with
their respective terms, subject, as to enforceability, to general principles of
equity and to bankruptcy, insolvency, moratorium, and other similar laws
affecting the enforcement of creditors' rights generally; and the Preferred
Stock will be duly and validly authorized and, when executed and delivered on
behalf of the Company in accordance with this Agreement, will be a valid and
binding obligation of the Company in accordance with its terms, subject to
general principles of equity and to bankruptcy, insolvency, moratorium, or other
similar laws affecting the enforcement of creditors' rights generally.
e. Non-contravention. The execution and delivery of this Agreement and the
Registration Rights Agreement by the Company, the issuance of the Securities,
and the consummation by the Company of the other transactions contemplated by
this Agreement, the Registration Rights Agreement, and the Preferred Stock do
not and will not conflict with or result in a breach by the Company of any of
the terms or provisions of, or constitute a default under (i) the articles of
incorporation or by-laws of the Company, each as currently in effect, (ii) any
indenture, mortgage, deed of trust, or other material agreement or instrument to
which the Company is a party or by which it or any of its properties or assets
are bound, including any listing agreement for the Common Stock except as herein
set forth, (iii) to its knowledge, any existing applicable law, rule, or
regulation or any applicable decree, judgment, or order of any court, United
States federal or state regulatory body, administrative agency, or other
governmental body having jurisdiction over the Company or any of its properties
or assets, or (iv) the Company's listing agreement for its Common Stock, except
such conflict, breach or default which would not have a material adverse effect
on the Company or on the transactions contemplated herein.
f. Approvals. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the stockholders of the Company is required to be obtained
by the Company for the issuance and sale of the Securities to the Buyer as
contemplated by this Agreement, except such authorizations, approvals and
consents that have been obtained.
g. SEC Filings. None of the Company's SEC Documents contained, at the time
they were filed, any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
made therein in light of the circumstances under which they were made, not
misleading. The Company has since April 1, 1997 timely filed all requisite
forms, reports and exhibits thereto with the SEC.
h. Absence of Certain Changes. Since December 31, 1997, there has been no
material adverse change and no material adverse development in the business,
properties, operations, condition (financial or otherwise), or results of
operations of the Company, except as disclosed in the Company's SEC Documents.
Since December 31, 1997, except as provided in the Company's SEC Documents, the
Company has not (i) incurred or become subject to any material liabilities
6
(absolute or contingent) except liabilities incurred in the ordinary course of
business consistent with past practices; (ii) discharged or satisfied any
material lien or encumbrance or paid any material obligation or liability
(absolute or contingent), other than current liabilities paid in the ordinary
course of business consistent with past practices; (iii) declared or made any
payment or distribution of cash or other property to stockholders with respect
to its capital stock, or purchased or redeemed, or made any agreements to
purchase or redeem, any shares of its capital stock; (iv) sold, assigned or
transferred any other tangible assets, or canceled any debts or claims, except
in the ordinary course of business consistent with past practices; (v) suffered
any substantial losses or waived any rights of material value, whether or not in
the ordinary course of business, or suffered the loss of any material amount of
existing business; (vi) made any changes in employee compensation, except in the
ordinary course of business consistent with past practices; or (vii) experienced
any material problems with labor or management in connection with the terms and
conditions of their employment.
i. Full Disclosure. There is no fact known to the Company (other than
general economic conditions known to the public generally or as disclosed in the
Company's SEC Documents) that has not been disclosed in writing to the Buyer
that (i) would reasonably be expected to have a material adverse effect on the
business or financial condition of the Company , (ii) would reasonably be
expected to materially and adversely affect the ability of the Company to
perform its obligations pursuant to this Agreement or any of the agreements
contemplated hereby (collectively, including this Agreement, the "Transaction
Agreements"), or (iii) would reasonably be expected to materially and adversely
affect the value of the rights granted to the Buyer in the Transaction
Agreements.
j. Absence of Litigation. Except as set forth in the Company's SEC
Documents, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board or body pending or, to the knowledge of the
Company, threatened against or affecting the Company, wherein an unfavorable
decision, ruling or finding would have a material adverse effect on the
properties, business or financial condition, or results of operation of the
Company and its subsidiaries taken as a whole or the transactions contemplated
by any of the Transaction Agreements or which would adversely affect the
validity or enforceability of, or the authority or ability of the Company to
perform its obligations under, any of the Transaction Agreements.
k. Absence of Events of Default. Except as set forth in Section 3(e)
hereof, no Event of Default (or its equivalent term), as defined in the
respective agreement to which the Company is a party, and no event which, with
the giving of notice or the passage of time or both, would become an Event of
Default (or its equivalent term) (as so defined in such agreement), has occurred
and is continuing, which would have a material adverse effect on the Company's
financial condition or results of operations.
l. Prior Issues. During the twelve (12) months preceding the date hereof,
the Company has not issued any convertible securities. The presently outstanding
unconverted principal amount of each such issuance as at June 1, 1998 are set
forth in Annex V.
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m. No Undisclosed Liabilities or Events. The Company has no liabilities or
obligations other than those disclosed in the Company's SEC Documents or those
incurred in the ordinary course of the Company's business since December 31,
1997, and which individually or in the aggregate, do not or would not have a
material adverse effect on the properties, business, condition (financial or
otherwise), or results of operations of the Company individually, or together
with its subsidiaries, taken as a whole. No event or circumstances has occurred
or exists with respect to the Company or its properties, business, condition
(financial or otherwise), or results of operations, which, under applicable law,
rule or regulation, requires public disclosure or announcement prior to the date
hereof by the Company but which has not been so publicly announced or disclosed.
There are no proposals currently under consideration or currently anticipated to
be under consideration by the Board of Directors or the executive officers of
the Company which proposal would (x) change the charter or by-laws of the
Company, each as currently in effect, with or without shareholder approval,
which change would reduce or otherwise adversely affect the rights and powers of
the shareholders of the Common Stock or (y) materially or substantially change
the business, assets or capital of the Company, including its interests in
subsidiaries.
n. No Default. The Company is not in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust or other material instrument
or agreement to which it is a party or by which it or its property is bound.
o. No Integrated Offering. Neither the Company nor any of its affiliates
nor any person acting on its or their behalf has, directly or indirectly, at any
time since April 1, 1997, made any offer or sales of any security or solicited
any offers to buy any security under circumstances that would eliminate the
availability of the exemption from registration under Rule 506 of Regulation D
in connection with the offer and sale of the Securities as contemplated hereby.
p. Dilution. The number of Shares issuable upon conversion of the Preferred
Stock may increase substantially in certain circumstances, including, but not
necessarily limited to, the circumstance wherein the trading price of the Common
Stock declines prior to the conversion of the Preferred Stock. The Company's
executive officers and directors have studied and fully understand the nature of
the Securities being sold hereby and recognize that they have a potential
dilutive effect. The board of directors of the Company has concluded, in its
good faith business judgment, that such issuance is in the best interests of the
Company. The Company specifically acknowledges that its obligation to issue the
Shares upon conversion of the Preferred Stock is binding upon the Company and
enforceable regardless of the dilution such issuance may have on the ownership
interests of other shareholders of the Company.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Transfer Restrictions. The Buyer acknowledges that (1) the Preferred
Stock have not been and are not being registered under the provisions of the
1933 Act and, except as
8
provided in the Registration Rights Agreement, the Shares have not been and are
not being registered under the 1933 Act, and may not be transferred unless (A)
subsequently registered thereunder or (B) the Buyer shall have delivered to the
Company and opinion of counsel, reasonably satisfactory in form, scope and
substance to the Company, to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration; (2) any sale of the Securities made in reliance on Rule 144
promulgated under the 1933 Act may be made only in accordance with the terms of
said Rule and further, if said Rule 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 used in
the 1933 Act, may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (3) neither the
Company nor any other person is under any obligation to register the Securities
(other than pursuant to the Registration Rights Agreement) under the 1933 Act or
to comply with the terms and conditions of any exemption thereunder.
b. Restrictive Legend. The Buyer acknowledges and agrees that the Preferred
Stock and, until such time as the Common Stock has been registered under the
1933 Act as contemplated by the Registration Rights Agreement and sold in
accordance with an effective Registration Statement, certificates and other
instruments representing any of the Securities shall bear a restrictive legend
in substantially the following form (and a stop-transfer order may be placed
against transfer of any such Securities):
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR
OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER
EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS
NOT REQUIRED.
c. Registration Rights Agreement. The parties hereto agree to enter into
the Registration Rights Agreement on or before the Closing Date.
d. Filings and Shareholder Consent. (i) The Company undertakes and agrees
to make all necessary filings in connection with the sale of the Preferred Stock
to the Buyer under any United States laws and regulations applicable to the
Company, or by any domestic securities exchange or trading market, and to
provide a copy thereof to the Buyer promptly after such filing.
(ii) The Company undertakes and agrees to take all steps necessary to have
a vote of the shareholders of the Company regarding authorization of the
Company's issuance to the holders of the Preferred Stock of shares of Common
Stock in excess of twenty percent (20%) of the outstanding shares of Common
Stock on the Closing Date on or before the Effective Date in accordance with
NASDAQ Rule 4301(c)(25)(H)(i)(d)(2). The Company will recommend to the
9
shareholders that such authorization be granted and will seek proxies from
shareholders not attending the meeting (if such meeting is required to
effectuate such authorization) naming a director or officer of the Company as
such shareholder's proxy and directing the proxy to vote, or giving the proxy
the authority to vote, in favor of such authorization. Upon determination that
the shareholders have voted in favor of such authorization, the Company shall
cause its counsel to issue to the Buyer an unqualified opinion (the
"Authorization Opinion") that such authorization has been duly adopted by all
necessary corporate action of the Company and that the Company will be able to
issue, without restriction as to the number of such shares, all shares of Common
Stock as may be issuable upon conversion of the Preferred Stock and without any
limits imposed by the Cap Regulations (as defined below) adopted on or before
and in effect on the date of the Authorization Opinion. The Authorization
Opinion shall state that the Buyer may rely thereon in connection with the
transactions contemplated regarding its holdings of the Preferred Stock. If, for
any reason, (x) the Authorization Opinion is not issued within five (5) business
days after such meeting, (y) the meeting is not held by the thirtieth day after
the Effective Date or (z) the requisite shareholder is not obtained at the
meeting, the Conversion Price shall be adjusted to ninety percent (90%) of what
the Conversion Price would have been in the absence of this provision.
(iii) In furtherance of the provisions of the immediately preceding
subparagraph (ii) hereof, the Company (a) commits to using its best efforts to
obtain any shareholder authorization contemplated by said subparagraph (ii) by
written consent of shareholders holding at least the minimum number of shares
necessary to take such action without a meeting of all shareholders and, if such
consent is not obtained, by vote of the shareholders at a meeting of
shareholders duly called and held, and (b) represents to the Buyer that the
Company has obtained the binding irrevocable commitment or proxy (each, a
"Principal Voter Proxy") of each Principal Voter (as defined below) that such
Principal Voter will vote in favor of any shareholder authorization contemplated
by said subparagraph (ii). A "Principal Voter" is a person who meets any one or
more of the following criteria: (A) a person who is a director or principal
officer of the Company (each, a "Company Principal") and who, directly or
indirectly, holds any shares of Common Stock of the Company; (B) a spouse of a
Company Principal (a "Principal's Spouse") who, directly or indirectly, holds
any shares of Common Stock of the Company, (C) a parent, sibling or child of a
Company Principal who resides in the household of a Company Principal or of a
Principal's Spouse (each, a "Principal's Relative") and who, directly or
indirectly, holds any shares of Common Stock or (D) any other person or entity,
including, without limitation, for profit or non-profit corporations,
partnerships and trusts, whose voting rights regarding Common Stock of the
Company is subject to the direction, control or other influence of any Company
Principal, Principal's Spouse or Principal's Relative. The Company will deliver
such Principal Voter Proxies to the Buyer or the Buyer's designee within ten
(10) business days after the Closing Date, together with an opinion of the
Company's counsel that each such Principal Voter Proxy is binding and
irrevocable and is enforceable or exercisable by the Buyer or the Buyer's
designee.
e. Reporting Status. So long as the Buyer beneficially owns any of the
Preferred Stock, the Company shall file, upon the effectiveness of the Company's
Form 10SB, all reports required to be filed with the SEC pursuant to Section 13
or 15(d) of the 1934 Act, and the
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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 thereunder
would permit such termination. The Company will take all reasonable action under
its control to continue the listing and trading of its Common Stock on The
NASDAQ/Bulletin Board Market and will comply in all material respects with the
Company's reporting, filing and other obligations under the by-laws or rules of
the National Association of Securities Dealers, Inc. ("NASD") or The
NASDAQ/Bulletin Board Market.
f. Use of Proceeds. The Company will use the proceeds from the sale of the
Preferred Stock (excluding amounts paid by the Company for legal fees, finder's
fees and escrow agent fees in connection with the sale of the Preferred Stock)
for internal working capital purposes and shall not, directly or indirectly, use
such proceeds for any loan to or investment in any other corporation,
partnership, enterprise or other person, including any of its affiliates, or to
repay any debt to any of its affiliates.
g. Certain Agreements. The Company covenants and agrees that, except as
provided in the immediately succeeding sentence, it will not, without the prior
written consent of the Buyer, enter into any subsequent or further offer or sale
of Common Stock or securities convertible into Common Stock with any third party
on any date which is earlier than one hundred eighty (180) days after the
Effective Date. Notwithstanding the foregoing provisions of this subparagraph
(g), the Company may complete an offering under Rule 504 of up to 30,000 shares
of Common Stock to an unrelated party.
h. Available Shares. The Company shall have at all times authorized and
reserved for issuance, free from preemptive rights, shares of Common Stock
sufficient to yield two hundred percent (200%) of the number of shares of Common
Stock issuable at conversion as may be required to satisfy the conversion rights
of the Buyer pursuant to the terms and conditions of the Preferred Stock.
i. Limitation on Issuance of Shares. The Company may be limited in the
number of shares of Common Stock it may issue by virtue of (i) the number of
authorized shares or (ii) the applicable rules and regulations of the principal
securities market on which the Common Stock is listed or traded (collectively,
the "Cap Regulations"). The Company agrees, whether or not provided in the
Certificate of Designations, that (i) the Company will take all steps reasonably
necessary to be in a position to issue shares of Common Stock on conversion of
the Preferred Stock without violating the Cap Regulations and (ii) if, despite
taking such steps, the Company still can not issue such shares of Common Stock
without violating the Cap Regulations, the holder of one or more shares of
Preferred Stock which can not be converted as result of the Cap Regulations
(each such share, an "Unconverted Preferred Stock") shall have the option,
exercisable in such holder's sole and absolute discretion, to elect either of
the following remedies:
(x) require the Company to issue shares of Common Stock in accordance
with such holder's notice of conversion at a conversion purchase price
equal to the average of the closing bid price per share of Common Stock for
any five (5)
11
consecutive trading days (subject to certain equitable adjustments for
certain events occurring during such period) during the sixty (60) trading
days immediately preceding the date of notice of conversion; or
(y) require the Company to redeem such share of Unconverted Preferred
Stock for an amount (the "Redemption Amount"), payable in cash, equal to:
V x M
------
CP
where:
"V" means the liquidation preference of a share of Unconverted
Preferred Stock plus any accrued but unpaid dividends thereon;
"CP" means the conversion price in effect on the date of redemption
(the "Redemption Date") specified in the notice from the holder of the
Unconverted Preferred Stock electing this remedy; and
"M" means the highest closing bid price per share of the Common Stock
during the period beginning on the Redemption Date and ending on the date
of payment of the Redemption Amount.
If a holder owns more than one share of Unconverted Preferred Stock, such holder
may elect one of the above remedies with respect to some of such shares of
Unconverted Preferred Stock and the other remedy with respect to other shares of
Unconverted Preferred Stock. The Certificate of Designations shall not contain
any provisions inconsistent with the above terms. The provisions of this
paragraph are not intended to limit the scope of the provisions otherwise
included in the Certificate of Designations.
5. TRANSFER AGENT INSTRUCTIONS.
a. Promptly following the delivery by the Buyer of the Purchase Price for
the Preferred Stock in accordance with Section 1(c) hereof, the Company will
irrevocably instruct its transfer agent to issue Common Stock from time to time
upon conversion of the Preferred Stock in such amounts as specified from time to
time by the Company to the transfer agent, bearing the restrictive legend
specified in Section 4(b) of this Agreement prior to registration of the Shares
under the 1933 Act, registered in the name of the Buyer or its nominee and in
such denominations to be specified by the Buyer in connection with each
conversion of the Preferred Stock. The Company warrants that no instruction
other than such instructions referred to in this Section 5 and stop transfer
instructions to give effect to Section 4(a) hereof prior to registration and
sale of the Shares under the 1933 Act will be given by the Company to the
transfer agent and that the Shares shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in this
12
Agreement, the Registration Rights Agreement, and applicable law. Nothing in
this Section shall affect in any way the Buyer's obligations and agreement to
comply with all applicable securities laws upon resale of the Securities. If the
Buyer provides the Company with an opinion of counsel reasonably satisfactory to
the Company that registration of a resale by the Buyer of any of the Securities
in accordance with clause (1)(B) of Section 4(a) of this Agreement is not
required under the 1933 Act, the Company shall (except as provided in clause (2)
of Section 4(a) of this Agreement) permit the transfer of the Securities and, in
the case of the Converted Shares, promptly instruct the Company's transfer agent
to issue one or more certificates for Common Stock without legend in such name
and in such denominations as specified by the Buyer.
b. (i) The Company will permit the Buyer to exercise its right to convert
the Preferred Stock by telecopying or delivering an executed and completed
Notice of Conversion to the Company and delivering, within five (5) business
days thereafter, the original Preferred Stock being converted to the Company by
express courier, with a copy to the transfer agent.
(ii) The term "Conversion Date" means, with respect to any conversion
elected by the holder of the Preferred Stock, the date specified in the Notice
of Conversion, provided the copy of the Notice of Conversion is telecopied to or
otherwise delivered to the Company in accordance with the provisions hereof so
that is received by the Company on or before such specified date.
(iii) The Company shall, at its expense, take all actions and use all
means necessary and diligent to cause its transfer agent to transmit the
certificates representing the Converted Shares issuable upon conversion of any
Preferred Stock (together with Preferred Stock not being so converted) to the
Buyer via express courier, by electronic transfer or otherwise, within three (3)
business days (such third business day, the "Delivery Date") after (A) the
business day on which the Company has received both of the Notice of Conversion
(by facsimile or other delivery) and the original Preferred Stock being
converted (and if the same are not delivered to the Company on the same date,
the date of delivery of the second of such items) or (B) the date a dividend
payment on the Preferred Stock, which the Company has elected to pay by the
issuance of Common Stock, as contemplated by the Preferred Stock, was due.
c. The Company understands that a delay in the issuance of the Shares of
Common Stock beyond the Delivery Date could result in economic loss to the
Buyer. As compensation to the Buyer for such loss, the Company agrees to pay
late payments to the Buyer for late issuance of Shares upon Conversion in
accordance with the following schedule (where "No. Business Days Late" is
defined as the number of business days beyond two (2) business days from the
Delivery Date):
Late Payment For Each $10,000 of
Preferred Stock Liquidation
Preference or Interest
No. Business Days Late Amount Being Converted
13
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 +$200 for each Business
Day Late beyond 10 days
The Company shall pay any payments incurred under this Section in immediately
available funds upon demand. Nothing herein shall limit the Buyer's right to
pursue actual damages for the Company's failure to issue and deliver the Common
Stock to the Buyer. Furthermore, in addition to any other remedies which may be
available to the Buyer, in the event that the Company fails for any reason to
effect delivery of such shares of Common Stock within two (2) business days
after the Delivery Date, the Buyer will be entitled to revoke the relevant
Notice of Conversion by delivering a notice to such effect to the Company
whereupon the Company and the Buyer shall each be restored to their respective
positions immediately prior to delivery of such Notice of Conversion.
d. If, by the relevant Delivery Date, the Company fails for any reason to
deliver the Shares to be issued upon conversion of a Preferred Stock and after
such Delivery Date, the holder of the Preferred Stock being converted (a
"Converting Holder") purchases, in an open market transaction or otherwise,
shares of Common Stock (the "Covering Shares") in order to make delivery in
satisfaction of a sale of Common Stock by the Converting Holder (the "Sold
Shares"), which delivery such Converting Holder anticipated to make using the
Shares to be issued upon such conversion (a "Buy-In"), the Company shall pay to
the Converting Holder, in addition to all other amounts contemplated in other
provisions of the Transaction Agreements, and not in lieu thereof, the Buy-In
Adjustment Amount (as defined below). The "Buy-In Adjustment Amount" is the
amount equal to the excess, if any, of (x) the Converting Holder's total
purchase price (including brokerage commissions, if any) for the Covering Shares
over (y) the net proceeds (after brokerage commissions, if any) received by the
Converting Holder from the sale of the Sold Shares. The Company shall pay the
Buy-In Adjustment Amount to the Company in immediately available funds
immediately upon demand by the Converting Holder. By way of illustration and not
in limitation of the foregoing, if the Converting Holder purchases shares of
Common Stock having a total purchase price (including brokerage commissions) of
$11,000 to cover a Buy-In with respect to shares of Common Stock it sold for net
proceeds of $10,000, the Buy-In Adjustment Amount which Company will be required
to pay to the Converting Holder will be $1,000.
e. In lieu of delivering physical certificates representing the Common
Stock issuable upon conversion, provided the Company's transfer agent is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer program, upon request of the Buyer and its compliance with the
provisions contained in this paragraph, so long as the certificates therefor
14
do not bear a legend and the Buyer thereof is not obligated to return such
certificate for the placement of a legend thereon, the Company shall use its
best efforts to cause its transfer agent to electronically transmit the Common
Stock issuable upon conversion to the Buyer by crediting the account of Buyer's
Prime Broker with DTC through its Deposit Withdrawal Agent Commission system.
f. The Company will authorize its transfer agent to give information
relating to the Company directly to the Buyer or the Buyer's representatives
upon the request of the Buyer or any such representative. The Company will
provide the Buyer with a copy of the authorization so given to the transfer
agent.
15
6. DELIVERY INSTRUCTIONS.
The Preferred Stock shall be delivered by the Company to the Escrow Agent
pursuant to Section 1(b) hereof, on a delivery against payment basis, no later
than the Closing Date.
7. CLOSING DATE.
a. The Closing Date shall occur on the date which is the first NYSE trading
day after the fulfillment or waiver of all closing conditions pursuant to
Sections 8 and 9 hereof or such other date and time as is mutually agreed upon
by the Company and the Buyer.
b. The closing of the purchase and issuance of Preferred Stock shall occur
on the Closing Date at the offices of the Escrow Agent and shall take place no
later than 12:00 Noon, New York time, on such day or such other time as is
mutually agreed upon by the Company and the Buyer.
c. Notwithstanding anything to the contrary contained herein, the Escrow
Agent will be authorized to release the Escrow Property only upon satisfaction
of the conditions set forth in Sections 8 and 9 hereof. The Certificates
representing the Preferred Stock shall be delivered by the Company to the Escrow
Agent pursuant to Section 1(b) hereof no later than the Closing Date.
8. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell the Preferred
Stock to the Buyer pursuant to this Agreement on the Closing Date is conditioned
upon:
a. The execution and delivery of this Agreement by the Buyer;
b. Delivery by the Buyer to the Escrow Agent of good funds as payment in
full of an amount equal to the purchase price for the Preferred Stock in
accordance with this Agreement;
c. The accuracy on such Closing Date of the representations and warranties
of the Buyer contained in this Agreement, each as if made on such date, and the
performance by the Buyer on or before such date of all covenants and agreements
of the Buyer required to be performed on or before such date; and
d. There shall not be in effect any law, rule or regulation prohibiting or
restricting the transactions contemplated hereby, or requiring any consent or
approval which shall not have been obtained.
9. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
16
The Company understands that the Buyer's obligation to purchase the
Preferred Stock on the Closing Date is conditioned upon:
a. The execution and delivery of this Agreement and the Registration Rights
Agreement by the Company;
b. Delivery by the Company to the Escrow Agent of the Certificate
representing the Preferred Stock in accordance with this Agreement;
c. The accuracy in all material respects on the Closing Date of the
representations and warranties of the Company contained in this Agreement. each
as if made on such date, and the performance by the Company on or before such
date of all covenants and agreements of the Company required to be performed on
or before such date;
d. On the Closing Date, the Buyer shall have received an opinion of counsel
for the Company, dated the Closing Date, in form, scope and substance reasonably
satisfactory to the Buyer, substantially to the effect set forth in Annex III
attached hereto; and
e. No statute, rule, regulation, executive order, decree, ruling or
injunction shall be enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction which prohibits or adversely
effects any of the transactions contemplated by this Agreement or the
Transaction Documents, and no proceeding or investigation shall have been
commenced or threatened which may have the effect of prohibiting or adversely
affecting any of the transactions contemplated by this Agreement or the
Transaction Documents.
10. GOVERNING LAW: MISCELLANEOUS.
a. This Agreement shall be governed by and interpreted in accordance with
the laws of the State of New York for contracts to be wholly performed in such
state and without giving effect to the principles thereof regarding the conflict
of laws. Each of the parties consents to the jurisdiction of the federal courts
whose districts encompass any part of the City of New York or the state courts
of the State of New York sitting in the City of New York in connection with any
dispute arising under this Agreement and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on forum non
conveniens, to the bringing of any such proceeding in such jurisdictions. To the
extent determined by such court, the Company shall reimburse the Buyer for any
reasonable legal fees and disbursements incurred by the Buyer in enforcement of
or protection of any of its rights under any of the Transaction Agreements.
b. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
17
c. 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 or the validity or
enforceability of this Agreement in any other jurisdiction.
d. This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto.
e. All pronouns and any variations thereof refer to the masculine, feminine
or neuter, singular or plural, as the context may require.
f. A facsimile transmission of this signed Agreement shall be legal and
binding on all parties hereto.
g. This Agreement may be signed in one or more counterparts, each of which
shall be deemed an original.
h. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.
i. 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 or the validity or
enforceability of this Agreement in any other jurisdiction.
j. This Agreement may be amended only by an instrument in writing signed by
the party to be charged with enforcement thereof.
k. In the event for any reason, any payment by or act of the Company or the
Buyer with respect to any of the Transaction Agreements shall result in payment
of interest which would exceed the limit authorized by or be in violation of the
law of the jurisdiction applicable to the Transaction Agreements, then ipso
facto the obligation of the Company to pay interest or perform such act or
requirement shall be reduced to the limit authorized under such law, so that in
no event shall the Company be obligated to pay any such interest, perform any
such act or be bound by any requirement which would result in the payment of
interest in excess of the limit so authorized. In the event any payment by or
act of the Company shall result in the extraction of a rate of interest in
excess of a sum which is lawfully collectible as interest, then such amount (to
the extent of such excess not returned to the Company) shall, without further
agreement or notice between or by the Company or the Buyer, be deemed applied to
the payment of the liquidation preference of the Preferred Stock, if any,
immediately upon receipt of such excess funds by the Buyer, with the same force
and effect as though the Company had specifically designated such sums to be so
applied and the Buyer had agreed to accept such sums as an interest-free
prepayment thereof. If any part of such excess remains after the liquidation
preference has been paid in full, whether by the provisions of
18
the preceding sentences of this paragraph (k) or otherwise, such excess shall be
deemed to be an interest-free loan from the Company to the Buyer, which loan
shall be payable immediately upon demand by the Company. The provisions of this
paragraph (k) shall control every other provision of the Transaction Agreements.
l. This Agreement supersedes all prior agreements and understandings among
the parties hereto with respect to the subject matter hereof.
11. NOTICES. Any notice required or permitted hereunder shall be given in
writing (unless otherwise specified herein) and shall be deemed effectively
given on the earliest of
(a) the date delivered, if delivered by personal delivery as against
written receipt therefor or by confirmed facsimile transmission,
(b) the seventh business day after deposit, postage prepaid, in the
United States Postal Service by registered or certified mail, or
(c) the third business day after mailing by international express
courier, with delivery costs and fees prepaid,
in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate by
ten (10) days' advance written notice similarly given to each of the other
parties hereto):
COMPANY: VOXCOM HOLDINGS, INC.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Secretary
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Glast, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
BUYER: At the address set forth on the signature page of this Agreement.
19
ESCROW AGENT: ▇▇▇▇▇▇▇ & Prager, Esqs.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's and the
Buyer's representations and warranties herein shall survive the execution and
delivery of this Agreement and the delivery of the Preferred Stock and payment
of the Purchase Price, and shall inure to the benefit of the Buyer and the
Company and their respective successors and assigns.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK.]
20
IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer by
one of its officers thereunto duly authorized as of the date set forth below.
NUMBER OF SHARES OF
PREFERRED STOCK TO BE PURCHASED: 200,000
AGGREGATE PURCHASE PRICE OF
SUCH PREFERRED STOCK: $2,000,000
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed on its behalf this13th day of June, 1998.
c/o ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & Co, Ltd Dominion Capital Fund, Ltd
------------------------------------ --------------------------------
Address Printed Name of Subscriber
▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Ont M54-2V2
By: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------------
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇ (Signature of Authorized Person)
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Agent
Nassau, Bahamas Printed Name and Title
-----------------------------------
Jurisdiction of Incorporation
or Organization
As of the date set forth below, the undersigned hereby accepts this Agreement
and represents that the foregoing statements are true and correct and that it
has caused this Securities Purchase Agreement to be duly executed on its behalf.
VOXCOM HOLDINGS, INC.
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------
Title: President
-------------------------------
Date: June 22, 1998
-------------------------------
IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer by
one of its officers thereunto duly authorized as of the date set forth below.
NUMBER OF SHARES OF
PREFERRED STOCK TO BE PURCHASED: 110,000
----------
AGGREGATE PURCHASE PRICE OF
SUCH PREFERRED STOCK: $ 1,100,000
----------
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed on its behalf this13th day of June, 1998.
c/o ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ & Co, Ltd Sovereign Partners Limited Partnership
----------------------------------- --------------------------------------
Address Printed Name of Subscriber
▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Ont M54-2V2
By: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------------------
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇ (Signature of Authorized Person)
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Agent
----------------------------------
Nassau, Bahamas Printed Name and Title
-----------------------------------
Jurisdiction of Incorporation
or Organization
As of the date set forth below, the undersigned hereby accepts this Agreement
and represents that the foregoing statements are true and correct and that it
has caused this Securities Purchase Agreement to be duly executed on its behalf.
VOXCOM HOLDINGS, INC.
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------
Title: President
------------------------
Date: June 22, 1998
------------------------