EXHIBIT 99.1
STOCK PURCHASE AGREEMENT
BY AND AMONG
CD WAREHOUSE, INC.
AND
THE SEVERAL PURCHASERS NAMED IN SCHEDULE I
DATED AS OF MAY __, 1998
THE OFFER AND SALE OF THE SECURITIES REFERRED TO IN THIS AGREEMENT (THE
"OFFERING") HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS AND SUCH SHARES ARE
BEING OFFERED AND SOLD IN RELIANCE ON THE EXEMPTION FROM THE SECURITIES
REGISTRATION AND QUALIFICATION REQUIREMENTS OF THE ACT AND SUCH STATE LAWS
OFFERED BY REGULATION S (PROMULGATED UNDER THE ACT), REGULATION D AND/OR CERTAIN
STATE LAW SECURITIES EXEMPTIONS. ACCORDINGLY, THE SECURITIES MAY NOT BE
TRANSFERRED OR RESOLD WITHOUT REGISTRATION AND QUALIFICATION UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS, UNLESS AN EXEMPTION FROM SUCH REGISTRATION AND
QUALIFICATION UNDER THE ACT AND SUCH LAWS IS THEN AVAILABLE. THE OFFER AND SALE
OF THE SECURITIES EFFECTED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR OTHER
REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR
ENDORSED THE MERITS OF THE OFFERING.
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") dated as of May __, 1998,
is made by and among CD WAREHOUSE, INC., a Delaware corporation (the "Company"),
and the several purchasers named in the attached Schedule I (individually a
"Purchaser" and collectively the "Purchasers").
W I T N E S S E T H:
WHEREAS, the Company wishes to sell and issue to the Purchasers an
aggregate of _____________ shares of Common Stock (as hereinafter defined) at a
purchase price of $______ per share; and
WHEREAS, the Purchasers, severally, wish to purchase the Common Stock on
the terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
set forth herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
-----------
For purposes hereof, the following terms shall have the meanings set forth
below:
1.01. "Certificate of Incorporation" shall have the meaning given such
term in Section 3.02.
1.02. "Best Knowledge" or "Best of its Knowledge" shall mean the due
inquiry of the person making such statement of its officers,
directors and appropriate employees and advisors who would
reasonably be anticipated to have knowledge of such matter.
1.03. "Closing" shall have the meaning set forth in Section 2.03.
STOCK PURCHASE AGREEMENT
Page 2
1.04. "Closing Date" shall be the date of the Closing which will be held
at such time or times as provided in Section 2.03.
1.05. "Commission" shall mean the Securities and Exchange Commission.
1.06. "Common Stock" shall mean the common stock of the Company, par value
$0.01 per share.
1.07. "Company" shall mean CD Warehouse, Inc., a Delaware corporation.
1.08. "Disclosure Documents" shall have the meaning set forth in Section
3.05.
1.09. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
1.10. "Non-U.S. Purchaser" shall mean any Purchaser who is not a U.S.
Person.
1.11. "Person" shall mean an individual, corporation, trust, partnership,
joint venture, unincorporated organization, government agency or any
agency or political subdivision thereof, or other entity.
1.12. "Purchaser" or "Purchasers" shall have the meaning given such term
in the preamble of this Agreement.
1.13. "Regulation S" shall mean Rules 901 through 905 promulgated under
the Securities Act.
1.14. "Securities Act" shall mean the Securities Act of 1933, as amended.
1.15. "Shares" shall mean the shares of Common Stock offered hereby.
1.16. "Subsidiary" shall mean, as to the Company, any corporation of which
more than 50% of the outstanding stock having ordinary voting power
to elect a majority of the Board of Directors of such corporation
(irrespective of whether or not at the time stock of any other class
or classes of such corporation shall have or might have voting power
by reason of the happening of any contingency) is at the time
directly or indirectly owned by the Company, or by one or more of
its subsidiaries, or by the Company and one or more of its
subsidiaries.
1.17. "U.S. Person" shall have the meaning specified in Rule 902 of the
Securities Act.
ARTICLE II
PURCHASE AND SALE OF SHARES
---------------------------
2.01. Sale of Shares. Subject to all of the terms and conditions herein
stated, the Company agrees to sell, assign, transfer and deliver to
each Purchaser on the Closing Date, and each Purchaser severally
agrees to purchase from the Company on the Closing Date, the number
of Shares set forth opposite the name of such Purchaser under the
heading
STOCK PURCHASE AGREEMENT
Page 3
"Number of Shares" on Schedule I, at a purchase price of $10.00
(U.S.) per share. Upon execution of a counterpart signature page of
this Agreement, each such Purchaser shall become a party hereto and
shall be deemed to be a "Purchaser" for all purposes.
2.02. Closing. The closing of the sale (the "Closing") referred to in
Section 2.01 of this Agreement shall take place on one or more
occasions (each such closing being a "Closing Date") upon receipt by
the Company of the executed signature pages hereto and upon receipt
by the Escrow Agent of the purchase price payable by the Purchasers,
at the offices of Day, Edwards, Federman, Propester & ▇▇▇▇▇▇▇▇▇▇▇,
P.C., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, but
no later than June 1, 1998.
2.03. Closing Deliveries.
(a) At Closing, the Company shall issue and deliver to each
Purchaser a certificate or certificates in definitive form,
registered in the name of and representing the respective
Shares being purchased by such Purchaser, with the following
restrictive legend set forth below (the "Restrictive Legend")
in such denominations to be specified by Buyer:
"The securities represented by this Certificate have not
been registered under the United States Securities Act of
1933 (the "Act") and may not be sold, transferred, pledged
or otherwise hypothecated unless (a) they are covered by a
registration statement or a post-effective amendment thereto
under the Act, (b) they are covered by an exemption
available under the Act, or (c) in the opinion of counsel
for Buyer, which opinion shall be reasonably acceptable to
the Company, such sale, transfer, pledge or hypothecation is
otherwise exempt from the provisions of Section 5 of the
Act."
(b) As payment in full for the Shares being purchased by such
Purchaser under this Agreement, and against delivery of the
stock certificate or certificates therefor as aforesaid, on
each respective Closing Date each Purchaser shall: (i) deliver
to the Escrow Agent a check, payable to the order of Texas
Community Bank, N.A., as Escrow Agent for the Company, in the
amount set forth opposite the name of such Purchaser on
Schedule I; (ii) transfer such sum to the account of the
Company by wire transfer; or (iii) deliver or transfer such sum
to the Company by any combination of such methods of payments.
(c) As soon as practicable following each Closing Date the Company
shall cause its transfer agent to issue and deliver to the
respective Purchaser(s) tendering payment on such Closing Date
a certificate or certificates in definitive form, registered in
the name of and representing the respective Shares being
purchased by such Purchaser(s).
STOCK PURCHASE AGREEMENT
Page 4
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company represents and warrants to the Purchasers as follows:
3.01. Organization and Qualifications. The Company and each of its
Subsidiaries has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of
its organization; each of the Company and its Subsidiaries is duly
qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the ownership or leasing of
its properties or the conduct of its business requires such
qualification except where the failure to be so qualified or to be
in good standing would not have a material adverse effect on the
condition (financial or otherwise), earnings, operations, business
or business prospects of the Company and its Subsidiaries considered
as a whole.
3.02. Authorization. The execution and delivery by the Company of this
Agreement and the performance by the Company of its obligations
hereunder, the issuance, sale and delivery of the Shares have been
duly authorized by all requisite corporate action and will not
violate any provision of law, any order of any court or other agency
or government, the Certificate of Incorporation of the Company, as
amended (the "Certificate of Incorporation"), or the Bylaws of the
Company, as amended, or any provision of any indenture, agreement
with or other instrument to which the Company or any of its
properties or assets is bound, or conflict with, result in a breach
of or constitute (with due notice or lapse of time or both) a
default under any such indenture, agreement or other instrument, or
result in the creation or imposition of any lien, charge,
restriction, claim or encumbrance of any nature whatsoever upon any
of the properties or assets of the Company.
3.03. Validity. This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of
the Company, enforceable in accordance with its terms, except as
limited by applicable bankruptcy, insolvency, reorganization and
moratorium laws and other laws affecting enforcement of creditors'
rights generally and by general principles of equity.
3.04. Authorized Capital Stock. The authorized capital stock of the
Company consists of: (i) 10,000,000 shares of Common Stock of which
1,920,000 shares were outstanding immediately prior to Closing; and
(ii) 5,000,000 shares of Preferred Stock, none of which were
outstanding immediately prior to Closing. The designations, powers,
preferences, rights, qualifications, limitations and restrictions in
respect of each class and series of authorized capital stock of the
Company are as set forth in the Certificate of Incorporation and all
such designations, powers, preferences, rights, qualifications,
limitations and restrictions are valid, binding and enforceable and
in accordance with all applicable laws.
3.05. Access to Information. The Company has furnished Buyer with copies
of the Company's most recent Annual Report on Form 10-KSB filed with
the Commission, proxy statement relating to the 1998 Annual Meeting
of Stockholders, and all forms 10-QSB and 8-K, if
STOCK PURCHASE AGREEMENT
Page 5
any, filed thereafter (collectively, the "Disclosure Documents").
3.06. SEC Reporting. The Company is a "Domestic Issuer" and a "Reporting
Issuer," as such terms are defined by Rule 902 of Regulation S. The
Company has registered its Common Stock pursuant to Section 12(b) or
(g) of the Exchange Act, and is in full compliance with all
reporting requirements of either Section 13(a) or 15(d) of the
Exchange Act. The Company's Common Stock trades on the Nasdaq
SmallCap Market under the symbol CDWI. The Company shall use to its
best efforts to maintain the listing of the Common Stock on the
Nasdaq SmallCap Market or such other stock exchange listing the
Common Stock. The Company has not received any notice or other
communication regarding the removal of the Common Stock from the
Nasdaq SmallCap Market.
3.07. No Directed Selling Efforts. Neither the Company nor any of its
Affiliates, nor any person acting on its or their behalf has engaged
in any directed selling efforts (as defined in Regulation S) with
respect to the Shares, nor has the Company conducted any general
solicitation (as that term is used in Regulation D under the
Securities Act) with respect to the Shares.
ARTICLE IV
REPRESENTATION AND WARRANTIES OF THE PURCHASERS
-----------------------------------------------
4.01. Representations and Warranties Applicable to U.S. Purchasers. Each
Purchaser who is a U.S. Person severally represents and warrants to
the Company that:
(a) it understands that (i) the Shares have not been registered
under the Securities Act by reason of their issuance in a
transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof or Rule 505 or
506 promulgated under the Securities Act; (ii) the Shares must
be held a minimum of one year unless a subsequent disposition
thereof is registered under the Securities Act or is exempt
from such registration; (iii) the Shares will bear a legend to
such effect; and (iv) the Company will make a notation on its
transfer books to such effect.
4.02. Non-U.S. Purchaser. Each Purchaser who is not a U.S. Person
severally represents and warrants to the Company that:
(a) it is not a U.S. Person within the meaning of Rule 902 under
the Securities Act and was not organized for the specific
purpose of acquiring the shares;
(b) Buyer is not a "distributor" as defined by Rule 902 of
Regulation S;
(c) At the time the purchase order for this transaction was
originated, the Buyer was physically outside of the United
States and such purchase order was not the result of directed
selling efforts by the Seller in the United States;
(d) No offer to purchase the Shares was made by the Buyer while in
the United States;
STOCK PURCHASE AGREEMENT
Page 6
(e) it understands that (i) the Shares have not been registered
under the Securities Act by reason of their issuance in a
transaction exempt from the registration requirements of the
Securities Act pursuant to regulation S thereof or Rule 904
promulgated thereunder and may not be offered or sold within
the U.S. or to, or for the account or benefit of, U.S. persons
except in transactions exempt from the registration
requirements of the Securities Act; (ii) for a period of one
year after the Closing Date, the Shares may not be offered or
sold within the U.S. or to, or for the account or benefit of
U.S. persons, (iii) the Shares will bear a legend to such
effect; and (iv) the Company will make a notation on its
transfer books to such effect;
(f) Buyer acknowledges and agrees that the offer and sale of the
Shares by the Company has not been registered under the
Securities Act and agree that all subsequent offers and sales
of the Shares will be made (i) outside the United States in
compliance with Rule 904 of Regulation S, (ii) pursuant to
registration of the Shares under the Securities Act, or (iii)
pursuant to an exemption from such registration. Buyer
understands the conditions of the exemption from registration
afforded by Regulation S and Section 4(l) of the Securities Act
and acknowledges that there can be no assurance that it will be
able to rely on either exemption. Furthermore, Buyer will not
resell the Shares to U.S. Persons or within the United States
until after the end of the one year period commencing on the
Closing Date (as defined below in Section 2) (the "Distribution
Compliance Period") and thereafter only pursuant to
registration of the Shares under the Securities Act or pursuant
to an exemption from such registration;
(g) Buyer agrees that, at all times after the execution of this
Agreement by Buyer and prior to the expiration of the
Distribution Compliance Period, it will keep its purchase of
the Shares confidential, except as required by law and except
as necessary in the ordinary course of Buyer's business;
4.03 Representations and Warranties Applicable to all Purchasers.
(a) it is an "accredited investor" within the meaning of Rule 501
under the Securities Act and was not organized for the specific
purpose of acquiring the Shares or an investment company as
defined in the Investment Company Act of 1940, as applicable;
(b) it has sufficient knowledge and experience in investing in
companies similar to the Company in terms of the Company's
stage of development so as to be able to evaluate the risks and
merits of an investment in the Shares and it is able
financially to bear the risks thereof;
(c) Buyer acknowledges receipt and review of the Disclosure
Documents and the exhibits to this Agreement, and hereby
represents that Buyer has been furnished by the Company during
the course of this transaction with all information regarding
the Company which the Buyer has requested or desired to know;
that all documents which could be reasonably provided have been
made available for
STOCK PURCHASE AGREEMENT
Page 7
inspection and review, and that such information and documents
have, in Buyer's opinion, afforded Buyer with all of the same
information that would be provided in a registration statement
filed under the Securities Act; that Buyer has been afforded
the opportunity to ask questions of and receive answers form
duly authorized officers or other representatives of the
Company concerning the terms and conditions of the offering of
the Shares, and any additional information which Buyer has
requested.
(d) the Shares being issued to it are being acquired for its own
account for the purpose of investment and not with a view to or
for sale in connection with any distribution thereof; and
(e) Buyer understands that the Shares are being offered and sold to
it in reliance on specific provisions of United States and, if
applicable state, securities laws and that the Company is
relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of
Buyer set forth herein in order to determine the applicability
of such provisions. Accordingly, Buyer agrees to notify the
Company of any events which would cause the representations and
warranties of Buyer to be untrue or breached at any time after
the execution of this Agreement by Buyer and prior to the
expiration of the Distribution Compliance Period.
(f) This Agreement has been duly authorized, validly executed, and
delivered on behalf of Buyer and is a valid and binding
agreement enforceable in accordance with its terms, subject to
general principles of equity and to bankruptcy or other laws
affecting the enforcement of creditors' rights generally.
(g) Buyer, in making the decision to purchase the Shares subscribed
for, has relied upon independent investigations made by it and
has not relied on any information or representations made by
third parties. Notwithstanding, the Buyer has relied upon the
accurateness and completeness of the Disclosure Documents.
(h) Buyer has not taken any action that would cause the Company to
be subject to any claim for commission or other fee or
remuneration by any broker, finder, or other person and Buyer
indemnifies the Company against any such claim caused by the
actions of Buyer or any of its employees or agents.
(i) Buyer understands that the Company makes no representation
regarding the fulfillment on the future of any reporting
requirements under the Exchange Act, or the dissemination to the
public of any current information concerning the Company. Buyer
understands and hereby acknowledges that the Company is under no
obligation to register the Shares under the Securities Act.
(j) Buyer agrees to hold the Company and its directors, officers and
controlling persons and their respective heirs, representatives,
successors and assigns harmless and to indemnify them against
all liabilities, costs and expenses incurred by them as a result
of any misrepresentation made by Buyer contained herein or any
sale or distribution of the Shares by the Buyer in violation of
STOCK PURCHASE AGREEMENT
Page 8
applicable federal and state securities laws. This
indemnification agreement shall survive the closing of this
transaction.
ARTICLE V
PURCHASERS' CONDITIONS TO CLOSING
---------------------------------
The obligation of each Purchaser to purchase the Shares under Article II
is, at its option, subject to the satisfaction, on or before the Closing Date of
the following conditions.
5.01. Representations and Warranties to be True and Correct. The
representations and warranties contained in Article Ill shall be
true, complete and correct on and as of the Closing Date with
the same effect as though such representations and warranties
had been made on and as of such date.
5.02. Performance. The Company shall have performed and complied with
all agreements contained herein required to be performed or
complied with by it prior to or at the Closing Date.
ARTICLE VI
COMPANY CONDITIONS TO CLOSING
-----------------------------
The obligations of the Company to consummate the Closing hereunder and sell
the Common Stock shall be subject to the satisfaction of the following
conditions precedent at or before the closing.
6.01. Documents and Proceedings. All documents and instruments to be
delivered by the Purchasers and all corporate and other
proceedings in connection with this transaction shall have been
so delivered and performed and shall be reasonably satisfactory
to the Company and its legal counsel.
6.02. Performance of Agreement. The Purchasers shall have performed all
of their covenants and obligations under this Agreement.
6.03. Representations and Warranties Correct. The representations and
warranties of the Purchasers contained in Article IV of this
Agreement shall be true, complete and correct on and as of the
Closing Date with the same effect as though such representations
and warranties had been made on and as of such date.
ARTICLE VII
MISCELLANEOUS
-------------
7.01. Expenses. Each party hereto will pay its own expenses in
connection with the transactions contemplated hereby, whether or
not such transactions shall be consummated.
7.02. Survival of Agreements. All covenants, agreements,
representations and warranties made
STOCK PURCHASE AGREEMENT
Page 9
herein or in any instrument delivered to the Purchasers pursuant
to or in connection with this Agreement shall survive the
execution and delivery of this Agreement, the issuance, sale and
delivery of the Shares, and all statements contained in any
instrument delivered by the Company hereunder or thereunder or in
connection herewith or therewith shall be deemed to constitute
representations and warranties made by the Company.
7.03. Brokerage. Each party hereto will indemnify and hold harmless the
others against and in respect of any claims for brokerage or
other commissions relative to this Agreement or to the
transactions contemplated hereby, based in any way on agreements,
arrangements or understandings made or claimed to have been made
by such party with any third party.
7.04. Notices. All notices, requests, consents and other communications
hereunder shall be delivered in person, mailed by certified or
registered mail, return receipt requested, or sent by telecopier
or telex, addressed as follows:
(a) if to the Company, to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇. Day, Esq.,
Day, Edwards, Federman, Propester & ▇▇▇▇▇▇▇▇▇▇▇, P.C.,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇. ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇; and
(b) to each Purchaser at the address set forth in Schedule I;
or, in any such case, at such other address or addresses as
shall have been furnished in writing by such party to the
others.
7.06. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Oklahoma.
7.07. Entire Agreement. This Agreement, including the Schedules hereto,
constitutes the sole and entire agreement of the parties with
respect to the subject matter hereof. All Schedules are hereby
incorporated herein by reference.
7.08. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
7.09. Amendments. This Agreement may not be amended or modified, and no
provisions hereof may be waived, without the written consent of
the Company.
7.10. Severability. If any provision of this Agreement shall be
declared void or unenforceable by any judicial or administrative
authority, the validity of any other provision and of the
STOCK PURCHASE AGREEMENT
Page 10
entire Agreement shall not be affected thereby.
7.11. Titles and Subtitles. The titles and subtitles used in this
Agreement are for convenience only and are not to be considered
in construing or interpreting any term or provision of this
Agreement.
IN WITNESS WHEREOF, the Company and the Purchasers have executed
this Agreement as of the day and year first above written.
CD WAREHOUSE, INC.,
a Delaware corporation
By: __________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
[Corporate Seal]
Attest:
By: __________________________
▇▇▇▇▇ ▇. Day, Secretary
STOCK PURCHASE AGREEMENT
SIGNATURE PAGE
______________________________
Attached to and Made a Part of the
STOCK PURCHASE AGREEMENT
By and among CD WAREHOUSE, INC., a Delaware corporation (the "Company"), and
the Purchasers (as such term is defined therein) dated May __, 1998 (the
"Purchase Agreement").
_________________________________________
The undersigned, by execution of this Purchase Agreement Signature Page (the
"Signature Page"), agrees to all terms and provisions of the Purchase Agreement
and shall become a party thereto in like manner as if the undersigned had
executed the original of said Purchase Agreement as a Purchaser. This Signature
Page, when executed by the undersigned shall, together with all similar such
Signature Pages executed by the parties to the Purchase Agreement, become one
and the same instrument with the original Purchase Agreement to which these
Signature Pages will be appended.
Please indicate your agreement to the foregoing by executing below.
PURCHASER:
DATED:________________ ________________________________
(Print Name of Purchaser)
________________________________
(Signature)
________________________________
(Print Title or Capacity
(if Purchaser is not an individual))
________________________________
(Print Name of Person Signing
(if Purchaser is not an individual))