SECURITIES EXCHANGE AGREEMENT
SECURITIES EXCHANGE AGREEMENT (this "Agreement"), dated as of September
25, 1998, by and among COMPU-▇▇▇▇, INC., a corporation organized under the laws
of the State of Delaware (the "Company"), and the purchaser (the "Purchaser")
set forth on the execution pages hereto (the "Execution Pages").
WHEREAS:
A. The Company and the Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions 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 "Securities Act").
B. The Company previously entered into a Securities Purchase Agreement
(the "Securities Purchase Agreement") dated as of May 31, 1998 by and among the
Company, the Purchaser, and JNC Opportunity Fund Ltd. (the "Series A Purchaser"
and together with the Purchaser, the "Purchasers") pursuant to which the Company
sold, and the Series A Purchaser purchased, (x) 3,250 units (the "Preferred
Units"), each Preferred Unit consisting of (i) one share of the Company's Series
A Convertible Preferred Stock, par value $.01 per share, convertible into shares
of the Company's Common Stock, par value $.01 per share (the "Common Stock"),
and (ii) warrants (the "Warrants") to acquire 57,497 shares of Common Stock; and
the Company sold, and the Purchaser purchased (y) 1,750 units (the "Common
Units"), each Common Unit consisting of (i) 186.916 shares of Common Stock (the
"Common Shares"), and (ii) Warrants to acquire 32,710 shares of Common Stock.
The Company and the Purchaser each desire to exchange, upon the terms and
conditions stated in this Agreement, all of the Common Shares held by the
Purchaser for 1,750 shares of the Company's Series B Convertible Preferred
Stock, par value $.01 per share (the "Preferred Shares"), convertible into
shares of Common Stock. The rights, preferences and privileges of the Preferred
Shares, including the terms upon which such Preferred Shares are convertible
into shares of Common Stock, are set forth in the form of Certificate of
Designations, Preferences and Rights attached hereto as Exhibit A (the
"Certificate of Designation"). The shares of Common Stock issuable upon
conversion of the Preferred Shares or otherwise pursuant to the Certificate of
Designation are referred to herein as the "Conversion Shares." The Preferred
Shares and the Conversion Shares are sometimes collectively referred to herein
as the "Securities" and each of them may sometimes individually be referred to
herein as a "Security."
C. Contemporaneous with the execution and delivery of this Agreement,
the parties hereto are executing and delivering an amendment to the Registration
Rights Agreement dated as of May 31, 1998 by and among the Company and the
Purchasers, in the form attached hereto as
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Exhibit B (the "Registration Rights Agreement Amendment" and such Registration
Rights Agreement, as so amended, shall be referred to herein as the
"Registration Rights Agreement"), pursuant to which the Company has agreed to
provide certain registration rights under the Securities Act and the rules and
regulations promulgated thereunder, and applicable state securities laws.
NOW, THEREFORE, the Company and the Purchaser hereby agree as follows:
1. EXCHANGE OF SECURITIES.
a. Exchange of Common Shares and Preferred Shares. On the Closing Date
(as defined below), subject to the satisfaction (or waiver) of the conditions
set forth in Section 6 and Section 7 below, the Company shall issue to the
Purchaser 1,750 Preferred Shares in exchange for 327,103 Common Shares and the
Purchaser agrees to exchange such 327,103 Common Shares in return for such 1,750
Preferred Shares.
b. Form of Exchange. On the Closing Date, the Purchaser shall deliver
the certificates representing the Common Shares being exchanged by the Purchaser
at the Closing hereunder to the Company, against delivery of duly executed
certificates representing the Preferred Shares, and the Company shall deliver
such duly executed certificates against delivery of such certificates
representing the Common Shares by the Purchaser to the Company.
c. Closing Date. The date and time of the exchange of Common Shares and
Preferred Shares pursuant to this Agreement (the "Closing") shall be as soon as
practicable after the satisfaction (or waiver) of the conditions thereto set
forth in Section 6 and Section 7 below, or such other time as may be mutually
agreed upon by the Company and the Purchaser (the "Closing Date"). The Closing
shall occur at the offices of Klehr, Harrison, ▇▇▇▇▇▇, Branzburg & ▇▇▇▇▇▇, LLP,
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
2. PURCHASER'S REPRESENTATIONS AND WARRANTIES
The Purchaser represents and warrants to the Company as follows:
a. Exchange Purpose. The Purchaser is exchanging the Common Shares for
the Preferred Shares and no commission or other remuneration has been, is being,
or shall be, paid or given directly or indirectly by the Purchaser or its
affiliates or on behalf of the Purchaser for soliciting such exchange.
b. Reliance on Exemptions. The Purchaser understands that the Preferred
Shares are being exchanged for Common Shares held by the Purchaser in reliance
upon specific exemptions from the registration requirements of United States
federal and state securities laws and that the Company is relying upon the truth
and accuracy of, and the Purchaser's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Purchaser set
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forth herein in order to determine the availability of such exemptions and the
eligibility of the Purchaser to acquire the Preferred Shares.
c. Governmental Review. The Purchaser understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities.
d. Transfer or Resale. The Purchaser understands that (i) except as
provided in the Registration Rights Agreement, the sale or resale of the
Securities have not been and are not being registered under the Securities Act
or any state securities laws, and the Securities may not be transferred unless
(a) the resale of the Securities has been registered thereunder; or (b) the
Purchaser shall have delivered to the Company an opinion of counsel (which
opinion shall be in form, substance and scope customary for opinions of counsel
in comparable transactions) to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration; or (c) the Securities are sold under Rule 144 promulgated under
the Securities Act (or a successor rule) ("Rule 144"); or (d) the Securities are
sold or transferred to an affiliate of the Purchaser who agrees to sell or
otherwise transfer the Securities only in accordance with the provisions of this
Section 2(d) and who is an Accredited Investor (as that term is defined in Rule
501(a) of Regulation D); and (ii) neither the Company nor any other person is
under any obligation to register such Securities under the Securities Act or any
state securities laws (other than pursuant to the Registration Rights
Agreement). Notwithstanding the foregoing or anything else contained herein to
the contrary, the Securities may be pledged as collateral in connection with a
bona fide margin account or other lending arrangement.
e. Legends. The Purchaser understands that the Preferred Shares and,
until such time as the Common Shares and the Conversion Shares have been
registered under the Securities Act (including registration pursuant to Rule 416
thereunder) as contemplated by the Registration Rights Agreement or otherwise
may be sold by the Purchaser under Rule 144, the certificates for the Preferred
Shares, Common Shares and the Conversion Shares may bear a restrictive legend in
substantially the following form:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or the securities laws of
any state of the United States. The securities represented hereby may
not be offered, sold, transferred or assigned in the absence of an
effective registration statement for the securities under applicable
securities laws unless offered, sold, transferred or assigned under an
available exemption from the registration requirements of those laws.
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, (a) the sale of
such Security is registered under the Securities Act (including registration
pursuant to Rule 416 thereunder) as contemplated by the Registration Rights
Agreement; (b) such holder or such holder's agent provides the Company with an
opinion of counsel,
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in form, substance and scope customary for opinions of counsel in comparable
transactions, to the effect that a public sale or transfer of such Security may
be made without registration under the Securities Act; or (c) such holder or
such holder's agent provides the Company with reasonable assurances that such
Security can be sold under Rule 144. The Purchaser agrees to sell all
Securities, including those represented by a certificate(s) from which the
legend has been removed, pursuant to an effective registration statement or
under an exemption from the registration requirements of the Securities Act. In
the event the above legend is removed from any Security and thereafter the
effectiveness of a registration statement covering such Security is suspended or
the Company determines that a supplement or amendment thereto is required by
applicable securities laws, then upon reasonable advance notice to the Purchaser
the Company may require that the above legend be placed on any such Security
that cannot then be sold pursuant to an effective registration statement or
under Rule 144 and the Purchaser shall cooperate in the replacement of such
legend. Such legend shall thereafter be removed when such Security may again be
sold pursuant to an effective registration statement or under Rule 144.
f. Authorization; Enforcement. This Agreement, the Registration Rights
Agreement Amendment and the Registration Rights Agreement have been duly and
validly authorized, executed and delivered on behalf of Purchaser and are valid
and binding agreements of Purchaser enforceable in accordance with their terms.
g. Residency. The Purchaser is a resident of the jurisdiction set forth
under such Purchaser's name on the Execution Page hereto executed by such
Purchaser.
h. Organization and Qualification. The Purchaser is duly organized and
existing in good standing under the laws of the jurisdiction in which it was
formed, and has the requisite power to own its properties and to carry on its
business as now being conducted. The Purchaser is duly qualified to do business
and is in good standing in every jurisdiction in which the nature of the
business conducted by it makes such qualification necessary, except where the
failure to so qualify would have a material adverse effect on the ability of the
Purchaser to perform its obligations hereunder or under the Registration Rights
Agreement.
i. Investment Purpose. The Purchaser is exchanging the Common Shares
for the Preferred Shares for the Purchaser's own account for investment purposes
and not with a present view towards the public sale or distribution thereof,
except pursuant to sales that are exempt from the registration requirements of
the Securities Act and/or sales registered under the Securities Act. The
Purchaser understands that the Purchaser must bear the economic risk of this
investment indefinitely, unless the Securities are registered pursuant to the
Securities Act and any applicable state securities or blue sky laws or an
exemption from such registration is available, and that the Company has no
present intention of registering the resale of any such Securities other than as
contemplated by the Registration Rights Agreement. Notwithstanding anything in
this Section 2(i) to the contrary, by making the representations herein, the
Purchaser does not agree to hold the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities
PHIL1\144578-6
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at any time in accordance with or pursuant to a registration statement or an
exemption from the registration requirements under the Securities Act.
j. Accredited Investor Status. The Purchaser is an "Accredited
Investor" as that term is defined in Rule 501(a) of Regulation D.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each Purchaser as follows:
a. Authorization; Enforcement. (i) The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement and the Registration Rights Agreement, to issue and exchange the
Preferred Shares for the Common Shares in accordance with the terms hereof, and
to issue the Conversion Shares upon conversion of the Preferred Shares in
accordance with the terms of the Certificate of Designation; (ii) the execution,
delivery and performance of this Agreement and the Registration Rights Agreement
by the Company and the consummation by it of the transactions contemplated
hereby and thereby (including, without limitation, the issuance of the Preferred
Shares, the exchange of the Preferred Shares for the Common Shares, and the
issuance and reservation for issuance of the Conversion Shares) have been duly
authorized by the Company's Board of Directors and no further consent or
authorization of the Company, its Board of Directors or any committee of the
Board of Directors is required; (iii) this Agreement has been duly executed and
delivered by the Company; and (iv) this Agreement constitutes, and, upon
execution and delivery by the Company of the Registration Rights Agreement
Amendment, the Registration Rights Agreement will constitute, valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms.
b. Certificate of Designation. The Certificate of Designation, in the
form attached hereto, will be duly filed prior to Closing with the Secretary of
State of the State of Delaware and, upon issuance of the Preferred Shares in
accordance with the terms hereof, the Purchaser shall be entitled to the rights
set forth therein.
c. Issuance of Shares. The Preferred Shares are duly authorized and
upon issuance in accordance with the terms of this Agreement, the Preferred
Shares will be validly issued, fully paid and non-assessable, and free from all
taxes, liens, claims and encumbrances and will not be subject to any preemptive
or other similar rights of stockholders of the Company and will not impose
personal liability on the holders thereof. The Conversion Shares are duly
authorized and reserved for issuance, and, upon conversion of the Preferred
Shares in accordance with the terms thereof, will be validly issued, fully paid
and non-assessable, and free from all taxes, liens, claims and encumbrances and
will not be subject to any preemptive or other similar rights of stockholders of
the Company and will not impose personal liability upon the holder thereof.
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d. No Conflicts. Except as set forth on Schedule 3(d), the execution,
delivery and performance of this Agreement and the Registration Rights Agreement
by the Company, the performance by the Company of its obligations under the
Certificate of Designation and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance and reservation for issuance, as applicable, of the Preferred Shares
and the Conversion Shares and the exchange of the Preferred Shares for the
Common Shares) will not (i) result in a violation of the Company's Certificate
of Incorporation as in effect on the date hereof or the Company's By-laws as in
effect on the date hereof or (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 (including, without
limitation, the triggering of any anti-dilution provisions), acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its subsidiaries is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree (including U.S. federal and state
securities laws and regulations and rules or regulations of any self-regulatory
organizations to which either the Company or its securities are subject)
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,
with respect to clause (ii), for such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect). "Material
Adverse Effect" means any material adverse effect on (i) the Securities, (ii)
the ability of the Company to perform its obligations hereunder or under the
Certificate of Designation or the Registration Rights Agreement or (iii) the
business, operations, properties, prospects or financial condition of the
Company and its subsidiaries, taken as a whole. Except as specifically
contemplated by this Agreement and the Registration Rights Agreement, the
Company is not required to obtain any consent, approval, authorization or order
of, or make any filing or registration with, any court or governmental agency or
any regulatory or self regulatory agency in order for it to execute, deliver or
perform any of its obligations under this Agreement or the Registration Rights
Agreement or to perform its obligations under the Certificate of Designation, in
each case in accordance with the terms hereof or thereof.
e. Acknowledgment Regarding Exchange of Common Shares for Preferred
Shares. The Company acknowledges and agrees that the Purchaser is not acting as
a financial advisor or fiduciary of the Company (or in any similar capacity)
with respect to this Agreement or the transactions contemplated hereby, the
relationship between the Company and the Purchaser is "arms-length" and any
statement made by the Purchaser or any of its respective representatives or
agents in connection with this Agreement and the transactions contemplated
hereby is not advice or a recommendation and is merely incidental to the
Purchaser's exchange of Securities and has not been relied upon by the Company,
its officers or directors in any way. The Company further acknowledges that the
Company's decision to enter into this Agreement has been based solely on an
independent evaluation by the Company and its representatives.
f. Exchange Purpose. The Company is issuing the Preferred Shares
exclusively in exchange for the Common Shares and no commission or other
remuneration has been, is being, or
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shall be, paid or given, directly or indirectly by the Company or on behalf of
the Company for soliciting such exchange.
g. Exclusivity. Other than the transactions contemplated hereby, the
Company is not offering, selling or issuing any shares of Common Stock in any
transaction which would constitute part of a plan of financing which includes
the transactions contemplated hereby.
h. No Brokers. Except for fees paid to HNY Associates, LLC in
connection with the Securities Purchase Agreement, no fees or commissions are
payable by the Company to any broker, financial advisor, finder, investment
banker, or bank with respect to the transactions contemplated hereby. The
Purchaser shall have no obligation with respect to any fees or with respect to
any claims made by or on behalf of other persons for fees of a type described in
this Section 3(h) that may be due in connection with the transactions
contemplated hereby. The Company shall indemnify and hold harmless the
Purchaser, its respective employees, officers, directors, agents and partners,
and its respective Affiliates (as such term is defined under Rule 405
promulgated under the Securities Act), from and against all claims, losses,
damages, costs (including the costs of preparation and reasonable attorney's
fees) and expenses suffered in respect of any such claimed or existing fees. In
the event such a claim is made against the Purchaser, the Company shall have the
right to participate in, and to assume control of, the defense thereof with
counsel mutually satisfactory to the Purchaser and the Company; provided,
however, that the Company shall not be entitled to assume such defense and the
Purchaser shall have the right to retain its own counsel with the fees and
expenses to be paid by the Company, if, in the reasonable opinion of counsel
retained by the Company, the representation by such counsel of the Purchaser
would be inappropriate due to actual or potential conflicts of interest.
i. Securities Purchase Agreement Representations. The representations
and warranties of the Company contained in the Securities Purchase Agreement
were true and correct when made and as of the Closing Date thereunder as though
made at that time (except for representations and warranties that spoke as of a
specific date, which representations and warranties were true and correct as of
such date).
4. COVENANTS.
a. Best Efforts. The parties shall use their reasonable best efforts
timely to satisfy each of the conditions described in Section 6 and Section 7 of
this Agreement.
b. Reporting Status. So long as any Purchaser beneficially owns any of
the Securities, the Company shall timely file all reports required to be filed
with the SEC pursuant to the Exchange Act, and the Company shall not terminate
its status as an issuer required to file reports under the Exchange Act even if
the Exchange Act or the rules and regulations thereunder would permit such
termination. In addition, the Company shall take all actions necessary to
continue to be eligible to register the resale of its Common Stock on a
registration statement on Form S-3 under the Securities Act.
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c. Expenses. The Purchaser shall pay to the Company, or at its
direction, at the Closing, reimbursement for the expenses reasonably incurred by
the Company and its affiliates and advisors in connection with the negotiation,
preparation, execution and delivery of this Agreement and the other agreements
to be executed in connection herewith, including, without limitation, the
Purchaser's and its affiliates' and advisors' reasonable attorneys' fees and
expenses (the "Expenses"). In addition, from time to time thereafter, upon the
written request of the Company, the Purchaser shall pay to the Company such
additional Expenses, if any, not covered by such payment, in each case to the
extent reasonably incurred by the Company in connection with the negotiation,
preparation, execution and delivery of this Agreement and the other agreements
to be executed in connection herewith.
d. Reservation of Shares. The Company shall at all times have
authorized and reserved for the purpose of issuance a sufficient number of
shares of Common Stock to provide for the full conversion of the outstanding
Preferred Shares and the issuance of the Conversion Shares in connection
therewith subject to and as otherwise required by the Certificate of
Designation. In that regard, a "sufficient number of shares" with respect to the
Preferred Shares shall be deemed to be equal to the number of shares of Common
Stock required to be reserved for issuance by the Company pursuant to Article V
of the Certificate of Designation. The Company shall not reduce the number of
shares reserved for issuance upon conversion of the Preferred Shares (except as
a result of any such conversion) without the consent of the Purchaser.
e. Listing. The Company shall promptly secure the listing of the
Conversion Shares upon each national securities exchange or automated quotation
system, if any, upon which shares of Common Stock are then listed (subject to
official notice of issuance), unless such listing has already been accomplished
by the listing by the Company of the Common Shares, and shall maintain, so long
as the Purchaser (or any of its affiliates) own any Securities, such listing of
all Common Shares issued pursuant hereto and all Conversion Shares from time to
time issuable upon conversion of the Preferred Shares. The Company will take all
action necessary to continue the listing and trading of its Common Stock on the
New York Stock Exchange ("NYSE"), the American Stock Exchange ("AMEX"), the
Nasdaq National Market ("NNM") or the Nasdaq SmallCap Market ("SmallCap") and
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the National Association of Securities
Dealers (the "NASD") and such exchanges, as applicable. The Company shall
promptly provide to the Purchaser copies of any notices it receives regarding
the continued eligibility of the Common Stock for trading on the SmallCap or, if
applicable, any securities exchange or automated quotation system on which
securities of the same class or series issued by the Company are then listed or
quoted, if any.
f. Corporate Existence. Subject to the provisions of the Certificate of
Designation, so long as the Purchaser (or any of its affiliates) beneficially
owns any Securities, the Company shall maintain its corporate existence, and in
the event of a merger, consolidation or sale of all or substantially all of the
Company's assets, the Company shall ensure that the surviving or successor
entity in such transaction (i) assumes the Company's obligations hereunder and
under the Certificate of Designation, and the agreements and instruments entered
into in connection herewith regardless
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of whether or not the Company would have had a sufficient number of shares of
Common Stock authorized and available for issuance in order to effect the full
conversion of all Preferred Shares outstanding as of the date of such
transaction and (ii) is a publicly traded corporation whose common stock is
listed for trading on the NNM, SmallCap, NYSE or AMEX.
g. Stockholder Approval. The Company shall hold an annual or special
meeting of its stockholders no later than November 3, 1998 and use its best
efforts to obtain at such meeting such approvals of the Company's stockholders
as may be required (i) to ratify the issuance of the Common Shares pursuant to
the Securities Purchase Agreement, and (ii) to issue all of the shares of Common
Stock issuable upon conversion of, or otherwise with respect to, the Preferred
Shares without violating NASD Rules 4310(c)(25)(H) or 4460(i) (or any successor
rules thereto which may then be in effect) (the "Stockholder Approval"). The
Company shall comply with the filing and disclosure requirements of Section 14
promulgated under the Exchange Act in connection with the solicitation,
acquisition and disclosure of such Stockholder Approval. The Company represents
and warrants that its Board of Directors has adopted resolutions to, among
things, unanimously recommend that the Company's stockholders approve the
proposal contemplated by this Section 4(g) and shall so indicate such
recommendation in the proxy statement used to solicit such Stockholder Approval.
5. TRANSFER AGENT INSTRUCTIONS.
a. The Company shall instruct its transfer agent to issue certificates,
registered in the name of the Purchaser or its nominee, for the Conversion
Shares in such amounts as specified from time to time by the Purchaser or the
Purchaser's agent to the Company (including upon conversion of the Preferred
Shares). To the extent and during the periods provided in Sections 2(d) and 2(e)
of this Agreement, all such certificates shall bear the restrictive legend
specified in Section 2(e) of this Agreement.
b. The Company warrants that no instruction other than such
instructions referred to in this Section 5, and stop transfer instructions to
give effect to Section 2(d) hereof in the case of the transfer of the Conversion
Shares prior to registration thereof under the Securities Act or without an
exemption therefrom, 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, the Certificate
of Designation, and the Registration Rights Agreement. Nothing in this Section
shall affect in any way each Purchaser's obligations and agreement set forth in
Section 2(e) hereof to resell the Securities pursuant to an effective
registration statement or under an exemption from the registration requirements
of applicable securities law.
c. If (i) (A) the Conversion Shares have been registered under the
Securities Act as contemplated by the Registration Rights Agreement, or (B) the
Purchaser provides the Company and the transfer agent with an opinion of
counsel, which opinion of counsel shall be in form, substance and scope
customary for opinions of counsel in comparable transactions, to the effect that
the Securities to be sold or transferred may be sold or transferred pursuant to
an exemption from registration, or (C) the Purchaser provides the Company with
reasonable assurances that such
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Securities may be sold under Rule 144, and (ii) (A) the Purchaser or the
Purchaser's agent has delivered to the Company certificates representing the
Conversion Shares along with a written request for the removal of any
restrictive legend set forth thereon or (B) in the case of the conversion by the
Purchaser of the Preferred Shares, the Purchaser has complied with the
procedures for conversion set forth in Article IV of the Certificate of
Designation, the Company shall permit the transfer and promptly instruct its
transfer agent to issue the Conversion Shares in such name and in such
denominations as specified by the Purchaser. If the Company's transfer agent is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer program, the Company shall cause its transfer agent to electronically
transmit the Conversion Shares to such Purchaser or its transferee by crediting
the account of such Purchaser or its transferee with DTC through its Deposit
Withdrawal Agent Commission system ("DTC Transfer"). If the aforementioned
conditions to a DTC Transfer are not satisfied, the Company shall deliver to the
Purchaser or its transferee physical certificates representing the Conversion
Shares which certificates shall not bear any legend restricting transfer of the
Conversion Shares represented thereby. Further, the Purchaser may instruct the
Company to deliver to the Purchaser or its transferee unlegended physical
certificates representing the Conversion Shares in lieu of delivering such
shares by way of DTC Transfer.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO EXCHANGE.
The obligation of the Company hereunder to issue the Preferred Shares
and deliver the Preferred Shares to the Purchaser at the Closing is subject to
the satisfaction, on or before the Closing Date, of each of the following
conditions thereto, 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.
a. The Purchaser shall have executed the signature page to this
Agreement and the Registration Rights Agreement Amendment, and delivered the
same to the Company.
b. The Series A Purchaser shall have executed the signature page to the
Registration Rights Agreement Amendment and the Consent attached hereto and
delivered the same to the Company.
c. The Purchaser shall have delivered the certificates representing the
Common Shares being exchanged for the Preferred Shares in accordance with
Section 1(b) above.
d. The representations and warranties of the Purchaser shall be true
and correct as of the date when made and as of the Closing Date as though made
at that time (except for representations and warranties that speak as of a
specific date, which representations and warranties shall be true and correct as
of such date), and the Purchaser shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by the Purchaser at
or prior to the Closing Date.
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e. No litigation, statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.
f. The Purchaser shall deliver at least 327,103 Common Shares to the
Company at the Closing.
7. CONDITIONS TO THE PURCHASER'S OBLIGATION TO EXCHANGE.
The obligation of the Purchaser hereunder to deliver the Common Shares
to be exchanged by it for the Preferred Shares at the Closing is subject to the
satisfaction, on or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Purchaser's sole benefit
and may be waived by the Purchaser at any time at the Purchaser's sole
discretion:
a. The Company shall have executed this Agreement, and the Registration
Rights Agreement Amendment, and delivered the same to the Purchaser.
b. The Series A Purchaser shall have executed the signature page to the
Registration Rights Agreement Amendment and the Consent attached hereto and
delivered the same to the Company.
c. The Certificate of Designation shall have been accepted for filing
with the Secretary of State of the State of Delaware and a copy thereof
certified by the Secretary of State of the State of Delaware shall have been
delivered to the Purchaser.
d. The Company shall have delivered to the Purchaser duly executed
certificates (in such denominations as such Purchaser shall request)
representing the Preferred Shares being delivered to the Purchaser in exchange
for the Common Shares at the Closing in accordance with Section 1(b) above.
e. The Common Stock shall be authorized for quotation and listed on the
SmallCap and trading in the Common Stock (or the SmallCap generally) shall not
have been suspended by the SEC or the SmallCap, nor shall any such suspension be
pending or threatened.
f. The representations and warranties of the Company shall be true and
correct as of the date when made and as of the Closing Date as though made at
that time (except for representations and warranties that speak as of a specific
date, which representations and warranties shall be true and correct as of such
date) and the Company shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Company at or prior
to the Closing Date.
PHIL1\144578-6
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g. No litigation, statute, rule, regulation, executive order, decree,
ruling, injunction, action or proceeding shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction or any self-regulatory organization having authority over the
matters contemplated hereby which questions the validity of, or challenges or
prohibits the consummation of any of the transactions contemplated by this
Agreement.
h. Such Purchaser shall have received an opinion of the Company's
counsel, dated as of the Closing Date, in form, scope and substance reasonably
satisfactory to such Purchaser and in substantially the form of Exhibit C
attached hereto.
i. The Company shall have delivered evidence reasonably satisfactory to
the Purchasers that the Company's transfer agent has agreed to act in accordance
with irrevocable instructions in the form attached hereto as Exhibit D.
j. The Company shall deliver at least 1,750 Preferred Shares to the
Purchaser at the Closing.
k. Each of the officers and directors of the Company identified on
Exhibit G-1 to the Securities Purchase Agreement shall have executed and
delivered to the Purchaser an agreement, similar to the form attached as Exhibit
G-2 to the Securities Purchase Agreement, pursuant to which such officers and
directors agree to vote all shares of capital stock of the Company which they
own and/or control in favor of the proposals set forth in Section 4(g) hereof.
8. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in the State of Delaware. The Company
irrevocably consents to the jurisdiction of the United States federal courts and
the state courts located in the State of New York in any suit or proceeding
based on or arising under this Agreement and irrevocably agrees that all claims
in respect of such suit or proceeding may be determined in such courts. The
Company irrevocably waives the defense of an inconvenient forum to the
maintenance of such suit or proceeding. The parties hereto agree that a final
non-appealable judgment in any such suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on such judgment or in any other
lawful manner.
b. Counterparts. This Agreement may be executed in two or more
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. This Agreement, once executed by a party, may be
delivered to the other parties hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
In the event any signature is delivered by facsimile transmission, the party
using such means of delivery shall cause the manually executed Execution Page(s)
to be physically delivered to the other party within five (5) days of the
execution hereof.
PHIL1\144578-6
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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 or the
validity or enforceability of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein. The parties intend that the
Securities Purchase Agreement and related documents remain in full force and
effect. Notwithstanding the foregoing, in the event of a conflict between the
Securities Purchase Agreement and related documents, on the one hand, and this
Agreement and related documents on the other hand, the terms and provisions of
this Agreement and related documents shall govern with respect to such conflict.
No provision of this Agreement may be waived other than by an instrument in
writing signed by the party to be charged with enforcement and no provision of
this Agreement may be amended other than by an instrument in writing signed by
the Company and each Purchaser.
f. Notices. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier or confirmed telecopy, in each case addressed to a party. The addresses
for such communications shall be:
If to the Company:
Compu-▇▇▇▇, Inc.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Chief Executive Officer
with a copy simultaneously transmitted by like means to:
Certilman Balin ▇▇▇▇▇ & ▇▇▇▇▇, LLP
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇, Esquire and
▇▇▇▇▇ ▇. ▇▇▇▇▇, Esquire
If to the Purchaser, to the address set forth under the Purchaser's
name on the Execution Page hereto executed by the Purchaser.
PHIL1\144578-6
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Each party shall provide notice to the other parties of any change in
address.
Upon the Purchaser's submission of a Notice of Conversion to the
Company in accordance with the Certificate of Designation, the Purchaser shall
also send a courtesy copy of such Notice of Conversion to:
Certilman Balin ▇▇▇▇▇ & ▇▇▇▇▇, LLP
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇, Esquire and
▇▇▇▇▇ ▇. ▇▇▇▇▇, Esquire
The failure of the Purchaser to send a courtesy copy of the Notice of
Conversion as set forth above shall not render the Notice of Conversion so
submitted invalid or defective and, notwithstanding the failure to provide such
Notice of Conversion as aforesaid, such Notice of Conversion shall be deemed to
be valid and effective.
g. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. Except as
provided herein or therein, neither the Company nor the Purchaser shall assign
this Agreement or the Registration Rights Agreement or any rights or obligations
hereunder or thereunder. Notwithstanding the foregoing, any Purchaser may assign
its rights hereunder to any of its "affiliates" (as that term is defined under
the Exchange Act) who are Accredited Investors without the consent of the
Company (provided such assignees agree to be bound by all of the terms and
conditions hereof), or to any other person or entity with the consent of the
Company, which consent shall not be unreasonably withheld. This provision shall
not limit the Purchaser's right to transfer the Securities pursuant to the terms
of the Certificate of Designation and this Agreement or to assign the
Purchaser's rights hereunder and/or thereunder to any such transferee.
h. 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. The respective representations, warranties, agreements and
covenants of the parties set forth in Sections 2, 3, 4, 5 and 8 hereof shall
survive the Closing hereunder notwithstanding any investigation conducted by or
on behalf of the Purchaser, except that the representations set forth in Section
3(i) shall survive only so long as the representations set forth in Section 3 of
the Securities Purchase Agreement. Moreover, none of the representations and
warranties made by the Company herein shall act as a waiver of any rights or
remedies the Purchaser may have under applicable federal or state securities
laws. The Company agrees to indemnify and hold harmless the Purchaser and each
of the Purchaser's officers, directors, employees, partners, members, agents and
affiliates for loss or damage arising as a result of or related to any breach or
alleged breach by the Company of any of its representations or covenants set
forth herein, including
PHIL1\144578-6
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advancement of reasonable expenses as they are incurred. In the event such a
claim is made against the Purchaser by a third party relating to the foregoing,
the Company shall have the right to participate in and to assume control of, the
defense thereof with counsel mutually satisfactory to the Purchaser and the
Company; provided, however, that the Company shall not be entitled to assume
such defense and the Purchaser shall have the right to retain its own counsel
with the fees and expenses to be paid by the Company, if, in the reasonable
opinion of counsel retained by the Company, the representation by such counsel
of the Purchaser would be inappropriate due to actual or potential conflicts of
interest.
j. Publicity. The Company and the Purchaser shall have the right to
review before issuance any press releases, SEC or NASD filings, or any other
public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior review
of the Purchaser, to make any press release or SEC or NASD filings with respect
to such transactions as is required by applicable law and regulations (although
the Purchaser shall be consulted by the Company in connection with any such
press release and filing 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 Closing shall not have occurred
on or before September 30, 1998, unless the parties agree otherwise, this
Agreement shall terminate at the close of business on such date. Notwithstanding
any termination of this Agreement, any party not in breach of this Agreement
shall preserve all rights and remedies it may have against another party hereto
for a breach of this Agreement prior to or relating to the termination hereof.
m. Joint Participation in Drafting. Each party to this Agreement has
participated in the negotiation and drafting of this Agreement, the Certificate
of Designation and the Registration Rights Agreement Amendment. As such, the
language used herein and therein shall be deemed to be the language chosen by
the parties hereto to express their mutual intent, and no rule of strict
construction will be applied against any party to this Agreement.
n. Equitable Relief. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Purchaser by
vitiating the intent and purpose of the transactions contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations hereunder (including, but not limited to, its obligations pursuant
to Section 5 hereof) will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Agreement (including,
but not limited to, its obligations pursuant to Section 5 hereof), that the
Purchaser shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate issuance and transfer
of the
PHIL1\144578-6
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Securities, without the necessity of showing economic loss and without any bond
or other security being required.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
PHIL1\144578-6
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IN WITNESS WHEREOF, the undersigned Purchaser and the Company have
caused this Agreement to be duly executed as of the date first above written.
COMPU-▇▇▇▇, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: CEO
PURCHASER:
JNC STRATEGIC FUND LTD.
By: /s/ ▇▇▇▇ ▇▇▇▇
Name:
Title:
RESIDENCE: Cayman Islands
ADDRESS:
▇/▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (▇▇▇▇▇▇) ▇▇▇.
▇/▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (▇▇▇▇▇▇▇) Ltd.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇
with copies of all notices to:
Encore Capital Management, L.L.C.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇
AGGREGATE EXCHANGE AMOUNTS
Number of Series B Preferred Shares to be Received 1,750
----------------
at Closing
Number of Common Shares to be Delivered at Closing 327,103
----------------
PHIL1\144578-6
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CONSENT
Dated as of September 25, 1998
JNC OPPORTUNITY FUND LTD. ("JNCO") hereby consents to the issuance of the
Series B Preferred Stock and the other transactions contemplated by the
Securities Exchange Agreement (the "Agreement") of even date herewith between
Compu-▇▇▇▇, Inc. and JNC Strategic Fund Ltd.
IN WITNESS WHEREOF, JNCO has caused this Consent attached to the Agreement
to be duly executed as of the date first above written.
JNC OPPORTUNITY FUND LTD.
By: /s/ ▇▇▇▇ ▇▇▇▇
Name:
Title:
PHIL1\144578-6
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