SECURED CONVERTIBLE DEBENTURE PURCHASE AGREEMENT (this "Agreement"),
dated as of September 21, 2001, among Phoenix International Industries,
Inc., a Florida corporation (the "Company"), and the investors signatory
hereto (each such investor is a "Purchaser" and all such investors are,
collectively, the "Purchasers").
WHEREAS, subject to the terms and conditions set forth in this
Agreement and in accordance with Section 4(2) under the Securities Act of
1933, as amended (the "Securities Act"), and Rule 506 promulgated
thereunder, the Company desires to issue and sell to the Purchasers
and the Purchasers, severally and not jointly, desire to purchase from
the Company, (i) an aggregate principal amount of $300,000 of the
Company's 12% Secured Convertible Debentures, due eighteen months from
issuance, which shall be in the form of Exhibit A (the "Closing
Debentures"), which are convertible into shares of the Company's
common stock, $.001 par value per share (the "Common Stock"), and (ii)
certain Warrants (as defined in Section 1.2 hereof).
WHEREAS, each Purchaser owns 12% Secured Convertible Debentures
of the Company issued to such Purchaser on June 23, 2000 and August
31, 2000, respectively, pursuant to a Secured Convertible Debenture
Purchase Agreement, dated June 23, 2000, between the Company and the
Purchasers ("Existing Debentures"). The outstanding principal balance
(including any accrued but unpaid interest) of the Existing Debentures
held by each such Purchaser is set forth below such Purchaser's name
on its signature page to this Agreement.
WHEREAS, the Company and the Purchasers have agreed to cancel the
Existing Debentures and in place of the Existing Debentures, the
Company has agreed to issue new secured convertible debentures to the
Purchasers, substantially in the form of Exhibit A and in the
outstanding principal balance (including any accrued but unpaid
interest) set forth below each Purchaser's name on its signature page
to this Agreement (the "Re-issued Debentures").
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained
in this Agreement, and for other good and valuable consideration the
receipt and adequacy of which are hereby acknowledged, the Company and
the Purchasers agree as follows:
ARTICLE I
---------
PURCHASE, SALE AND EXCHANGE
---------------------------
1.1 The Closing; Settlement Dates
-----------------------------
(a) (i) Subject to the terms and conditions set forth in
this Agreement, the Company shall issue and sell to the Purchasers and
the Purchasers shall, severally and not jointly, purchase from the
Company, to be paid and issued on settlement dates described in this
Section 1.1, the Debentures for an aggregate purchase price of $300,000.
The closing of the purchase and sale of the Debentures (the"Closing") shall
take place at the offices of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
1
LLP ("▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇"), ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
(ii) On the date of execution of this Agreement (the
"Closing Date"), the parties shall deliver or shall cause to be delivered
the following: (A) the Company shall deliver to each Purchaser: (1) a
Closing Debenture registered in the name of such Purchaser in an aggregate
principal amount indicated below such Purchaser's name on the signature page
to this Agreement for Closing Debentures, (2) a Common Stock purchase
warrant, in the form of Exhibit D, registered in the name of such Purchaser,
pursuant to which such Purchaser shall have the right to acquire, for every
one Dollar ($1) of the principal amount of the Closing Debentures acquired by
it hereunder, five shares of Common Stock, upon the terms and conditions
set forth therein (collectively, the "Closing Warrants"), (3) the legal
opinion of ▇. ▇▇▇ ▇▇▇▇▇▇▇▇, Esq., outside counsel to the Company, in the form
of Exhibit C, (4) an executed Registration Rights Agreement, dated the date
hereof, among the Company and the Purchasers, in the form of Exhibit B
(the "Registration Rights Agreement"), (5) Transfer Agent Instructions, in
the form of Exhibit E, delivered to and acknowledged in writing by the
Company's transfer agent (the "Transfer Agent Instructions"), (6) an executed
Security Agreement, dated the date hereof, among the Company and the
Purchasers, in the form of Exhibit F (the "Security Agreement") and (7) a
Re-Issued Debenture, substantially in the form of Exhibit A; and (B) each
Purchaser will deliver to the Company: (1) the purchase price indicated below
such Purchaser's name on the signature page to this Agreement for the Closing
Debentures and Closing Warrants in United States dollars in immediately
available funds by wire transfer to an account designated in writing by the
Company for such purpose, (2) executed originals of this Agreement, the
Registration Rights Agreement and Security Agreement and (3) the Existing
Debentures held by such Purchaser.
(iii) If each of the conditions set forth in Section 1.1(b),
have been either satisfied by the Company or waived by each Purchaser, then
promptly after the Effective Date (as defined herein), (A) the Company will,
against delivery of the amounts set forth in clause (B) in this paragraph,
deliver to each Purchaser, (1) 12% Secured Convertible Debentures in the
form of Exhibit A, in an aggregate principal amount indicated below such
Purchaser's name on the signature page to this Agreement (the "Additional
Debentures"), (2) a Common Stock purchase warrant, in the form of Exhibit D,
registered in the name of such Purchaser, pursuant to which such Purchaser
shall have the right to acquire, for every one Dollar ($1) of the principal
amount of the Additional Debentures acquired by it hereunder, five shares of
Common Stock (the "Additional Warrants" and together with the Additional
Debentures, the "Additional Securities"), and (B) each Purchaser will deliver
to the Company, the purchase price indicated below such Purchaser's name on
the signature page to this Agreement for Additional Debentures and Additional
Warrants in United States Dollars in immediately available funds by wire
transfer to an account designated in writing by the Company for such purpose.
The date on which the deliveries contemplated in this paragraph occur is
the "Additional Funding Date."
(b) Conditions precedent to the purchase of Additional Securities.
--------------------------------------------------------------
Notwithstanding anything to the contrary contained in this Agreement,
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the obligation of a Purchaser to purchase the securities described in Section
1.1(a)(iii) is subject to the satisfaction by the Company by the Additional
Funding Date of each of the following conditions:
(i) Accuracy of the Company's Representations and Warranties.
---------------------------------------------------------
The representations and warranties of the Company contained in this Agreement
and the Security Agreement shall be true and correct as of the date when
made and as of the Additional Funding Date, as though made on and as of the
Additional Funding Date (other than representations and warranties which
relate to a specific date, which shall not include representations and
warranties relating to the "date hereof" which representations and warranties
shall be true as of such specific date);
(ii) Performance by the Company.
--------------------------- The Company shall
have timely performed, satisfied and complied with all covenants,
agreements and conditions required by the Transaction Documents (as
defined herein) to be performed, satisfied or complied with by the
Company between the Closing Date and the Additional Funding Date and
no Event (as defined in the Registration Rights Agreement) shall have
occurred which has not been cured;
(iii) No Injunction.
-------------- Since the Closing Date, no statute,
rule, regulation, executive order, decree, ruling or injunction shall have
been enacted, entered, promulgated, amended, modified or endorsed by any
court of governmental authority of competent jurisdiction or governmental
authority, stock market or trading facility which prohibits the consummation
of any of the transactions contemplated by the Transaction Documents;
(iv) Adverse Changes.
---------------- Since the Closing Date, no
event or series of events which reasonably would be expected to have
or result in a material adverse effect on the results of operations,
assets or financial condition of the Company and the Subsidiaries
(taken as a whole) shall have occurred and be continuing; and
(v) Compliance Certificate.
----------------------- The Company shall have
delivered to each Purchaser on the Additional Funding Date, a
certificate, signed by the President of the Company, stating that all
applicable conditions specified in Section 1.1(b) have been fulfilled
and stating that there shall have been no adverse change in the
business, affairs, prospects, operations, properties, assets or
condition of the Company since the Closing Date (provided, however,
that such certificate shall not preclude Purchasers from making their
own determination as to such compliance, and that such certificate
shall not cure compliance defaults) and that the UCC's in the Security
Agreement are in full force and effect, and granting the Purchasers
with a security interest.
1.2 Certain Defined Terms.
---------------------- As used herein, Debentures
shall include all "Closing Debentures," "Re-issued Debentures" and all
"Additional Debentures" (all as hereinafter defined). As used herein,
Warrants shall include all "Closing Warrants" and all "Additional
Warrants." For purposes of this Agreement, "Conversion Price,"
"Original Issue Date" and "Trading Day" shall have the meanings set
forth in the Debentures; "Business Day" shall mean any day except
Saturday, Sunday and any day which shall be a federal legal holiday in
the United States or a day on which banking institutions in the State
of New York or Florida are authorized or required by law or other
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governmental action to close. A "Person" means an individual or
corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock
company, government (or an agency or subdivision thereof) or other
entity of any kind.
ARTICLE II
----------
REPRESENTATIONS AND WARRANTIES
------------------------------
2.1 Representations and Warranties of the Company.
---------------------------------------------- The Company
hereby makes the following representations and warranties to the Purchasers:
(a) Organization and Qualification.
------------------------------- The Company is a
corporation duly incorporated, validly existing and in good standing
under the laws of the State of Florida 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 2.1(a) (collectively
the "Subsidiaries"). Each of the Subsidiaries is an entity, duly
incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization (as applicable), with the requisite 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 or other entity 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, individually or in
the aggregate, (x) adversely affect the legality, validity or
enforceability of the Securities (as defined below) or any of this
Agreement, the Registration Rights Agreement, the Security Agreement,
the Transfer Agent Instructions or the Warrants (collectively, the
"Transaction Documents"), (y) have or result in a material adverse
effect on the results of operations, assets, prospects, or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as
a whole, or (z) adversely impair the Company's ability to perform
fully on a timely basis its obligations under any of the Transaction
Documents (any of (x), (y) or (z), 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 by each of the Transaction
Documents and otherwise to carry out its obligations thereunder. The
execution and delivery of each of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated
thereby have been duly authorized by all necessary action on the part
of the Company and no further action is required by the Company. Each
of the Transaction Documents has been duly executed by the Company
and, when delivered in accordance with the terms hereof, will
constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms. Neither the Company
nor any Subsidiary is in violation of any of the provisions of its
respective certificate or articles of incorporation, by-laws or other
organizational or charter documents.
-4-
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(c) Capitalization.
--------------- The number of authorized, issued and
outstanding capital stock of the Company is set forth in Schedule
2.1(c). No shares of Common Stock are entitled to preemptive or
similar rights, nor is any holder of the securities of the Company
entitled to preemptive or similar rights arising out of any agreement
or understanding with the Company by virtue of any of the Transaction
Documents. Except as a result of the purchase and sale of the
Debentures and the Warrants and except as disclosed in Schedule
2.1(c), there are no outstanding options, warrants, script rights to
subscribe to, calls or commitments of any character whatsoever
relating to, or 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. The issue and sale of Underlying Shares (as hereinafter
defined) will not obligate the Company to issue shares of Common Stock
or other securities to any person other than the Purchaser and will
not result in a right of any holder of Company securities to adjust
the exercise or conversion or reset price under such securities.
(d) Issuance of the Debentures and the Warrants.
--------------------------------------------
The Debentures will be duly and validly issued, free and clear of all
liens, encumbrances and rights of first refusal of any kind
(collectively, "Liens"). On the date hereof, the Company will have
(and will, at all times while Debentures and the Warrants are
outstanding, maintain) an adequate reserve of duly authorized shares
of Common Stock, reserved for issuance to the holders of such
Debentures and Warrants, to enable it to perform its conversion,
exercise and other obligations under this Agreement. Such number of
reserved and available shares of Common Stock shall not be less than
the sum of 20% of the number of shares of Common Stock which would be
issuable upon (i) conversion in full of the Debentures assuming such
conversion occurred on the Original Issue Date, and the Debentures
remain outstanding for one year and all interest is paid in shares of
Common Stock and (ii) exercise in full of the Warrants. The shares
of Common Stock issuable upon conversion of the Debentures and upon
exercise of the Warrants are collectively referred to herein as the
"Underlying Shares." All Underlying Shares shall be duly reserved for
issuance to the holders of the Debentures and the Warrants. The
Debentures, the Warrants and the Underlying Shares are collectively
referred to herein as, the "Securities."
(e) No Conflicts.
------------ The execution, delivery and performance
of the Transaction Documents by the Company and the consummation by
the Company of the transactions contemplated thereby do not and will
not (i) conflict with or violate any provision of the Company's or any
Subsidiary's certificate or articles of incorporation, bylaws or other
charter documents (each as amended through the date hereof), or (ii)
subject to obtaining the Required Approvals (as defined below),
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 (with or without notice, lapse of time or both) of, any
agreement, credit facility, debt or other instrument (evidencing a
Company or Subsidiary debt or otherwise) or other understanding to
which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected,
or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or
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governmental authority to which the Company or a Subsidiary is subject
(including federal and state securities laws and regulations), or by
which any property or asset of the Company or a Subsidiary is bound or
affected; except in the case of each of clauses (ii) and (iii), as could
not, individually or in the aggregate, have or result in 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, except for violations which, individually or in the aggregate,
could not have or result in a Material Adverse Effect.
(f) Filings, Consents and Approvals.
-------------------------------- Neither the Company
nor any Subsidiary is required to obtain any consent, waiver,
authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the Transaction
Documents, other than (i) the filings required pursuant to Section
3.10, (ii) the filing with the Commission of a registration statement
meeting the requirements set forth in the Registration Rights
Agreement and covering the resale of the Underlying Shares by the
Purchasers (the "Underlying Shares Registration Statement"), (iii)
applicable Blue Sky filings, and (iv) in all other cases where the
failure to obtain such consent, waiver, authorization or order, or to
give such notice or make such filing or registration could not have or
result in, individually or in the aggregate, a Material Adverse Effect
(collectively, the "Required Approvals").
(g) Litigation; Proceedings.
------------------------ There is no action, suit,
inquiry, notice of violation, proceeding or investigation pending or,
to the knowledge of the Company, threatened against or affecting the
Company or any of its Subsidiaries or any of their respective
properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county,
local or foreign) (collectively, an "Action" ) which (i) adversely
affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the Securities or (ii) could, if there
were an unfavorable decision, individually or in the aggregate, have
or result in a Material Adverse Effect. Neither the Company nor any
Subsidiary, nor any director or officer thereof, is or has been the
subject of any Action involving a claim of violation of or liability
under federal or state securities laws or a claim of breach of
fiduciary duty. The Company does not have pending before the
Commission any request for confidential treatment of information and
the Company has no knowledge of any expected such request that would
be made prior to the Effectiveness Date (as defined in the Registration
Rights Agreement). There has not been, and to the best of the Company's
knowledge there is not pending or contemplated, any investigation by
the Commission involving the Company or any current or former director
or officer of the Company.
(h) No Default or Violation.
------------------------ Neither the Company nor any
Subsidiary (i) is in default under or in violation of (and no event
has occurred which has not been waived which, with notice or lapse of
time or both, would result in a default by the Company or any
Subsidiary under), nor has the Company or any Subsidiary received
notice of a claim that it is in default under or that it is 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, (ii) is in violation of any order of any
court, arbitrator or governmental body, or (iii) is in violation of any
-6-
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statute, rule or regulation of any governmental authority, in each
case of clauses (i), (ii) or (iii) above, except as could not individually
or in the aggregate, have or result in a Material Adverse Effect. The
security interests granted to the Purchasers pursuant to the Security
Agreement will convey and grant to the Purchasers a first priority
security interest in all of the Collateral (as such term is defined in
such agreement).
(i) Private Offering.
----------------- Assuming the accuracy of the
representations and warranties of the Purchasers set forth in Sections
2.2(b)-(g), the offer, issuance and sale of the Securities to the
Purchasers as contemplated hereby are exempt from the registration
requirements of the Securities Act. Neither the Company nor any
Person acting on its behalf has taken or is, to the knowledge of the
Company, contemplating taking any action which could subject the
offering, issuance or sale of the Securities to the registration
requirements of the Securities Act including soliciting any offer to
buy or sell the Securities by means of any form of general
solicitation or advertising.
(j) SEC Reports; Financial Statements.
---------------------------------- The Company has
filed all reports required to be filed by it under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), including
pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company was
required by law to file such material) (the foregoing materials being
collectively referred to herein as the "SEC Reports" and, together
with the Schedules to this Agreement, the "Disclosure Materials") on a
timely basis or has received a valid extension of such time of filing
and has filed any such SEC Reports prior to the expiration of any such
extension. As of their respective dates, the SEC Reports complied in
all material respects with the requirements of the Securities Act and
the Exchange Act and the rules and regulations of the Commission
promulgated thereunder, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading. All material agreements to which the
Company is a party or to which the property or assets of the Company
are subject have been filed as exhibits to the SEC Reports as required
under the Exchange Act. The financial statements of the Company
included in the SEC Reports comply in all material respects with
applicable accounting requirements and the rules and regulations of
the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance
with generally accepted accounting principles applied on a consistent
basis during the periods involved ("GAAP"), except as may be otherwise
specified in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of the
Company and its consolidated subsidiaries as of and for the dates
thereof and the results of operations and cash flows for the periods
then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments. Since December 31, 2000,
except as specifically disclosed in the SEC Reports, (a) there has
been no event, occurrence or development that has or that could result
in a Material Adverse Effect, (b) the Company has not incurred any
liabilities (contingent or otherwise) other than (x) liabilities
incurred in the ordinary course of business consistent with past
practice and (y) liabilities not required to be reflected in the
Company's financial statements pursuant to GAAP or required to be
disclosed in filings made with the Commission, (c) the Company has not
altered its method of accounting or the identity of its auditors,
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(d) the Company has not declared or made any payment or distribution of
cash or other property to its stockholders or officers or directors
(other than in compliance with existing Company stock option plans)
with respect to its capital stock, or purchased, redeemed (or made any
agreements to purchase or redeem) any shares of its capital stock and
(e) the Company has not issued or committed to issue shares of Common
Stock or securities that are convertible or exchangeable into, or give
holders thereof the right to receive, shares of Common Stock.
(k) Investment Company.
------------------- The Company is not, and is not an
Affiliate (as defined in Rule 405 under the Securities Act) of, an
"investment company" within the meaning of the Investment Company Act
of 1940, as amended.
(l) Certain Fees.
------------- No fees or commissions will be payable
by the Company to any broker, financial advisor or consultant, finder,
placement agent, investment banker, bank or other Person with respect
to the transactions contemplated by this Agreement. The Purchasers
shall have no obligation with respect to any fees or with respect to
any claims made by or on behalf of other Persons for fees of a type
contemplated in this Section that may be due in connection with the
transactions contemplated by this Agreement. The Company shall
indemnify and hold harmless the Purchasers, their employees, officers,
directors, agents, and partners, and their respective Affiliates, from
and against all claims, losses, damages, costs (including the costs of
preparation and attorney's fees) and expenses suffered in respect of
any such claimed or existing fees, as such fees and expenses are
incurred.
(m) Solicitation Materials.
----------------------- Neither the Company nor any
Person acting on the Company's behalf has solicited any offer to buy
or sell the Securities by means of any form of general solicitation or
advertising.
(n) Form S-B2 Eligibility.
---------------------- The Company is eligible to
register securities for resale with the Commission under Form S-B2
promulgated under the Securities Act.
(o) Exclusivity.
------------ The Company shall not issue and sell the
Debentures or the Warrants to any Person other than the Purchasers
without the specific prior written consent of the Purchasers.
(p) Seniority.
---------- No indebtedness of the Company is senior
to the Debentures in right of payment, whether with respect to
interest or upon liquidation or dissolution, or otherwise.
(q) Listing and Maintenance Requirements Compliance.
------------------------------------------------
Except as set forth in the SEC Reports, the Company has not, in the
two years preceding the date hereof, received written notice from any
other stock exchange, market or trading facility on which the Common
Stock is or has been listed (or on which it has been quoted) to the
effect that the Company is not in compliance with the listing or
maintenance requirements of such exchange, market or trading facility.
The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing
and maintenance requirements.
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(r) Patents and Trademarks.
----------------------- Neither the Company nor any
of its Subsidiaries have or have rights to use patents, patent
applications, trademarks, trademark application, service marks,
tradenames, copyrights, licensed and rights. In the event that while
the Debentures are outstanding, the Company or a Subsidiary ever owns
patents or trademarks or should make an application theretofore, then
the Company shall promptly execute and cooperate to cause to be filed
with the Patent and Trademark Office, an Intellectual Property
Security Agreement in the form to be prepared by Purchasers, to
provide Purchasers a first priority lien on all such Intellectual
property.
(s) Registration Rights; Rights of Participation.
--------------------------------------------- Except as set
forth on Schedule 6(b) to the Registration Rights Agreement, the Company
has not granted or agreed to grant to any Person any rights (including
"piggy-back" registration rights) to have any securities of the Company
registered with the Commission or any other governmental authority which
has not been satisfied. Except as set forth on Schedule 6(b) to the
Registration Rights Agreement, no Person has any right of first refusal,
preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by the Transaction Documents.
(t) Regulatory Permits.
------------------- The Company and its Subsidiaries
possess all certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities necessary
to conduct their respective businesses, except where the failure to
possess such permits could not, individually or in the aggregate, have
or result in a Material Adverse Effect ("Material Permits"), and
neither the Company nor any such Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material
Permit.
(u) Title.
------ The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them
which is material to the business of the Company and its Subsidiaries
and good and marketable title in all personal property owned by them
which is material to the business of the Company and its Subsidiaries,
in each case free and clear of all Liens, except for Liens granted to
the Purchasers pursuant to the Security Agreement and for other Liens
as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property
by the Company and its Subsidiaries. Any real property and facilities
held under lease by the Company and its Subsidiaries are held by them
under valid, subsisting and enforceable leases of which the Company
and its Subsidiaries are in compliance and do not interfere with the
use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
(v) Labor Relations.
---------------- No material labor problem exists or,
to the knowledge of the Company, is imminent with respect to any of the
employees of the Company.
(w) Disclosure.
----------- The Company confirms that neither it
nor any other Person acting on its behalf has provided any of the
Purchasers or its agents or counsel with any information that
constitutes or might constitute material non-public information. The
Company understands and confirms that the Purchasers shall be relying
on the foregoing representations in effecting transactions in
securities of the Company. All disclosure provided to the Purchasers
-9-
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regarding the Company, its business and the transactions contemplated
hereby, including the Schedules to this Agreement, furnished by or on
behalf of the Company are true and correct 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.
(x) Solvency.
--------- The Company, after giving effect to the
transactions contemplated by this Agreement, will be solvent (i.e.,
the Company will be able to pay its debts as they become due and
payable). Currently the Company has no information that would lead it
to reasonably conclude that the Company would not have the ability to,
nor does it intend to take any action that would impair its ability
to, pay its debts from time to time incurred in connection therewith
as such debts become due and payable.
(y) Application of Takeover Protections.
------------------------------------ The Company
and its Board of Directors have taken all necessary action, if any, in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the
Company's Certificate of Incorporation (or similar charter documents)
or the laws of its state of incorporation that is or could become
applicable to the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights under
the Transaction Documents, including without limitation the Company's
issuance of the Securities and the Purchasers' ownership of the
Securities.
2.2 Representations and Warranties of the Purchasers.
------------------------------------------------- Each
Purchaser hereby for itself and for no other Purchaser represents and
warrants to the Company as follows:
(a) Organization; Authority.
------------------------ Such Purchaser is an entity
duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization with the requisite corporate
or partnership power and authority to enter into and to consummate the
transactions contemplated by the Transaction Documents and otherwise
to carry out its obligations thereunder. The purchase by such
Purchaser of the Securities hereunder has been duly authorized by all
necessary action on the part of such Purchaser. Each of Transaction
Documents has been duly executed by such Purchaser, and when delivered
by such Purchaser in accordance with the terms hereof, will constitute
the valid and legally binding obligation of such Purchaser, enforceable
against it in accordance with its terms.
(b) Investment Intent.
------------------ Such Purchaser is acquiring the
Securities as principal for its own account for investment purposes
only and not with a view to or for distributing or reselling such
Securities or any part thereof, without prejudice, however, to such
Purchaser's right, subject to the provisions of this Agreement, the
Registration Rights Agreement and the Warrant, at all times to sell or
otherwise dispose of all or any part of such Securities pursuant to an
effective registration statement under the Securities Act or under an
exemption from such registration and in compliance with applicable
federal and state securities laws. Nothing contained herein shall be
deemed a representation or warranty by such Purchaser to hold the
Securities for any period of time. Such Purchaser is acquiring the
Securities hereunder in the ordinary course of its business.
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Such Purchaser does not have any agreement or understanding, directly or
indirectly, with any Person to distribute the Securities.
(c) Purchaser Status.
----------------- At the time such Purchaser was offered
the Securities, it was, and at the date hereof it is an "accredited
investor" as defined in Rule 501(a) under the Securities Act.
(d) Experience of such Purchaser.
----------------------------- Such Purchaser, 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 Securities, and has so evaluated the merits and
risks of such investment.
(e) Ability of such Purchaser to Bear Risk of Investment.
-----------------------------------------------------
Such Purchaser is able to bear the economic risk of an investment in
the Securities and, at the present time, is able to afford a complete
loss of such investment.
(f) Access to Information.
---------------------- Such Purchaser acknowledges
that it has reviewed the Disclosure Materials and 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 Securities
and the merits and risks of investing in the Securities; (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; and (iii) the
opportunity to obtain such additional information which the Company
possesses or can acquire without unreasonable effort or expense that
is necessary to make an informed investment decision with respect to
the investment and to verify the accuracy and completeness of the
information contained in the Disclosure Materials. Neither such
inquiries nor any other investigation conducted by or on behalf
of such Purchaser or its representatives or counsel shall modify,
amend or affect such Purchaser's right to rely on the truth, accuracy
and completeness of the Disclosure Materials and the Company's
representations and warranties contained in the Transaction Documents.
(g) General Solicitation.
--------------------- Such Purchaser is not purchasing
the Securities as a result of or subsequent to any advertisement, article,
notice or other communication regarding the Securities published in any
newspaper, magazine or similar media or broadcast over television or radio
or presented at any seminar or any other general solicitation or general
advertisement.
(h) Reliance.
--------- Such Purchaser understands and acknowledges
that (i) the Securities are being offered and sold to it without
registration under the Securities Act in a private placement that is
exempt from the registration provisions of the Securities Act and (ii)
the availability of such exemption, depends in part on, and the
Company will rely up on the accuracy and truthfulness of, the foregoing
representations and such Purchaser hereby consents to such reliance.
-11-
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The Company acknowledges and agrees that no Purchaser makes or has
made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section
2.2.
ARTICLE III
-----------
OTHER AGREEMENTS OF THE PARTIES
-------------------------------
3.1 Transfer Restrictions.
---------------------- (a) The Securities may only be
disposed of pursuant to an effective registration statement under the
Securities Act, to the Company or pursuant or to an available
exemption from or in a transaction not subject to the registration
requirements of the Securities Act, and in compliance with any
applicable federal and state securities laws. In connection with any
transfer of Securities other than pursuant to an effective
registration statement or to the Company, except as otherwise set
forth herein, the Company may require the transferor thereof to
provide to the Company an opinion of counsel selected by the
transferor, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Securities
under the Securities Act. Any such transferee shall agree in writing
to be bound by the terms of this Agreement and shall have the rights
of a Purchaser under this Agreement and the Registration Rights
Agreement.
(b) The Purchasers agree to the imprinting, so long as is
required by this Section 3.1(b), of the following legend on the
Securities:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE CONVERTIBLE OR EXERCISABLE HAVE BEEN REGISTERED WITH
THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION
OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
Underlying Shares shall not contain the legend set forth above
nor any other legend if the conversion of Debentures or the exercise
of the Warrants, as the case may be, occurs at any time while an
Underlying Shares Registration Statement is effective under the
Securities Act or the holder is relying on Rule 144 promulgated under
the Securities Act ("Rule 144") in connection with the resale of such
Underlying Shares, or in the event there is not an effective Underlying
Shares Registration Statement, and Rule 144 is not then available for
resale of the Underlying Shares, at such time as such legend is not
required under applicable requirements of the Securities Act
-12-
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(including, without limitation, judicial interpretations and
pronouncements issued by the staff of the Commission). The Company
shall cause its counsel to issue the legal opinion included in
the Transfer Agent Instructions to the Company's transfer agent on the
Effective Date. The Company agrees that following the Effective Date,
it will, no later than three Trading Days following the delivery by a
Purchaser to the Company of a certificate or certificates representing
such Underlying Shares issued with a restrictive legend, deliver to
such Purchaser certificates representing such Underlying Shares which
shall be free from all restrictive and other legends. The Company may
not make any notation on its records or give instructions to any transfer
agent of the Company which enlarge the restrictions of transfer set forth
in this Section.
3.2 Acknowledgment of Dilution.
--------------------------- The Company acknowledges that
the issuance of Underlying Shares upon the conversion of the
Debentures and the exercise of the Warrants will result in dilution of
the outstanding shares of Common Stock, which dilution may be substantial
under certain market conditions. The Company further acknowledges that
its obligations to deliver Underlying Shares to the Purchasers upon
conversion of the Debentures is unconditional and absolute regardless of
the effect of any such dilution.
3.3 Furnishing of Information.
-------------------------- After the Closing Date, and
thereafter, for as long as the Purchasers own Securities, the Company
covenants to timely file (or obtain extensions in respect thereof and
file within the applicable grace period) all reports required to be
filed by the Company after the date hereof pursuant to Section 13(a)
or 15(d) of the Exchange Act. As long as the Purchasers own Securities,
if the Company is not required to file reports pursuant to such sections,
it will prepare and furnish to the Purchasers and make publicly available
in accordance with Rule 144(c) promulgated under the Securities Act such
information as is required for the Purchasers to sell the Securities under
Rule 144 promulgated under the Securities Act. The Company further
covenants that it will take such further action as any holder of Securities
may reasonably request, all to the extent required from time to time to
enable such Person to sell Underlying Shares without registration under
the Securities Act within the limitation of the exemptions provided by
Rule 144 promulgated under the Securities Act, including causing its
attorneys to render and deliver any legal opinion required in order to
permit a Purchaser to receive Underlying Shares free of all restrictive
legends and to subsequently sell Underlying Shares under Rule 144 upon
receipt of a notice of an intention to sell or other form of notice having
a similar effect. Upon the request of any such Person, the Company shall
deliver to such Person a written certification of a duly authorized officer
as to whether it has complied with such requirements.
3.4 Integration.
------------ The Company shall not, and shall use its best
efforts to ensure that, no Affiliate of the Company 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 Securities in a
manner that would require the registration under the Securities Act of
the sale of the Securities to the Purchasers.
3.5 Increase in Authorized Shares.
----------------------------- If on any date the Company
would be, if a notice of conversion or exercise (as the case may be)
were to be delivered on such date, precluded from issuing (a) 200% of
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the number of Underlying Shares as would then be issuable upon a conversion
in full of the Debentures and (b) the number of Underlying Shares issuable
upon exercise in full of the Warrants (the "Current Required Minimum"), in
either case, due to the unavailability of a sufficient number of authorized
but unissued or reserved shares of Common Stock, then the Board of Directors
of the Company shall promptly prepare and mail to the stockholders of the
Company proxy materials requesting authorization to amend the Company's
certificate or articles of incorporation to increase the number of shares
of Common Stock which the Company is authorized to issue to at least such
number of shares as reasonably requested by the Purchasers in order to
provide for such number of authorized and unissued shares of Common Stock
to enable the Company to comply with its issuance, conversion exercise and
reservation of shares obligations as set forth in this Agreement, the
Debentures and the Warrants (the sum of (x) the number of shares of Common
Stock then outstanding plus all shares of Common Stock issuable upon
exercise of all outstanding options, warrants and convertible instruments,
and (y) the Current Required Minimum, shall be a reasonable number). In
connection therewith, the Board of Directors shall (a) adopt proper
resolutions authorizing such increase, (b) recommend to and otherwise
use its best efforts to promptly and duly obtain stockholder approval to
carry out such resolutions (and hold a special meeting of the stockholders
no later than the earlier to occur of the sixtieth (60th) day after delivery
of the proxy materials relating to such meeting and the ninetieth (90th)
day after request by a holder of Securities to issue the number of
Underlying Shares in accordance with the terms hereof) and (c) within
five (5) Business Days of obtaining such stockholder authorization,
file an appropriate amendment to the Company's certificate or articles
of incorporation to evidence such increase.
3.6 Reservation and Listing of Underlying Shares.
--------------------------------------------- (a) The
Company shall (i) in the time and manner required by any national
securities exchange, market, trading or quotation facility on which
the Common Stock is then traded, prepare and file with such national
securities exchange, market, trading or quotation facility on which
the Common Stock is then traded an additional shares listing application
covering a number of shares of Common Stock which is not less than the
Initial Minimum, (ii) take all steps necessary to cause such shares of
Common Stock to be approved for listing on any such national securities
exchange, market or trading or quotation facility on which the Common
Stock is then listed as soon as possible thereafter, and (iii) provide
to the Purchasers evidence of such listing, and the Company shall maintain
the listing of its Common Stock thereon. If the number of Underlying Shares
issuable upon (x) conversion in full of the then outstanding Debentures
and (y) exercise in full of the then unexercised portion of the Warrants,
exceeds eighty-five percent (85%) of the number of Underlying Shares
previously listed on account thereof with any such required exchanges,
then the Company shall take the necessary actions to immediately list
a number of Underlying Shares as equals no less than the then Current
Required Minimum.
(b) The Company shall maintain a reserve of shares of Common Stock
for issuance upon conversion of the Debentures in full and upon exercise
in full of the Warrants in accordance with this Agreement, in such amount
as may be required to fulfill its obligations in full under the Transaction
Documents, which reserve shall equal no less than the then Current Required
Minimum.
-14-
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3.7 Conversion and Exercise Procedures.
----------------------------------- The Transfer Agent
Instructions, the Conversion Notice (as defined in the Debentures) and
the Form of Election to Purchase (as defined in the Warrants) sets
forth the totality of the procedures with respect to the conversion of
the Debentures and the exercise of the Warrants, including the form of
legal opinion, if necessary, that shall be rendered to the Company's
transfer agent and such other information and instructions as may be
reasonably necessary to enable the Purchasers to convert their
Debentures and their Warrants, as the case may be.
3.8 Conversion and Exercise Obligations of the Company.
--------------------------------------------------- The Company
shall honor conversions of the Debentures and exercise of the Warrants
and shall deliver Underlying Shares in accordance with the respective terms,
conditions and time periods set forth in the Debentures and the Warrants.
3.9 Subsequent Financing; Right of First Refusal; Limitation on
-----------------------------------------------------------
Registrations.
-------------
(a) Without the prior written consent of the Purchasers, prior
to the 150th day following the Effective Date (such date will be extended
by the number of days after the Effectiveness Date (as defined in the
Registration Rights Agreement) that an Underlying Shares Registration
Statement has not been declared effective by the Commission and by the
number of days after the Effective Date during which a Purchaser is not
permitted or unable to utilize the prospectus or otherwise to resell
Underlying Shares under the Underlying Shares Registration Statement)
(the "Restricted Period"), the Company will not offer, sell, grant any
option to purchase, or otherwise dispose of (or announce any offer, sale,
grant or any option to purchase or other disposition) any of its securities
(including the issuance of any debt or other instrument at any time over
the life thereof convertible into or exchangeable for Common Stock) or any
of its Affiliate's securities that may be exchangeable or convertible into
Common Stock, or otherwise enter into any other transaction intended to be
exempt or not subject to registration under the Securities Act (collectively,
a "Subsequent Placement"), unless none of the securities issued or granted
(or securities issuable upon conversion or exercise thereof) may be resold
or registered for issuance or resale under the Securities Act until the
termination of the Restricted Period. The restriction contained in the
foregoing sentence shall not apply to (i) issuances of Common Stock pursuant
to a Strategic Transaction (as defined below), (ii) issuances of shares
of Common Stock as payment of the purchase price for an acquisition of
assets or stock of an unaffiliated Person, and (iii) the granting of
options or warrants to employees, officers and directors of the Company,
and the issuance of Common Stock upon exercise of such options or warrants
granted under any stock option plan heretofore or hereinafter duly adopted
by the Company ("Option Plan Issuances"). A "Strategic Transaction" shall
mean a transaction or relationship in which the Company issues shares of
Common Stock to a Person which is, itself or through its subsidiaries, an
operating company in a business related to the business of the Company and
in which the Company receives material benefits in addition to the investment
of funds, but shall not include a transaction in which the Company is issuing
securities primarily for the purpose of raising capital or to an entity whose
primary business is investing in securities.
(b) Without the prior written consent of the Purchasers, prior
to the 151st day following the Effective Date, the Company shall not,
directly or indirectly enter into a Subsequent Placement, unless: (A)
-15-
-15-
the Company delivers to each of the Purchasers a written notice
(the "Subsequent Placement Notice") of its intention to effect such
Subsequent Placement, which Subsequent Placement Notice shall describe
in reasonable detail the proposed terms of such Subsequent Placement,
the amount of proceeds intended to be raised thereunder, the Person
with whom such Subsequent Placement shall be effected, and attached to
which shall be a term sheet or similar document relating thereto and
(B) such Purchaser shall not have notified the Company by 6:30 p.m.
(New York City time) on the tenth Trading Day after its receipt of the
Subsequent Placement Notice of its willingness to provide (or to cause
its sole designee to provide), subject to completion of mutually
acceptable documentation, financing to the Company on the same terms
set forth in the Subsequent Placement Notice. If the Purchasers shall
fail to notify the Company of their intention to enter into such
negotiations within such time period, the Company may effect the
Subsequent Placement substantially upon the terms and to the Persons
(or Affiliates of such Persons) set forth in the Subsequent Placement
Notice, provided, that the Company shall provide the Purchasers with a
second Subsequent Placement Notice, and the Purchasers shall again
have the right of first refusal set forth above in this paragraph (b),
if the Subsequent Placement subject to the initial Subsequent
Placement Notice shall not have been consummated for any reason on the
terms set forth in such Subsequent Placement Notice within thirty
Trading Days after the date of the initial Subsequent Placement Notice
with the Person (or an Affiliate of such Person) identified in the
Subsequent Placement Notice. If the Purchasers shall indicate a
willingness to provide financing in excess of the amount set forth in
the Subsequent Placement Notice, then each Purchaser shall be entitled
to provide financing pursuant to such Subsequent Placement Notice up
to an amount equal to such Purchaser's pro-rata portion of the
aggregate number of Securities purchased by such Purchaser under this
Agreement, but the Company shall not be required to accept financing
from the Purchasers in an amount in excess of the amount set forth in
the Subsequent Placement Notice. The restrictions of this subsection
shall not apply to: (i) a Subsequent Placement in which the securities
(and securities issuable upon conversion or exercise thereof) shall be
restricted from resale and conversion and will not be registered for
issuance or resale for at least 365 days following the issuance date
thereof, (ii) issuances of shares of Common Stock pursuant to a
Strategic Transaction, (iii) issuances of shares of Common Stock as
payment of the purchase price for an acquisition of assets or stock of
an unaffiliated Person and (iv) Option Plan Issuances.
(c) Except for (x) Underlying Shares, (y) other "Registrable
Securities" (as such term is defined in the Registration Rights
Agreement) to be registered, and securities of the Company permitted
pursuant to Schedule 6(b) of the Registration's Rights Agreement to be
registered, in an Underlying Shares Registration Statement in
accordance with the Registration Rights Agreement, and (z) Common
Stock permitted to be issued pursuant to paragraph (a)(i)- (iii) of
Section 3.9(a), the Company shall not, for a period of not less than
90 Trading Days after the Effective Date without the prior written
consent of the Purchasers (i) issue or sell any of its or any of its
Affiliates' equity or equity-equivalent securities pursuant to
Regulation S promulgated under the Securities Act, or (ii) register
any securities of the Company. Any days that a Purchaser is unable to
sell Underlying Shares under the Underlying Shares Registration
Statement shall be added to such 90 Trading Day period.
-16-
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3.10 Certain Securities Laws Disclosures; Publicity.
----------------------------------------------- The Company
shall: (i) on the Closing Date, issue a press release reasonably
acceptable to the Purchasers disclosing the transactions contemplated
hereby, (ii) file with the Commission a Report on Form 8-K disclosing
the transactions contemplated hereby within ten Business Days after
the Closing Date, and (iii) timely file with the Commission a Form D
promulgated under the Securities Act. The Company shall, no less than
two Business Days prior to the filing of any disclosure required by
clauses (ii) and (iii) above, provide a copy thereof to the
Purchasers for their review. The Company and the Purchasers shall
consult with each other in issuing any other press releases or
otherwise making public statements or filings and other communications
with the Commission or any regulatory agency or stock market or
trading facility with respect to the transactions contemplated hereby
and neither party shall issue any such press release or otherwise make
any such public statement, filings or other communications without the
prior written consent of the other, except that if such disclosure is
required by law or stock market regulation, in which such case the
disclosing party shall promptly provide the other party with prior
notice of such public statement, filing or other communication.
Notwithstanding the foregoing, the Company shall not publicly disclose
the names of the Purchasers, or include the names of the Purchasers in
any filing with the Commission, or any regulatory agency, trading
facility or stock market without the prior written consent of the
Purchasers, except to the extent such disclosure (but not any
disclosure as to the controlling Persons thereof) is required by law
or stock market regulations, in which case the Company shall provide
the Purchasers with prior notice of such disclosure.
3.11 Transfer of Intellectual Property Rights.
----------------------------------------- Except in
connection with the sale of all or substantially all of the assets of
the Company or licensing arrangements in the ordinary course of the
Company's business, the Company shall not transfer, sell or otherwise
dispose of any Intellectual Property Rights, or allow any of the
Intellectual Property Rights to become subject to any Liens, or fail
to renew such Intellectual Property Rights (if renewable and it would
otherwise lapse if not renewed), without the prior written consent of
the Purchasers.
3.12 Use of Proceeds.
---------------- The Company shall use the net proceeds
from the sale of the Securities hereunder for working capital purposes,
and not for the satisfaction of any portion of the Company's debt
(other than payment of trade payables in the ordinary course of
the Company's business and prior practices), and to redeem any Company
equity or equity-equivalent securities or to settle any outstanding
litigation.
3.13 Reimbursement.
-------------- So long as Purchasers have complied with the
terms and conditions of this Agreement, if any Purchaser becomes involved
in any capacity in any action, proceeding or investigation brought by or
against any Person, including stockholders of the Company, solely as a
result of acquiring the Securities under this Agreement, the Company will
reimburse such Purchaser for its reasonable legal and other expenses
(including, but not limited to, the cost of any investigation, preparation
or travel) incurred in connection therewith, as such expenses are incurred.
The reimbursement obligations of the Company under this paragraph shall be
in addition to any liability which the Company may otherwise have, shall
extend upon the same terms and conditions to any Affiliates of the Purchasers
who are actually named in such action, proceeding or investigation, and
partners, directors, agents, employees and controlling persons (if any),
as the case may be, of the Purchasers and any such Affiliate, and shall be
-17-
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binding upon and inure to the benefit of any successors, assigns,heirs and
personal representatives of the Company, the Purchasers and any such
Affiliate and any such Person. The Company also agrees that neither the
Purchasers nor any such Affiliates, partners, directors, agents, employees
or controlling persons shall have any liability to the Company or any
Person asserting claims on behalf of or in right of the Company solely as
a result of acquiring the Securities under this Agreement.
3.14 Non-Disclosure of Non-Public Information.
----------------------------------------- The Company shall
not disclose non-public information to the Purchasers or their advisors or
representatives unless prior to disclosure of such information the Company
identifies such information as being non-public information and the
Purchasers agree to enter into a non-disclosure agreement in form mutually
acceptable to the Company and the Purchasers.
3.15 Shareholder Rights Plan.
------------------------ No claim will be made or enforced
by the Company or any other Person that any Purchaser is an "Acquiring
Person" under any shareholders rights plan or similar plan or arrangement
in effect or hereafter adopted by the Company, or that any Purchaser could
be deemed to trigger the provisions of any such plan or arrangement, by
virtue of receiving Securities or shares of Common Stock under the
Transaction Documents.
ARTICLE IV
----------
MISCELLANEOUS
-------------
4.1 Fees and Expenses.
------------------ At the Closing, the Company shall
reimburse the Purchasers for their legal fees and expenses incurred in
connection with the preparation and negotiation of the Transaction
Documents by paying to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ $15,000 for the preparation
and negotiation of the Transaction Documents. The amount contemplated
by the immediately preceding sentence shall be retained by the
Purchasers and shall not be delivered to the Company at the Closing.
Other than the amount contemplated herein, and except as otherwise
specified in the Registration Rights Agreement and the Security
Agreement, 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 all stamp and other taxes and duties levied in connection
with the issuance of the Securities.
4.2 Entire Agreement; Amendments.
----------------------------- The Transaction Documents,
together with the Exhibits and Schedules thereto and Transfer Agent
Instructions, 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, which
the parties acknowledge have been merged into such documents, exhibits
and schedules.
4.3 Notices.
------- Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in
writing and shall be deemed given and effective on the earliest of (i)
the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile telephone number specified in this
Section prior to 6:30 p.m. (New York City time) on a Business Day,
(ii) the Business Day after the date of transmission, if such
-18-
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notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Agreement later than 6:30 p.m.
(New York City time) on any date and earlier than 11:59 p.m.
(New York City time) on such date, (iii) the Business Day following
the date of mailing, if sent by U.S. nationally recognized overnight
courier service, or (iv) upon actual receipt by the party to whom
such notice is required to be given. The address for such notices
and communications shall be as follows:
If to a Purchaser: To the address set forth under such
Purchaser's name on the signature pages
hereto.
or such other address as may be designated in writing hereafter, in
the same manner, by such Person.
4.4 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 each of 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.
4.5 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.
4.6 Successors and Assigns.
----------------------- This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and
permitted assigns. The Company may not assign this Agreement or any
rights or obligations hereunder without the prior written consent of
the Purchasers. The Purchasers may not assign this Agreement or any
of the rights or obligations hereunder without the consent of the
Company; however this provision shall not limit any Purchaser's right
to transfer Securities accrued hereunder or transfer or assign rights
under the Registration Rights Agreement.
4.7 No Third-Party Beneficiaries.
----------------------------- This Agreement is intended
for the benefit of the parties hereto and their respective successors
and permitted assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person.
4.8 Governing Law.
-------------- All questions concerning the construction,
validity, enforcement and interpretation of the Transaction Documents
shall be governed by and construed and enforced in accordance with the
internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all
legal proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement and
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any other Transaction Documents (whether brought against a party hereto
or its respective affiliates, directors, officers, shareholders, employees
or agents) shall be commenced in the state and federal courts sitting in the
City of New York, Borough of Manhattan. Each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect
to the enforcement of the any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction
of any such court, that such suit, action or proceeding is improper. Each
party hereto hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding
by mailing a copy thereof via registered or certified mail or overnight
delivery (with evidence of delivery) to such party at the address in effect
for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto
(including its affiliates, agents, officers, directors and employees)
hereby irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby. If either party shall commence an
action or proceeding to enforce any provisions of a Transaction
Document, then the prevailing party in such action or proceeding shall
be reimbursed by the other party for its attorneys fees and other
costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.
4.9 Survival.
--------- The representations, warranties, agreements and
covenants contained herein shall survive the Closing and the delivery,
exercise and conversion of the Warrants or the Debentures, as the case
may be.
4.10 Execution.
---------- 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.
4.11 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 affecting 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.
4.12 Remedies.
--------- In addition to being entitled to exercise all
rights provided herein or granted by law, including recovery of
damages, each of the Purchasers will be entitled to specific
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performance of the obligations of the Company under the Transaction
Documents. The parties hereto agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
its obligations described in the foregoing sentence and hereby agrees
to waive in any action for specific performance of any such obligation
the defense that a remedy at law would be adequate.
4.13 Independent Nature of Purchasers Obligations and Rights.
--------------------------------------------------------
The obligations of each Purchaser under any Transaction Document is
several and not joint with the obligations of any other Purchaser and
no Purchaser shall be responsible in any way for the performance of
the obligations of any other Purchaser under any Transaction Document.
Nothing contained herein or in any Transaction Document, and no action
taken by any Purchaser pursuant thereto, shall be deemed to constitute
the Purchasers as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the Purchasers
are in any way acting in concert with respect to such obligations or
the transactions contemplated by the Transaction Document. Each
Purchaser shall be entitled to independently protect and enforce its
rights, including without limitation the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not
be necessary for any other Purchaser to be joined as an additional
party in any proceeding for such purpose.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this
Secured Convertible Debenture Purchase Agreement to be duly executed
by their respective authorized signatories as of the date first
indicated above.
PHOENIX INTERNATIONAL INDUSTRIES, INC.
By:_____________________________________
Name: /S/▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chief Executive Officer
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
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AJW PARTNERS, LLC
By: SMS Group, LLC
By:_____________________________________
Name: /S/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title:
Aggregate Purchase Price for Closing Debentures:
$70,000
Aggregate Purchase Price for Additional Debentures:
$35,000
Aggregate Number of Shares of Common Stock
acquirable under Closing Warrant: 350,000
Aggregate Number of Shares of Common Stock
acquirable under Additional Warrant: 175,000
Outstanding Principal Balance (including any
accrued but unpaid interest) of Existing Debenture
Issued to Purchaser on June 23, 2000 $ 0
Outstanding Principal Balance (including
any accrued but unpaid interest) of Existing
Debenture Issued to Purchaser on
August 31, 2000 $522,316.42
Address for Notice:
AJW Partners, LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
With copies to: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇ and (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
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NEW MILLENNIUM CAPITAL PARTNERS II, LLC
By: First Street Manager II, LLC
By:_____________________________________
Name: /S/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title:
Aggregate Purchase Price for Closing Debentures:
$130,000
Aggregate Purchase Price for Additional Debentures:
$ 65,000
Aggregate Number of Shares of Common Stock
acquirable under Closing Warrant: 650,000
Aggregate Number of Shares of Common Stock
acquirable under Additional Warrant: 325,000
Outstanding Principal Balance (including any accrued
but unpaid interest) of Existing Debenture Issued to
Purchaser on June 23, 2000
$399,285.62
Outstanding Principal Balance (including any accrued but
unpaid interest) of Existing Debenture Issued to
Purchaser on August 31, 2000 $642,054.79
Address for Notice:
------------------
New Millennium Capital Partners II, LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
With copies to: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇ and (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
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______________________________________________________________________
----------------------------------------------------------------------
SECURED CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
AMONG
PHOENIX INTERNATIONAL INDUSTRIES, INC.
and
THE INVESTORS SIGNATORY HERETO
Dated as of September 21, 2001
_____________________________________________________________________
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