Exhibit 10.31
SANCTUARY ▇▇▇▇▇ MULTIMEDIA CORPORATION
SECURITIES EXCHANGE AGREEMENT
As of April 10, 1997
TABLE OF CONTENTS
PAGE
SECTION 1 Authorization and Sale of the Securities; Advances . . . . . . . . . . 1
1.1 Authorization of Securities. . . . . . . . . . . . . . . . . . . . . . 1
1.2 Exchange of the Debentures . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Warrants to Purchase Common Stock. . . . . . . . . . . . . . . . . . . 2
SECTION 2 Closing Date; Delivery . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 3 Representations and Warranties of the Company. . . . . . . . . . . . . 3
3.1 Organization; Articles and Bylaws. . . . . . . . . . . . . . . . . . . 3
3.2 Corporate Power. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.4 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.5 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.6 Risk Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.7 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.8 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.9 Litigation, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.10 Governmental Consent, etc. . . . . . . . . . . . . . . . . . . . . . . 5
3.11 Patents, Trademarks and Trade Secrets. . . . . . . . . . . . . . . . . 5
3.12 Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 4 Representations and Warranties of the Purchasers . . . . . . . . . . . 6
4.1 Investment Representations and Covenants of the Purchasers . . . . . . 6
4.2 Legends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.3 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.4 Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 5 Conditions to Closing of the Purchasers. . . . . . . . . . . . . . . . 9
5.1 Representations and Warranties Correct . . . . . . . . . . . . . . . . 9
5.2 Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.3 Third Party Consents . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.4 Compliance with Federal Securities Laws. . . . . . . . . . . . . . . . 9
5.5 Blue Sky . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 6 Conditions to Closing of Company . . . . . . . . . . . . . . . . . . . 10
6.1 Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.2 Compliance with Federal Securities Laws. . . . . . . . . . . . . . . . 10
6.3 Blue Sky . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.4 Certificate of Incorporation . . . . . . . . . . . . . . . . . . . . . 10
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TABLE OF CONTENTS
(CONTINUED)
Page
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SECTION 7 Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.1 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.2 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . 10
7.3 Entire Agreement; Amendment. . . . . . . . . . . . . . . . . . . . . . 10
7.4 Notices, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.5 Delays or Omissions. . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.6 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.9 California Corporate Securities Law. . . . . . . . . . . . . . . . . . 12
EXHIBITS
A Schedule of Purchasers
B Rights and Privileges of the Series A Preferred Stock
C Form of Warrant for 27.5% Coverage
D Form of Warrant for 55% Coverage
E Disclosure Schedule
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SANCTUARY ▇▇▇▇▇ MULTIMEDIA CORPORATION
SECURITIES EXCHANGE AGREEMENT
This Securities Exchange Agreement (this "Agreement") is made as of
April 10, 1997 by and among Sanctuary ▇▇▇▇▇ Multimedia Corporation, a British
Columbia, Canada corporation (the "Company"), and the individuals and
entities listed on the Schedule of Purchasers attached hereto as EXHIBIT A
(the "Purchasers").
WHEREAS, the Purchasers and the Company entered into that certain
Securities Purchase Agreement dated as of September 18, 1996 (the "Purchase
Agreement") pursuant to which the Purchasers purchased 8% Convertible
Debentures due July 31, 1999 of the Company (the "Debentures");
WHEREAS, in connection with the purchase of the Debentures the Company
issued to the Purchasers warrants to purchase Common Stock of the Company at
the rate of one share of Common Stock for every US$2.00 principal amount of
the Debentures;
WHEREAS, the Company has granted to holders of record of Common Stock
and Debentures who are not Canadian residents as of March 7, 1997 rights to
purchase shares of Common Stock (the "Rights Offering" and each right granted
a "Right");
WHEREAS, the Company and Purchasers wish to exchange the Debentures for
shares of the Company's Series A Preferred Stock and additional warrants to
purchase Common Stock of the Company;
NOW, THEREFORE, for good and valuable consideration the value of which
is hereby acknowledged, the Company and the Purchasers agree as follows:
SECTION 1
AUTHORIZATION AND SALE OF THE SECURITIES; ADVANCES
1.1 AUTHORIZATION OF SECURITIES. The Company has or prior to the
Closing Date (defined in Section 2.1) will have authorized the issuance of
(a) 100,000 shares of Series A Preferred Stock with rights and privileges as
set forth in EXHIBIT B attached hereto; (b) warrants to purchase up to an
aggregate of 24,300,833 shares of the Company's Common Stock in substantially
the form attached hereto as EXHIBIT C or EXHIBIT D (the "Warrants"), which
warrants shall be exercisable at a price of US$0.15 per share, and (c) up to
an aggregate of 68,484,166 shares of the Company's Common Stock for issuance
upon conversion of the Series A Preferred Stock and exercise of the Warrants.
The Series A Preferred Stock and the Warrants shall hereinafter be
collectively referred to as the "Securities" and the Common Stock issuable
upon conversion of the Series A Preferred Stock and exercise of the Warrants
shall hereinafter be collectively referred to as the "Conversion Stock".
1.2 EXCHANGE OF THE DEBENTURES. As soon as practicable after the
Closing Date, for each US$53.02 principal amount of Debentures held by a
Purchaser, the Company will deliver to such Purchaser one share of Series A
Preferred Stock. No fractional shares of Series A Preferred Stock shall be
issued but the number of shares of Series A Preferred Stock shall be rounded
down to the nearest whole share and no cash shall be paid to Purchaser in
lieu of any fractional shares.
1.3 WARRANTS TO PURCHASE COMMON STOCK.
(a) If the Purchaser has subscribed to exercise less than 25% of
the total Rights granted to such Purchaser pursuant to the Rights Offering,
which total Rights shall include both those Rights granted based on the
Common Stock held by such Purchaser as of March 7, 1997 (the "Record Date")
and those Rights granted based on the aggregate principal amount of
Debentures held by such Purchaser as of the Record Date, as soon as
practicable after the Closing Date, the Company shall issue the Purchaser a
Warrant to purchase that number of shares of the Company's Common Stock set
forth in Column 4 of Exhibit A, which number shall be equal to 27.5% of the
shares of Common Stock issuable upon conversion of the Series A Preferred
Stock to be issued to such Purchaser pursuant to Section 1.2 of this
Agreement, in substantially the form attached hereto as EXHIBIT C.
(b) If the Purchaser shall have subscribed to exercise 25% or more
of the total Rights granted to such Purchaser in the Rights Offering, which
total Rights shall include both those Rights granted based on the Common
Stock held by such Purchaser on the Record Date and those Rights granted
based on the aggregate principal amount of debentures held by such Purchaser,
the Company shall issue to the Purchaser a Warrant to purchase that number of
shares of the Company's Common Stock set forth in Column 5 of Exhibit A,
which shall be equal to 55% of the shares of Common Stock issuable upon
conversion of the Series A Preferred Stock to be issued to such Purchaser
pursuant to Section 1.2 of this Agreement, in substantially the form attached
hereto as EXHIBIT D.
(c) For the purpose of determining the number of Warrants to be
granted to each Purchaser, the Series A Preferred Stock shall be convertible
into one share of Common Stock for each US$0.12 of principal amount of the
Debentures held by such Purchaser just prior to the Exchange. The Company
shall not issue a Warrant which is exercisable for a fraction of a share of
Common Stock and the aggregate number of shares issuable under such Warrant
shall be automatically rounded to the next lowest whole integer without any
other compensation payable to the Purchaser of such Warrant.
1.4 REGISTRATION RIGHTS. The Purchasers shall be entitled to the
registration rights set forth on Exhibit G to the Securities Purchase
Agreement dated September 18, 1996 by and among the Company and the
Purchasers, which is incorporated herein by reference and made a part hereof
as if fully set forth herein; provided, however, that the Company shall have
the right to file a Registration Statement on Form S-2 in lieu of a
Registration Statement on Form S-1, if such form is available to the Company.
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SECTION 2
CLOSING DATE; DELIVERY
2.1 CLOSING DATE. The closing of the exchange shall occur on April 18,
1997 (the "Closing Date").
2.2 DELIVERY. As soon as practicable after the Closing, the Company
will deliver to each Purchaser a certificate evidencing the Purchaser's
shares of Series A Preferred Stock as specified opposite such Purchaser's
name on EXHIBIT A hereto together with a Warrant or Warrants to purchase the
number of shares of the Company's Common Stock as determined in accordance
with Section 1.3 against delivery of the original Debentures and warrants
granted pursuant to the Purchase Agreement for exchange to the Company.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Disclosure Schedule attached hereto as
EXHIBIT E, the Company hereby represents and warrants to the Purchasers as
follows:
3.1 ORGANIZATION; ARTICLES AND BYLAWS. The Company is a corporation
duly organized and existing under, and by virtue of, the laws of British
Columbia, Canada. The Company has the requisite corporate power to own and
operate its properties and assets, and to carry on its business as presently
conducted and as proposed to be conducted. The Company is in good standing
in British Columbia, Canada and authorized to do business as a foreign
corporation and in good standing in the state of California, the only
jurisdiction in the United States in which such authorization is presently
required to carry on the Company's business.
3.2 CORPORATE POWER. The Company has all requisite legal and corporate
power to execute and deliver this Agreement, to issue and sell the Securities
and the Conversion Stock hereunder and to carry out and perform its
obligations under the terms of this Agreement and the Warrants.
3.3 CAPITALIZATION. As of March 7, 1997, the Company was authorized to
issue 100,000,000 shares of Common Stock, of which 23,241,164 shares are
issued and outstanding. As of March 7, 1997, the Company had granted
warrants to purchase 5,751,000 shares of Common Stock. Furthermore, as of
March 7, 1997, the Company had options to purchase 1,456,000 shares of Common
Stock outstanding pursuant to the 1995 Stock Option Plan and options to
purchase 1,179,000 shares of Common Stock had been granted pursuant to the
1996 Stock Plan subject to shareholder approval of the 1996 Stock Plan.
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3.4 AUTHORIZATION. All corporate action on the part of the Company,
its officers, directors and shareholders necessary for the authorization,
execution, delivery and performance by the Company of this Agreement, the
authorization, sale, issuance and delivery of the Securities, the
authorization, sale, issuance and delivery of the Conversion Stock, and the
performance of the Company's obligations hereunder has been taken and the
sale, issuance and delivery of the Securities and the Conversion Stock and
the execution, delivery and performance of this Agreement will not violate
the Company's articles, bylaws or any of its material agreements. This
Agreement and the Warrants, when executed and delivered by the Company, shall
constitute valid and binding obligations of the Company enforceable in
accordance with their terms, subject to laws of general application relating
to bankruptcy, insolvency and the relief of debtors (other than usury laws)
and rules of law governing specific performance, injunctive relief or other
equitable remedies. The Securities (including the Conversion Stock), when
issued in compliance with the provisions of this Agreement, will be validly
issued, fully paid and nonassessable, and will be free of any consensual
liens or encumbrances created by the Company; provided, however, that the
Securities may be subject to restrictions on transfer under state and/or
federal securities laws as well as laws of other jurisdictions such as Canada
as set forth herein or as otherwise required at the time a transfer is
proposed.
3.5 SUBSIDIARIES. Except for Sanctuary ▇▇▇▇▇ Multimedia, Inc., a
Nevada corporation, and Magic Quest, Inc., a California corporation, both of
which are wholly-owned subsidiaries of the Company, which are duly
incorporated and validly existing corporations and are in good standing in
the state of California, the Company has no subsidiaries or affiliated
companies. The Company is not a participant in any joint venture,
partnership or similar arrangement.
3.6 RISK DISCLOSURES. The Company has provided or made available to
each Purchaser a copy of or access to copies of the Company's 1995 Annual
Report on Form 10-K/A-3 and Quarterly Report on Form 10-Q for the period
ended December 31, 1996 (the "Public Disclosure Documents") and such were
accurate and complete as of the date of filing. There has been no material
change in the Company's financial condition since those documents were filed,
except as disclosed to the Purchasers in writing. In addition, each
Purchaser has been provided with a Prospectus dated as of March 14, 1997 in
connection with the Company's Rights Offering and a Prospectus/Proxy
Statement dated March 14, 1997 in connection with the Company's Extraordinary
General Meeting of Shareholders to consider, among other things, the
Company's domestication into the State of Delaware (collectively, the
"Prospectuses"), which is incorporated herein by reference and made a part
hereof as if fully set forth herein. The disclosures set forth in this
Agreement and in the documents and information delivered to the Purchasers
represent the Company's reasonable best effort, under the circumstances of a
financially distressed company, to disclose, fairly and adequately, its
business condition and prospects. Each Purchaser had a reasonable
opportunity to ask questions of and receive answers from the officers or
directors of the Company concerning the terms and conditions of the offering
of the Securities including the business and business prospects of the
Company, and to obtain additional information, to the extent possessed or
obtainable without unreasonable effort or expense, necessary to verify the
accuracy of the information provided to the Purchasers. The information and
documents delivered to each Purchaser described above contain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933,
as amended (the "Securities Act") and Section 21E of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). These forward-looking
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statements involve risks and uncertainties which include, without limitation,
certain risks related to continued competitive pressures in the marketplace,
inventory levels in the retail channel, the introduction of competitive
products and downward pricing pressures, intellectual property rights and
litigation, as well as the Company's continuing lack of capital resources.
In particular, and without limiting the generality of the foregoing, all
financial projections of the Company's future prospects and financial results
provided by the Company are qualified in their entirety by the risk factors
set forth in the Prospectuses. The Company will not update such financial
projections, and has informed the Purchasers that such projections may not be
met.
3.7 BROKERS OR FINDERS. Except as set forth herein, the Company has
not incurred, directly or indirectly, any liability for brokerage or finders'
fees, agent's commission or other similar charges in connection with this
Agreement or any of the transactions contemplated hereby.
3.8 TAX MATTERS. The Company has filed all necessary federal and state
property, income and franchise tax returns and has paid all taxes shown as
due thereon or otherwise owed by it to any taxing authority except those
contested in good faith and for which appropriate amounts have been reserved
in accordance with generally accepted accounting principles.
3.9 LITIGATION, ETC. There are no actions, suits, proceedings or
investigations pending against the Company, any of its subsidiaries or its
properties (or any written threats thereof), or, to the Company's knowledge,
against any of the Company's or its subsidiaries' employees, before any court
or governmental agency (nor has the Company received any written notice or
written threat thereof), the outcome of which, if determined adversely to the
Company individually or in the aggregate would have a material adverse effect
upon the Company's financial condition, except as disclosed in the Public
Disclosure Documents.
3.10 GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization
of or designation, declaration or filing with any governmental authority on
the part of the Company is required in connection with the valid execution
and delivery of this Agreement or the offer, sale or issuance of the
Securities or Conversion stock, or the consummation of any other transaction
contemplated hereby, except (a) the filing of the Certificate of
Incorporation with the State of Delaware if the Company's Domestication into
Delaware is approved by the Company's shareholders or the approval of the
terms of the Series A Preferred Stock by the British Columbia Securities
Commission if the Domestication is not approved by the Company's
shareholders, and (b) qualification (or taking such action as may be
necessary to secure an exemption from qualification, if available) of the
offer and sale of the Securities and Conversion stock under applicable
federal and state securities laws, which filings and qualifications, if
required, will be accomplished in a timely manner.
3.11 PATENTS, TRADEMARKS AND TRADE SECRETS. The Company owns or has a
valid right to use the patents, patent rights, licenses, trade secrets,
trademarks, trademark rights, trade names or trade name rights, copyrights,
inventions and intellectual property rights being used to conduct its
business as now operated and as now proposed to be operated; and to the
Company's knowledge the conduct of its business as now operated and as now
proposed to be operated does not and will not
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conflict with valid patents, patent rights, licenses, trade secrets,
trademarks, trademark rights, trade names or trade name rights, copyrights,
inventions and intellectual property rights of others.
3.12 PERMITS. The Company has all franchises, permits, licenses, and
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which would materially and adversely affect the
business, properties, prospects, or financial condition of the Company and
its subsidiaries considered as one enterprise. The Company is not in default
in any material respect under any of such franchises, permits, licenses, or
other similar authority except for such defaults which would not have a
material adverse effect on the business of the Company and its Subsidiaries
considered as one enterprise.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
The Purchasers hereby severally represent and warrant to the Company
with respect to the purchase of the Securities (including the Conversion
Stock) as follows:
4.1 INVESTMENT REPRESENTATIONS AND COVENANTS OF THE PURCHASERS.
(a) This Agreement is made by the Company with each Purchaser in
reliance upon such Purchaser's representations and covenants made in this
Section 4, which by its execution of this Agreement the Purchaser hereby
confirms.
(b) Each Purchaser understands that the Securities (and the
Conversion Stock) have not been registered under the Securities Act of 1933,
as amended (the "Securities Act") or any state securities qualification
requirements and are being offered and sold pursuant to an exemption from
registration or qualification contained in the Securities Act based in part
upon the representations of such Purchaser contained herein.
(c) Each Purchaser knows of no public solicitation or
advertisement of an offer in connection with the proposed issuance and sale
of the Securities.
(d) Each Purchaser is acquiring the Securities to be issued and
sold hereunder (and the Conversion Stock) for its own account for investment
and not as a nominee and not with a view to the distribution thereof. Each
Purchaser understands that it must bear the economic risk of this investment
indefinitely unless the Securities or such Conversion Stock are registered
pursuant to the Securities Act, or an exemption from such registration is
available, and that the Company has no present intention of registering the
Securities or such Conversion Stock. Each Purchaser further understands that
there is no assurance that any exemption from the Securities Act will be
available or, if available, that such exemption will allow such Purchaser to
dispose of or otherwise transfer any or all of the Securities or such
Conversion Stock under the circumstances, in the amounts or at the times
Purchaser might propose.
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(e) By reason of its business or financial experience, or that of
its professional advisor, each Purchaser has the capacity to protect its own
interests in connection with the purchase of the Securities hereunder and has
the ability to bear the economic risk (including the risk of total loss) of
its investment.
(f) Each Purchaser further covenants that it will not make any
sale, transfer or other disposition of the Securities or such Conversion
Stock in violation of the Securities Act, the Exchange Act, or the rules and
regulations of the Commission promulgated thereunder.
(g) Each Purchaser acknowledges that the Securities (including the
Conversion Stock) must be held indefinitely unless subsequently registered
under the Securities Act or an exemption from such registration is available.
It is aware of the provisions of Rule 144 promulgated under the Securities
Act which permit limited resale of securities purchased in a private
placement subject to the satisfaction of certain conditions, including, among
other things, the existence of a public market for the securities, the
availability of certain current public information about the Company, the
resale occurring not less than two years (or "one year" following the
effective date of certain amendments by the Securities and Exchange
Commission to Rule 144) after a party has purchased and paid for the security
to be sold, the sale being through a "broker's transaction" or in
transactions directly with a "market maker" (as provided by Rule 144(f)) and
the number of securities being sold during any three-month period not
exceeding specified limitations. It is further aware that Rule 144(k)
permits persons who have not been affiliates (as defined in Rule 144(a)) of
the Company for at least three months and who have beneficially owned their
securities for at least three years (or "two years" following the effective
date of certain amendments by the Securities and Exchange Commission to Rule
144) after full payment for such securities to sell such securities without
regard to the current public information, manner of sale and volume
limitations described above.
(h) Each Purchaser acknowledges that in the event all of the
requirements of Rule 144 are not met, registration under the Securities Act
or an exemption from registration will be required for any disposition of the
Securities and the Conversion Stock. Each Purchaser understands that
although Rule 144 is not exclusive, the Commission has expressed its opinion
that persons proposing to sell restricted securities received in a private
offering other than in a registered offering or pursuant to Rule 144 will
have a substantial burden of proof in establishing that an exemption from
registration is available for such offers or sales and that such persons and
the brokers who participate in the transactions do so at their own risk.
(i) Each Purchaser covenants that, in the absence of an effective
registration statement covering the Securities and the Conversion Stock, it
will sell, transfer, or otherwise dispose of the Securities and any
Conversion Stock only in a manner consistent with its representations and
covenants set forth in this Section 4.
(j) The residence of each Purchaser (or, in the case of a
partnership or corporation, such entity's principal place of business as
office) is correctly set forth on EXHIBIT A.
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(k) Each Purchaser acknowledges that it has received or has had
access to the Public Disclosure Documents as filed with the Securities and
Exchange Commission and the Prospectuses. Each Purchaser acknowledges that
the disclosures set forth herein and therein represent the Company's
reasonable best efforts, under the circumstances of a financially-distressed
corporation, to disclose, fairly and adequately, its business condition and
prospects. Each Purchaser has had a reasonable opportunity to ask questions
of and receive answers from the officers or directors of the Company
concerning the terms and conditions of the offering of the Securities
including the business and business prospects of the Company, and to obtain
additional information necessary to verify the accuracy of the information
provided to Purchasers.
(l) Each Purchaser is an "Accredited Investor" as such term is
defined in Rule 501(a) promulgated by the Securities and Exchange Commission
pursuant to the Securities Act.
4.2 LEGENDS. Each Purchaser understands and acknowledges that the
Securities and the Conversion Stock thereof will be imprinted with certain
legends, including but not limited to, the following:
(a) THIS SECURITY AND THE SECURITIES INTO WHICH IT IS CONVERTIBLE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY
NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED
UNLESS AND UNTIL REGISTERED UNDER THE ACT OR IN AN OPINION OF COUNSEL,
IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT IS AVAILABLE
FOR SUCH OFFER, SALE, OR TRANSFER, PLEDGE OR HYPOTHECATION.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A HOLD
PERIOD EXPIRING AT MIDNIGHT ON APRIL 17, ▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ UNTIL THE EXPIRY OF THE HOLD PERIOD EXCEPT AS
PERMITTED BY THE BRITISH COLUMBIA SECURITIES ACT AND REGULATIONS MADE
UNDER SUCH ACT.
(b) Any legend required by applicable state law.
4.3 AUTHORIZATION. Each Purchaser has the full power and authority to
execute, deliver and perform this Agreement. This Agreement when executed
and delivered by each Purchaser will constitute valid and legally binding
obligations of such Purchaser, enforceable in accordance with their terms,
subject to laws of general application relating to bankruptcy, insolvency,
and the relief of debtors and other laws of general application affecting
enforcement of creditors' rights generally, rules
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of law governing specific performance, injunctive relief and other equitable
remedies, and limitations of public policy.
4.4 ADVISORS. Each Purchaser is not relying on any statements or
representations of the Company or any of its agents with respect to the
financial, tax or other legal consequences of this investment and the
transactions contemplated by the Agreement except to the extent contained in
the representations made by the Company in Section 3 of this Agreement.
SECTION 5
CONDITIONS TO CLOSING OF THE PURCHASERS
Each Purchaser's obligation to purchase the Securities at the Closing,
except as specifically indicated below, is subject to the fulfillment or
waiver on or prior to the Closing Date of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by the Company in Section 3 hereof shall be true and correct
in all material respects on the Closing Date with the same force and effect
as if they had been made on and as of said date.
5.2 INVESTMENT. Pequot Partners Fund, L.P. and Pequot International
Fund, Inc., together, shall hereinafter be referred to as "Pequot." Pequot
shall have subscribed to exercise Rights granted in the Rights Offering and,
in connection with such exercise, to purchase at least 8,333,334 shares of
Common Stock for an aggregate amount of US$1,000,000 or more.
5.3 THIRD PARTY CONSENTS. All necessary third party consents on the
part of the Company, if any, shall have been obtained.
5.4 COMPLIANCE WITH FEDERAL SECURITIES LAWS. There is an exemption to
the registration requirement of the Securities Act of 1933, as amended (the
"Securities Act").
5.5 BLUE SKY. The Company shall have obtained all necessary Blue Sky
law permits and qualifications, or secured an exemption therefrom, required
by any state in which the exchange of securities shall occur.
SECTION 6
CONDITIONS TO CLOSING OF COMPANY
The Company's obligation to sell and issue the Securities at each
Closing is subject to the fulfillment of the following conditions:
-9-
6.1 INVESTMENT. For the purposes of this Section 6.1, Pequot shall be
considered one Purchaser. Pequot shall have subscribed to exercise Rights
granted in the Rights Offering, and, in connection with such offering, shall
have agreed to purchase at least 8,333,334 shares of Common Stock for an
aggregate amount of US$1,000,000 or more.
6.2 COMPLIANCE WITH FEDERAL SECURITIES LAWS. There is an exemption to
the registration requirement of the Securities Act.
6.3 BLUE SKY. The Company shall have obtained all necessary Blue Sky
law permits and qualifications, or secured an exemption therefrom, required
by any state in which the exchange of securities shall occur.
6.4 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation
shall have been filed with the Secretary of State of Delaware, or, if the
Domestication is not approved, approval for the issuance of the issuance of
the Series A Preferred Stock shall have been received from the British
Columbia Securities Commission.
SECTION 7
MISCELLANEOUS
7.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the internal substantive laws of the State of California.
7.2 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors and assigns of the parties hereto, provided, however, that the
rights of the Purchasers to purchase the Securities shall not be assignable
without the prior written consent of the Company.
7.3 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the exhibits
hereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof. Neither this
Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against
whom enforcement of any such amendment, waiver, discharge or termination is
sought.
7.4 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by
messenger, addressed (a) if to a Purchaser, at such Purchaser's address set
forth on EXHIBIT A, or at such other address as such Purchaser shall have
furnished to the Company, or (b) if to the Company, as follows:
-10-
Sanctuary ▇▇▇▇▇ Multimedia Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
7.5 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to the Purchasers upon any breach or default of the
Company under this Agreement shall impair any such right, power or remedy of
the Purchasers nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character by any Purchaser of any provisions or conditions of this Agreement,
must be in writing and shall be effective only to the extent specifically set
forth in such writing. All remedies, either under this Agreement, or by law
or otherwise afforded to the Purchasers, shall be cumulative and not
alternative.
7.6 EXPENSES. The Company and the Purchasers shall each bear their own
expenses and legal fees incurred on their behalf with respect to this
Agreement and the transactions contemplated hereby.
7.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original and all of which shall
constitute one instrument.
7.8 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective
if it materially changes the economic benefit of this Agreement to any party.
-11-
7.9 CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF
SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS AN EXEMPTION FROM
SUCH QUALIFICATION IS AVAILABLE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT
ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, OR SUCH
EXEMPTION BEING AVAILABLE.
[Intentionally Blank]
-12-
IN WITNESS WHEREOF, the undersigned parties have hereunto set their
hands as of the date first set forth above.
"COMPANY" "PURCHASER"
SANCTUARY ▇▇▇▇▇
MULTIMEDIA CORPORATION ---------------------------------
a British Columbia, (Print or Type Name of Purchaser)
Canada corporation
--------------------------------- ---------------------------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, President and (Signature)
Chief Executive Officer
---------------------------------
(Print or Type Name and Title, if
different from Purchaser)
(SIGNATURE PAGE FOR PURCHASE AGREEMENT)
EXHIBIT A
SCHEDULE OF PURCHASERS
Shares of
Principal Series A
Amount of Preferred Number of Shares Number of Shares
Name and Address Debenture Stock Subject to Warrant Pre-Split Subject to Warrant Post-Split
------------------------------- ------------ -------- -------------------------------------------------------------
27.5% 55% 27.5% 55%
Travelers Indemnity Company $ 550,000 10,373 1,260,362 2,520,725 63,018 126,036
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Pequot Partners Fund, L.P. $2,000,000 37,721 4,583,258 9,166,516 229,163 458,326
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Pequot International Fund, Inc. $2,000,000 37,721 4,583,258 9,166,516 229,163 458,326
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ $ 110,000 2,074 251,999 503,999 12,600 25,200
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇-Beer $ 110,000 2,074 251,999 503,999 12,600 25,200
c/▇ ▇▇▇▇▇▇▇▇ Securities
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ $ 110,000 2,074 251,999 503,999 12,600 25,200
c/▇ ▇▇▇▇▇▇▇▇ Securities
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Garret and ▇▇▇▇▇ ▇▇▇▇▇▇ $ 110,000 2,074 251,999 503,999 12,600 25,200
c/▇ ▇▇▇▇▇▇▇▇ Securities
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Ebbets Field Investment Co. $ 72,000 1,357 164,881 329,762 8,244 16,488
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Willow Creek Capital Partners, LP $ 72,000 1,357 164,881 329,762 8,244 16,488
▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇.,
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇. ▇. ▇▇▇▇▇ $ 42,000 792 96,231 192,462 4,812 9,623
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ $ 42,000 792 96,231 192,462 4,812 9,623
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ $ 42,000 792 96,231 192,462 4,812 9,623
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ $ 42,000 792 96,250 192,462 4,812 9,623
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
EXHIBIT B
RIGHTS AND PRIVILEGES OF THE SERIES A PREFERRED STOCK
EXHIBIT C
FORM OF WARRANT FOR 27.5% COVERAGE
EXHIBIT D
FORM OF WARRANT FOR 55% COVERAGE
EXHIBIT E
DISCLOSURE SCHEDULE