Exhibit 10.2
Series A Preferred Stock Purchase Agreement
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SERIES A PREFERRED STOCK PURCHASE AGREEMENT
By and Among
GEM GLOBAL YIELD FUND LIMITED
(the "Purchaser")
and
A SURE ECOMMERCE, INC.
(the "Company")
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Dated as of July 13, 2000
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TABLE OF CONTENTS
Page
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Article I Certain Definitions.......................................... 1
Article II Purchase of Preferred Shares and Warrants.................... 5
Article III Representations and Warranties............................... 8
Article IV Other Agreements of the Parties..............................12
Article V Assignment of Rights and Assumption of Obligations...........21
Article VI Termination..................................................21
Article VII Legal Fees and Default Interest Rate.........................22
Article VIII Miscellaneous................................................22
Exhibit A Form of Convertible Preferred Share
Exhibit B Form of Warrant
Exhibit C Form of Registration Rights Agreement
Exhibit D Conversion Procedures
Exhibit E Form of Escrow Agreement
Exhibit F Form of Power of Attorney
Exhibit G Form of Legal Opinion
Exhibit H Form of Termination Warrant
Schedule 1 List of Purchasers
Schedule 3.1(a) Subsidiaries
Schedule 3.1(c) Capitalization
Schedule 3.1(e) Conflicts
Schedule 3.1(f) Required Consents and Approvals
Schedule 3.1(g) Litigation
Schedule 3.1(h) No Defaults of Violations
Schedule 6.1 Form 8-K Disclosure Obligations
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SERIES A PREFERRED STOCK PURCHASE AGREEMENT
THIS AGREEMENT, dated as of July 13, 2000 (this "Agreement"), is by and
among A Sure eCommerce, Inc., a Nevada corporation, with its executive offices
at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇ ▇▇▇ ▇▇▇ (the
"Company"), and the purchasers listed on Schedule 1 hereof (each individually,
the "Purchaser" and collectively, the "Purchasers").
WHEREAS, the Company desires to issue and sell to the Purchasers and the
Purchasers desire to acquire the Company's Series A Preferred Stock (the
"Preferred Shares").
IN CONSIDERATION of the mutual covenants, promises and agreements set
forth herein, and for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. Certain Definitions. As used in this Agreement, and unless
the context requires a different meaning, the following terms have the meanings
indicated:
"Affiliate" means, with respect to any Person, any Person that,
directly or indirectly, controls, is controlled by or is under common control
with such Person. For the purposes of this definition, "control" (including,
with correlative meanings, the terms "controlled by" and "under common control
with") shall mean the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities by contract or otherwise.
"Agreement" shall mean this Convertible Preferred Share Purchase
Agreement and the Exhibits and Schedules annexed hereto.
"Business Day" means any day except Saturday, Sunday and any day
which is a legal holiday or a day on which banking institutions in the State of
New York are authorized or required by law or other government actions to close,
between the hours of 9:30 a.m. and 6:00 p.m. New York Time.
"Certificate of Designations" means the Certificate of Designations
of Series A Preferred Stock annexed hereto as Exhibit A.
"Closing" shall have the meaning set forth in Section 2.2(b).
"Closing Date" shall mean the date of Closing, as set forth in
Section 2.2(b).
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"Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations thereunder as in effect on the date hereof.
"Commission" means the United States Securities and Exchange
Commission.
"Common Stock" means shares now or hereafter authorized of the class
of common stock, no par value, of the Company and stock of any other class into
which such shares may hereafter have been reclassified or changed.
"Company" shall have the meaning set forth in the introductory
paragraph.
"Disclosure Documents" means the disclosure package consisting of
the Company's Business Plan 2000, audited balance sheet as of August 31, 1999
and the related statements of income, cash flows and stockholders' equity for
the period ended August 31, 1999, and the unaudited balance sheet as of February
29, 2000 and the related statements of income, cash flows and stockholders'
equity for the six months ended February 29, 2000, and the Merger Agreement, all
of which have been delivered to the Purchasers in connection with the offering
by the Company of the Preferred Shares and the Schedules to this Agreement
furnished by or on behalf of the Company pursuant to Section 3.1.
"Effective Date" shall have the meaning set forth in Section 2.2(b).
"Escrow Agent" means ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇; Tel: ▇▇▇-▇▇▇-▇▇▇▇; Fax: ▇▇▇-▇▇▇-▇▇▇▇.
"Event of Default" shall have the meaning set forth in the Preferred
Shares.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"GEM" means Global Emerging Markets, Ltd. with its registered
address at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇; Phone: ▇▇▇-▇▇▇-▇▇▇▇;
Fax: ▇▇▇-▇▇▇-▇▇▇▇.
"▇▇▇▇" means GEM Advisors, Inc., with its registered address at ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇; Phone: ▇▇▇-▇▇▇-▇▇▇▇; Fax:
▇▇▇-▇▇▇-▇▇▇▇.
"HERZ" means Hertz Technology Group, Inc., a Delaware corporation.
"Indemnified Party" shall have the meaning set forth in Section
4.16(b).
"Indemnifying Party"shall have the meaning set forth in Section
4.16(b).
"KGL" shall have the meaning set forth in Section 4.28.
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"Lien" means, with respect to any asset, any mortgage, lien, pledge,
encumbrance, charge or security interest of any kind in or on such asset or the
revenues or income thereon or therefrom.
"Limitations on Conversion" shall have the meaning set forth in
Section 4.19.
"Losses" shall have the meaning set forth in Section 4.16(a).
"Material" shall mean having a financial consequence in excess of
$100,000.
"Material Adverse Effect" shall have the meaning set forth in
Section 3.1(a).
"Merger Agreement" shall have the meaning set forth in Article V.
"Minimum Stock Price" shall have the meaning set forth in Section
5.1(h).
"Minimum Stock Price Determination Date" shall have the meaning set
forth in Section 5.1(h).
"NASD" means the National Association of Securities Dealers, Inc.
"Nasdaq" shall mean the Nasdaq Stock Market, Inc.(R)
"OTCBB" shall mean the OTC Bulletin Board(R).
"Per Preferred Share Consideration" shall have the meaning set forth
in Section 2.2(a)
"Per Share Market Value" of the Common Stock means on any particular
date (a) the last sale price of shares of Common Stock on such date or, if no
such sale takes place on such date, the last sale price on the most recent prior
date, in each case as officially reported on the principal national securities
exchange on which the Common Stock is then listed or admitted to trading, or (b)
if the Common Stock is not then listed or admitted to trading on any national
securities exchange, the closing bid price per share as reported by Nasdaq, or
(c) if the Common Stock is not then listed or admitted to trading on the Nasdaq,
the closing bid price per share of the Common Stock on such date as reported on
the OTCBB or if there is no such price on such date, then the last bid price on
the date nearest preceding such date, or (d) if the Common Stock is not quoted
on the OTCBB, the closing bid price for a share of Common Stock on such date in
the over-the-counter market as reported by the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices) or if there is no such price on such date, then the last bid
price on the date nearest preceding such date, or (e) if the Common Stock is no
longer publicly traded, the fair market value of a share of Common Stock as
determined by an Appraiser (as defined in Section 4(c)(iv) of the Preferred
Share) selected in good faith by the holders of a majority of principal amount
of outstanding Preferred Shares; provided, however, that the Company, after
receipt of the determination by such Appraiser, shall have the right to select
an additional Appraiser,
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in which case, the fair market value shall be equal to the average of the
determinations by each such Appraiser.
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Preferred Shares" means the Series A Preferred Stock of the Company
issued pursuant to the Certificate of Designations.
"Preferred Share Escrow Shares" shall have the meaning set forth in
Section 2.2(c).
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Purchase Price" shall have the meaning set forth in Section 2.2(a).
"Purchaser" and "Purchasers" shall have the meaning set forth in the
introductory paragraph.
"Required Approvals" shall have the meaning set forth in Section
3.1(f).
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiaries" shall have the meaning set forth in Section 3.1(a).
"Termination Warrants" means the common stock purchase warrants
issued to the Purchasers and/or their assigns, in the form annexed hereto as
Exhibit H.
"Trading Day" means (a) a day on which the Common Stock is quoted on
Nasdaq, the OTCBB or the principal stock exchange on which the Common Stock has
been listed, or (b) if the Common Stock is not quoted on Nasdaq, the OTCBB or
any stock exchange, a day on which the Common Stock is quoted in the
over-the-counter market, as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its functions of
reporting prices).
"Transaction Documents" means this Agreement, the Registration
Rights Agreement annexed hereto as Exhibit C, the Escrow Agreement annexed
hereto as Exhibit E, the Power or Attorney annexed hereto as Exhibit F, and all
other documents, instruments and writings required to have been delivered by the
Company at the Execution Date pursuant to this Agreement.
"Underlying Shares" means the shares of Common Stock into which the
Preferred Shares are convertible in accordance with the terms hereof and the
Preferred Share.
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"Warrant" means the common stock purchase warrant issued to the
Purchasers and/or their assigns, in the form annexed hereto as Exhibit B.
"Warrant Escrow Shares" shall have the meaning as set forth in
Section 2.2(c).
"Warrant Shares" means the shares of Common Stock for which the
Warrants can be exercised in accordance with the terms hereof and the Warrant.
ARTICLE II
PURCHASE OF PREFERRED SHARES AND WARRANTS
Section 2.1. Execution of Documents; Delivery of Termination Warrants.
(a) As soon as practicable after the execution by all parties (the
"Execution Date") of the Transaction Documents and the execution and delivery by
the Company of the Termination Warrants, the Company shall, in accordance with
the Registration Rights Agreement, file a duly completed registration statement
on the appropriate form with the Commission to register the resale of the
Underlying Shares and the Warrant Shares under the Securities Act.
(b) As consideration for entering into this Agreement, in the event
this Agreement is terminated for any reason pursuant to Section 6.1 herein, (i)
the Company shall pay the Purchasers, within three (3) Business Days of the date
of termination, an aggregate of One Hundred Thousand Dollars (US$100,000) in
such allocation as set forth in Schedule 1, and (ii) the Purchasers shall retain
the Termination Warrants and any and all rights and privileges thereunder
without condition or obligation to the Company.
Section 2.2. Purchase of Preferred Shares and Delivery of Warrants;
Closing.
(a) Subject to the terms and conditions set forth in this Agreement,
the Company hereby agrees to issue and sell to the Purchasers, and the
Purchasers hereby agree to purchase from the Company on the Closing Date the
amount of Preferred Shares and the number of Warrants listed opposite each of
the Purchasers' names on Schedule 1. The Preferred Shares shall have the
respective rights, preferences and privileges set forth in the form of
Certificate of Designations annexed as Exhibit A, at a price per Preferred Share
of One Thousand Dollars (US$1,000) (the "Per Preferred Share Consideration").
The Per Preferred Share Consideration multiplied by the number of Preferred
Shares to be purchased by the Purchasers hereunder is hereinafter referred to as
the "Purchase Price". The total principal amount of Preferred Shares to be
purchased by the Purchasers and the total Purchase Price shall be Five Million
Dollars (US$5,000,000). The Warrants shall have the respective terms and
conditions as set forth in the form of Warrant annexed as Exhibit B.
(b) The closing of the purchase and sale of the Preferred Shares and
issuance of the Warrants (the "Closing") shall take place at the offices of the
Escrow Agent no later than five (5) Business Days after the registration
statement, in accordance with and subject to the Registration
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Rights Agreement, the form of which is annexed as Exhibit C, is granted
effectiveness by the Commission, time being of the essence, unless the parties
agree in writing to extend such date. The effective date of the Registration
Statement (the "Effective Date") shall occur no later than one hundred-eighty
(180) days after the Execution Date (unless such day is not a Business Day, then
the next Business Day), unless all of the Purchasers agree in advance in writing
to extend such 180 day period and set forth the new effective date deadline. The
date of the Closing is hereinafter referred to as the "Closing Date".
(c) At the Closing, the Company shall deliver to the Escrow Agent
the following:
(i) original and duly executed Preferred Shares registered
in the names of the Purchasers in the amounts set forth
in Schedule 1;
(ii) original and duly executed Warrants registered in the
names of the Purchasers in the amounts proportionate to
the principal amount of Preferred Shares purchased by
each Purchaser as set forth in Schedule 1;
(iii) The number of shares of duly issued Common Stock of the
Company equal to four (4) times the number of shares of
Common Stock otherwise issuable as if the Preferred
Shares were converted in their entirety on the Closing
Date, in share denominations of ten thousand (10,000)
shares registered in the name of each of the Purchasers
in the amounts proportionate to the principal amount of
Preferred Shares purchased by each Purchaser set forth
in Schedule 1 for use in the conversion of the
Preferred Shares (the "Preferred Share Escrow Shares");
(iv) The number of shares of duly issued Common Stock of the
Company equal to four (4) times the number of shares of
Common Stock otherwise issuable as if the Warrants were
exercised in their entirety on the Closing Date in
share denominations of ten thousand (10,000) shares
registered in the name of each of the Purchasers in the
amounts proportionate to the principal amount of
Preferred Shares purchased by each Purchaser set forth
in Schedule 1 for use in the exercise of the Warrants
(the "Warrant Escrow Shares");
(v) the legal opinion in substantially the form annexed
hereto as Exhibit G, addressed to the Purchasers and
dated the Closing Date from the Counsel for the
Company;
(vi) a certificate, dated the Closing Date, signed by the
Secretary or an Assistant Secretary of the Company and
certifying (i) that attached thereto is a true, correct
and complete copy of (A) the Company's
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Articles of Incorporation, as amended to the date
thereof, (B) the Company's By-Laws, as amended to the
date thereof, (C) resolutions duly adopted by the Board
of Directors of the Company authorizing the execution
and delivery of this Agreement, the issuance and sale
of the Preferred Shares, Warrants and the Underlying
Shares and the appointment of the Attorney-in-Fact
pursuant to Section 4.15 attached hereto as Exhibit F,
and (D) a certificate of good standing from the
Secretary of State of Nevada and (ii) the incumbency of
officers executing this Agreement; and
(vii) a certificate, dated the Closing Date, signed by the
President, certifying that the Company's
representations and warranties in Article III are true
and correct on the Closing Date.
(viii) all other documents, instruments and writings required
to have been delivered or necessary at or prior to
Closing by the Company pursuant to this Agreement.
(d) Upon receipt by the Escrow Agent of those items set forth above,
the Purchasers shall deliver the following to the Escrow Agent:
(i) the Purchase Price in United States dollars in
immediately available funds by wire transfer to an
account designated in writing by the Escrow Agent prior
to the Closing;
(ii) the Termination Warrants; and
(iii) all documents, instruments, and writings required to
have been delivered or necessary at or prior to Closing
by the Purchasers pursuant to this Agreement.
(e) Upon receipt of all of the items set forth in subparagraphs (c)
and (d) of this Section, the Escrow Agent shall deliver the Purchase Price, less
the fees set forth in Section 4.28 to the Company in accordance with its written
instructions, and shall deliver the items set forth in subparagraph (c), with
the exception of the Preferred Share Escrow Shares and Warrant Escrow Shares
which shall be held in accordance with the terms of this Agreement, the
Preferred Share and the Escrow Agreement, to the Purchasers.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
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Section 3.1. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Purchasers as follows, all of which
survive Closing:
(a) Organization and Qualification. The Company is a corporation,
duly incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with the requisite corporate power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. The Company has no subsidiaries other than as set forth
in Schedule 3.1(a) (collectively, the "Subsidiaries"). Each of the Subsidiaries
is a corporation, duly incorporated, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, with the full corporate power
and authority to own and use its properties and assets and to carry on its
business as currently conducted. Each of the Company and the Subsidiaries is
duly qualified to do business and is in good standing as a foreign corporation
in each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, could not reasonably be
expected to have, individually or in the aggregate, a material adverse effect on
(a) the results of operations, assets, prospects, or financial condition of the
Company and the Subsidiaries, or (b) the Purchasers' rights under this
Agreement, the Escrow Agreement, the Preferred Shares and the Warrants (a
"Material Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated hereby and otherwise to carry out its obligations hereunder and
thereunder. The execution and delivery of this Agreement by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary action on the part of the Company. This
Agreement has been duly executed and delivered by the Company and constitutes
the valid and binding obligation of the Company enforceable against the Company
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable principles
of general application.
(c) Capitalization. The authorized, issued and outstanding capital
stock of the Company and each of the Subsidiaries is set forth in Schedule
3.1(c). No shares of Common Stock are entitled to preemptive or similar rights.
Except as specifically set forth in Schedule 3.1(c), there are no outstanding
options, warrants, script rights to subscribe to, calls or commitments of any
character whatsoever relating to, or, except as a result of the purchase and
sale of the Preferred Shares hereunder, securities, rights or obligations
convertible into or exchangeable for, or giving any person any right to
subscribe for or acquire any shares of Common Stock, or contracts, commitments,
understandings, or arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of Common Stock, or securities or rights
convertible or exchangeable into shares of Common Stock. Neither the Company nor
any Subsidiary is in violation of any of the provisions of its respective
articles of incorporation, bylaws or other charter documents or resolutions.
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(d) Issuance of Preferred Shares and Warrants. The Preferred Shares
and Warrants have been duly and validly authorized for issuance, offer and sale
pursuant to this Agreement and, when issued and delivered as provided hereunder
against payment in accordance with the terms hereof, shall be valid and binding
obligations of the Company enforceable in accordance with their terms. The
Company has and at all times while the Preferred Shares and Warrants are
outstanding has and will continue to maintain an adequate reserve of shares of
Common Stock to enable it to perform its obligations under this Agreement, the
Preferred Shares and Warrants. When issued in accordance with the terms hereof
and the Preferred Shares and the Warrants, the Underlying Shares will be duly
authorized, validly issued, fully paid and nonassessable. There are not
outstanding any equity or equity equivalent security substantially similar to
the Preferred Shares, including any security with a floating conversion price
substantially similar to the Preferred Shares.
(e) No Conflicts. Except as set forth in Schedule 3.1(e), the
execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
do not and will not (i) conflict with or violate any provision of its or its
Subsidiaries' articles of incorporation, resolutions or bylaws or (ii) be
subject to obtaining the consents referred to in Section 3.1(f), conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company is a party, or (iii) result in a violation of
any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company is
subject (including Federal and State securities laws and regulations), or by
which any property or asset of the Company is bound or affected, except in the
case of each of clauses (ii) and (iii), such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect. The business
of the Company is not being conducted in violation of any law, ordinance or
regulation of any governmental authority.
(f) Consents and Approvals. Except as set forth in Schedule 3.1(f),
neither the Company nor any Subsidiary is required to obtain any consent,
permit, waiver, authorization or order of, or make any filing or registration
with, any court or other federal, State, local or other govern mental authority
or other Person in connection with the execution, delivery and performance by
the Company of this Agreement, other than the applicable filings under State and
federal securities laws (collectively, the "Required Approvals").
(g) Litigation; Proceedings. Except as set forth in Schedule 3.1(g),
there is no action, suit, notice of violation, proceeding, inquiry or
investigation pending or threatened against or affecting the Company or any of
its Subsidiaries or any of their respective properties before or by any court,
governmental or administrative agency or regulatory authority (Federal, State,
county, local or foreign) which (i) relates to or challenges the legality,
validity or timely enforceability of this Agreement or the Preferred Shares and
Warrants, (ii) could, individually or in the aggregate, have a Material Adverse
Effect or (iii) could, individually or in the aggregate, materially impair the
ability of the Company to perform fully on a timely basis its obligations under
this Agreement.
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(h) No Default or Violation. Except as set forth in Schedule 3.1(h),
either the Company nor any Subsidiary (i) is in default under or in violation of
any indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound, except
such conflicts or defaults as do not have a Material Adverse Effect, (ii) is in
violation of any order of any court, arbitrator or governmental body, except for
such violations as do not have a Material Adverse Effect, or (iii) is in
violation of any statute, rule or regulation of any governmental authority which
could (individually or in the aggregate) (x) adversely affect the legality,
validity or enforceability of this Agreement, (y) have a Material Adverse Effect
or (z) adversely impair the Company's ability or obligation to perform fully on
a timely basis its obligations under this Agreement.
(i) Certain Fees. No fees or commission will be payable by the
Company to any investment banker, broker, placement agent or bank with respect
to the consummation of the transactions contemplated hereby except as provided
in Section 4.28.
(j) Disclosure Documents. The Disclosure Documents are accurate and
do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
Each of the Purchasers acknowledge and agree that the Company makes no
representation or warranty with respect to the transactions contemplated hereby
other than those specifically set forth in Section 3.1 herein.
Section 3.2. Representations and Warranties of the Purchasers. The
Purchasers hereby represent and warrant to the Company as follows:
(a) Organization and Qualification. Each of the Purchasers is a
corporation duly incorporated and validly existing and in good standing under
the laws of the jurisdiction of its incorporation.
(b) Authorization; Enforcement. Each of the Purchasers has the
requisite corporate power and authority to enter into and to consummate the
transactions contemplated hereby and otherwise to carry out its obligations
hereunder and thereunder. The execution and delivery of this Agreement and the
purchase of the Preferred Shares and the Warrants by the Purchasers hereunder
have been duly authorized by all necessary action on the part of each of the
Purchasers. This Agreement has been duly executed and delivered by each of the
Purchasers or on its behalf and constitutes the valid and legally binding
obligation of the Purchasers, enforceable against each of the Purchasers in
accordance with its terms; except as such enforceability may be limited by
applicable bankruptcy, insolvency, liquidation, fraudulent transfer,
reorganization, moratorium and remedies or by other equitable principles of
general application or similar laws relating to or affecting generally the
enforcement of creditors' rights.
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(c) Investment Intent. Each Purchaser is acquiring the Preferred
Shares, Warrants, Underlying Shares and the Warrant Shares for its own account
for investment purposes only and not with a view to or for distributing or
reselling such Preferred Shares, Warrants, Underlying Shares or Warrant Shares
or any part thereof or interest therein, without prejudice, however, to the
Purchasers' right, subject to the provisions of this Agreement, at all times to
sell or otherwise dispose of all or any part of such Preferred Shares, Warrants,
Underlying Shares or Warrant Shares in compliance with applicable federal and
State securities laws.
(d) Purchasers' Status. At the time each of the Purchasers was
offered the Preferred Shares and/or the Warrants, it was, and at the date
hereof, it is, and at the Closing Date, it will be, an "accredited investor" as
defined in Rule 501(a) under the Securities Act.
(e) Experience of Purchasers. Each of the Purchasers, either alone
or together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Preferred Shares, and
has so evaluated the merits and risks of such investment.
(f) Ability of Purchaser to Bear Risk of Investment. Each of the
Purchasers is able to bear the economic risk of an investment in the Preferred
Shares and, at the present time, is able to afford a complete loss of such
investment.
(g) Prohibited Transactions. The Preferred Shares to be purchased by
each of the Purchasers are not being acquired, directly or indirectly, with the
assets of any "employee benefit plan", within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended.
(h) Access to Information. Each of the Purchasers acknowledges
receipt of the Disclosure Documents and further acknowledges that it has been
afforded (i) the opportunity to ask such questions as it has deemed necessary
of, and to receive answers from, representatives of the Company concerning the
terms and conditions of the offering of the Preferred Shares and the Warrants
and the merits and risks of investing in the Preferred Shares and the Warrants;
(ii) access to information about the Company and the Company's financial
condition, results of operations, business, properties, management and prospects
sufficient to enable it to evaluate its investment in the Preferred Shares and
the Warrants; and (iii) the opportunity to obtain such additional information
which the Company possesses or can acquire which is necessary to make an
informed investment decision with respect to the Preferred Shares and the
Warrants.
(i) Reliance. Each of the Purchasers understands and acknowledges
that (i) the Preferred Shares and the Warrants are being offered and sold, and
the Underlying Shares and Warrant Shares are being offered, to it without
registration under the Securities Act in a transaction that is exempt from the
registration provisions of the Securities Act and (ii) the availability of such
exemption, depends in part on, and that the Company will rely upon the accuracy
and truthfulness of, the foregoing representations and each of the Purchasers
hereby consents to such reliance.
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(j) Corporate Domicile. Each of the Purchasers is a foreign
corporation and has its residence or corporate domicile outside the United
States.
(k) Current Funds. Purchasers have, and will have at Closing,
readily available the current funds required to purchase the Preferred Shares.
(l) Acknowledgment of Counsel to the Company. Purchasers acknowledge
that KGL, for purposes of this transaction is acting as counsel to the Company,
notwithstanding KGL will act as Escrow Agent pursuant to this Agreement and
members of KGL are to be granted powers of attorney pursuant to this Agreement.
The Company acknowledges and agrees that each of the Purchasers makes no
representation or warranty with respect to the transactions contemplated hereby
other than those specifically set forth in Section 3.2 herein.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
Section 4.1. Manner of Offering. The Preferred Shares and Warrants are
being issued pursuant to Rule 506 of Regulation D of the Securities Act. The
Preferred Shares, Warrants, Underlying Shares and the Warrant Shares will bear
restrictions on transfer, and will carry a restrictive legend with respect to
the exemption from registration under the Securities Act. The transfer and
resale of the Preferred Shares, the Warrants and the Underlying Shares may be
made only pursuant to registration under the Securities Act or an exemption from
such registration.
Section 4.2. Furnishing of Information. As long as each of the Purchasers
owns Preferred Shares, the Warrants, Underlying Shares or the Warrant Shares,
the Company will furnish to it, promptly after they have been prepared all
annual, quarterly reports and other reports and filings required by Section
13(a) or 15(d) of the Exchange Act.
Section 4.3. Notice of Certain Events. The Company shall on a continuing
basis (i) advise each of the Purchasers promptly after obtaining knowledge
thereof, and, if requested by any of the Purchasers, confirm such advice in
writing, of (A) the issuance by any State securities commission of any stop
order suspending the qualification or exemption from qualification of the
Preferred Shares, the Warrants, the Underlying Shares or the Warrant Shares for
offering or sale in any jurisdiction, or the initiation of any proceeding for
such purpose by any State securities commission or other regulatory authority,
or (B) any event that makes any statement of a material fact made in the
Disclosure Documents untrue or that requires the making of any additions to or
changes in the Disclosure Documents in order to make the statements therein, in
the light of the circumstances under which they are made, not misleading, (ii)
use its best efforts to prevent the issuance of any stop order or order
suspending the qualification or exemption from qualification of the Preferred
Shares, the Warrants, the Underlying Shares or the Warrant Shares under any
State securities or Blue Sky laws, and (iii) if at any time any State securities
commission or other regulatory authority shall issue an order suspending the
qualification or exemption from qualification of the Preferred Shares, the
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Warrants or the Common Stock under any such laws, use its best efforts to obtain
the withdrawal or lifting of such order at the earliest possible time.
Section 4.4. Copies and Use of Disclosure Documents. The Company shall
furnish each of the Purchasers, without charge, as many copies of the Disclosure
Documents, and any amendments or supplements thereto, as each of the Purchasers
may reasonably request. The Company consents to the use of the Disclosure
Documents, and any amendments and supplements thereto, by each of the Purchasers
in connection with resales of the Preferred Shares, the Warrants, Underlying
Shares or the Warrant Shares other than pursuant to an effective registration
statement.
Section 4.5. Modification to Disclosure Documents. If any event shall
occur as a result of which, in the reasonable judgment of the Company or any of
the Purchasers, it becomes necessary or advisable to amend or supplement the
Disclosure Documents in order to make the statements therein, in the light of
the circumstances at the time the Disclosure Documents were delivered to any of
the Purchasers, not misleading, or if it is necessary to amend or supplement the
Disclosure Documents to comply with applicable law, the Company shall promptly
prepare an appropriate amendment or supplement to the Disclosure Documents (in
form and substance reasonably satisfactory to both the Purchasers and Company)
so that (i) as so amended or supplemented the Disclosure Documents will not
include an untrue statement of material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances existing at the time it is delivered to any of the Purchasers, not
misleading and (ii) the Disclosure Documents will comply with applicable law.
Section 4.6. [Reserved].
Section 4.7. Integration. The Company shall not and shall use its best
efforts to ensure that no Affiliate shall sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in Section
2 of the Securities Act) that would be integrated with the offer or sale of the
Preferred Shares, the Warrants, Underlying Shares, or the Warrant Shares in a
manner that would require the registration under the Securities Act of the sale
of the Preferred Shares and the Warrants to the Purchasers.
Section 4.8. Furnishing of Rule 144A Materials. The Company shall, for so
long as any of the Preferred Shares, the Warrants, Underlying Shares or Warrant
Shares remain outstanding and during any period in which it is not subject to
Section 13 or 15(d) of the Exchange Act, make available to any registered holder
of Preferred Shares, the Warrants, Underlying Shares or Warrant Shares in
connection with any sale thereof and any prospective purchaser of such Preferred
Shares, Warrants, Underlying Shares or Warrant Shares from such Person, the
following information in accordance with Rule 144A(d)(4) under the Securities
Act: a brief statement of the nature of the business of the Company and the
products and services it offers and the Company's most recent audited balance
sheet and profit and loss and retained earnings statements, and similar audited
financial statements for such part of the two preceding fiscal years as the
Company has been in operation.
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Section 4.9. Solicitation Materials. The Company shall not (i) distribute
any offering materials in connection with the offering and sale of the Preferred
Shares, the Warrants, Underlying Shares or Warrant Shares other than the
Disclosure Documents and any amendments and supplements thereto prepared in
compliance herewith or (ii) solicit any offer to buy or sell the Preferred
Shares, the Warrants, Underlying Shares or Warrant Shares by means of any form
of general solicitation or advertising.
Section 4.10 Subsequent Financial Statements. The Company shall furnish to
the Purchasers, promptly after they are filed with the Commission, a copy of all
financial statements for any period subsequent to the period covered by the
financial statements included in the Disclosure Documents until the earlier of
the full conversion of the Preferred Shares or the Maturity Date of the
Preferred Shares.
Section 4.11. Prohibition on Certain Actions. From the date hereof through
the Closing Date, the Company shall not and shall cause the Subsidiaries not to,
without the prior written consent of the Purchasers, (i) amend its Articles of
Incorporation, bylaws or other charter documents so as to adversely affect any
rights of the Purchasers; (ii) split, combine or reclassify its outstanding
capital stock; (iii) declare, authorize, set aside or pay any dividend or other
distribution with respect to the Common Stock; (iv) redeem, repurchase or offer
to repurchase or otherwise acquire shares of its Common Stock; or (v) enter into
any agreement with respect to any of the foregoing.
Section 4.12. Listing of Common Stock. The Company shall use its best
efforts to maintain the quote for its Common Stock on the national securities
exchange or market on which the Common Stock is listed during the period that
the Preferred Shares may be converted hereunder by the Purchasers or the
Warrants may be exercised, and shall provide to the Purchasers evidence of such
listing.
Section 4.13. Escrow. The Company and the Purchasers agree to enter into,
simultaneous with the execution of this Agreement, the escrow agreement attached
hereto and made part hereof as Exhibit E (the "Escrow Agreement").
Section 4.14. Conversion and Exercise Procedures and Maintenance of
Escrowed Shares for Conversions and Exercises. Exhibit D attached hereto and
made a part hereof sets forth the procedures with respect to the conversion of
the Preferred Shares and the exercise of the Warrants, including the forms of
Notice of Conversion and Notice of Exercise to be provided upon conversion or
exercise, instructions as to the procedures for conversion or exercise, the form
of legal opinion, if necessary, that shall be rendered to the Company and such
other information and instructions as may be reasonably necessary to enable any
of the Purchasers to exercise its right of conversion or exercise smoothly and
expeditiously. The Company agrees that, at any time the conversion price of the
Preferred Shares is such that the number of Preferred Share Escrow Shares is
less than 200% of the number of shares of Common Stock that would be needed to
satisfy full conversion of all of the Preferred Shares given the then current
conversion price (the "Full Conversion Shares"), upon ten (10) Business Days
written notice of such circumstance to the Company by the Purchasers and/or
Escrow Agent, it will issue additional share certificates in the names of each
of the Purchasers in
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denominations of 10,000 shares, and deliver same to the Escrow Agent, such that
the new number of Preferred Share Escrow Shares is equal to 200% of the Full
Conversion Shares.
Section 4.15 Attorney-in-Fact. To effectuate the terms and provisions of
this Agreement, the Escrow Agreement, the Preferred Share and the Warrants, the
Company hereby agrees to give a power of attorney as is evidenced by Exhibit F
attached hereto. All acts done under such power of attorney are hereby ratified
and approved and neither the Attorney-in-Fact nor any designee or agent thereof
shall be liable for any acts of commission or omission, for any error of
judgment or for any mistake of fact or law, as long as the Attorney-in-Fact is
operating within the scope of the power of attorney and this Agreement and its
exhibits. The power of attorney being coupled with an interest shall be
irrevocable while any amount of the Preferred Share remains unpaid, any amount
of the Warrants remain unexercised or any portion of this Agreement or the
Escrow Agreement remains unsatisfied. In addition, the Company shall give the
Attorney-in-Fact a corporate resolution executed by the Board of Directors of
the Company which authorizes future issuances of the Underlying Shares for the
Preferred Shares, and which resolution states that it is irrevocable while any
of the Preferred Shares remain outstanding, any amount of the Warrants remain
unexercised or any portion of this Agreement or the Escrow Agreement remains
unsatisfied.
Section 4.16 Indemnification.
(a) Indemnification.
(i) The Company shall, notwithstanding termination of this
Agreement and without limitation as to time, indemnify and hold harmless GEM,
▇▇▇▇ and each Purchaser, their respective officers, directors, agents and
employees of each of them, each Person who controls GEM, ▇▇▇▇ or each such
Purchaser (within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act) and the officers, directors, agents and employees of each
such controlling Person, to the fullest extent permitted by applicable law, from
and against any and all losses, claims, damages, liabilities, costs (including,
without limitation, costs of preparation and attorneys' fees) and expenses
(collectively, "Losses"), as incurred, arising out of or relating to a breach or
breaches of any representation, warrant, covenant or agreement by the Company
under this Agreement, the other Transaction Documents, the Preferred Shares or
the Warrants.
(ii) Each Purchaser, severally and not jointly, shall
notwithstanding termination of this Agreement and without limitation as to time,
indemnify and hold harmless the Company, its officers, directors, agents and
employees, each Person who controls the Company (within the meaning of Section
15 of the Securities Act of Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person, to the fullest
extent permitted by application law, from and against any and all Losses, as
incurred, arising out of, or relating to, a breach or breaches of any
representation, warranty, covenant or agreement by such Purchaser under this
Agreement, the other Transaction Documents, the Certificate of Designations or
the Warrants.
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(b) Conduct of Indemnification Proceedings. If any Proceeding shall
be brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party promptly shall notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally determined by a court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
or Parties unless: (1) the Indemnifying Party has agreed to pay such fees and
expenses; or (2) the Indemnifying Party shall have failed promptly to assume the
defense of such Proceeding and to employ counsel reasonably satisfactory to such
Indemnified Party in any such Proceeding; or (3) the named parties to any such
Proceeding (including any impleaded parties) include both such Indemnified Party
and the Indemnifying Party, and such Indemnified Party shall have been advised
by counsel that a conflict of interest is likely to exist if the same counsel
were to represent such Indemnified Party and the Indemnifying Party (in which
case, if such Indemnified Party notifies the Indemnifying Party in writing that
it elects to employ separate counsel at the expense of the Indemnifying Party,
the Indemnifying Party shall not have the right to assume the defense of the
claim against the Indemnified Party but will retain the right to control the
overall Proceedings out of which the claim arose and such counsel employed by
the Indemnified Party shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending Proceeding in respect of
which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party to which the
Indemnified Party is entitled hereunder (including reasonable fees and expenses
to the extent incurred in connection with investigating or preparing to defend
such Proceeding in a manner not inconsistent with this Section) shall be paid to
the Indemnified Party, as incurred, within ten (10) Business Days of written
notice thereof to the Indemnifying Party.
No right of indemnification under this Section 4.16 shall be
available as to a particular Indemnified Party if there is a non-appealable
final judicial determination that such Losses arise solely out of the negligence
or bad faith of such Indemnified Party in performing the obligations of such
Indemnified Party under this Agreement or a breach by such Indemnified Party of
its obligations under this Agreement.
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(c) Contribution. If a claim for indemnification under Section
4.16(a) is unavailable to an Indemnified Party or is insufficient to hold such
Indemnified Party harmless for any Losses in respect of which this Section 4.16
would apply by its terms (other than by reason of exceptions provided in this
Section 4.16(c)), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses in such proportion as is
appropriate to reflect the relative benefits received by the Indemnifying Party
on the one hand and the Indemnified Party on the other and the relative fault of
the Indemnifying Party and Indemnified Party in connection with the actions or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and Indemnified
Party shall be determined by reference to, among other things, whether there was
a judicial determination that such Losses arise in part out of the negligence or
bad faith of the Indemnified Party in performing the obligations of such
Indemnified Party under this Agreement or the Indemnified Party's breach of its
obligations under this Agreement. The amount paid or payable by a party as a
result of any Losses shall be deemed to include any attorneys' or other fees or
expenses incurred by such party in connection with any Proceeding to the extent
such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party.
(d) Nonexclusive. The indemnity and contribution agreements
contained in this Section are in addition to any liability that the Indemnifying
Parties may have to the Indemnified Parties.
Section 4.17 Exclusivity. For a period of one (1) year from the date of
this Agreement, the Company shall not offer or issue any equity or equity
equivalent securities substantially similar to the Preferred Shares, including
any security with a floating conversion price substantially similar to the
Preferred Shares.
Section 4.18 Blue Sky Qualification. In accordance with the Registration
Rights Agreement annexed hereto as Exhibit C, the Company shall qualify the
Underlying Shares and the Warrant Shares under the securities or Blue Sky laws
of such jurisdictions as any of the Purchasers may reasonably request and shall
continue such qualification at all times through the second anniversary of the
last Closing Date; provided, however, that neither the Company nor its
Subsidiaries shall be required in connection therewith to qualify as a foreign
corporation where they are not now so qualified or to take any action that would
subject the Company to general service of process in any such jurisdiction where
it is not then so subject or subject the Company to any material tax in any such
jurisdiction where it is not then so subject.
Section 4.19 Purchasers' Ownership of Common Stock. In addition to and not
in lieu of the limitations on conversion set forth in the Certificate of
Designations, the conversion and exercise rights of each of the Purchasers set
forth in the Certificate of Designations and the Warrants, as applicable, shall
be limited, solely to the extent required, from time to time, such that, unless
each of the Purchasers give written notice 75 days in advance to the Company of
their intention to exceed the Limitation on Conversions as defined herein, with
respect to all or a specified amount of the Preferred Shares and the
corresponding number of the Underlying Shares, in no instance shall the
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maximum number of shares of Common Stock which the Purchasers (singularly,
together with any Persons who in the determination of such Purchasers, together
with such Purchasers, constitute a group as defined in Rule 13d-5 of the
Exchange Act) may receive in respect of any conversion of the Preferred Shares,
or exercise of the Warrants, exceed, at any one time, an amount equal to the
remainder of (i) 4.99% of the then issued and outstanding shares of Common Stock
of the Company following such conversion or exercise minus (ii) the number of
shares of Common Stock of the Company then owned by any of the Purchasers
(including any shares of Common Stock deemed beneficially owned due to ownership
of the Preferred Shares and Warrants) (the foregoing being herein referred to as
the "Limitation on Conversion"); provided, however, that if ten (10) Business
Days have elapsed since any of the Purchasers shall have declared an Event of
Default (as that term is defined in the Certificate of Designations) and the
Company shall not have cured such Event of Default, the provisions of this
Section 4.19 shall be null and void from and after such date. The Company shall,
promptly upon its receipt of a notice of conversion tendered by any of the
Purchasers (or its sole designee), as applicable, and upon its receipt of a
notice of exercise under the terms of the Warrants, notify such Purchaser by
telephone and by facsimile of the number of shares of Common Stock outstanding
on such date and the number of Underlying Shares which would be issuable to such
Purchaser (or its sole designee, as the case may be) if the conversion requested
in such notice of conversion or exercise requested in such notice of exercise
were effected in full, whereupon, notwithstanding anything to the contrary set
forth in the Certificate of Designations or the Warrants, such Purchaser may
within one (1) Business Day of its receipt of the Company notice required by
this Section 4.19 by facsimile revoke such conversion or exercise to the extent
(in whole or in part) that it determines that such conversion or exercise would
result in such Purchaser owning shares of Common Stock in excess of the
Limitation on Conversion.
Section 4.20 Suspension of Trading in Common Stock. The Company shall
maintain trading in the shares of the Common Stock (and if suspended shall have
trading reinstated within ten (10) Trading Days) on such stock exchange or
market upon which the Common Stock shall then be listed for trading (other than
as a result of the suspension of trading in securities on such market generally
or temporary suspensions pending the release of material information).
Section 4.21 No Violation of Applicable Law. Notwithstanding any provision
of this Agreement to the contrary, if the redemption of the Preferred Shares,
the Warrants, the Underlying Shares or the Warrant Shares otherwise required
under this Agreement, the Preferred Share, the Warrant, or the Registration
Rights Agreement would be prohibited by the relevant provisions of Nevada law,
such redemption shall be effected as soon as it is permitted under such law;
provided, however, that interest payable by the Company with respect to any such
redemption shall continue to accrue in accordance with Section 4.20.
Section 4.22 Redemption Restrictions. Notwithstanding any provision of
this Agreement to the contrary, if any redemption of Preferred Shares, the
Warrants, Underlying Shares or the Warrant Shares otherwise required under this
Agreement, the Preferred Share, the Warrant, or the Registration Rights
Agreement would be prohibited in the absence of consent from any lender of the
Company or any of the Subsidiaries, or by the holders of any class of securities
of the Company, the Company shall use its best efforts to obtain such consent as
promptly as practicable after the
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redemption is required. Interest payable by the Company with respect to any such
redemption shall continue to accrue in accordance with Section 4.20 until such
consent is obtained. Nothing contained in this Section 4.22 shall be construed
as a waiver by any of the Purchasers of any rights it may have by virtue of any
breach of any representation or warranty of the Company herein as to the absence
of any requirement to obtain any such consent.
Section 4.23 No Other Registration Rights. During the period commencing
the date hereof and ending on the earlier to occur of (i) the one year
anniversary of the Closing and (ii) the date the Registration Statement required
to be filed by the Company in accordance with the Registration Rights Agreement
is declared effective under the Securities Act by the Commission, the Company
may not file any registration statement that provides for the registration of
shares of Common Stock to be sold by other shareholders of the Company without
the prior written consent of the Purchasers or their assigns. Such registration
rights shall not apply to registration statements relating solely to (i)
employee benefit plans notwithstanding the inclusion of a resale prospectus for
securities received under such employee benefit plan, or (ii) business
combinations.
Section 4.24. Merger or Consolidation. Until the earlier of the full
conversion of the Preferred Shares or three (3) years from the Closing Date, the
Company and each Subsidiary will not, in a single transaction or a series of
related transactions, (i) consolidate with or merge with or into any other
Person, or (ii) permit any other Person to consolidate with or merge into it,
unless (w) either (A) the Company shall be the survivor of such merger or
consolidation or (B) the surviving Person shall expressly assume by supplemental
agreement all of the obligations of the Company under the Preferred Shares and
the Warrants and this Agreement; (x) immediately before and immediately after
giving effect to such transaction (including any indebtedness incurred or
anticipated to be incurred in connection with the transaction), no Default or
Event of Default shall have occurred and be continuing; (y) if the Company is
not the surviving entity, such surviving entity's common shares shall be listed
on either The New York Stock Exchange, American Stock Exchange, or Nasdaq
National Market or Nasdaq SmallCap Market and (z) the Company has delivered to
the Purchasers an officers' certificate and opinion of counsel, each stating
that such consolidation, merger or transfer complies with this Agreement, that
the surviving Person agrees to be bound thereby and that all conditions
precedent in this Agreement relating to such transactions have been satisfied.
Section 4.25 Registration of Underlying Shares and Warrant Shares.
Pursuant to the terms of the Registration Rights Agreement between the Company
and the Purchasers, the Company shall cause the Underlying Shares and Warrant
Shares to be registered under the Securities Act, and so long as any Preferred
Shares remain outstanding or any Warrants remain unexercised, the Company agrees
to keep such registration current with the Commission and with such states of
the United States as the Holders (as that term is defined in the Preferred
Share) of the Preferred Share or Warrants shall reasonably request in writing.
All costs and expenses of registration shall be borne by the Company.
Section 4.26 Liquidated Damages. The Company understands and agrees that
an Event of Default as contained in this Agreement, the Transaction Documents
and/or the Certificate of
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Designations will result in substantial economic loss to the Purchasers which
will be extremely difficult to calculate with precision. Therefore, after the
Closing, if for any reason the Company fails to cure any Event of Default within
the time given to cure such Event of Default, if any, as compensation and
liquidated damages for such default, and not as a penalty, the Company agrees to
pay liquidated damages to the Purchasers in an amount equal to the two times
(2x) the Purchase Price. The Company shall upon demand pay the Purchasers, such
liquidated damages by wire transfer in immediately available funds to an account
designated by the Purchasers. Nothing herein shall limit the right of any of the
Purchasers to pursue actual damages (less the amount of any liquidated damages
received pursuant to the foregoing) for the Company's failure to cure an Event
of Default, consistent with the terms of this Agreement. NOTWITHSTANDING
ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, THE COMPANY'S OBLIGATIONS
UNDER THIS SECTION SHALL SURVIVE ANY TERMINATION OF THIS AGREEMENT.
Section 4.27 [Reserved].
Section 4.28. Fees. The Company will pay the following fees and expenses
in connection with this transaction: (a) US$15,000 to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇, LLP ("KGL") for document production fees, receipt of which is
acknowledged, (b) $500 to KGL for expenses, receipt of which is acknowledged,
and (c) US$5,000 to KGL as escrow agent fee. All fees and expenses will be paid
at Closing and the Escrow Agent shall deduct such fees and expenses directly
from escrow.
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ARTICLE V
ASSIGNMENT OF RIGHTS AND ASSUMPTION OF OBLIGATIONS
It shall be a condition to Closing that, as of the Closing Date, (i) the
Company's Common Stock be registered under Section 12 of the Exchange Act, and
(ii) the Company's Common Stock be listed for trading on a national securities
exchange, Nasdaq or the OTCBB; provided, however, that this condition shall be
met upon the closing of the merger pursuant to the Agreement and Plan of Merger
(the "Merger Agreement") by and among, the Company, HERZ, Asure Acquisition
Corporation, a Delaware corporation, and ▇▇▇ ▇. ▇▇▇▇▇, dated July 13, 2000,
which Merger Agreement shall require HERZ to assume the obligations of the
Company hereunder.
Upon the closing of the merger pursuant to the Merger Agreement, (x) this
Agreement and the Exhibits hereto shall be deemed to have been amended to
reflect HERZ as the issuer of the Preferred Shares, the Warrants, the Underlying
Shares, and the Warrant Shares, (y) the documents to be executed and delivered
at the Closing shall be amended to reflect this Article V, and (z) the
Disclosure Documents shall also include HERZ's (A) most recent Annual Report on
Form 10-KSB, as filed with the SEC, (B) the most recent Quarterly Reports on
Form 10-QSB since its most recent Annual Report on Form 10-KSB as filed with the
SEC, (C) its most recent Proxy Statement as filed with the SEC, and (D) any
Current Reports on Form 8-K as filed with the SEC since its most recent Annual
Report on Form 10-KSB, copies of which have been made available to the
Puchasers.
ARTICLE VI
TERMINATION
Section 6.1. Termination by the Company or the Purchasers. This Agreement
shall be automatically terminated prior to Closing if:
(a) there shall be in effect any statute, rule, law or regulation,
including an amendment to Regulation D or an interpretive release promulgated or
issued thereunder, that prohibits the consummation of the Closing or if the
consummation of the Closing would violate any non-appealable final judgment,
order, decree, ruling or injunction of any court of or governmental authority
having competent jurisdiction;
(b) the Closing shall not have occurred by 5:30 Eastern Time one
hundred-eighty (180) days after the Execution Date (unless such day is not a
Business Day, then the next Business Day);
(c) the Company's Common Stock is not registered under Section 12 of
the Exchange Act;
(d) the Company is not current in its reporting obligations under
Section 13 or 15(d) of the Exchange Act;
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(e) an event occurs prior to the Closing requiring the Company to
report such event to the SEC on Form 8-K and not otherwise set forth in Schedule
6.1 provided however such events shall only include the following items under
Form 8-K: Item 1; Item 2; Item 3; or Item 4 (however, as to Item 4, only if
requiring disclosure under Item 304 (a)(1)(iv) under Regulation on S-K); or
(f) trading in the Common Stock has been suspended, delisted, or
otherwise ceased by the Commission or the NASD or other exchange or market on
which the Common Stock is listed or quoted (except for any suspension of trading
of limited duration solely to permit dissemination of material information
regarding the Company) and not reinstated within ten (10) Trading Days.
Section 6.2. Termination by the Company. This Agreement may be terminated
prior to Closing by the Company, by giving written notice of such termination to
the Purchasers, if any of the Purchasers have materially breached any
representation, warranty, covenant or agreement contained in this Agreement or
the Registration Rights Agreement and such breach is not cured within ten (10)
Business Days following receipt by such Purchaser of notice of such breach and
the other Purchasers decline to be substituted for the breaching Purchaser's
investment.
ARTICLE VII
LEGAL FEES AND DEFAULT INTEREST RATE
In the event any Party commences legal action to enforce its rights under
this Agreement, the Preferred Shares, the Warrants or the Escrow Agreement, the
non-prevailing party shall pay all reasonable costs and expenses (including but
not limited to reasonable attorney's fees, accountant's fees, appraiser's fees
and investigative fees) incurred in enforcing such rights. In the event of an
uncured Default by any party hereunder, interest shall accrue on all unpaid
amounts due the aggrieved party at the rate of 15% per annum, compounded
annually.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Fees and Expenses. Except as set forth above, each party
shall pay the fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this Agreement.
The Company shall pay the fees of the Escrow Agent and all stamp and other taxes
and duties levied in connection with the issuance of the Preferred Shares and
Warrants (and upon conversion or exercise thereof, the Underlying Shares and
Warrant Shares) pursuant hereto. Each of the Purchasers shall be responsible for
its own tax liability that may arise as a result of the investment hereunder or
the transactions contemplated by this Agreement. Whether or not the transactions
contemplated by this Agreement are consummated or this Agreement is terminated,
the Company shall pay (i) all costs, expenses, fees and all taxes incident to
and in connection with: (A) the preparation, printing and distribution of the
Registration Statement and all amendments and supplements thereto (including,
without limitation, financial statements and exhibits), and all
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preliminary and final Blue Sky memoranda and all other agreements, memoranda,
correspondence and other documents prepared and delivered in connection
herewith, (B) the issuance and delivery of the Preferred Shares and Warrants
and, upon conversion or exercise thereof, the Underlying Shares and the Warrant
Shares, (C) the exemption from registration of the Preferred Shares and Warrants
and, upon conversion or exercise thereof, the Underlying Shares and Warrant
Shares for offer and sale to the Purchasers under the securities or Blue Sky
laws of the applicable jurisdiction, (D) furnishing such copies of the
Registration Statement and all amendments and supplements thereto, as may
reasonably be requested for use in connection with resales of the Preferred
Shares and Warrants and, upon conversion or exercise thereof, the Underlying
Shares and the Warrant Shares, and (E) the preparation of certificates for the
Preferred Shares and Warrants and, upon conversion or exercise thereof, the
Underlying Shares and Warrant Shares (including, without limitation, printing
and engraving thereof), (ii) all fees and expenses of the counsel and
accountants of the Company and (iii) all expenses and listing fees on securities
exchanges, if any.
Section 8.2. Entire Agreement; Amendments. This Agreement, together with
the Exhibits, Annexes and Schedules hereto, contain the entire understanding of
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, with respect to such matters.
This Agreement shall be deemed to have been drafted and negotiated by both
parties hereto and no presumptions as to interpretation, construction or
enforceability shall be made by or against either party in such regard.
Section 8.3. Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been made upon facsimile transmission (with transmission confirmation report) at
the 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) whichever shall first occur.
The addresses for such communications shall be:
If to the Company: A Sure eCommerce, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇, President
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to: ▇▇▇▇▇▇ Gottbetter & ▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Purchasers: See Schedule 1 - Schedule of Purchasers
(attached hereto)
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If to Escrow Agent: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or such other address as may be designated in writing hereafter, in the same
manner, by such person.
Section 8.5 Amendments; Waivers. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by both the Company and the Purchasers, or, in the case of a waiver,
by the party against whom enforcement of any such waiver is sought. No waiver of
any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
Section 8.6. Headings. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
Section 8.7. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and permitted
assigns. The assignment by a party of this Agreement or any rights hereunder
shall not affect the obligations of such party under this Agreement.
Section 8.8. No Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
Section 8.9. Governing Law; Venue; Service of Process. The parties hereto
acknowledge that the transactions contemplated by this Agreement and the
exhibits hereto bear a reasonable relation to the State of New York. The parties
hereto agree that the internal laws of the State of New York shall govern this
Agreement and the exhibits hereto, including, but not limited to, the
enforcement of the amount of interest to be charged on the outstanding principal
amount of the Preferred Shares and as to all issues related to usury. Any action
to enforce the terms of this Agreement or any of its exhibits shall be
exclusively brought in the State and/or federal courts in the State and County
of New York. Service of process in any action by Purchasers to enforce the terms
of this Agreement may be made by serving a copy of the summons and complaint, in
addition to any other relevant documents, by commercial overnight courier to the
Company at its principal address set forth in this Agreement.
Section 8.10. Survival. The representations and warranties of the Company
and the Purchasers contained in Article III and the agreements and covenants of
the parties contained in
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Article IV and this Article VIII shall survive the Closing (or any earlier
termination of this Agreement).
Section 8.11. Counterpart Signatures. This Agreement may be executed in
two or more counterparts, all of which when taken together shall be considered
one and the same agreement and shall become effective when counterparts have
been signed by each party and delivered to the other party, it being understood
that both parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission, such signature shall create a
valid and binding obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as if such
facsimile signature page were an original thereof.
Section 8.12. Publicity. The Company and the Purchasers shall consult with
each other in issuing any press releases or otherwise making public statements
with respect to the transactions contemplated hereby and neither party shall
issue any such press release or otherwise make any such public statement without
the prior written consent of the other, which consent shall not be unreasonably
withheld or delayed, unless counsel for the disclosing party deems such public
statement to be required by applicable federal and/or State securities laws.
Except as otherwise required by applicable law or regulation, the Company will
not disclose to any third party the names of the Purchasers.
Section 8.13. Severability. In case any one or more of the provisions of
this Agreement shall be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this Agreement shall
not in any way be affected or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
Section 8.14. Limitation Remedies. With respect to claims by the Company,
or persons acting by or through the Company, for remedies at law or at equity,
relating to or arising out of a breach of this Agreement, liability, if any,
shall, in no event, include loss of profits, or incidental, indirect, exemplary,
punitive, special or consequential damages of any kind.
[ SIGNATURE PAGE FOLLOWS ]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first indicated above.
Company:
A SURE ECOMMERCE, INC.
By: /s/ ▇.▇. ▇▇▇▇▇▇
-------------------------------------
Name: ▇.▇. ▇▇▇▇▇▇
Title: Chairman
Purchasers:
GEM GLOBAL YIELD FUND LIMITED
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Director
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SCHEDULE 1
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Full Amount of Number of Termination Termination
Preferred Shares to be Warrant Shares Amount
Name and Address of Purchaser Purchased Exercisable
-------------------------------------------------------------------------------------------------
GEM Global Yield Fund Limited $5,000,000 500,000 US$100,000
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇
Tel: ▇▇.▇▇▇.▇▇▇.▇▇▇▇
Fax: ▇▇.▇▇▇.▇▇▇.▇▇▇▇
-------------------------------------------------------------------------------------------------
[Other Schedules and Exhibits Omitted]