CONVERTIBLE DEBENTURES AND WARRANTS PURCHASE AGREEMENT
Between
Sedona Corporation
and
the Investors Signatory Hereto
CONVERTIBLE DEBENTURES AND WARRANTS PURCHASE AGREEMENT dated as of
November 22, 2000 (the "Agreement"), between the Investors signatory hereto
(each an "Investor" and together the "Investors"), and Sedona Corporation, a
corporation organized and existing under the laws of the Commonwealth of
Pennsylvania (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Investors,
and the Investors shall purchase, in the aggregate, (i) $3,000,000 principal
amount of Convertible Debentures (as defined below) and (ii) Warrants (as
defined below).
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Certain Definitions
Section 1.1. "Capital Shares" shall mean the Common Stock and any shares of any
other class of common stock whether now or hereafter authorized, having the
right to participate in the distribution of earnings and assets of the Company.
Section 1.2. "Capital Shares Equivalents" shall mean any securities, rights, or
obligations that are convertible into or exchangeable for or give any right to
subscribe for any Capital Shares of the Company or any warrants, options or
other rights to subscribe for or purchase Capital Shares or any such convertible
or exchangeable securities.
Section 1.3. "Closing" shall mean the closing of the purchase and sale of the
Convertible Debentures and Warrants pursuant to Section 2.1.
Section 1.4. "Closing Date" shall mean the date on which all conditions to the
Closing have been satisfied (as defined in Section 2.1(b) hereto) and the
Closing shall have occurred.
Section 1.5. "Common Stock" shall mean the Company's common stock, $0.001 par
value per share.
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Section 1.6. "Conversion Shares" shall mean the shares of Common Stock
registered pursuant to the Registration Statement issuable upon conversion of
the Convertible Debentures.
Section 1.7. "Convertible Debenture(s)" shall mean the 5% convertible
debenture(s) registered pursuant to the Registration Statement due 120 days from
their date of issuance, in the form of Exhibit A hereto.
Section 1.8. "Damages" shall mean any loss, claim, damage, judgment, penalty,
deficiency, liability, costs and expenses (including, without limitation,
reasonable attorney's fees and disbursements and reasonable costs and expenses
of expert witnesses and investigation).
Section 1.9. "Escrow Agent" shall have the meaning set forth in the Escrow
Agreement.
Section 1.10. "Escrow Agreement" shall mean the Escrow Agreement in
substantially the form of Exhibit B hereto executed and delivered
contemporaneously with this Agreement.
Section 1.11. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
Section 1.12. "Material Adverse Effect" shall mean any effect on the business,
operations, properties, prospects, stock price or financial condition of the
Company that is material and adverse to the Company and its subsidiaries and
affiliates, taken as a whole, and/or any condition, circumstance, or situation
that would prohibit or otherwise interfere with the ability of the Company to
enter into and perform any of its obligations under this Agreement, the
Convertible Debentures, the Warrants or the Escrow Agreement in any material
respect.
Section 1.13. "Maturity Date" shall mean the date on which the outstanding
principle amount and any accrued but unpaid interest of the Convertible
Debentures are due and payable as set forth in the Convertible Debenture.
Section 1.14. "Outstanding" when used with reference to shares of Common Stock
or Capital Shares (collectively the "Shares"), shall mean, at any date as of
which the number of such Shares is to be determined, all issued and outstanding
Shares, and shall include all such Shares issuable in respect of outstanding
scrip or any certificates representing fractional interests in such Shares;
provided, however, that "Outstanding" shall not mean any such Shares then
directly or indirectly owned or held by or for the account of the Company.
Section 1.15. "Person" shall mean an individual, a corporation, a partnership, a
limited liability company, an association, a trust or other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
Section 1.16. "Principal Market" shall mean the American Stock Exchange, the New
York Stock Exchange, the NASDAQ National Market, or the NASDAQ Small-Cap Market,
whichever is at the time the principal trading exchange or market for the Common
Stock, based upon share volume.
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Section 1.17. "Prospectus Supplement" shall mean the prospectus supplement to
the Registration Statement relating to the offer of the Convertible Debenture,
the Warrants, the Conversion Shares and the Warrant Shares.
Section 1.18. "Purchase Price" shall mean the sum of $2,500,000, in the
aggregate, which amount the Company and the Investor hereby acknowledge
represents an original issue discount to the Convertible Debentures.
Section 1.19. "Registration Statement" shall mean the registration statement on
Form S-3 (File No. 333-37678), dated May 23, 2000 and the amendment thereto
dated June 26, 2000, filed by the Company with the SEC under the Securities Act
of 1933, as amended (the "Securities Act"), to register with the Commission
pursuant to Rule 415 of the Securities Act the public offering of the Company's
debt and equity securities.
Section 1.21. "SEC" shall mean the Securities and Exchange Commission.
Section 1.22. "SEC Documents" shall mean the Registration Statement, the
Prospectus Supplement, the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1999 and each report, proxy statement or registration
statement filed by the Company with the SEC pursuant to the Exchange Act or the
Securities Act since the filing of the Annual Report through the date hereof.
Section 1.23. "Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
Section 1.24. "Securities" shall mean the Convertible Debentures, the Conversion
Shares, the Warrants and the Warrant Shares.
Section 1.25. "Shares" shall have the meaning set forth in the definition of
Outstanding herein.
Section 1.26. "Trading Day" shall mean any day during which the Principal Market
shall be open for business.
Section 1.27. "Warrants" shall mean the Commitment Warrants (as defined in
Section 2.2), substantially in the form of Exhibit C, and the Additional
Warrants (as defined in Section 2.2), substantially in the form of Exhibit D, to
purchase shares of Common Stock, both to be issued to the Investors pro-rata
hereunder and registered pursuant to the Registration Statement.
Section 1.28. "Warrant Shares" shall mean all shares of Common Stock registered
pursuant to the Registration Statement or other securities issued or issuable
pursuant to exercise of the Warrants.
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ARTICLE II
Purchase and Sale of Convertible Debentures and Warrants
Section 2.1. Investment.
(a) Upon the terms and subject to the conditions set forth herein, the
Company agrees to sell, and the Investors, severally and not jointly, agree to
purchase, in the aggregate, $3,000,000 principal amount of Convertible
Debentures together with the Warrants at the Purchase Price on the Closing Date.
Each Investor shall deliver to the Escrow Agent immediately available funds in
their proportionate amount of the Purchase Price as set forth on the signature
pages hereto and the Company shall deliver the Convertible Debentures evidencing
said principal sum to the Escrow Agent, to be held by the Escrow Agent pursuant
to the Escrow Agreement. Upon satisfaction of the conditions set forth in
Section 2.1(b), the Closing shall occur at the offices of the Escrow Agent at
which time the Escrow Agent (x) shall release the Convertible Debentures and the
Warrants to the Investors and (y) shall release the Purchase Price (after all
fees have been paid as set forth in the Escrow Agreement), pursuant to the terms
of the Escrow Agreement.
(b) The Closing is subject to the satisfaction or waiver by the party to be
benefited thereby of the following conditions:
(i) acceptance and execution by the Company and by the Investors,
of this Agreement and all exhibits hereto;
(ii) delivery into escrow by each Investor of immediately available
funds in their proportionate amount of the Purchase Price of
the applicable Convertible Debenture and Warrant, as more
fully set forth in the Escrow Agreement;
(iii) all representations and warranties of the Investors contained
herein shall remain true and correct as of the Closing Date
(as a condition to the Company's obligations);
(iv) all representations and warranties of the Company contained
herein shall remain true and correct as of the Closing Date
(as a condition to the Investors' obligations);
(v) the Company shall have obtained all permits and qualifications
required by any state for the offer and sale of the
Convertible Debentures and Warrants, or shall have the
availability of exemptions therefrom;
(vi) the sale and issuance of the Convertible Debentures and the
Warrants hereunder, and the proposed issuance by the Company
to the Investors of the Common Stock underlying the
Convertible Debentures and the Warrants upon the conversion or
exercise thereof shall be legally permitted by all laws and
regulations to which the Investors and the Company are subject
and there shall be no ruling, judgment or writ of any court
prohibiting the transactions contemplated by this Agreement;
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(vii) delivery of the original fully executed Convertible Debentures
and Warrants to the Escrow Agent;
(viii) delivery to the Escrow Agent of an opinion of ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, counsel to the Company, in the form of
Exhibit E hereto; and
(ix) Delivery of the Company's original executed Escrow Agreement.
Section 2.2. Warrants. At the Closing, the Company shall issue to the
Investors (i) a warrant to purchase, in the aggregate, up to a number of shares
of Common Stock equal to $450,000 divided by the closing bid price of the Common
Stock on the Principal Market on the Trading Day immediately prior to the
Closing Date (the "Commitment Warrant"), and (ii) a warrant to purchase, in the
aggregate, up to a number of shares of Common Stock equal to $300,000 divided by
the closing bid price of the Common Stock on the Principal Market on the Trading
Day immediately prior to the Closing Date (the "Additional Warrant"). The
Additional Warrant shall be exercisable only in the event that any outstanding
principal and accrued but unpaid interest on the Convertible Debenture is not
paid in full on or before 120 calendar days from the Closing Date. The exercise
price of the Warrants shall be 115% of the average of the closing bid prices of
the Common Stock on the Principal Market on the five (5) consecutive Trading
Days immediately prior to the Closing Date. The Company shall issue Warrants to
the Investors pro rata among all Investors in proportion to their respective
initial purchases of the Convertible Debentures pursuant to this Agreement.
Section 2.3. Liquidated Damages. The parties hereto acknowledge and agree
that the sums payable pursuant to this Agreement shall constitute liquidated
damages and not penalties. The parties further acknowledge that a breach by
either party of this Agreement, or exhibits thereto, (a) the amount of loss or
damages likely to be incurred is incapable or is difficult to precisely
estimate, (b) the amounts specified in such agreements bear a reasonable
proportion and are not plainly or grossly disproportionate to the probable loss
likely to be incurred by the Investors in connection with the failure by the
Company to maintain the effectiveness of the Registration Statement or to
deliver stock certificates upon any conversion, and (c) the parties are
sophisticated businesses and have been represented by sophisticated and able
legal and financial counsel and negotiated this Agreement at arm's length.
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ARTICLE III
Representations and Warranties of each Investor
Each Investor, severally and not jointly, represents and warrants to the Company
that:
Section 3.1. Organization. The Investor is duly organized, validly existing and
in good standing under the laws of its jurisdiction of organization.
Section 3.2. Authority. This Agreement and each agreement attached as an exhibit
hereto which is required to be executed by the Investor has been duly authorized
and validly executed and delivered by the Investor and is a valid and binding
agreement of the Investor enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
Section 3.3. Not an Affiliate. The Investor is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of the Securities Act) of the
Company.
Section 3.4. Absence of Conflicts. The execution and delivery of this Agreement
and each agreement which is attached as an exhibit hereto and executed by the
Investor in connection herewith, and the consummation of the transactions
contemplated hereby and thereby, and compliance with the requirements hereof and
thereof by the Investor, will not violate any law, rule, regulation, order,
writ, judgment, injunction, decree or award binding on the Investor or (a)
violate any provision of any indenture, instrument or agreement to which the
Investor is a party or is subject, or by which the Investor or any of its assets
is bound; (b) conflict with or constitute a material default thereunder; (c)
result in the creation or imposition of any lien pursuant to the terms of any
such indenture, instrument or agreement, or constitute a breach of any fiduciary
duty owed by the Investor to any third party; or (d) require the approval of any
third-party (which has not been obtained) pursuant to any material contract,
agreement, instrument, relationship or legal obligation to which the Investor is
subject or to which any of its assets, operations or management may be subject.
Section 3.5. Disclosure; Access to Information. The Investor has received all
documents, records, books and other publicly available information pertaining to
Investor's investment in the Company that have been requested by the Investor.
The Investor acknowledges delivery of the Prospectus Supplement. The Company is
subject to the periodic reporting requirements of the Exchange Act, and the
Investor has reviewed copies of all SEC Documents deemed relevant by Investor.
Section 3.6. No Misrepresentation. The representations and warranties of the
Investor contained in this Agreement, any schedule, annex or exhibit hereto and
any agreement, instrument or certificate furnished by the Investor to the
Company pursuant to this Agreement, do not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
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ARTICLE IV
Representations and Warranties of the Company
As of the date hereof, the Company represents and warrants to the
Investors that, except as set forth on the SEC Documents or on the Disclosure
Schedule prepared by the Company and attached hereto:
Section 4.1. Organization of the Company. The Company is a corporation duly
incorporated and existing in good standing under the laws of the Commonwealth of
Pennsylvania and has all requisite corporate authority to own its properties and
to carry on its business as now being conducted. Except as set forth in the SEC
Documents, the Company does not have any subsidiaries, and does not own more
that fifty percent (50%) of or control any other business entity. The Company is
duly qualified and is in good standing as a foreign corporation to do business
in every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, other than those in which the
failure so to qualify would not have a Material Adverse Effect.
Section 4.2. Authority. (i) The Company has the requisite corporate power and
corporate authority to conduct its business as now conducted, to enter into and
perform its obligations under this Agreement, the Escrow Agreement and the
Warrants, and to issue the Convertible Debentures, the Conversion Shares, the
Warrants and the Warrant Shares pursuant to their respective terms, (ii) the
execution, issuance and delivery of this Agreement, the Escrow Agreement, the
Convertible Debentures and the Warrants by the Company and the consummation by
it of the transactions contemplated hereby have been duly authorized by all
necessary corporate action and no further consent or authorization of the
Company or its Board of Directors or stockholders is required, and (iii) this
Agreement, the Escrow Agreement, the Warrants and the Convertible Debentures
have been duly executed and delivered by the Company and at the Closing shall
constitute valid and binding obligations of the Company enforceable against the
Company in accordance with their terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application and except the Company makes
no representation or warranty with respect to the enforceability of any terms of
these agreements which require the Company to issue Conversion Shares upon
conversion of the Convertible Debenture and Warrant Shares upon the exercise of
the Warrants notwithstanding the commencement of any case under 11 U.S.C. ss.
101 et seq. (the "Bankruptcy Code") or, in the event it is a debtor under the
Bankruptcy Code, to waive any rights to relief it may have under 11 U.S.C. ss.
362 in respect of the conversion of the Convertible Debenture and the exercise
of the Warrants, or which prohibit the Company from seeking affirmative judicial
relief from its obligations hereunder other than pursuant to the Bankruptcy
Code. The Company has duly and validly authorized and reserved for issuance
shares of Common Stock sufficient in number for the conversion of the
Convertible Debentures and the exercise of the Warrants. The Company understands
and acknowledges the potentially dilutive effect to the Common Stock of the
issuance of the Conversion Shares and Warrant Shares. The Company further
acknowledges that its obligation to issue Conversion Shares upon conversion of
the Convertible Debentures and Warrant Shares upon exercise of the Warrants in
accordance with this Agreement and the Convertible Debentures is absolute and
unconditional regardless of the dilutive effect that such issuance may have on
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the ownership interests of other stockholders of the Company, to the extent
permitted under the Bankruptcy Code, and notwithstanding the commencement of any
case under the Bankruptcy Code. The Company shall not seek affirmative judicial
relief from its obligations hereunder except pursuant to the Bankruptcy Code,
although the Company reserves the right to defend any actin brought by the
Investor or the third party. In the event the Company is a debtor under the
Bankruptcy Code, the Company hereby waives to the fullest extent permitted any
rights to relief it may have under 11 U.S.C. ss. 362 in respect of the
conversion of the Convertible Debentures and the exercise of the Warrants. The
Company agrees, without cost or expense to the Investors, to take or consent to
any and all action necessary to effectuate relief under 11 U.S.C. ss. 362.
Section 4.3. Capitalization. The authorized capital stock of the Company
consists of (i) 50,000,000 shares of Common Stock, $0.001 par value per share,
of which 30,194,514 shares were issued and outstanding as of November 20, 2000;
(ii)1,000,000 shares of Class A preferred stock, $2.00 par value per share, of
which (A) 500,000 have been designated as Series A Convertible Preferred Stock,
500,000 of which shares are issued and outstanding, (B) 1,000 have been
designated as Series F Convertible Preferred Stock, 781 of which shares are
issued and outstanding, (C) 3,000 have been designated as Series G Convertible
Preferred Stock, 1,725 of which shares are issued and outstanding and (D) 1,500
have been designated as Series H Convertible Preferred Stock, 1,500 of which
shares are issued and outstanding, and no other shares of preferred stock are
issued and outstanding. Except for (i) the outstanding Series A Convertible
Preferred Stock, Series F Convertible Preferred Stock, Series G Convertible
Preferred Stock and Series H Convertible Preferred Stock, (ii) as set forth in
any of the Company's SEC Documents and (iii) as set forth in the Disclosure
Schedule, there are no outstanding Capital Shares Equivalents nor any agreements
or understandings pursuant to which any Capital Shares Equivalents may become
outstanding. Except as otherwise set forth in the Disclosure Schedule, the
Company is not a party to any agreement granting to any person with respect to
any of its equity or debt securities registration rights that have not been
exercised as of the date hereof or anti-dilution rights that have not been
waived.
Section 4.4. Common Stock. The Company has registered its Common Stock under
Sections 12(b) or 12(g) of the Exchange Act, is in full compliance with its
reporting and filing obligations under the Exchange Act, and has not take any
action or filed any document (whether or not permitted by the Securities Act or
the Exchange Act or the rules promulgated thereunder) to terminate or suspend
such registration or to terminate or suspend its reporting and filing
obligations under the Exchange Act or Securities Act. The Company has taken all
action necessary to list its Common Stock on the Principal Market and is in
compliance in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Principal Market.
Section 4.5. SEC Documents. The Company has made available to the Investors true
and complete copies of the SEC Documents. The Company has not provided to the
Investors any information that, according to applicable law, rule or regulation,
should have been disclosed publicly prior to the date hereof by the Company, but
which has not been so disclosed. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the Securities Act
and the Exchange Act, and the rules and regulations of the SEC promulgated
thereunder and the SEC Documents did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
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necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial statements of the
Company included in the SEC Documents complied in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC or other applicable rules and regulations with respect thereto at the
time of such inclusion. Such financial statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except (i) as may be otherwise indicated in
such financial statements or the notes thereto or (ii) in the case of unaudited
interim statements, to the extent they 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 operations
and cash flows for the periods then ended (subject, in the case of unaudited
interim statements, to normal year-end audit adjustments). Neither the Company
nor any of its subsidiaries has any material indebtedness, obligations or
liabilities of any kind (whether accrued, absolute, contingent or otherwise, and
whether due or to become due) that would have been required to be reflected in,
reserved against or otherwise described in the financial statements or in the
notes thereto in accordance with GAAP, which was not fully reflected in,
reserved against or otherwise described in the financial statements or the notes
thereto included in the SEC Documents or was not incurred in the ordinary course
of business consistent with the Company's past practices since the last date of
such financial statements.
Section 4.6. Valid Issuances. When validly converted or exercised in accordance
with the terms of the Convertible Debentures or Warrant, respectively, the
Conversion Shares and Warrant Shares will be duly and validly issued, fully
paid, and non-assessable. Neither the sales of the Securities pursuant to, nor
the Company's performance of its obligations under, this Agreement, the Escrow
Agreement, the Convertible Debentures or the Warrants will (i) result in the
creation or imposition by the Company of any liens, charges, claims or other
encumbrances upon the Securities or, except as contemplated herein, any of the
assets of the Company, or (ii) entitle the holders of Outstanding Capital Shares
to preemptive or other rights to subscribe for or acquire the Capital Shares or
other securities of the Company. The Convertible Debentures, the Warrants, the
Conversion Shares and the Warrant Shares, shall not subject the Investors to
personal liability to the Company or its creditors by reason of the possession
thereof.
Section 4.7. No Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby, including without limitation the issuance of and payment of
interest upon the Securities, do not and will not (i) result in a violation of
the Company's Certificate of Incorporation or By-Laws or (ii) conflict with, or
constitute a material default (or an event that 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 material agreement, indenture or
instrument, or any "lock-up" or similar provision of any underwriting or similar
agreement to which the Company is a party, or (iii) result in a violation of any
federal, state or local law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations) applicable to the
Company or by which any material property or asset of the Company is bound or
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affected, nor is the Company otherwise in violation of, conflict with or default
under any of the foregoing (except in each case for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not have, individually or in the aggregate, a Material Adverse Effect);
provided, however, that the Company makes no representation or warranty that any
rights of the Investor under this Agreement, the Convertible Debenture or the
Warrants will be enforceable in any bankruptcy proceeding involving the Company,
nor that the enforcement of the rights of the Investor under this Agreement or
the Convertible Debenture does not conflict with or create an event of default
under the governing documents respecting the creation and sale of the Company's
Series F Convertible Preferred Stock, Series G Convertible Preferred Stock and
Series H Convertible Preferred Stock. The business of the Company is not being
conducted in violation of any law, ordinance or regulation of any governmental
entity, except for possible violations that either singly or in the aggregate
would not have a Material Adverse Effect. The Company is not required under any
Federal, state or local law, rule or regulation 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 this Agreement or issue and sell the Convertible Debentures or
the Warrants in accordance with the terms hereof (other than the filing of the
Prospectus Supplement and any state securities filings that may be required to
be made by the Company subsequent to Closing); provided that, for the purposes
of the representations made in this sentence, the Company is assuming and
relying upon the accuracy of the relevant representations and agreements of the
Investor herein.
Section 4.8. No Material Adverse Change. Except as set forth in the SEC
Documents, since the date of the financial statement contained in the Company's
most recently filed Form 10-Q (or Form 10-QSB) or Form 10-K (or Form 10-KSB), no
Material Adverse Effect has occurred or exists with respect to the Company.
Section 4.9. No Undisclosed Events or Circumstances. Except as set forth in the
SEC Documents, since the date of the financial statement contained in the
Company's most recently filed Form 10-Q (or Form 10-QSB) or Form 10-K (or Form
10-KSB), no event or circumstance has occurred or exists with respect to the
Company or its businesses, properties, prospects, operations or financial
condition, that, under any 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 in the SEC Documents.
Section 4.10. Litigation and Other Proceedings. Except as set forth in the SEC
Documents, there are no lawsuits or proceedings pending or, to the knowledge of
the Company, threatened, against the Company or any subsidiary, nor has the
Company received any written or oral notice of any such action, suit, proceeding
or investigation, which could reasonably be expected to have a Material Adverse
Effect. No judgment, order, writ, injunction or decree or award has been issued
by or, to the knowledge of the Company, requested of any court, arbitrator or
governmental agency which could result in a Material Adverse Effect.
Section 4.11. No Misleading or Untrue Communication. The Company and, to the
knowledge of the Company, any person representing the Company, or any other
person selling or offering to sell the Convertible Debentures or the Warrants in
connection with the transaction contemplated by this Agreement, have not made,
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at any time, any oral communication in connection with the offer or sale of the
same which contained any untrue statement of a material fact or omitted to state
any material fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading.
Section 4.12. Material Non-Public Information. The Company has not disclosed to
the Investors any material non-public information that (i) if disclosed, would
reasonably be expected to have a material effect on the price of the Common
Stock, or (ii) according to applicable law, rule or regulation, should have been
disclosed publicly by the Company prior to the date hereof but which has not
been so disclosed.
Section 4.13. Insurance. The Company and each subsidiary maintains property and
casualty, general liability, workers' compensation, environmental hazard,
personal injury and other similar types of insurance, as necessary to conduct
its business, with financially sound and reputable insurers that is adequate,
consistent with industry standards and the Company's historical claims
experience. The Company has not received notice from, and has no knowledge of
any threat by, any insurer (that has issued any insurance policy to the Company)
that such insurer intends to deny coverage under or cancel, discontinue or not
renew any insurance policy presently in force.
Section 4.14. Tax Matters.
(a) The Company and each subsidiary has filed all Tax Returns, which it
is required to file under applicable laws; all such Tax Returns are true and
accurate and have been prepared in compliance with all applicable laws; the
Company has paid all Taxes due and owing by it or any subsidiary (whether or not
such Taxes are required to be shown on a Tax Return) and have withheld and paid
over to the appropriate taxing authorities all Taxes which it is required to
withhold from amounts paid or owing to any employee, stockholder, creditor or
other third parties; and since December 31, 1999, the charges, accruals and
reserves for Taxes with respect to the Company (including any provisions for
deferred income taxes) reflected on the books of the Company are adequate to
cover any Tax liabilities of the Company if its current tax year were treated as
ending on the date hereof.
(b) No claim has been made by a taxing authority in a jurisdiction
where the Company does not file tax returns that the Company or any subsidiary
is or may be subject to taxation by that jurisdiction. There are, to the
Company's knowledge, no foreign, federal, state or local tax audits or
administrative or judicial proceedings pending or being conducted with respect
to the Company or any subsidiary; no information related to Tax matters has been
requested by any foreign, federal, state or local taxing authority; and, except
as disclosed above, no written notice indicating an intent to open an audit or
other review has been received by the Company or any subsidiary from any
foreign, federal, state or local taxing authority. There are no material
unresolved questions or claims concerning the Company's Tax liability. The
Company (A) has not executed or entered into a closing agreement pursuant to ss.
7121 of the Internal Revenue Code or any predecessor provision thereof or any
similar provision of state, local or foreign law; or (B) has not agreed to or is
required to make any adjustments pursuant to ss. 481 (a) of the Internal Revenue
Code or any similar provision of state, local or foreign law by reason of a
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change in accounting method initiated by the Company or any of its subsidiaries
or has any knowledge that the IRS has proposed any such adjustment or change in
accounting method, or has any application pending with any taxing authority
requesting permission for any changes in accounting methods that relate to the
business or operations of the Company. The Company has not been a United States
real property holding corporation within the meaning of ss. 897(c)(2) of the
Internal Revenue Code during the applicable period specified in ss.
897(c)(1)(A)(ii) of the Internal Revenue Code.
(c) The Company has not made an election under ss. 341(f) of the
Internal Revenue Code. The Company is not liable for the Taxes of another person
that is not a subsidiary of the Company under (A) Treas. Reg. ss. 1.1502-6 (or
comparable provisions of state, local or foreign law), (B) as a transferee or
successor, (C) by contract or indemnity or (D) otherwise. The Company is not a
party to any tax sharing agreement. The Company has not made any payments, is
not obligated to make payments nor is it a party to an agreement that could
obligate it to make any payments that would not be deductible under ss. 280G of
the Internal Revenue Code.
(d) For purposes of this Section 4.16:
"IRS" means the United States Internal Revenue Service.
"Tax" or "Taxes" means federal, state, county, local, foreign, or
other income, gross receipts, ad valorem, franchise, profits, sales
or use, transfer, registration, excise, utility, environmental,
communications, real or personal property, capital stock, license,
payroll, wage or other withholding, employment, social security,
severance, stamp, occupation, alternative or add-on minimum,
estimated and other taxes of any kind whatsoever (including,
without limitation, deficiencies, penalties, additions to tax, and
interest attributable thereto) whether disputed or not.
"Tax Return" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and
including any amendment thereof.
Section 4.15. Property. Neither the Company nor any of its subsidiaries owns any
real property. Each of the Company and its subsidiaries has good and marketable
title to all personal property owned by it, free and clear of all liens,
encumbrances and defects except such as do not materially affect the value of
such property and do not materially interfere with the use made and proposed to
be made of such property by the Company; and to the Company's knowledge any real
property and buildings held under lease by the Company as tenant are held by it
under valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and intended to be made of such
property and buildings by the Company. The Company's present facilities are
adequate for the Company's reasonably foreseeable needs.
Section 4.16. Intellectual Property. Each of the Company and its subsidiaries
owns or possesses adequate and enforceable rights to use all patents, patent
applications, trademarks, trademark applications, trade names, service marks,
copyrights, copyright applications, licenses, know-how (including trade secrets
and other unpatented and/or unpatentable proprietary or confidential
12
information, systems or procedures) and other similar rights and proprietary
knowledge (collectively, "Intangibles") necessary for the conduct of its
business as now being conducted. To the Company's knowledge, neither the Company
nor any of its subsidiaries is infringing upon or in conflict with any right of
any other person with respect to any Intangibles. No adverse claims have been
asserted by any person to the ownership or use of any Intangibles and the
Company has no knowledge of any basis for such claim.
Section 4.17. Internal Controls and Procedures. The Company maintains books and
records and internal accounting controls which provide reasonable assurance that
(i) all transactions to which the Company or any subsidiary is a party or by
which its properties are bound are executed with management's authorization;
(ii) the recorded accounting of the Company's consolidated assets is compared
with existing assets at regular intervals; (iii) access to the Company's
consolidated assets is permitted only in accordance with management's
authorization; and (iv) all transactions to which the Company or any subsidiary
is a party or by which its properties are bound are recorded as necessary to
permit preparation of the financial statements of the Company in accordance with
U.S. generally accepted accounting principles.
Section 4.18. Payments and Contributions. Neither the Company, any subsidiary,
nor any of its directors, officers or, to its knowledge, other employees has (i)
used any Company funds for any unlawful contribution, endorsement, gift,
entertainment or other unlawful expense relating to political activity; (ii)
made any direct or indirect unlawful payment of Company funds to any foreign or
domestic government official or employee; (iii) violated or is in violation of
any provision of the Foreign Corrupt Practices Act of 1977, as amended; or (iv)
made any bribe, rebate, payoff, influence payment, kickback or other similar
payment to any person with respect to Company matters.
Section 4.19. Permits and Licenses. The Company holds all necessary permits and
licenses to conduct its business as presently conducted. All of such permits and
licenses are in full force and effect and, to its knowledge, the Company is not
in material violation of any thereof.
Section 4.20. No Misrepresentation. The representations and warranties of the
Company contained in this Agreement, any schedule, annex or exhibit hereto and
any agreement, instrument or certificate furnished by the Company to the
Investors pursuant to this Agreement, do not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
Section 4.21. Related Party Transactions. The Company is not a party to any
agreement or transaction with any of its officers, directors, greater than 5%
shareholders or any Affiliate (as defined in SEC Rule 405) of any of said
persons that would require disclosure under Item 404 of Regulation S-K that will
not be disclosed in the next Form 10-K or proxy statement.
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ARTICLE V
Covenants of the Investors
Each Investor, severally and not jointly, covenants with the Company
that:
Section 5.1. Compliance with Law. The Investor's trading activities with respect
to shares of the Company's Common Stock will be in compliance with all
applicable state and federal securities laws, rules and regulations and rules
and regulations of the Principal Market on which the Company's Common Stock is
listed.
Section 5.2 Limitation on Short Sales. The Investor agrees that it will make no
short sales (as defined in any applicable SEC or NASD rules) of the Company's
Common Stock while the Convertible Debenture remains issued and outstanding.
ARTICLE VI
Covenants of the Company
Section 6.1. Registration Statement. The Company shall cause the Registration
Statement to remain effective from the date hereof until all of the Securities
(i) have been disposed of pursuant to the Registration Statement, (ii) have been
sold under circumstances under which all of the applicable conditions of Rule
144 (or any similar provision then in force) under the Securities Act ("Rule
144") are met, or (iii) such time as, in the opinion of counsel to the Company,
all Securities may be sold without any time, volume or manner limitations
pursuant to Rule 144(k) (or any similar provision then in effect) under the
Securities Act. The Company has reserved and the Company shall continue to
reserve and keep available at all times, free of preemptive rights, pro-rata
among the Investors in proportion to their respective initial purchases of such
securities, shares of Common Stock registered pursuant to the Registration
Statement for the purpose of enabling the Company to issue 200% of the
registered Conversion Shares and registered Warrant Shares pursuant to this
Agreement, based on the then Conversion Price (as defined in the Convertible
Debenture). On any date hereafter, in the event that an Investor does not
receive Conversion Shares or Warrant Shares registered under the Securities Act
upon the conversion of a Convertible Debenture or exercise of a Warrant, then
the Company will pay each Investor (pro-rata on a monthly basis), as liquidated
damages and not as a penalty, two percent (2%) per month of the aggregate market
value of shares of Common Stock purchased from the Company (including the
Conversion Shares which would be issuable upon conversion of the Convertible
Debentures on any date of determination whether or not the Convertible
Debentures are then convertible pursuant to their terms) and including any
Warrant Shares held by the Investor (which for the purposes of this provision
shall be valued at the difference between the market value of the Warrant Shares
at such time and the Warrant exercise price) and held by the Investor for each
month thereafter until such shares are registered or the Investor no longer
holds any Convertible Debentures or Warrants. The market value of the Common
Stock for this purpose shall be the average closing bid price on the Principal
Market during such suspension period.
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Section 6.2. Notice of Certain Events Affecting Registration. The Company will
notify the Investor upon the occurrence of any of the following events
("Suspension Event") in respect of the Registration Statement or Prospectus
Supplement in respect of the Securities: (i) receipt of any request for
additional information from the SEC or any other federal or state governmental
authority during the period of effectiveness of the Registration Statement the
response to which would require any amendments or supplements to the
Registration Statement; (ii) the issuance by the SEC or any other federal or
state governmental authority of any stop order suspending the effectiveness of
the Registration Statement or the initiation of any proceedings for that
purpose; (iii) receipt of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Securities for sale
in any jurisdiction or the initiation or threatening of any proceeding for such
purpose; (iv) the happening of any event that makes any statement made in the
Registration Statement or Prospectus Supplement or any document incorporated
therein by reference untrue in any material respect or that requires the making
of any changes in the Registration Statement, Prospectus Supplement or any
document incorporated by reference so that, in the case of the Registration
Statement, it will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein in order to make the
statements therein not misleading, and that in the case of the Prospectus
Supplement, it will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and (v) the Company's reasonable determination that a
post-effective amendment to the Registration Statement would be appropriate; and
the Company will promptly make available to the Investor any supplement or
amendment to the Registration Statement as may be required.
Section 6.3. Compliance with Law. Neither the Company nor any of its affiliates
(as that term is defined in Rule 405 under the Securities Act) has taken, nor
will any of them take, directly or indirectly, any action designed to cause or
that would result in, or which constitutes or that might reasonably be expected
to constitute, the stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Common Stock.
Section 6.4. Reservation of Common Stock. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, pro-rata among the Investors in proportion to
their respective initial purchases of such securities, shares of Common Stock
for the purpose of enabling the Company to issue 200% of the Conversion Shares
and the Warrant Shares pursuant to any conversion of the Convertible Debenture
or exercise of the Warrants, based on the Conversion Price (as defined in the
Convertible Debenture) on the date hereof. On any date hereafter, in the event
the number of shares of Common Stock reserved, as to any Investor, is less than
200% of the Conversion Shares necessary to convert all of such Investor's
Convertible Debenture, based on the then Conversion Price, and Warrant Shares to
exercise all of such Investor's Warrant (the "Trigger Amount"), then the Company
shall have thirty (30) days from such date to increase the number of shares
reserved as to such Investor above the Trigger Amount.
Section 6.5. Listing of Common Stock. The Company hereby agrees to maintain the
listing of the Common Stock on a Principal Market, and as soon as reasonably
practicable following the Closing to take all action necessary to list the
Conversion Shares and the Warrant Shares on the Principal Market. The Company
further agrees, if the Company applies to have the Common Stock traded on any
other Principal Market, it will include in such application the Conversion
Shares and the Warrant Shares, and will take such other action as is necessary
or desirable in the opinion of the Investors to cause the Conversion Shares and
15
Warrant Shares to be listed on such other Principal Market as promptly as
possible. The Company will take all action to continue the listing and trading
of its Common Stock on a Principal Market and will comply in all respects with
the Company's reporting, filing and other obligations under the bylaws or rules
of the Principal Market and shall provide Investors with copies of any
correspondence to or from such Principal Market which questions or threatens
delisting of the Common Stock, within three (3) Trading Days of the Company's
receipt thereof, until the Investors have disposed of all of their Securities.
Section 6.6. Exchange Act Registration. The Company will cause its Common Stock
to continue to be registered under Section 12(b) or (g) of the Exchange Act,
will use its best efforts to comply in all respects with its reporting and
filing obligations under the Exchange Act, and will not take any action or file
any document (whether or not permitted by the Exchange Act or the rules
thereunder) to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under said Act until the Investors have
disposed of all of their Securities.
Section 6.7. Corporate Existence; Conflicting Agreements. The Company will take
all steps necessary to preserve and continue the corporate existence of the
Company. The Company shall not enter into any agreement, the terms of which
agreement would restrict or impair the right or ability of the Company to
perform any of its obligations under this Agreement or any of the other
agreements attached as exhibits hereto.
Section 6.8. Consolidation; Merger. The Company shall not, at any time after the
date hereof, effect any merger or consolidation of the Company with or into, or
a transfer of all or substantially all of the assets of the Company to, another
entity (a "Consolidation Event") unless the resulting successor or acquiring
entity (if not the Company) assumes by written instrument or by operation of law
the obligation to deliver to the Investors such shares of stock and/or
securities as the Investors are entitled to receive pursuant to this Agreement
and the Convertible Debentures.
Section 6.9. Future Financing. After the Maturity Date, the Company agrees that
it will not enter into any other sale of its securities or any Capital Shares
Equivalents at a discount to the then-current bid price until the earlier of (i)
180 days after the effective date of the Registration Statement, (ii) three (3)
years from the Closing Date, or (iii) the date on which the Investor no longer
holds any of the Convertible Debentures. The foregoing shall not prevent or
limit the Company from engaging in any sale of securities (i) pursuant to the
exercise of options granted or to be granted under an employee benefit plan
which plan has been approved by the Company's stockholders, (ii) pursuant to any
compensatory plan for a full-time employee or key consultant, (iii) in
connection with a strategic partnership or other business transaction, the
principal purpose of which is not simply to raise money, (iv) in a registered
public offering by the Company which is underwritten by one or more established
investment banks (except an equity line type financing), (v) pursuant to the
Registration Statement, or (vi) with the prior written approval of a majority in
interest of the Investors, which will not be unreasonably withheld. In the event
the Company enters into a sale of its securities pursuant to any of the
aforementioned exceptions to the general prohibition on future financing in this
Section 6.9, the Investor shall have a right of first refusal to participate in
such financing. The Investors must notify the Company with seven (7) Trading
Days of receipt of notice of any such financing that it intends to participate
in.
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ARTICLE VII
Survival; Indemnification
Section 7.1. Survival. The representations, warranties and covenants made by
each of the Company and each Investor in this Agreement, the annexes, schedules
and exhibits hereto and in each instrument, agreement and certificate entered
into and delivered by them pursuant to this Agreement, shall survive the Closing
and the consummation of the transactions contemplated hereby; provided, however,
that the representations and warranties of the parties set forth in Articles 3
and 4 shall survive until November 21, 2003. In the event of a breach or
violation of any of such representations, warranties or covenants, the party to
whom such representations, warranties or covenants have been made shall have all
rights and remedies for such breach or violation available to it under the
provisions of this Agreement, irrespective of any investigation made by or on
behalf of such party on or prior to the Closing Date, unless such party had
actual knowledge of such breach or violation prior to the Closing Date.
Section 7.2. Indemnity. (a) The Company hereby agrees to indemnify and hold
harmless the Investors, their respective Affiliates and their respective
officers, directors, partners and members (collectively, the "Investor
Indemnitees"), from and against any and all Damages in excess of $50,000, and
agrees to reimburse the Investor Indemnitees for all reasonable out-of-pocket
expenses (including the reasonable fees and expenses of legal counsel), in each
case promptly as incurred by the Investor Indemnitees and to the extent arising
out of or in connection with:
(i) any misrepresentation, omission of fact or breach of any
of the Company's representations or warranties contained in this
Agreement, the annexes, schedules or exhibits hereto or any instrument,
agreement or certificate entered into or delivered by the Company
pursuant to this Agreement; or
(ii) any failure by the Company to perform in any material
respect any of its material covenants, agreements, undertakings or
obligations set forth in this Agreement, the annexes, schedules or
exhibits hereto or any instrument, agreement or certificate entered
into or delivered by the Company pursuant to this Agreement; or
(iii) any action instituted against the Investors, or any of
them or their respective Affiliates, by any stockholder of the Company
who is not an Affiliate of an Investor, with respect to any of the
transactions contemplated by this Agreement.
17
(b) Each Investor, severally and not jointly, hereby agrees to indemnify and
hold harmless the Company, its Affiliates and their respective officers,
directors, partners and members (collectively, the "Company Indemnitees"), from
and against any and all Damages in excess of $50,000, and agrees to reimburse
the Company Indemnitees for all reasonable out-of-pocket expenses (including the
reasonable fees and expenses of legal counsel), in each case promptly as
incurred by the Company Indemnitees and to the extent arising out of or in
connection with:
(i) any misrepresentation, omission of fact, or breach of any of the
Investor's representations or warranties contained in this
Agreement, the annexes, schedules or exhibits hereto or any
instrument, agreement or certificate entered into or delivered
by the Investor pursuant to this Agreement; or
(ii) any failure by the Investor to perform in any material respect
any of its material covenants, agreements, undertakings or
obligations set forth in this Agreement, the annexes, schedules
or exhibits hereto or any instrument, agreement or certificate
entered into or delivered by the Investor pursuant to this
Agreement.
Section 7.3. Notice. Promptly after receipt by either party hereto seeking
indemnification pursuant to Section 7.2 (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party from whom indemnification pursuant to Section
7.2 is being sought (the "Indemnifying Party") of the commencement thereof; but
the omission to so notify the Indemnifying Party shall not relieve it from any
liability that it otherwise may have to the Indemnified Party, except to the
extent that the Indemnifying Party is actually prejudiced by such omission or
delay. In connection with any Claim as to which both the Indemnifying Party and
the Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of any
Claim by the Indemnifying Party, the Indemnified Party shall have the right to
employ separate legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
and expenses of such separate legal counsel to the Indemnified Party if (and
only if): (x) the Indemnifying Party shall have agreed to pay such fees,
out-of-pocket costs and expenses, (y) the Indemnified Party reasonably shall
have concluded that representation of the Indemnified Party and the Indemnifying
Party by the same legal counsel would not be appropriate due to actual or, as
reasonably determined by legal counsel to the Indemnified Party, potentially
differing interests between such parties in the conduct of the defense of such
Claim, or if there may be legal defenses available to the Indemnified Party that
are in addition to or disparate from those available to the Indemnifying Party,
or (z) the Indemnifying Party shall have failed to employ legal counsel
reasonably satisfactory to the Indemnified Party within a reasonable period of
time after notice of the commencement of such Claim. If the Indemnified Party
employs separate legal counsel in circumstances other than as described in
clauses (x), (y) or (z) above, the fees, costs and expenses of such legal
counsel shall be borne exclusively by the Indemnified Party. Except as provided
18
above, the Indemnifying Party shall not, in connection with any Claim in the
same jurisdiction, be liable for the fees and expenses of more than one firm of
legal counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnifying Party shall not, without the prior written consent of
the Indemnified Party (which consent shall not unreasonably be withheld), settle
or compromise any Claim or consent to the entry of any judgment that does not
include an unconditional release of the Indemnified Party from all liabilities
with respect to such Claim or judgment.
All fees and expenses of the Indemnified Party (including reasonable
costs of defense and investigation in a manner not inconsistent with this
Section and all reasonable attorneys' fees and expenses) shall be paid to the
Indemnified Party, as incurred, within ten (10) Trading Days of written notice
thereof to the Indemnifying Party (regardless of whether it is ultimately
determined that an indemnified party is not entitled to indemnification
hereunder; provided, that the Indemnifying Party may require such Indemnified
Party to undertake to reimburse all such fees and expenses to the extent it is
finally judicially determined that such Indemnified Party is not entitled to
indemnification hereunder).
Section 7.4. Direct Claims. In the event one party hereunder should have a claim
for indemnification that does not involve a claim or demand being asserted by a
third party, the Indemnified Party promptly shall deliver notice of such claim
to the Indemnifying Party. If the Indemnified Party disputes the claim, such
dispute shall be resolved by mutual agreement of the Indemnified Party and the
Indemnifying Party or by binding arbitration conducted in accordance with the
procedures and rules of the American Arbitration Association as set forth in
Article X. Judgment upon any award rendered by any arbitrators may be entered in
any court having competent jurisdiction thereof.
ARTICLE VIII
Non-Public Information
Section 8.1. Non-Disclosure of Non-Public Information.
(a) The Company shall not disclose material non-public information to
the Investors, advisors to or representatives of the Investors unless prior to
disclosure of such information the Company identifies such information as being
non-public information and provides the Investors, such advisors and
representatives with the opportunity to accept or refuse to accept such
non-public information for review. Other than disclosure of any comment letters
received from the SEC staff with respect to the Registration Statement, the
Company may, as a condition to disclosing any non-public information hereunder,
require the Investors' advisors and representatives to enter into a
confidentiality agreement in form and content reasonably satisfactory to the
Company and the Investors.
(b) The Company will promptly notify the advisors and representatives
of the Investors and, if any, underwriters, of any event or the existence of any
circumstance (without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting material non-public
information (whether or not requested of the Company specifically or generally
during the course of due diligence by such persons or entities), which, if not
disclosed in the prospectus included in the Registration Statement, would cause
such prospectus to include a material misstatement or to omit a material fact
19
required to be stated therein in order to make the statements, therein in light
of the circumstances in which they were made, not misleading. Nothing contained
in this Section 8.1 shall be construed to mean that such persons or entities
other than the Investors (without the written consent of the Investors prior to
disclosure of such information as set forth in Section 8.1(a)) may not obtain
non-public information in the course of conducting due diligence in accordance
with the terms of this Agreement and nothing herein shall prevent any such
persons or entities from notifying the Company of their opinion that based on
such due diligence by such persons or entities, that the Registration Statement
contains an untrue statement of a material fact or omits a material fact
required to be stated in the Registration Statement in order to make the
statements contained therein, in light of the circumstances in which they were
made, not misleading.
(c) Confidentiality. The Investors agree that they will keep
confidential and will not disclose or divulge any confidential, proprietary or
secret information which it may obtain from the Company pursuant to information
obtained under this Section 8; provided, however, that an Investor may disclose
such information (i) to its attorneys, accountants, consultants, and other
professionals to the extent necessary to obtain their services in connection
with its investment in the Company, or (ii) pursuant to an order entered by a
legal, regulatory or administrative body having the authority to enter such
order provided, however, that, if practicable, prior to any such disclosure, the
applicable Investor shall give the Company prompt notice of such order so that
the Company may seek a protective order to take the other appropriate legal
action to avoid such disclosure.
ARTICLE IX
Choice of Law; Arbitration
Section 9.1. Governing Law/Arbitration. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made in New York by persons domiciled in New York City and without
regard to its principles of conflicts of laws. Any dispute under this Agreement
shall be exclusively submitted to arbitration under the American Arbitration
Association (the "AAA") in New York City, New York, and shall be finally and
conclusively determined by the decision of a board of arbitration consisting of
three (3) members (hereinafter referred to as the "Board of Arbitration")
selected according to the rules governing the AAA. The Board of Arbitration
shall meet on consecutive business days in New York City, New York, and shall
reach and render a decision in writing (concurred in by a majority of the
members of the Board of Arbitration) with respect to the amount, if any, which
the losing party is required to pay to the other party in respect of a claim
filed. In connection with rendering its decisions, the Board of Arbitration
shall adopt and follow the laws of the State of New York unless the matter at
issue is the corporation law of the company's state of incorporation, in which
event the corporation law of such jurisdiction shall govern such issue. To the
extent practical, decisions of the Board of Arbitration shall be rendered no
more than thirty (30) calendar days following commencement of proceedings with
respect thereto. The Board of Arbitration shall cause its written decision to be
delivered to all parties involved in the dispute. Any decision made by the Board
of Arbitration (either prior to or after the expiration of such thirty (30)
calendar day period) shall be final, binding and conclusive on the parties to
the dispute, and entitled to be enforced to the fullest extent permitted by law
and entered in any court of competent jurisdiction. The Board of Arbitration
shall be authorized and is hereby directed to enter a default judgment against
any party failing to participate in any proceeding hereunder within the time
periods set forth in the AAA rules. The non-prevailing party to any arbitration
(as determined by the Board of Arbitration) shall pay the expenses of the
prevailing party, including reasonable attorney's fees, in connection with such
arbitration. Any party shall be entitled to obtain injunctive relief from a
court in any case where such relief is available, and the prevailing party in
such injunctive action shall be entitled to its reasonable attorneys' fees in
connection therewith.
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ARTICLE X
Assignment
Section 10.1. Assignment. Neither this Agreement nor any rights of the Investors
or the Company hereunder may be assigned by either party to any other person.
Notwithstanding the foregoing, (a) the provisions of this Agreement shall inure
to the benefit of, and be enforceable by, any permitted transferee of any of the
Convertible Debentures and Warrants purchased or acquired by any Investor
hereunder with respect to the Convertible Debentures and Warrants held by such
person, and (b) upon the prior written consent of the Company, which consent
shall not unreasonably be withheld or delayed, each Investor's interest in this
Agreement may be assigned at any time, in whole or in part, to any other person
or entity (including any Affiliate of the Investor) who agrees to make the
representations and warranties contained in Article III and who agrees to be
bound by the terms of this Agreement. The Investor shall not assign its rights
under this Agreement to any Person identified to the Investor by the Company as
a competitor of the Company.
ARTICLE XI
Notices
Section 11.1. Notices. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) hand delivered, (ii) deposited
in the mail, registered or certified, return receipt requested, postage prepaid,
(iii) delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by facsimile, addressed as set forth below or to such other address
as such party shall have specified most recently by written notice. Any notice
or other communication required or permitted to be given hereunder shall be
deemed effective (a) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the first business day
following the date of sending by reputable courier service, fully prepaid,
addressed to such address, or (c) upon actual receipt of such mailing, if
mailed. The addresses for such communications shall be:
If to the Company: ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
21
with a copy to (shall not constitute ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
notice): ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
if to the Investors: As set forth on the signature pages hereto
with a copy to: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
(shall not constitute notice) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Green, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
Tel.: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 11.1 by giving written notice of such changed
address or facsimile number to the other party hereto as provided in this
Section 11.1.
ARTICLE XII
Miscellaneous
Section 12.1. Counterparts/ Facsimile/ Amendments. This Agreement may be
executed in multiple counterparts, each of which may be executed by less than
all of the parties and shall be deemed to be an original instrument which shall
be enforceable against the parties actually executing such counterparts and all
of which together shall constitute one and the same instrument. Except as
otherwise stated herein, in lieu of the original documents, a facsimile
transmission or copy of the original documents shall be as effective and
enforceable as the original. This Agreement may be amended only by a writing
executed by all parties.
Section 12.2. Entire Agreement. This Agreement, the agreements attached as
exhibits hereto, which include the Convertible Debentures, the Warrants and the
Escrow Agreement, as set forth the entire agreement and understanding of the
parties relating to the subject matter hereof and supersedes all prior and
contemporaneous agreements, negotiations and understandings between the parties,
both oral and written relating to the subject matter hereof. The terms and
conditions of all exhibits to this Agreement are incorporated herein by this
reference and shall constitute part of this Agreement as is fully set forth
herein.
Section 12.3. Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that such severability shall be ineffective if
it materially changes the economic benefit of this Agreement to any party.
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Section 12.4. Headings. The headings used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
Section 12.5. Number and Gender. There may be one or more Investors parties to
this Agreement, which Investors may be natural persons or entities. All
references to plural Investors shall apply equally to a single Investor if there
is only one Investor, and all references to an Investor as "it" shall apply
equally to a natural person.
Section 12.6. Reporting Entity for the Common Stock. The reporting entity relied
upon for the determination of the trading price or trading volume of the Common
Stock on any given Trading Day for the purposes of this Agreement shall be
Bloomberg, L.P. or any successor thereto. The written mutual consent of the
Investors and the Company shall be required to employ any other reporting
entity.
Section 12.7. Replacement of Certificates. Upon (i) receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of a certificate representing the Convertible Debentures or any
Conversion Shares or Warrants or any Warrant Shares and (ii) in the case of any
such loss, theft or destruction of such certificate, upon delivery of an
indemnity agreement or security reasonably satisfactory in form to the Company
or as may be required by the Company's Transfer Agent or (iii) in the case of
any such mutilation, on surrender and cancellation of such certificate, the
Company at its expense will execute and deliver, in lieu thereof, a new
certificate of like tenor.
Section 12.8. Fees and Expenses. Each of the Company and the Investors agrees to
pay its own expenses incident to the performance of its obligations hereunder,
except that the Company shall pay the fees, expenses and disbursements of
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Green, P.C., counsel to the Investors, in an amount equal to
$20,000, all as set forth in the Escrow Agreement.
Section 12.9. Finder's and Broker's Fees. Each of the parties hereto represents
that it has had no dealings in connection with this transaction with any finder
or broker who will demand payment of any fee or commission from the other party
except as set forth in the Escrow Agreement. The Company on the one hand, and
the Investors, on the other hand, agree to indemnify the other against and hold
the other harmless from any and all liabilities to any person claiming brokerage
commissions or finder's fees on account of services purported to have been
rendered on behalf of the indemnifying party in connection with this Agreement
or the transactions contemplated hereby.
Section 12.10. Publicity. The Company agrees that it will not issue any press
release or other public announcement, except as required by law, of the
transactions contemplated by this Agreement without the prior consent of the
Investors, which shall not be unreasonably withheld nor delayed by more than two
(2) Trading Days from their receipt of such proposed release. No release shall
name the Investors without their express consent.
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IN WITNESS WHEREOF, the parties hereto have caused this
Purchase Agreement to be executed by the undersigned, thereunto duly authorized,
as this 22nd day of November, 2000.
SEDONA CORPORATION
By:
------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇, President & CEO
INVESTORS:
Address: AMRO International, S.A.
C/o Ultra Finance
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇
▇.▇. ▇▇▇ ▇▇▇▇ By:
▇▇▇▇▇▇ ▇▇-▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ------------------------------------
Fax: ▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇▇, Director
Purchase Price:
24