EXHIBIT 4.1
-----------
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of December 24,
1997, by and among Altair International, Inc., an Ontario corporation, with
headquarters located at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
(the "Company"), and the investors listed on the Schedule of Buyers attached
hereto (individually, a "Buyer" and collectively, the "Buyers").
WHEREAS:
A. The Company and the Buyers are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Rule 506
of Regulation D ("Regulation D") as promulgated by the United States Securities
and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 Act");
B. The Company has authorized the issue of 5% Convertible Subordinated
Debentures due December 29, 2001 (the "Debentures"), substantially in the form
attached hereto as Exhibit A, which shall be convertible into shares of the
Company's Common Shares, no par value (the "Common Stock") (as converted, the
"Conversion Shares"), and the issue of warrants (the "Warrants"), substantially
in the form attached hereto as Exhibit B, to purchase shares of Common Stock
(the "Warrant Shares");
C. The Buyers wish to purchase, upon the terms and conditions stated in
this Agreement, initially an aggregate of $5,000,000 principal amount of
Debentures (the "Initial Debentures") and Warrants to purchase an aggregate of
75,000 shares of Common Stock (the "Initial Warrants") in the respective amounts
set forth opposite each Buyer's name on the Schedule of Buyers;
D. Subject to the terms and conditions set forth in this Agreement, the
Company has the right to cause the Buyers to purchase (i) up to $5,000,0000
aggregate principal amount of Debentures (pro rata based on the principal amount
of Initial Debentures each Buyer purchased in relation to the aggregate
principal amount of Initial Debentures) (the "Put Debentures") (the Initial
Debentures and the Put Debentures are collectively referred to in this Agreement
as the "Debentures") and (ii) Warrants to purchase up to an aggregate number of
shares of Common Stock equal to the product of 75,000 and a fraction, the
numerator of which is the aggregate principal amount of all Put Debentures and
the denominator of which is $5,000,000 (pro rata based on the number of Put
Debentures each Buyer purchased in relation to the total number of Put
Debentures) (the "Put Warrants") (the Initial Warrants and the Put Warrants are
collectively referred to in this Agreement as the "Warrants");
E. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
substantially in the form attached hereto as Exhibit C (the "Registration Rights
Exhibit 4.1
Agreement") pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Buyers hereby
agree as follows:
1. PURCHASE AND SALE OF DEBENTURES AND WARRANTS.
---------------------------------------------
a. Purchase of Debentures and Warrants. Subject to satisfaction (or
waiver) of the conditions set forth in Sections 6(a) and 7(a), the Company shall
issue and sell to the Buyers and the Buyers severally shall purchase from the
Company $5,000,000 aggregate principal amount of Initial Debentures and the
Initial Warrants, in the respective amounts set forth opposite each Buyer's name
on the Schedule of Buyers (the "Initial Closing"). Subject to the satisfaction
(or waiver) of the conditions set forth in Sections l(c), 1(d), 6(b) and 7(b),
the Company may require that each Buyer purchase (i) that principal amount of
Put Debentures equal to such Buyer's pro rata portion of up to $5,000,000
aggregate principal amount of Put Debentures (based on the principal amount of
Initial Debentures each Buyer purchased in relation to the aggregate principal
amount of Initial Debentures purchased by all of the Buyers) and (ii) Put
Warrants to purchase up to an aggregate of 75,000 shares of Common Stock equal
to such Buyer's pro rata portion of Put Warrants (based on the number of Put
Debentures each Buyer purchased in relation to the total number of Put
Debentures purchased by all of the Buyers), the total number of Put Warrants to
be equal to the product of 75,000 and a fraction, the numerator of which is the
aggregate principal amount of all Put Debentures and the denominator of which is
$5,000,000 (the "Put Closing"). The Initial Closing and the Put Closing
collectively are referred to in this Agreement as the "Closings." The purchase
price (the "Purchase Price") for each Debenture at each of the Closings shall be
100% of face value.
b. The Initial Closing Date. The date and time of the Initial
Closing (the "Initial Closing Date") shall be 10:00 a.m. Central Time, within
two (2) business days following the date hereof, subject to satisfaction (or
waiver) of the conditions to the Initial Closing set forth in Sections 6(a) and
7(a) (or such later date as is mutually agreed to by the Company and the
Buyers). The Initial Closing shall occur on the Initial Closing Date at the
offices of Kramer, Levin, Naftalis & ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, or at such other location as is mutually agreed to by the Company
and the Buyers.
c. The Put Closing Date. The date and time of the Put Closing (the
"Put Closing Date") shall be 10:00 a.m. Central Time, on the date specified in
the Company's Put Share Notice (as defined below), subject to satisfaction (or
waiver) of the conditions to the Put Closing set forth in Sections 6(b) and 7(b)
and the conditions set forth in Section 1(d), or such later date as is mutually
- 2 -
Exhibit 4.1
agreed to by the Company and the Buyers. Subject to the requirements of Sections
6(b) and 7(b) and satisfaction of the Put Notice Conditions (as defined in
Section l(d)), the Company on only one occasion may require each Buyer to
purchase Put Debentures and Put Warrants by delivering written notice to each of
the Buyers (a "Put Notice") at least 30 days but not more than 45 days (the "Put
Notice Date") prior to the Put Closing Date set forth in the Company's Put
Notice; provided, however, that such Put Closing Date may not be less than 240
days after the Initial Closing Date or more than 300 days after the Initial
Closing Date (the "Put Notice Period"). The Company's Put Notice shall set forth
(i) each Buyer's pro rata portion (based on the principal amount of Initial
Debentures each Buyer purchased in relation to the aggregate principal of
Initial Debentures purchased by the Buyers) of the aggregate principal amount of
Put Debentures, which aggregate principal amount shall not exceed $5,000,000,
and pro rata portion (based on the number of Initial Warrants each Buyer
purchased in relation to the total number of Initial Warrants purchased by the
Buyers) of the total number of Put Warrants which the Company is requiring each
Buyer to purchase at the Put Closing and (ii) the date selected by the Company
for the Put Closing Date. The Put Closing shall occur on the Put Closing Date at
the offices of Kramer, Levin, Naftalis & ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at such other location as is mutually agreed to by the
Company and the Buyers. The Initial Closing Date and the Put Closing Date
collectively are referred to in this Agreement as the "Closing Dates."
d. The Put Notice Conditions. Notwithstanding anything in this
Agreement to the contrary, the Company shall not be entitled to deliver a Put
Notice and require the Buyers to purchase the Put Debentures and Put Warrants
unless, in addition to the satisfaction of the requirements of Sections 6(b) and
7(b), all of the following conditions (the "Put Notice Conditions") are
satisfied: (i) during the period beginning 60 days prior to the Put Closing Date
and ending on and including the Put Closing Date, the Registration Statement (as
defined in the Registration Rights Agreement) shall have at all times been
effective; (ii) during the period beginning 90 days prior to the Put Closing
Date and ending on and including the Put Closing Date, the Common Stock has not
been delisted or suspended from trading on the Nasdaq SmallCap Market or the
Nasdaq National Market, as applicable; (iii) no event constituting a Major
Business Event (as defined below), including an agreement to consummate a Major
Business Event, shall have occurred during the period beginning on the Initial
Closing Date and ending on and including the Put Closing Date; and (iv) on each
day during the period beginning 60 days prior to the Put Closing Date and ending
on the day prior to the Put Closing Date, the fair market value of the Common
Stock is not less than $75,000,000; for purposes of this clause (iv), "fair
market value of the Common Stock" shall mean the closing price per share of
Common Stock on the Nasdaq SmallCap Market or the Nasdaq National Market, as
applicable, on the date of valuation multiplied by the total number of shares of
Common Stock then issued and outstanding. For purposes of this Section 1(d)
"Major Business Event" means (w) the consolidation, merger or other business
combination of the Company with another entity (other than pursuant to a
migratory merger effected solely for the purpose of changing the Company's
jurisdiction of incorporation or a merger between the Company and any
- 3 -
Exhibit 4.1
wholly-owned subsidiary of the Company, (x) the sale or transfer of all or
substantially all of the Company's assets, (y) a purchase, tender or exchange
offer made to and accepted by the holders of more than 50% of the outstanding
shares of Common Stock or (z) the failure for any reason, during any period of
two consecutive calendar years, of individuals who at the beginning of such
period constituted the board of directors of the Company (together with any new
directors whose election by the board of directors of the Company or whose
nomination for election by the stockholders of the Company was approved by a
vote of the majority of the directors then still in office who either were
directors at the beginning of such period or whose election or nomination for
election was previously so approved) to constitute a majority of the directors
of the Company then in office.
e. Form of Payment. On each of the Closing Dates, (i) each Buyer
shall pay the Purchase Price to the Company for the Debentures and Warrants to
be issued and sold to such Buyer at the respective Closing, by wire transfer of
immediately available funds in accordance with the Company's written wire
instructions, and (ii) the Company shall deliver to each Buyer certificates (in
the denominations such Buyer shall request) representing such principal amount
of Debentures and such number of Warrants which such Buyer is then purchasing
(as indicated opposite such Buyer's name on the Schedule of Buyers), duly
executed on behalf of the Company and registered in the name of such Buyer or
its designee.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
---------------------------------------
Each Buyer represents and warrants with respect to only itself that:
a. Investment Purpose. Such Buyer (i) is acquiring the Debentures
and the Warrants, (ii) upon conversion of the Debentures, will acquire the
Conversion Shares then issuable and (iii) upon exercise of the Warrants, will
acquire the Warrant Shares then issuable (the Debentures, the Warrants, the
Conversion Shares and the Warrant Shares are collectively referred to herein as
the "Securities"), for its own account for investment only and not with a view
towards, or for resale in connection with, the public sale or distribution
thereof, except pursuant to sales registered or exempted under the 1933 Act;
provided, however, that such Buyer reserves the right to dispose of the
Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act.
b. Accredited Investor Status. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a)(3) of Regulation D under the
1933 Act.
c. Reliance on Exemptions. Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
such Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
- 4 -
Exhibit 4.1
determine the availability of such exemptions and the eligibility of such Buyer
to acquire such Securities.
d. Information. Such Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by such Buyer, including all SEC Documents (as defined
below). Such Buyer has received from the Company the Private Placement
Memorandum which contains certain risk factors relating to the Company, and such
Buyer has reviewed the risk factors set forth therein. Such Buyer and its
advisors, if any, have been afforded the opportunity to review materials and to
ask questions of the Company. Neither such inquiries nor any other due diligence
investigations conducted by such Buyer or its advisors, if any, or its
representatives shall modify, amend or affect such Buyer's right to rely on the
Company's representations and warranties contained in Section 3. Such Buyer
understands that its investment in the Securities involves a high degree of
risk. Such Buyer has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with respect to its
acquisition of the Securities.
e. No Government Review. Such Buyer understands that no United
States federal or state authority or agency or any other governmental authority
or agency has passed on or made any recommendation or endorsement of the
Securities or the fairness or suitability of the investment in the Securities
nor have such authorities passed upon or endorsed the merits of the offering of
the Securities.
f. Transfer or Resale. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel, in a generally acceptable form, to the effect
that such Securities to be sold, assigned or transferred may be sold, assigned
or transferred pursuant to an exemption from such registration, or (C) such
Buyer provides the Company with reasonable assurance that such Securities can be
sold, assigned or transferred pursuant to Rule 144 promulgated under the 1933
Act (or a successor rule thereto) ("Rule 144"); (ii) any sale of the Securities
made in reliance on Rule 144 may be made only in accordance with the terms of
Rule 144 and further, if Rule 144 is not applicable, any resale of the
Securities under circumstances in which the seller (or the person through whom
the sale is made) may be deemed to be an underwriter (as the term is defined in
the ▇▇▇▇ ▇▇▇) may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (iii) neither the
Company nor any other person is under any obligation to register such Securities
under the 1933 Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder.
- 5 -
Exhibit 4.1
g. Legends. Such Buyer understands that the certificates or other
instruments representing the Debentures and the Warrants and, until such time as
the sale of the Conversion Shares and the Warrant Shares have been registered
under the 1933 Act, as contemplated by the Registration Rights Agreement, the
certificates representing the Conversion Shares and the Warrant Shares, except
as set forth below, shall bear a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of such
stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, ANY STATE
SECURITIES LAWS OR ANY OTHER SECURITIES LAWS. THE SECURITIES HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF (I) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND THE RECEIPT OF ALL NECESSARY STATE AND
FOREIGN APPROVALS OR (II) AN OPINION OF COUNSEL, IN FORM AND
SUBSTANCE REASONABLY ACCEPTABLE TO ALTAIR INTERNATIONAL INC., THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR ANY APPLICABLE STATE
OR FOREIGN SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER
SAID ACT.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any Security upon which it is
stamped if, unless otherwise required by state securities laws, (i) such
Security is registered for sale under the 1933 Act and all necessary state and
foreign approvals are obtained, (ii) in connection with a sale transaction, such
holder provides the Company with an opinion of counsel, in form and substance
reasonably acceptable to the Company, to the effect that a public sale or
transfer of such Security may be made without registration under the 1933 Act,
or (iii) such holder provides the Company with reasonable assurances that such
Security can be sold pursuant to Rule 144 without any restriction as to the
number of securities acquired as of a particular date that can then be
immediately sold. Each Buyer acknowledges, covenants and agrees to sell all
Securities, including those Securities represented by a certificate(s) from
which the legend has been removed, only pursuant to (i) a registration statement
with respect to which the Buyer has been notified (and the Buyer has not
received any notice to the contrary) is effective under the 1933 Act, or (ii)
advice of counsel that such sale is exempt from registration required by Section
5 of the 1933 Act.
h. Authorization; Enforcement. This Agreement and the Registration
Rights Agreement have been duly and validly authorized, executed and delivered
on behalf of such Buyer and are valid and binding agreements of such Buyer
enforceable in accordance with their terms, subject as to enforceability to
- 6 -
Exhibit 4.1
general principles of equity and to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to, or
affecting generally, the. enforcement of applicable creditors rights and
remedies.
i. Residency. Such Buyer is a resident of that country specified in
the Schedule of Buyers.
j. Trading Restrictions. During the period of thirty days prior to
the Closing Date, such Buyer and its affiliates have not, directly or
indirectly, entered into any short position or similar hedge of the Common Stock
and have not used shares of Common Stock to cover any such short position or
similar hedge.
k. No Material Misstatement. None of the representations or
warranties of the Buyers contained herein is false or misleading in any material
respect or omits to state a material fact necessary to make the statements
herein or therein not misleading in any material respect.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
----------------------------------------------
The Company represents and warrants to each of the Buyers that:
a. Organization and Qualification. The Company and each of its
subsidiaries (a complete list of which is set forth in Schedule 3(a)) are
corporations duly organized and validly existing in good standing under the laws
of the jurisdictions in which they are incorporated, and have the requisite
corporate power to own their properties and to carry on their respective
businesses as now being conducted. The Company and each of its subsidiaries are
duly qualified as foreign corporations to do business and are in good standing
in every jurisdiction in which the nature of the business conducted by them
makes such qualification necessary, except to the extent that the failure to be
qualified or be in good standing would not have a Material Adverse Effect. As
used in this Agreement, "Material Adverse Effect" means any material adverse
effect on the business, properties, assets, operations, results of operations,
liabilities, financial condition or prospects of the Company and its
subsidiaries, taken as a whole, or on the transactions contemplated hereby.
b. Authorization; Enforcement; Compliance with Other Instruments.
(i) The Company has the requisite corporate power and authority to enter into
and perform this Agreement (including the Irrevocable Transfer Agent
Instructions, as defined in Section 5), the Registration Rights Agreement, the
Debentures, and the Warrants (collectively, the "Transaction Documents"), and to
issue the Securities in accordance with the terms hereof and thereof, (ii) the
execution and delivery of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby, including without
limitation the issuance of the Debentures, the issuance of the Conversion Shares
upon conversion thereof, the issuance of the Warrants and the issuance of the
- 7 -
Exhibit 4.1
Warrant Shares upon exercise thereof, have been duly authorized by the Company's
Board of Directors and no further consent or authorization is required by the
Company, its Board of Directors or its stockholders, (iii) the Transaction
Documents have been duly executed and delivered by the Company, and (iv) each of
the Transaction Documents constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of creditors' rights and
remedies.
c. Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of unlimited shares of Common Stock, of which
15,492,749 shares are issued and outstanding and 1,435,500 shares are reserved
and available for issuance pursuant to the Company's stock option and purchase
plans, and no shares are reserved for issuance pursuant to securities (other
than the Debentures and the Warrants) exercisable or exchangeable for, or
convertible into, shares of Common Stock. All of such outstanding shares have
been, or upon issuance will be, validly issued and are fully paid and
nonassessable. Except as disclosed in Schedule 3(c), no shares of Common Stock
are subject to preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by the Company or were issued in violation of
the 1933 Act or applicable state, provincial or municipal securities laws.
Except as disclosed in Schedule 3(c), as of the date of this Agreement, (i)
there are no outstanding options, warrants, scrip, rights to subscribe to, call
or commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, any shares of capital stock of the Company
or any of its subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
subsidiaries or options, warrants, scrip, rights to subscribe to, call or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, any shares of capital stock of the Company
or any of its subsidiaries, (ii) there are no outstanding debt securities, (iii)
there are no agreements or arrangements under which the Company or any of its
subsidiaries is obligated to register the sale of any of their securities under
the 1933 Act (except the Registration Rights Agreement) and (iv) there are no
outstanding securities of the Company or any of its subsidiaries which contain
any redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its subsidiaries
is or may become bound to redeem or purchase a security of the Company or any of
its subsidiaries. Except as disclosed in Schedule 3(c), there are no securities
or instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the Securities pursuant to this Agreement, the
Debentures or the Warrants. The Company has furnished to the Buyers true and
correct copies of the Company's Articles of Incorporation, as amended and as in
effect on the date hereof (the "Articles of Incorporation"), and the Company's
By-laws, as in effect on the date hereof (the "By-laws"), and the terms of all
securities convertible into or exercisable for Common Stock and the material
rights of the holders thereof in respect thereto.
- 8 -
Exhibit 4.1
d. Issuance of Securities. The Debentures are duly authorized for
issuance and sale to the Buyers by the Company pursuant hereto. Sufficient
shares of Common Stock (subject to adjustment pursuant to the Company's covenant
set forth in Section 4(f)) have been duly authorized and reserved for issuance
upon conversion of the Debentures. Upon issuance in accordance with the terms
and conditions of this Agreement and the Debentures, the Conversion Shares will
be validly issued, fully paid and nonassessable and free from all taxes, liens
and charges with respect to the issue thereof with the holders being entitled to
all rights accorded to a holder of Common Stock. The Warrants are duly
authorized for issuance and sale to the Buyers by the Company pursuant hereto.
Sufficient shares of Common Stock (subject to adjustment pursuant to the
Company's covenant set forth in Section 4(f)) have been duly authorized and
reserved for issuance upon exercise of the Warrants. Upon exercise in accordance
with the terms and conditions of this Agreement and the Warrants, the Warrant
Shares will be validly issued, fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof with the holders
being entitled to all rights accorded to a holder of Common Stock. To the best
knowledge of the Company, assuming the accuracy of the representations of the
Buyers set forth in the Transaction Documents, the issuance by the Company of
the Securities is exempt from registration under the 1933 Act.
e. No Conflicts. Except as disclosed in Schedule 3(e), the
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated thereby
(including, without limitation, the reservation for issuance and issuance of the
Conversion Shares and the Warrant Shares) will not (i) result in a violation of
the Articles of Incorporation or the By-laws, (ii) conflict with, or constitute
a default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its subsidiaries is a party, or (iii) result in a
violation of any law, rule, regulation, by-law, directive, order, judgment or
decree (including federal, state, provincial and municipal securities laws and
regulations and the rules and regulations of the principal market or exchange on
which the Common Stock is traded or listed) applicable to the Company or any of
its subsidiaries or by which any property or asset of the Company or any of its
subsidiaries is bound or affected, except to the extent that matters within
clauses (ii) and (iii) immediately above would not have a Material Adverse
Effect. Except as disclosed in Schedule 3(e), neither the Company nor its
subsidiaries is in violation of any term of or in default under (i) the Articles
of Incorporation or the By-laws or their organizational charter or by-laws,
respectively, or (ii) any contract, agreement, mortgage, indebtedness,
indenture, instrument, judgment, decree or order or any statute, rule,
regulation, by-law or directive applicable to the Company or its subsidiaries,
except to the extent that such violation or default would not have a Material
Adverse Effect. The business of the Company and its subsidiaries is not being
conducted, and shall not be conducted, in violation of any law, ordinance, rule,
regulation, by-law or directive of any governmental entity. Except as
specifically contemplated by this Agreement and as required under the 1933 Act,
the Company is not required to obtain any consent, authorization or order of, or
- 9 -
Exhibit 4.1
make any filing or registration with, any court or governmental agency in order
for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents in accordance with the terms thereof.
Except as disclosed in Schedule 3(e), all consents, authorizations, orders,
filings and registrations which the Company is required to obtain pursuant to
the preceding sentence have been obtained or effected on or prior to the date
hereof. The Company and its subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing. The Company is not
in violation of the listing requirements of the Nasdaq SmallCap Market or the
Nasdaq National Market, as applicable, as in effect on the date hereof and on
each of the Closing Dates and is not aware of any facts which would reasonably
lead to delisting of the Common Stock by the Nasdaq SmallCap Market or the
Nasdaq National Market, as applicable, in the foreseeable future.
f. SEC Documents; Financial Statements. Since March 13, 1997, the
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the Securities Exchange Act of 1934, as amended (the "1934 Act") (all of the
foregoing and all exhibits included therein and financial statements and
schedules thereto and documents incorporated by reference therein being
hereinafter referred to as the "SEC Documents"). The Company has delivered to
each Buyer or its respective representatives true and complete copies of the SEC
Documents. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
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. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the consolidated financial position of the Company and its
subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). To the best
knowledge of the Company, no other information provided by or on behalf of the
Company to the Buyers which is not included in the SEC Documents, including,
without limitation, information referred to in Section 2(d), contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstance under
which they are or were made, not misleading.
- 10 -
Exhibit 4.1
g. Absence of Certain Changes. Except as disclosed in Schedule 3(g),
since December 31, 1996 there has been no Material Adverse Effect. The Company
has not taken any steps, and does not currently expect to take any steps, to
seek protection pursuant to any bankruptcy law nor does the Company or any of
its subsidiaries have any knowledge or reason to believe that its creditors
intend to initiate involuntary bankruptcy proceedings.
h. Absence of Litigation. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company or any of its subsidiaries, threatened against or affecting the Company
or any of its subsidiaries that could have a Material Adverse Effect. Schedule
3(h) contains a complete list of any pending or threatened proceeding (known to
the Company) against or affecting the Company or any of its subsidiaries,
without regard to whether it would have a Material Adverse Effect.
i. Acknowledgment Regarding Buyers' Purchase of Debentures and
Warrants. The Company acknowledges and agrees that each of the Buyers is acting
solely in the capacity of arm's length purchaser with respect to the Transaction
Documents and the transactions contemplated thereby. The Company further
acknowledges that no Buyer is acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the Transaction Documents
and the transactions contemplated thereby and any advice given by any of the
Buyers or any of their respective representatives or agents in connection with
the Transaction Documents and the transactions contemplated thereby is merely
incidental to such Buyer's purchase of the Securities. The Company further
represents to each Buyer that the Company's decision to enter into the
Transaction Documents has been based solely on the independent evaluation by the
Company and its representatives.
j. No Undisclosed Liabilities. As of the date of the most recent
balance sheet provided in Section 3(f), the Company had no material liabilities,
except for liabilities which are reflected or reserved for on such balance sheet
in accordance with generally accepted accounting principles or which are
specifically disclosed in the SEC Reports. Since the date of the most recent
balance sheet, the Company has operated in the ordinary course of business,
consistent with past practices, and has not incurred or become subject to, or
agreed to incur or become subject to, any material liability, except in the
ordinary course of business, consistent with past practice.
k. No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the ▇▇▇▇ ▇▇▇) in connection with the offer or sale of the
Securities.
l. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
- 11 -
Exhibit 4.1
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause the offering of the Securities
pursuant to this Agreement to be integrated with prior offerings by the Company
for purposes of the 1933 Act or any applicable stockholder approval provisions,
including, without limitation, under the rules and regulations of the Nasdaq
SmallCap Market or the Nasdaq National Market, as applicable, nor will the
Company or any of its subsidiaries take any action or steps that would require
registration of the Securities under the 1933 Act or cause the offering of the
Securities to be integrated with other offerings.
m. Employee Relations. Neither the Company nor any of its
subsidiaries is involved in any union labor dispute nor, to the knowledge of the
Company or any of its subsidiaries, is any such dispute threatened. Neither the
Company nor any of its subsidiaries is a party to a collective bargaining
agreement, and the Company and its subsidiaries believe that relations with
their employees are good. Each of the Company an its subsidiaries is in
compliance in all material respects with the applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the
regulations and published interpretations thereunder. None of the following
events has occurred or is reasonably expected to occur that when taken together
with all other such events could reasonably be expected to result in a Material
Adverse Effect: (i) any "reportable event," as defined in Section 4043 of ERISA
or the regulations issued thereunder, with respect to any "employee pension
benefit plan" as such term is defined in Section 3 of ERISA (other than a
Multiemployer Plan (as defined below)) subject to the provisions of Title IV of
ERISA or Section 412 of the Internal Revenue Code of 1986, as amended (the
"Code"), or Section 302 of ERISA (a "Plan"); (ii) the adoption of any amendment
to a Plan that would require the provision of security pursuant to Section
401(a)(29) of the Code or Section 307 of ERISA; (iii) the existence with respect
to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of
the Code or Section 302 of ERISA), whether or not waived; (iv) the filing
pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (v) the incurrence of any liability under Title IV of ERISA with respect
to the termination of any Plan or the withdrawal or partial withdrawal of the
Company or any of its subsidiaries from any Plan or "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA ("Multiemployer Plan"); (vi) the receipt
by the Company or any of its subsidiaries from the Pension Benefit Guaranty
Corporation or a plan administrator of any notice relating to the intention to
terminate any Plan or Plans or to appoint a trustee to administer any Plan;
(vii) the receipt by the Company or any of its subsidiaries of any notice
concerning the imposition of liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as such terms are
defined in Part I of Subtitle E of Title IV of ERISA or of a determination that
a Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA; and (viii) the occurrence of a
"prohibited transaction" with respect to which the Company or any of its
subsidiaries is a "disqualified person" (within the meaning of Section 4975 of
the Code) and with respect to which the Company or such subsidiary would be
liable for the payment of an excise tax.
- 12 -
Exhibit 4.1
n. Intellectual Property Rights. To the knowledge of the Company,
the Company and its subsidiaries own or possess adequate rights or licenses to
use all trademarks, trade names, service marks, service ▇▇▇▇ registrations,
service names, patents, patent rights, copyrights, inventions, licenses,
approvals, governmental authorizations, trade secrets and rights to conduct
their respective businesses as now conducted, except to the extent that the
failure to possess such rights or licenses would not have a Material Adverse
Effect. The Company and its subsidiaries do not have any knowledge of any
infringement by the Company or its subsidiaries of any trademarks, trade name
rights, patents, patent rights, copyrights, inventions, licenses, service names,
service marks, service ▇▇▇▇ registrations, trade secret or other similar rights
of others, and, except as set forth on Schedule 3(n), there is no claim, action
or proceeding being made or brought against, or to the Company's knowledge,
being threatened against, the Company or any of its subsidiaries regarding any
trademarks, trade names, patents, patent rights, invention, copyright, license,
service names, service marks, service ▇▇▇▇ registrations, trade secret or other
infringement; and the Company and its subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing, except for such
facts and circumstances which would not have a Material Adverse Effect.
o. Environmental Laws. (i) The Company and its subsidiaries (x) are
in compliance with any and all applicable foreign, provincial, municipal,
federal, state and local laws and regulations relating to the protection of
human health and safety or emissions, discharges, releases, threatened releases,
removal, remediation or abatement of pollutants, contaminants, chemicals or
industrial, hazardous or toxic substances or wastes into or in the environment
(including without limitation air, surface water, ground water or land), or
otherwise used in connection with the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of pollutants,
contaminants, hazardous or toxic substances or wastes, as defined under such
applicable laws ("Environmental Laws"), (y) have received all permits, licenses
or other approvals required of them under applicable Environmental Laws to
conduct their respective businesses and (z) are in compliance with all terms and
conditions of any such permit, license or approval, except to the extent that
the matters within clauses (x), (y) or (z) above would not have a Material
Adverse Effect.
(ii) There is no substance designated a "hazardous substance" by any
Environmental Law, including asbestos, petroleum, urea formaldehyde insulation
and petroleum by-products ("Hazardous Substance") present at any of the real
property currently owned or leased by the Company or any of its subsidiaries,
except to the extent that such presence could not reasonably be expected to have
a Material Adverse Effect; and with respect to such real property, there has not
occurred (x) any release or, to the knowledge of the Company, any threatened
release of a Hazardous Substance or (y) any discharge or, to the knowledge of
the Company, threatened discharge of any Hazardous Substance into the ground,
surface or navigable waters which discharge or threatened discharge violates any
federal, state, local, provincial, municipal or foreign laws, rules or
regulations concerning water pollution.
- 13 -
Exhibit 4.1
(iii) None of the Company or any of its subsidiaries has disposed
of, transported, or arranged for the transportation or disposal of any Hazardous
Substance where such disposal, transportation or arrangement would give rise to
liability pursuant to any Environmental Law other than any such liabilities that
could not reasonably be expected to have a Material Adverse Effect.
(iv) There are no underground storage tanks, asbestos-containing
materials, polychlorinated biphenyls or urea formaldehyde insulation at any of
the real property currently owned or leased by the Company or any of its
subsidiaries in violation of any Environmental Law.
p. Title. The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them, except to the extent that the failure to have
good and marketable title would not have a Material Adverse Effect, in each case
free and clear of all liens, encumbrances and defects except such as are
described in Schedule 3(p) or such 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 or any of its subsidiaries. Any real property and
facilities held under lease by the Company or any of its subsidiaries are held
by them under valid, subsisting and enforceable leases with such exceptions as
are not material and do not interfere with the use made and proposed to be made
of such property and buildings by the Company and its subsidiaries.
q. Insurance. The Company and each of its subsidiaries are insured
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its subsidiaries are
engaged. Neither the Company nor any of its subsidiaries has any reason to
believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not have a
Material Adverse Effect.
r. Regulatory Permits. Except as set forth on Schedule 3(e), the
Company and its subsidiaries possess all certificates, authorizations,
approvals, licenses, easements, rights-of-way, orders and permits ("Permits")
issued by the appropriate federal, state, provincial, municipal or foreign
regulatory authorities necessary to conduct their respective businesses, except
to the extent that the failure to possess such certificates, authorizations and
permits would not have a Material Adverse Effect; and neither the Company nor
any such subsidiary has received any notice of proceedings relating to the
revocation or modification of any such Permit.
s. Compliance With Law. Except as set forth on Schedule 3(s), each
of the Company and its subsidiaries has complied with, has not received any
notice of violation of, and has no knowledge of any facts which with or without
notice could reasonably be expected to constitute a violation of, any laws,
- 14 -
Exhibit 4.1
ordinances, rules, regulations, by-laws, directives, orders, judgment,
injunctions, awards or decrees of any governmental entity applicable to the
Company and its subsidiaries and their properties, except for any violation or
failure so to comply which could not reasonably be expected to have a Material
Adverse Effect.
t. Internal Accounting Controls. The Company and each of its
subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
u. No Materially Adverse Contracts, Etc. Neither the Company nor any
of its subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
reasonable judgment of the Company's officers has or is expected in the future
to have a Material Adverse Effect.
v. Tax Status. Except as set forth on Schedule 3(v), the Company and
each of its subsidiaries has made or filed all federal, state, provincial and
municipal income and all other tax returns, reports and declarations required by
any jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set aside on
its books provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim.
w. Dilutive Effect. The Company understands and acknowledges that
the number of Conversion Shares issuable upon conversion of the Debentures and
the number of Warrant Shares issuable upon exercise of the Warrants will
increase in certain circumstances. The Company further acknowledges that its
obligations to issue Conversion Shares upon conversion of the Debentures and to
issue Warrant Shares upon exercise of the Warrants in accordance with this
Agreement, the Debentures and the Warrants (subject to the terms and conditions
thereof), as the case may be, are absolute and unconditional regardless of the
dilutive effect that such issuances may have on the ownership interests of other
stockholders of the Company.
- 15 -
Exhibit 4.1
x. No Other Agreements. The Company has not, directly or indirectly,
made any agreements with any Buyers relating to the terms or conditions of the
transactions contemplated by the Transaction Documents except as set forth in
the Transaction Documents.
y. No Material Misstatement. None of the representations or
warranties of the Company contained herein and none of the information contained
in the Schedules hereto furnished by the Company is false or misleading in any
material respect or omits to state a material fact necessary to make the
statements herein or therein not misleading in any material respect.
4. COVENANTS.
----------
a. Best Efforts. Each party shall use its best efforts timely to
satisfy each of the conditions to be satisfied by it as provided in Sections 6
and 7 of this Agreement.
b. Form D. The Company agrees to file a Form D with respect to the
Securities as required under Regulation D and to provide a copy thereof to each
Buyer promptly after such filing. The Company shall, on or before each of the
Closing Dates, take such action as the Company shall reasonably determine is
necessary to qualify the Securities for, or obtain exemption for the Securities
for, sale to the Buyers at each of the Closings pursuant to this Agreement under
applicable securities or "Blue Sky" laws of the states of the United States and
under applicable securities laws of the applicable provinces and municipalities
of Canada, and shall provide evidence of any such action so taken to the Buyers
on or prior to the Closing Date. Each Buyer shall provide all information
reasonably requested by the Company in order to comply with its obligations
under this Section 4(b).
c. Reporting Status. Until the earlier of (i) the date as of which
the Investors (as that term is defined in the Registration Rights Agreement) may
sell all of the Conversion Shares without restriction pursuant to Rule 144(k)
promulgated under the 1933 Act (or successor thereto), or (ii) the date on which
(A) the Investors shall have sold all of the Conversion Shares and all of the
Warrant Shares and (B) none of the Debentures and Warrants is outstanding (the
"Registration Period"), the Company shall file all reports required to be filed
with the SEC pursuant to the 1934 Act, and the Company shall not terminate its
status as an issuer required to file reports under the 1934 Act even if the 1934
Act or the rules and regulations thereunder would otherwise permit such
termination.
d. Use of Proceeds. The Company will use the proceeds from the sale
of the Debentures and the Warrants for substantially the same purposes and in
substantially the same amounts as indicated in Schedule 4(d).
e. Financial Information. The Company agrees to send the following
to ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co., in its capacity as agent for the Investors (as that
- 16 -
Exhibit 4.1
term is defined in the Registration Rights Agreement), during the Registration
Period: (i) within two (2) days after the filing thereof with the SEC, a copy of
its Annual Reports on Form 10-K, its Quarterly Reports on Form 10-Q, any Current
Reports on Form 8-K and any registration statements or amendments filed pursuant
to the 1933 Act; (ii) on the same day as the release thereof, facsimile copies
of all press releases issued by the Company or any of its subsidiaries and (iii)
copies of any notices and other information made available or given to the
stockholders of the Company generally, contemporaneously with the making
available or giving thereof to the stockholders.
f. Reservation of Shares. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than 150% of the number of shares of Common Stock needed to
provide for the issuance of the Conversion Shares and the Warrant Shares.
g. Right of First Refusal. So long as an aggregate of at least ten
percent (10%) of the Debentures issued at the Closings remains outstanding, but
subject to the exceptions described below, the Company shall not enter into a
binding agreement or otherwise agree with any party for or otherwise issue
securities in connection with any debt financing with an equity component, any
equity financing at a fixed discount in excess of 10% of the Market Value (as
defined below) of such securities, or any sale or issuance of convertible
preferred stock ("Future Offerings") during the period beginning on the Initial
Closing Date and ending on and including the date which is 365 days after the
Initial Closing Date, unless it shall have first delivered to ▇▇▇▇▇▇, ▇▇▇▇▇▇ &
Co. written notice (the "Future Offering Notice") describing the proposed Future
Offering, including the terms and conditions thereof, and providing ▇▇▇▇▇▇,
▇▇▇▇▇▇ & Co. a non-assignable option to purchase up to the Maximum Amount (as
defined below), as of the date of delivery of the Future Offering Notice, in the
Future Offering on the same terms and conditions set forth in the Future
Offering Notice (the limitations referred to in this sentence are collectively
referred to as the "Capital Raising Limitation"). For purposes of this Section
4(g), "Market Value" shall mean the average of the closing prices on the Alberta
Stock Exchange, the Nasdaq SmallCap Market or the Nasdaq National Market, as
selected by the Company, for the Common Stock for the ten consecutive trading
days immediately preceding (i) if the Company selects the Alberta Stock Exchange
as the basis for the calculation of the Market Value, the date of the Company's
filing with the Alberta Stock Exchange of a notice of the proposed transaction
or the trading date immediately preceding the date of such notice, whichever
date is selected by the Alberta Stock Exchange, or (ii) if the Company selects
the Nasdaq SmallCap Market or the Nasdaq National Market as the basis for
calculation of the Market Value, the date of the Future Offering Notice (or, if
the Company is not required to send a Future Offering Notice, the date on which
the Company enters into an agreement to sell securities in the Future Offering
to the purchasers thereof); provided, however, that the Company shall not select
the Alberta Stock Exchange as the basis for the calculation of the Market Value
unless the Company is required to do so by rule or regulation of the Alberta
Stock Exchange. For purposes of this Section 4(g), "Maximum Amount" shall mean
the aggregate amount invested by ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co. and its affiliates
- 17 -
Exhibit 4.1
in the Company pursuant to this Agreement. ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co. can exercise its
option to participate in a Future Offering by delivering written notice thereof
to participate to the Company within ten (10) business days of receipt of a
Future Offering Notice, which notice shall state the quantity of securities
being offered in the Future Offering that it will purchase, up to the Maximum
Amount. In the event ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co. purchases less than all of the
securities available in the Future Offering within the periods described in this
Section 4(g), the Company shall have sixty (60) days thereafter to sell the
securities of the Future Offering respecting which the rights of ▇▇▇▇▇▇, ▇▇▇▇▇▇
& Co. were not exercised upon terms and conditions (as set forth in the
applicable transaction documents) no more favorable to the purchasers thereof
than the terms and conditions specified in the Future Offering Notice. In the
event the Company has not sold such securities of the Future Offering within
such 60-day period, the Company shall not thereafter issue or sell such
securities without first offering such securities to ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co. in the
manner provided in this Section 4(g). ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co. shall purchase such
securities on the date of consummation of the Future Offering. The Capital
Raising Limitation shall not apply to (i) a loan from a commercial bank, (ii)
any transaction involving the Company's issuances of securities (A) as
consideration in a merger or consolidation, (B) in connection with any strategic
partnership or joint venture, or (C) as consideration for the acquisition of a
business, product or license by the Company, (iii) the issuance of Common Stock
in an underwritten public offering, (iv) the issuance of securities upon
exercise or conversion of the Company's options, warrants or other convertible
securities outstanding as of the date hereof, (v) the grant of additional
options or warrants, or the issuance of additional securities, under any Company
stock option or restricted stock plan for the benefit of the Company's
employees, directors or consultants, (vi) a single issuance by the Company
consisting solely of Common Stock provided that the consideration received by
the Company for each such share of Common Stock issued is not less than the
greater of (A) the closing price of a share of Common Stock on the Nasdaq
SmallCap Market or the Nasdaq National Market, as applicable, on the day prior
to the date of issuance of such shares and (B) the average of the closing prices
on the Nasdaq SmallCap Market or the Nasdaq National Market, as applicable, for
the Common Stock for the 20 consecutive trading days immediately preceding the
date of issuance of such shares, or (vii) a fixed-discount offering of equity
securities in which the discount applied to such offering does not exceed ten
percent (10%) of the Market Value of such securities. ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co. shall
not be required to participate or exercise their right of first refusal with
respect to a particular Future Offering in order to exercise their right of
first refusal with respect to later Future Offerings.
h. Listing. The Company shall promptly use its best efforts to
secure the listing of all of the Registrable Securities (as defined in the
Registration Rights Agreement) upon the Nasdaq SmallCap Market or the Nasdaq
National Market, as applicable, upon which shares of Common Stock are listed
(subject to official notice of issuance) and shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all Registrable
Securities from time to time issuable under the terms of the Transaction
Documents. The Company shall maintain the Common Stock's authorization for
- 18 -
Exhibit 4.1
quotation on the Nasdaq SmallCap Market or the Nasdaq National Market, as
applicable. The Company shall promptly provide to ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co., as agent
for the Buyers, copies of any notices it receives from the Nasdaq SmallCap
Market or the Nasdaq National Market, as applicable, regarding the continued
eligibility of the Common Stock for listing on such automated quotation system
or securities exchange. The Company shall pay all fees and expenses in
connection with satisfying its obligations under this Section 4(h).
i. Expenses. Subject to Section 9(l), following the Initial Closing,
the Company shall reimburse the Buyers for the Buyers' reasonable attorneys fees
and expenses in connection with negotiating and preparing the Transaction
Documents and consummating the transactions contemplated thereby, up to an
aggregate of $20,000.
j. Filing of Form 8-K. On or before the fifteenth (15th) day
following each of the Closing Dates, the Company shall file a Form 8-K with the
SEC describing the terms of the transaction contemplated by the Transaction
Documents and consummated at such Closing, in each case in the form required by
the 1934 Act.
k. Sale Restrictions.
(i) Prior to conversion of any or all of the Debentures or the
exercise of any or all of the Warrants, without the prior written consent of the
Company, no Buyer shall enter into any short position involving the Common Stock
in an amount such that the aggregate short position of all Buyers exceeds the
greatest of (i) 20% of the average daily trading volume of the Common Stock on
the Nasdaq SmallCap Market or the Nasdaq National Market, as applicable, for the
five trading days immediately preceding the date of sale, (ii) 20% of the
trading volume of the Common Stock on the Nasdaq SmallCap Market or the Nasdaq
National Market, as applicable, on the day prior to the date of sale; and (iii)
50,000 shares.
(ii) Following the conversion of any or all of the Debentures or the
exercise of any or all of the Warrants, without the prior written consent of the
Company, no Buyer will sell at any time any Conversion Shares or Warrant Shares
in an amount such that the total number of Conversion Shares and Warrant Shares
sold by all Buyers exceeds the greatest of (i) 10% of the average daily trading
volume of the Common Stock on the Nasdaq SmallCap Market or the Nasdaq National
Market, as applicable, for the five trading days immediately preceding the date
of sale; (ii) 10% of the trading volume of the Common Stock on the Nasdaq
SmallCap Market or the Nasdaq National Market, as applicable, on the day prior
to the date of sale; and (iii) 35,000 shares.
l. Underwriting Lock-Up Agreements. At any time during the period
beginning on and including the Initial Closing Date and ending on the date which
is eighteen months after the Initial Closing Date, the Company may require that
all, but not less than all, of the holders of the Debentures and the Warrants
- 19 -
Exhibit 4.1
agree to sign a "lock-up" agreement with the underwriters of a public offering
of the Common Stock pursuant to which the holders would agree that, during the
period beginning on the date designated by the Company, which date shall be not
less than ten (10) days after the holders' receipt of such notice, and ending on
the date which is the earlier of the closing date of such offering and sixty
(60) days after the beginning of the lock-up period as designated by the Company
(the "Underwriting Lock-Up Period"), such holders would not sell any Conversion
Shares issued to the holders pursuant to a Conversion Notice delivered to the
Company or any Warrant Shares issued to the holders . The Company shall exercise
this right by delivering written notice (the "Lock-Up Request Notice") of such
request to all of the holders of the Debentures and Warrants then outstanding at
least 10 days prior to the date on which the Underwriting Lock-Up Period will
begin, but in no event prior to the filing of the registration statement for
such proposed offering. The Lock-up Request Notice shall state (i) that the
underwriters of such offering have requested that the holders of the Debentures
and the Warrants enter into "lock-up" agreements, (ii) the date on which the
Underwriting Lock-Up Period will begin and (iii) the name of the managing
underwriters of the proposed offering. Notwithstanding the foregoing, the
Company shall not be entitled to require the holders to enter into lock-up
agreements unless (A) the Underwriting Lock-Up Period is not more than 60 days,
(B) the Underwriting Lock-Up Period shall terminate immediately upon the
termination or abandonment or indefinite delay of the underwritten offering, (C)
the managing underwriters for such proposed offering are included on the
Schedule of Underwriters attached to this Agreement, (D) the preliminary
prospectus for such underwritten public offering reflects a price per share to
the public of not less than $10.00 per share and an aggregate gross proceeds to
the Company of at least $20,000,000, (E) there has been no other Underwriting
Lock-Up Period in the 365 days prior to the date of the Lock-Up Request Notice,
and (F) there has been no Grace Period (as defined in the Registration Rights
Agreement) during the period beginning on and including the date which is ten
days prior to the filing of the registration statement for the proposed offering
and ending on and including the first day of the Underwriting Lock-Up Period. If
the Company delivers a Lock-Up Request Notice and the underwritten public
offering is not consummated within 90 days of the first day of the Underwriting
Lock-Up Period and such failure to consummate the offering is due to any action
of the Company or any failure of the Company to act, then the Company may not
require any additional Underwriting Lock-Up Period pursuant to this Section
4(l).
5. TRANSFER AGENT INSTRUCTIONS.
----------------------------
The Company shall issue irrevocable instructions to its transfer
agent, and any subsequent transfer agent, to issue certificates, registered in
the name of each Buyer or its respective nominee(s), for (i) the Conversion
Shares in such amounts as specified from time to time by each Buyer to the
Company upon conversion of the Debentures in accordance with the terms and
conditions of the Transaction Documents and (ii) the Warrant Shares in such
amounts as specified from time to time by each Buyer to the Company upon
exercise of the Warrants in accordance with the terms and conditions of the
Transaction Documents (the "Irrevocable Transfer Agent Instructions"). Prior to
- 20 -
Exhibit 4.1
registration of the Conversion Shares and the Warrant Shares under the 1933 Act,
all such certificates shall bear the restrictive legend specified in Section
2(g). The Company warrants that, except as set forth in the Transaction
Documents, no instruction other than the Irrevocable Transfer Agent Instructions
referred to in this Section 5, and stop transfer instructions to give effect to
Section 2(f) (prior to registration of the Conversion Shares and Warrant Shares
under the 1933 Act), will be given by the Company to its transfer agent and that
the Securities shall otherwise be freely transferable on the books and records
of the Company as and to the extent provided in this Agreement and the
Registration Rights Agreement. Nothing in this Section 5 shall affect in any way
each Buyer's obligations and agreements set forth in Section 2(g) to comply with
all applicable prospectus delivery requirements, if any, upon resale of the
Conversion Shares or the Warrant Shares. If a Buyer provides the Company with an
opinion of counsel, reasonably satisfactory in form and substance to the
Company, that registration of a resale by such Buyer of any of such Securities
is not required under the 1933 Act, the Company shall permit the transfer, and
promptly instruct its transfer agent to issue one or more certificates in such
name and in such denominations as specified by such Buyer and without any
restrictive legends. The Company acknowledges that a breach by it of its
obligations arising under this Section 5 will cause irreparable harm to the
Buyers by vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 5 will be inadequate and agrees, in
the event of a breach or threatened breach by the Company of the provisions of
this Section 5, that the Buyers shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic loss
and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
-----------------------------------------------
a. Initial Closing Date. The obligation of the Company hereunder to
issue and sell the Initial Debentures and Initial Warrants to each Buyer at the
Initial Closing is subject to the satisfaction, at or before the Initial Closing
Date, of each of the following conditions, provided that these conditions are
for the Company's sole benefit and may be waived by the Company at any time in
its sole discretion by providing each Buyer with written notice thereof:
(i) Such Buyer shall have executed each of the Transaction Documents
(other than the Debentures and the Warrants) and delivered the same to the
Company.
(ii) Such Buyer shall have delivered to the Company the Purchase
Price for the Debentures and Warrants being purchased by such Buyer at the
Initial Closing by wire transfer of immediately available funds pursuant
to the wire instructions provided by the Company.
(iii) The representations and warranties of such Buyer in this
Agreement shall be true and correct in all material respects as of the
- 21 -
Exhibit 4.1
date when made and as of the Initial Closing Date as though made at that
time (except for representations and warranties that speak as of a fixed
date), and such Buyer shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required
by the Transaction Documents to be performed, satisfied or complied with
by such Buyer at or prior to the Initial Closing Date.
(iv) No suit, action or other proceeding shall have been commenced
(and be pending) which seeks to restrain or prohibit or questions the
validity or legality of the transactions contemplated by the Transaction
Documents, nor shall any such suit, action or proceeding be threatened.
(v) All consents, Permits, authorizations, approvals, waivers and
amendments required for the consummation of the transactions contemplated
by the Transaction Documents shall have been obtained.
b. Put Closing Date. The obligation of the Company hereunder to
issue and sell the Put Debentures and Put Warrants to each Buyer at the Put
Closing is subject to the Company's delivery of the Put Notice and the
satisfaction, at or before the Put Closing Date, of each of the following
conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion by providing
each Buyer with written notice thereof:
(i) Such Buyer shall have delivered to the Company the Purchase
Price for the Put Debentures and Put Warrants being purchased by such
Buyer at the Put Closing by wire transfer of immediately available funds
pursuant to the wire instructions provided by the Company.
(ii) The representations and warranties of such Buyer in this
Agreement shall be true and correct in all material respects as of the
date when made and as of the Put Closing Date as though made at that time
(except for representations and warranties that speak as of a specific
date), and such Buyer shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required
by the Transaction Documents to be performed, satisfied or complied with
by such Buyer at or prior to the Put Closing Date.
(iii) No suit, action or other proceeding shall have been commenced
(and be pending) which seeks to restrain or prohibit or questions the
validity or legality of the transactions contemplated by the Transaction
Documents, nor shall any such suit, action or proceeding be threatened.
- 22 -
Exhibit 4.1
(iv) All consents, Permits, authorizations, approvals, waivers and
amendments required for the consummation of the transactions contemplated
by the Transaction Documents shall have been obtained.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
--------------------------------------------------
a. Initial Closing Date. The obligation of each Buyer hereunder to
purchase the Initial Debentures and Initial Warrants at the Initial Closing is
subject to the satisfaction, at or before the Initial Closing Date, of each of
the following conditions, provided that these conditions are for each Buyer's
sole benefit and may be waived by such Buyer at any time in its sole discretion
by providing the Company with written notice thereof:
(i) The Company shall have executed each of the Transaction
Documents, and delivered the same to such Buyer.
(ii) The Common Stock shall be authorized for quotation on the
Nasdaq SmallCap Market or the Nasdaq National Market, as applicable;
trading in the Common Stock issuable upon conversion of the Initial
Debentures and upon exercise of the Initial Warrants, which are to be
traded on the Nasdaq SmallCap Market or the Nasdaq National Market, as
applicable, shall not have been suspended by the SEC or The Nasdaq Stock
Market, Inc.; and all of the Conversion Shares issuable upon conversion of
the Initial Debentures, and all of the Warrant Shares issuable upon
exercise of the Initial Warrants, to be sold at the Initial Closing shall
be listed upon the Nasdaq SmallCap Market or the Nasdaq National Market,
as applicable.
(iii) The representations and warranties of the Company in this
Agreement shall be true and correct in all material respects (except to
the extent that any of such representations and warranties is already
qualified as to materiality in Section 3, in which case, such
representations and warranties shall be true and correct without further
qualification) as of the date when made and as of the Initial Closing Date
as though made at that time and the Company shall have performed,
satisfied and complied in all material respects with the covenants,
agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by the Company at or prior to the
Initial Closing Date. Such Buyer shall have received a certificate,
executed by the Chief Executive Officer of the Company, dated as of the
Initial Closing Date, to the foregoing effect and as to such other matters
as may be reasonably requested by such Buyer including, without
limitation, an update as of the Initial Closing Date regarding the
representation contained in Section 3(c).
(iv) Such Buyer shall have received the opinion of the Company's
counsel dated as of the Initial Closing Date, in form, scope and substance
reasonably satisfactory to such Buyer and in substantially the form of
Exhibit D attached hereto.
- 23 -
Exhibit 4.1
(v) The Company shall have executed and delivered to such Buyer the
Debentures and the Warrants (in such denominations as such Buyer shall
request) being purchased by such Buyer at the Initial Closing.
(vi) The Board of Directors of the Company shall have adopted
resolutions consistent with Section 3(b)(ii) (the "Resolutions").
(vii) As of the Initial Closing Date, the Company shall have
reserved out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the Debentures and the exercise of
the Warrants, a number of shares of Common Stock equal to at least 150% of
the number of shares of Common Stock which would be issuable upon
conversion of the then outstanding Debentures and upon exercise of the
then outstanding Warrants, including for such purposes any Debentures and
any Warrants to be issued at such Closing.
(viii) The Company shall have delivered to such Buyer a certificate
evidencing the status of the Company and the incorporation and good
standing of each subsidiary of the Company in such corporation's
jurisdiction of incorporation issued by the Ministry of Consumer and
Commercial Relations (Ontario), with respect to the Company, and the
Secretary of State of the State of Nevada, with respect to the
subsidiaries of the Company, as of a date within 10 days of the Initial
Closing.
(ix) The Company shall have delivered to such Buyer a secretary's
certificate certifying as to (a) the Resolutions, (b) the Articles of
Incorporation and (c) Bylaws, each as in effect at the Initial Closing.
(x) The Company shall have delivered to such Buyer such other
documents relating to the transactions contemplated by the Transaction
Documents as such Buyer or its counsel may reasonably request.
(xi) No suit, action or other proceeding shall have been commenced
(and be pending) which seeks to restrain or prohibit or questions the
validity or legality of the transactions contemplated by the Transaction
Documents, nor shall any such suit, action or proceeding be threatened.
(xii) All consents, Permits, authorizations, approvals, waivers and
amendments required for the consummation of the transactions contemplated
by the Transaction Documents shall have been obtained.
b. Put Closing Date. The obligation of each Buyer hereunder to
purchase the Put Debentures and the Put Warrants at the Put Closing is subject
to receipt of the Put Notice and the satisfaction, at or before the Put Closing
- 24 -
Exhibit 4.1
Date, of each of the following conditions, provided that these conditions are
for each Buyer's sole benefit and may be waived by such Buyer at any time in its
sole discretion by providing the Company with written notice thereof:
(i) The Company shall have complied with the requirements of Section
l(c) and all of the Put Notice Conditions set forth in Section l(d) shall
have been satisfied.
(ii) The Common Stock shall be authorized for quotation on the
Nasdaq SmallCap Market or the Nasdaq National Market, as applicable;
trading in the Common Stock issuable upon conversion of the Put Debentures
and upon exercise of the Put Warrants, which are to be traded on the
Nasdaq SmallCap Market or the Nasdaq National Market, as applicable, shall
not have been suspended by the SEC or The Nasdaq Stock Market, Inc.; and
all of the Conversion Shares issuable upon conversion of the Put
Debentures, and all of the Warrant Shares issuable upon exercise of the
Put Warrants, to be sold at the Put Closing shall be listed upon the
Nasdaq SmallCap Market or the Nasdaq National Market, as applicable.
(iii) The representations and warranties of the Company in this
Agreement shall be true and correct in all material respects (except to
the extent that any of such representations and warranties is already
qualified as to materiality in Section 3, in which case, such
representations and warranties shall be true and correct without further
qualification) as of the date when made and as of the Put Closing Date as
though made at that time and the Company shall have performed, satisfied
and complied in all material respects with the covenants, agreements and
conditions required by the Transaction Documents to be performed,
satisfied or complied with by the Company at or prior to the Put Closing
Date. Such Buyer shall have received a certificate, executed by the Chief
Executive Officer of the Company, dated as of the Put Closing Date, to the
foregoing effect and as to such other matters as may be reasonably
requested by such Buyer including, without limitation, an update as of the
Put Closing Date regarding the representation contained in Section 3(c).
(iv) Such Buyer shall have received the opinion of the Company's
counsel dated as of the Put Closing Date, in form, scope and substance
reasonably satisfactory to such Buyer and in substantially the form of
Exhibit D attached hereto.
(v) The Company shall have executed and delivered to such Buyer the
Put Debentures and the Put Warrants (in such denominations as such Buyer
shall request) being purchased by such Buyer at the Put Closing.
(vi) The Board of Directors of the Company shall have adopted, and
shall not have amended, the Resolutions.
- 25 -
Exhibit 4.1
(vii) As of the Put Closing Date, the Company shall have reserved
out of its authorized and unissued Common Stock, solely for the purpose of
effecting the conversion of the Debentures and the exercise of the
Warrants, a number of shares of Common Stock equal to at least 150% of the
number of shares of Common Stock which would be issuable upon conversion
of the then outstanding Debentures and upon exercise of the then
outstanding Warrants, including for such purposes any Debentures and any
Warrants to be issued at such Put Closing.
(viii) The Company shall have delivered to such Buyer a certificate
evidencing the status of the Company and the incorporation and good
standing of each subsidiary of the Company in such corporation's
jurisdiction of incorporation issued by the Ministry of Consumer and
Commercial Relations (Ontario), with respect to the Company, and the
Secretary of State of the State of Nevada, with respect to the
subsidiaries of the Company, as of a date within 10 days of the Put
Closing.
(ix) The Company shall have delivered to such Buyer a secretary's
certificate certifying as to (a) the Resolutions, (b) the Articles of
Incorporation and (c) Bylaws, each as in effect at the Put Closing.
(x) The Company shall have delivered to such Buyer such other
documents relating to the transactions contemplated by this Agreement as
such Buyer or its counsel may reasonably request.
(xi) No suit, action or other proceeding shall have been commenced
(and be pending) which seeks to restrain or prohibit or questions the
validity or legality of the transactions contemplated by the Transaction
Documents, nor shall any such suit, action or proceeding be threatened.
(xii) All consents, Permits, authorizations, approvals, waivers and
amendments required for the consummation of the transactions contemplated
by the Transaction Documents shall have been obtained.
8. INDEMNIFICATION.
----------------
a. In consideration of each Buyer's execution and delivery of the
Transaction Documents and acquiring the Securities thereunder and in addition to
all of the Company's other obligations under the Transaction Documents, the
Company shall defend, protect, indemnify and hold harmless each Buyer and each
other holder of the Securities and all of their officers, directors, employees
and agents (including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "Buyer
Indemnitees") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
- 26 -
Exhibit 4.1
connection therewith (irrespective of whether any such Buyer Indemnitee is a
party to the action for which indemnification hereunder is sought), and
including reasonable attorneys' fees and disbursements (the "Buyer Indemnified
Liabilities"), incurred by any Buyer Indemnitee as a result of, or arising out
of, or relating to (a) any misrepresentation or breach of any representation or
warranty made by the Company in the Transaction Documents or any certificate,
instrument or document delivered pursuant thereto, (b) any breach of any
covenant, agreement or obligation of the Company contained in the Transaction
Documents or any certificate, instrument or document delivered pursuant thereto,
or (c) any cause of action, suit or claim brought or made against such Buyer
Indemnitee and arising out of or resulting from any transaction financed or to
be financed in whole or in part, directly or indirectly, with the proceeds of
the issuance of the Securities or the status of such Buyer or holder of the
Securities as an investor in the Company. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Buyer Indemnified Liabilities which is permissible under applicable law.
b. In consideration of the Company's execution and delivery of the
Transaction Documents and in addition to the other obligations of the Buyers
under the Transaction Documents, each of the Buyers severally, and not jointly
(the "Responsible Buyer"), shall defend, protect, indemnify and hold harmless
the Company and all of its officers, directors, employees and agents (including,
without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the "Company Indemnitees") from
and against any and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Company Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys' fees and disbursements (the "Company Indemnified Liabilities"),
incurred by any Company Indemnitee as a result of, or arising out of, or
relating to (a) any misrepresentation or breach of any representation or
warranty made by the Responsible Buyer(s) in the Transaction Documents or any
certificate, instrument or document delivered pursuant thereto, (b) any breach
of any covenant, agreement or obligation of the Responsible Buyer(s) contained
in the Transaction Documents or any certificate, instrument or document
delivered pursuant thereto, or (c) any cause of action, suit or claim brought or
made against such Company Indemnitee and arising out of or resulting from the
status of such Responsible Buyer(s) or holder of the Securities as an investor
in the Company; provided, however, that in no case shall the Responsible
Buyer(s) be liable or responsible for any amount in excess of the principal
amount of Debentures purchased by it as set forth opposite such Buyer's name on
the Schedule of Buyers. To the extent that the foregoing undertaking by the
Buyers may be unenforceable for any reason, the Responsible Buyer(s) shall make
the maximum contribution to the payment and satisfaction of each of the Company
Indemnified Liabilities which is permissible under applicable law; provided,
however, that in no case shall any Buyer be liable or responsible for any amount
in excess of the principal amount of Debentures purchased by it as set forth
opposite such Buyer's name on the Schedule of Buyers.
- 27 -
Exhibit 4.1
9. GOVERNING LAW; MISCELLANEOUS.
-----------------------------
a. Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New York without regard
to the principles of conflict of laws. Each party hereby irrevocably submits to
the non-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, 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
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party 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 to such party at the address for such
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. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
b. Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which 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. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof.
c. Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement supersedes all other
prior oral or written agreements between or among the Buyers, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and the Transaction Documents contain the entire understanding
of the parties with respect to the matters covered therein and, except as
specifically set forth therein, neither the Company nor any Buyer makes any
representation, warranty, covenant or undertaking with respect to such matters.
No provision of this Agreement may be amended other than by an instrument in
- 28 -
Exhibit 4.1
writing signed by the Company and the holders of at least two-thirds (2/3) of
the Debentures then outstanding, and no provision hereof may be waived other
than by an instrument in writing signed by the party against whom enforcement is
sought.
f. Notices. Any notices consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically generated and kept on file by the
sending party); (iii) three (3) days after being sent by U.S. certified mail,
return receipt requested, or (iv) one (1) day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company:
Altair International Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇
▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: Chief Financial Officer
With copies to:
Altair International Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
and
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ & ▇▇▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
If to the Transfer Agent:
- 29 -
Exhibit 4.1
Equity Transfer Services
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
If to a Buyer, to its address and facsimile number on the Schedule of
Buyers, with copies to such Buyer's representatives as set forth on the Schedule
of Buyers.
Each party shall provide five (5) days' prior written notice to the other
party of any change in address or facsimile number or person to whose attention
notices shall be given.
g. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Debentures or the Warrants. The Company shall
not assign this Agreement or any rights or obligations hereunder without the
prior written consent of the holders of two-thirds (2/3) of the Debentures then
outstanding. No Buyer shall assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Company, except that a Buyer
may assign some or all of its rights hereunder to an "affiliate" of such Buyer
(as such term is defined in the 1934 Act), without the consent of the Company;
provided, however, that any such assignment shall not release such Buyer from
its obligations hereunder unless such obligations are assumed by such assignee
and the Company has consented to such assignment and assumption. Notwithstanding
anything to the contrary, ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co. shall not, without the prior
written consent of the Company, assign or transfer any of its rights under
Section 4(g).
h. No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. Survival. Unless this Agreement is terminated under Section 9(l),
the representations and warranties of the Company and the Buyers contained in
Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and 9,
and the indemnification provisions set forth in Section 8, shall survive each of
the Closings. Each Buyer shall be responsible only for its own representations,
warranties, agreements and covenants hereunder.
j. Publicity. The Company and one representative selected by the
Buyers shall have the right to approve before issuance any press releases or any
other public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior
approval of any Buyer, to make any press release or other public disclosure with
respect to such transactions as is required by applicable law and regulations
- 30 -
Exhibit 4.1
(although each Buyer shall be consulted by the Company in connection with any
such press release or other public disclosure prior to its release and shall be
provided with a copy thereof).
k. Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. Termination. In the event that the Initial Closing shall not have
occurred with respect to a Buyer on or before five (5) business days from the
date hereof due to the Company's or such Buyer's failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the nonbreaching party's
failure to waive such unsatisfied condition(s)), the nonbreaching party shall
have the option to terminate this Agreement with respect to such breaching party
at the close of business on such date without liability of any party to any
other party; provided, however, that if this Agreement is terminated pursuant to
this Section 9(l), the Company shall remain obligated to reimburse the
non-breaching Buyers for the expenses described in Section 4(i) above.
m. Construction. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party. Unless the
context otherwise requires: (a) words in the singular include the plural and in
the plural include the singular; (b) "or" is disjunctive but not exclusive; (c)
"including" means "including, without limitation,"; (d) masculine pronouns
include the feminine pronouns and feminine pronouns include the masculine
pronouns; and all references herein to Sections or Exhibits are references to
Sections of or Exhibits to this Agreement unless otherwise specified.
- 31 -
Exhibit 4.1
IN WITNESS WHEREOF, the Buyers and the Company have caused this Securities
Purchase Agreement to be duly executed as of the date first written above.
COMPANY: BUYERS:
ALTAIR INTERNATIONAL INC. ▇▇▇▇▇▇▇▇, L.P.
By: ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co., L.P.
Its: General Partner
By:_____________________________ By:_________________________________________
Name:___________________________ Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its:____________________________ Its: Chief Operating Officer
GAM ARBITRAGE INVESTMENTS, INC.
By: ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co., L.P.
Its: Investment Advisor
By:_________________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Chief Operating Officer
AG SUPER FUND INTERNATIONAL
PARTNERS, L.P.
By: ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co., L.P.
Its: General Partner
By:_________________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Chief Operating Officer
RAPHAEL, L.P.
By:_________________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Chief Operating Officer
Exhibit 4.1
RAMIUS FUND, LTD.
By: AG Ramius Partners, L.L.C.
Its: Investment Advisor
By:_________________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Managing Officer
▇▇▇▇▇▇▇ ENTERPRISES, INC.
By: AG Ramius Partners, L.L.C.
Its: Investment Advisor
By:_________________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Managing Officer
Exhibit 4.1
SCHEDULE OF BUYERS
Principal
Amount
Investor Address of Initial Investor's Representatives' Address
Investor Name and Facsimile Number Debenture and Facsimile Number
▇▇▇▇▇▇▇▇, L.P. c/o ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co., L.P. $3,000,000 ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co., L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ - 26th Floor ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇ Attn: ▇▇▇▇ ▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇ Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
GAM Arbitrage c/o ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co., L.P. $ 300,000 ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co., L.P.
Investments, Inc. ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ - 26th Floor ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇ Attn: ▇▇▇▇ ▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇ Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
AG Super Fund c/o ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co., L.P. $ 300,000
International Partners, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Raphael, L.P. c/o ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co., L.P. $ 300,000 c/o ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co., L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ - 26th Floor ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇ Attn: ▇▇▇▇ ▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇ Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Ramius Fund, Ltd. ▇/▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇., ▇.▇. $ 500,000 c/o ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co., L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ - 26th Floor ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇ Attn: ▇▇▇▇ ▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇ Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇ Enterprises, c/o ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co., L.P. $ 600,000 c/o ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co., L.P.
Inc. ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ - 26th Floor ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇ Attn: ▇▇▇▇ ▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇ Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
======================================================================================================
Exhibit 4.1
SCHEDULE OF UNDERWRITERS
▇.▇. ▇▇▇▇▇▇▇ & Sons Inc.
Bancamerica ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ & Co.
Cruttendon ▇▇▇▇ Incorporated
CS First Boston
▇▇▇▇ ▇▇▇▇▇▇▇▇ Incorporated
Deutsche ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ Lufkin & ▇▇▇▇▇▇▇▇ Securities Corporation
▇▇▇▇▇▇▇▇▇▇ & Co., Inc.
▇▇▇▇▇▇ ▇▇▇▇ Incorporated
Genesis Merchant Securities
▇▇▇▇▇▇▇ Sachs & Co.
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
Invermed Associates
▇.▇. ▇▇▇▇▇▇ & Company
▇▇▇▇▇▇ Brothers Inc.
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co.
NationsBank ▇▇▇▇▇▇▇▇▇▇ Securities
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, Discover & Co.
▇▇▇▇▇▇▇ & Company, Inc.
▇▇▇▇▇▇▇▇▇▇▇ & Co.
Pacific Growth Equities Inc.
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ Jaffray Inc.
Prudential Securities Incorporated
Punk ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Associates, Inc.
SBC Warburg/▇▇▇▇▇▇ Read
▇▇▇▇▇ ▇▇▇▇▇▇ Salomon
UBS Securities, Inc.
Vector Securities
Wedbush ▇▇▇▇▇▇ Securities
Exhibit 4.1
Schedule 3(a)
Subsidiaries
1) Fine Gold Recovery Systems, Inc., a Nevada corporation.
2) Mineral Recovery Systems, Inc., a Nevada corporation.
Exhibit 4.1
Schedule 3(c)
Capitalization
1) Altair International, Inc. Stock Option Plan, provides for issuance of
2,500,000 Altair common shares. See Form S-8, filed July 11, 1997, for
Option Plan details. As of 17 December 1997, 882,500 shares granted under
the plan remained unexercised, and 553,000 shares remained for granting
under the Plan.
2) Notes payable as of September 30, 1997, including both principal and
accrued interest totaled $257,543.
Exhibit 4.1
Schedule 3(e)
No Conflicts
1) Application to list additional shares on NASDAQ Small Cap Market or NASDAQ
National Market, as applicable, will be filed following execution of the
Transaction Documents.
Schedule 3(f)
ALTAIR INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
(Expressed in United States Dollars)
September 30, December 31,
1997 1996
(unaudited) (audited)
------------- ----------
ASSETS
Current
Cash and term deposits $ 2,953,241 $ 3,270,161
Advances and accounts receivable 60,024 13,556
----------- -----------
3,013,265 3,283,717
Capital
Office equipment, vehicles, testing and mining
equipment. (Cost, net of amortization) 455,744 257,018
Centrifugal jig patents and related expenditures
(Cost, net of amortization) 3,967,856 4,365,064
Mineral properties and related deferred
exploration expenditures 456,204 126,302
Goodwill, net 10,789 10,789
----------- -----------
$ 7,903,858 $ 8,042,890
=========== ===========
LIABILITIES
Current
Accounts payable and accrued liabilities $ 162,773 $ 155,729
Current portion of notes payable 153,036
----------- -----------
162,773 308,765
Notes payable 257,543 269,685
----------- -----------
420,316 578,450
----------- -----------
SHAREHOLDERS' EQUITY
Capital stock issued
15,233,245 common shares at September 30, 12,779,254 11,421,004
1997; 14,686,296 shares at December 31, 1996
----------- -----------
Deficit
Balance, beginning of period 3,956,564 3,347,808
Net loss for period 1,339,148 608,756
----------- -----------
Balance, end of period 5,295,712 3,956,564
----------- -----------
Total Shareholders' Equity 7,483,542 7,464,440
----------- -----------
$ 7,903,858 $ 8,042,890
=========== ===========
Exhibit 4.1
Schedule 3(g)
Absence of Certain Changes
None.
Exhibit 4.1
Schedule 3(h)
Absence of Litigation
1) Fine Gold Recovery Systems, Inc. (Plaintiff), versus Micron Science, Inc.
and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (Defendants) filed December 6, 1996, in the Second
Judicial District Court of the State of Nevada.
Exhibit 4.1
Schedule 3(n)
Intellectual Property Rights
None.
Exhibit 4.1
Schedule 3(p)
Title
None.
Exhibit 4.1
Schedule 3(s)
Compliance With Law
None.
Exhibit 4.1
Schedule 3(v)
Tax Status
None.
Exhibit 4.1
Schedule 4(d)
Use of Proceeds
Asset Acquisitions $4,000,000
Camden Project Development and
Additional Tennessee Lease Positions $3,000,000
Corporate Expansion and Working Capital $2,200,000
Transaction Costs $ 800,000
----------
Total $10,000,000