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EXHIBIT 10.1
PURCHASE AGREEMENT
SERIES A CONVERTIBLE SUBORDINATED NOTES,
COMMON STOCK AND WARRANTS
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This Series A Convertible Subordinated Note, Common Stock and Warrant
Purchase Agreement, dated as of September 7, 1999, is by and between ACCENT
COLOR SCIENCES, INC., a Connecticut corporation (the "Company"), each of the
investors listed on Schedule A attached hereto, who are each referred to
individually as an "Investor," and who are collectively referred to as the
"Investors," and Pennsylvania Merchant Group (the "Placement Agent").
INTENDING TO BE LEGALLY BOUND, and in consideration of the mutual
agreements stated below, the parties agree as follows:
1. Purchase and Sale of Series A Convertible Subordinated Notes and
Warrants.
1.1 Sale and Issuance of Series A Convertible Subordinated Notes,
Common Stock and Warrants. Subject to the terms and conditions of this
Agreement, (i) each Investor agrees, severally, to purchase at the Closing (as
hereafter defined), and the Company agrees to sell and issue to each Investor at
such closing Series A Convertible Subordinated Notes of the Company in the form
attached hereto as Exhibit I in the principal amount (in denominations of
$1,000) (individually, a "Note" and collectively the "Notes") and/or Common
Stock (the "Shares") set forth opposite each Investor's name on Schedule A
hereto and (ii) the Company agrees to deliver for the benefit of each Investor a
warrant in the form attached hereto as Exhibit II to purchase the number of
shares of the Company's Common Stock set forth opposite such Investor's name on
Schedule A hereto (individually a "Warrant" and collectively the "Warrants").
The Notes, the Shares and the Warrants are hereinafter sometimes referred to as
the "Securities".
1.2 Closing. The purchase and sale of the Securities shall take
place at the offices of Murtha, Cullina, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ LLP, CityPlace I,
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ at 10:00 a.m. on September 7, 1999, or
at such other time and place as the Company and the Investors mutually agree
upon (which time and place are designated as the "Closing"); provided, however,
that if acceptable to the Company and the Investors, the Closing may be effected
by facsimile transmission of executed copies of the documents delivered at the
Closing and payment of the purchase price specified in Section 1.1 and by
sending original copies of the documents delivered at the Closing by reputable
overnight delivery service, postage or delivery charges prepaid, for delivery to
the parties at their addresses stated on the signature page of this Agreement by
the third business day following the Closing. At the Closing the Company shall
deliver to or for the benefit of each Investor, a Note substantially in the form
of Exhibit I and/or Share certificate in the principal amount or for the number
of Shares set forth opposite such Investor's name on Schedule A hereto and a
Warrant in the form attached hereto as Exhibit II to purchase that number of
shares of the Company's Common Stock set forth opposite such Investor's name on
Schedule A hereto against payment of the purchase price therefor by check, wire
transfer, or any combination thereof, to which such Investor is entitled.
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2. Representations and Warranties of the Company. Knowing that each
Investor is relying thereon, the Company hereby represents and warrants to each
Investor that:
2.1 Organization, Good Standing and Qualification. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Connecticut and has all requisite corporate power and
authority to carry on its business as now conducted. The Company is duly
qualified to transact business and is in good standing in each jurisdiction in
which the failure to so qualify would have a material adverse effect on its
business or properties.
2.2 Capitalization and Voting Rights. The authorized capital of
the Company will consist immediately prior to the Closing, of 35,000,000 shares
of common stock, without par value ("Common Stock"), of which 17,765,865 shares
are issued and outstanding, and 500,000 shares of Preferred Stock, without par
value, of which 1,828 shares designated as Series B Convertible Preferred Stock,
stated value $1,000.00 per share ("Series B Preferred Stock"), are issued and
outstanding. Such shares of currently outstanding Series B Preferred Stock are
now redeemable in cash or convertible into shares of Common Stock in accordance
with the terms thereof, at the election of the holder. The outstanding shares of
Common Stock and Series B Preferred Stock are all duly and validly authorized
and issued, fully paid and nonassessable.
2.3 Options and Warrants. There are outstanding options to
purchase 1,335,250 shares of Common Stock and warrants to purchase 2,227,607
shares of Common Stock. The Board of Directors of the Company has granted
options to purchase an additional 1,842,500 shares of Common Stock conditional
on shareholder approval of a 2,000,000 share increase in shares of Common Stock
available under the Company's 1995 Stock Incentive Plan out of which such shares
would then be reserved.
2.4 Except as otherwise set forth above and in the Company's
filings with the Securities and Exchange Commission, there are no other
authorized, issued or outstanding securities of the Company and there is no
outstanding subscription, option, convertible or exchangeable security,
preemptive right, warrant, call or agreement (other than this Agreement)
relating to the Common Stock or any other obligation or commitment to issue any
shares of capital stock of the Company.
2.5 Authorization. All corporate action on the part of the
Company, its officers, directors and shareholders necessary for the
authorization and execution and delivery of this Agreement, the Securities and
the Registration Rights Agreement in the form attached hereto as Exhibit III
(the "Registration Rights Agreement") the performance of all obligations of the
Company hereunder and thereunder, and the authorization and issuance (or
reservation for issuance) of the Shares and the Common Stock issuable upon
conversion of the Notes and exercise of the Warrants, has been taken or will be
taken prior to the Closings. This Agreement, the Securities and the Registration
Rights Agreement constitute valid and legally binding obligations of the
Company, enforceable in accordance with their respective terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general application affecting enforcement of creditors' rights
generally, and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies.
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2.6 Valid Issuance of Common Stock. The Shares and the Common
Stock issuable upon conversion of the Notes and exercise of the Warrants have
been duly and validly reserved for issuance and, upon issuance in accordance
with the terms of the Company's Certificate of Incorporation, the Securities
will be duly and validly issued, fully paid, and nonassessable and will be free
of restrictions on transfer other than restrictions on transfer under this
Agreement, the Notes and the Warrants and under applicable state and U.S.
federal securities laws.
2.7 Offering. Subject in part to the truth and accuracy of the
Investors' representations set forth in Section 3 of this Agreement, the offer,
sale and issuance of the Securities as contemplated by this Agreement are exempt
from the registration requirements of the Securities Act of 1933, as amended
(the "Act"), and neither the Company nor any authorized agent acting on its
behalf will take any action hereafter that would cause the loss of such
exemption.
2.8 Use of Proceeds. The net proceeds received by the Company from
the sale of the Securities shall be used by the Company for working capital
purposes.
2.9 Filed Information. The Company has delivered to each Investor
a true and complete copy of its latest Annual Report on Form 10-K and its latest
Quarterly Report on Form 10-Q. All reports, registrations, documents, statements
and other filings required to be made by the Company with the Securities and
Exchange Commission ("SEC") have been timely filed. None of the such materials
contains any untrue statement of a material fact or omits 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; provided, however, that the Company is in discussion with the staff
concerning the proper reporting for financial statement purposes of its Series B
Preferred Stock in response to an assertion by the staff of the SEC that such
stock should be reported in the "mezzanine" section of the balance sheet as of
the end of 1998 and the quarter ended March 31, 1999 in the same manner as such
stock is recorded on the balance sheet of the Company as of June 30, 1999. In
the event that the Company is unsuccessful in persuading the staff of the SEC of
the correctness of the Company's position, then the Company may be required to
amend its Annual Report on Form 10-K for the year ended December 31, 1998 and
its Quarterly Report on Form 10-Q for the quarter ended March 31, 1999 in order
to revise the recording of its Series B Preferred Stock in a manner similar to
the manner in which such stock is recorded on the balance sheet of the Company
as filed with its Quarterly Report on Form 10-Q for the quarter ended June 30,
1999. Such Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 may
also be amended to reflect certain allocations between the first and second
quarters of 1999 as a result of any amendment to the report for the quarter
ended March 31, 1999.
3. Representations and Warranties of the Investors. Each Investor
hereby represents and warrants severally (and not jointly) that:
3.1 Authorization. The Investor has full power and authority to
enter into this Agreement, and such Agreement constitutes such Investor's valid
and legally binding obligation, enforceable in accordance with its terms, except
(i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium,
and other laws of general application affecting
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enforcement of creditors' rights generally and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief, or other
equitable remedies. All actions on the part of the Investors necessary for the
authorization, execution and delivery of this Agreement and performance of all
the obligations contemplated hereby, have been taken or will be taken prior to
the Closing.
3.2 Purchase Entirely for Own Account. This Agreement is made with
such Investor in reliance upon such Investor's representation to the Company,
which by such Investor's execution of this Agreement such Investor hereby
confirms, that the Securities to be received by such Investor and the Common
Stock issuable upon conversion and exercise thereof (the "Underlying
Securities") will be acquired for investment for such Investor's own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof except in accordance with the Act, and that such Investor has
no present intention of selling, granting any participation in, or otherwise
distributing the same, by executing this Agreement, such Investor further
represents that such Investor does not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to any of the Securities or
Underlying Securities.
3.3 Disclosure of Information. Such Investor acknowledges receipt
of the reports referred to in Sections 2.9 of this Agreement. Such Investor
believes it has received all the information it considers necessary or
appropriate for deciding whether to purchase the Securities. Such Investor
further represents that it has had an opportunity to ask questions and receive
answers from the Company regarding the terms and conditions of the offering of
the Securities and the business, properties, prospects and financial condition
of the Company. The foregoing, however, does not limit or modify the
representations and warranties of the Company in Section 2 of this Agreement or
the right of such Investor to rely thereon.
3.4 Investment Experience. Such Investor is an investor in
securities of companies in the development stage and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment, and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Securities.
Investor also represents it has not been organized for the purpose of acquiring
the Securities.
3.5 Accredited Investor. Such Investor is an "accredited investor"
within the meaning of SEC Rule 501 of Regulation D, as presently in effect.
3.6 Restricted Securities. Such Investor understands that the
Securities and Underlying Securities it is purchasing are characterized as
"restricted securities" under the federal securities laws inasmuch as they are
being acquired from the Company in a transaction not involving a public offering
and that under such laws and applicable regulations such securities may be
resold without registration under the Act only in certain limited circumstances.
In this connection, such Investor represents that it is familiar with SEC Rule
144, as presently in effect, and understands the resale limitations imposed
thereby and by the Act.
3.7 Further Limitations on Disposition. Without in any way
limiting the representations set forth above, such Investor further agrees not
to make any disposition of all or
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any portion of the Securities unless and until the transferee has agreed in
writing for the benefit of the Company to be bound by this Section 3 provided
and to the extent this Section is then applicable; and:
(a) There is then in effect a Registration Statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(b) (i) Such Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a reasonably
detailed statement of the circumstances surrounding the proposed disposition,
and (ii) if reasonably requested by the Company, such Investor shall have
furnished the Company with an opinion of counsel, reasonably satisfactory to the
Company that such disposition will not require registration of such shares under
the Act; provided that the Company will not require opinions of counsel for
transactions made pursuant to Rule 144.
3.8 Legends. It is understood that the certificates evidencing the
Securities and Underlying Securities may bear legends to the following effect:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO THE SECURITIES UNDER SUCH ACT AND SUCH STATE SECURITIES
LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO
RULE 144 OF SUCH ACT.
4. Placement Agent. The Company has authorized Pennsylvania
Merchant Group (the "Placement Agent") to act as Placement Agent with regard to
the offer and sale to certain Investors of the Securities, and the Placement
Agent represents and agrees with the Company as follows:
4.1 Sales to Accredited Investors. The Placement Agent has and
will only make offers and sales of the Securities to Investors or potential
Investors it reasonably believes to be "accredited investors" as that term is
defined in Section 3.5 hereof.
4.2 Regulation D Compliance. Offers and sales of the Securities
have and will be made in compliance with Regulation D under the Act, to the
extent applicable to the Placement Agent, and the Placement Agent has not and
shall not offer to sell the Securities by any form of general solicitation or
general advertising that is prohibited by Rule 502(c) promulgated under the Act.
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4.3 Compliance Generally. The Placement Agent has and will observe
all securities laws and regulations applicable to it in any jurisdiction in
which it has or may offer, sell or deliver the Securities and it will not,
directly or indirectly, offer, sell or deliver the Securities or distribute or
publish any prospectus, circular, advertisement or other offering material in
relation to the Securities in or from any state in the United States or country
or jurisdiction except under circumstances that will result in compliance with
any applicable laws and regulations.
4.4 Sales Commissions. In consideration of the Placement Agent's
services hereunder, the Company shall pay Placement Agent in cash on the Closing
Date a commission of seven percent (7%) of the total proceeds to the Company
from the sale of the Securities.
5. State Securities Laws. The Company will provide applicable notices
and legends as may be required by applicable state securities laws.
6. Covenants of the Company.
6.1 Delivery of Financial Statements. The Company shall deliver to
each Investor:
(a) as soon as practicable, but in any event within one
hundred and twenty (120) days after the end of each fiscal year of the Company,
financial statements audited and certified by independent public accountants of
nationally recognized standing selected by the Company.
(b) as soon as practicable, but in any event within sixty (60)
days after the end of each of the first three (3) quarters of each fiscal year
of the Company, unaudited financial statements for such fiscal quarter.
6.2 Indebtedness. Without the written consent of the Investors
holding a majority of the Notes, the Company shall not incur aggregate
indebtedness in excess of $1,000,000.
6.3 Compensation. The Company shall not use the proceeds received
from the sale of the Securities to pay any management fees or bonuses to any
executive employee of the Company without the written consent of the Investors
holding a majority of the Notes.
6.4 Dividends. Without the written consent of the Investors
holding a majority of the Notes, the Company shall not declare, set aside, or
pay any cash or other dividend or make any cash or other distribution with
respect to its Common Stock.
6.5 Preferred Stockholder Commitment. The Company has received the
commitment of holders of Series B Preferred Stock to grant the Company 90 days
from September 1, 1999 to either:
(a) Redeem all Series B Preferred Stock for face amount plus
accrued 6% premium; or
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(b) Convert all Series B Preferred Stock into Common Stock on
the same terms as the sale of Common Stock in a private placement resulting in
gross proceeds of at least $4 million (less any part of the aggregate principal
amount of the Notes not required to be repaid out of such proceeds) which closes
during such 90-day period.
This commitment is contingent upon the purchase of Securities
resulting in net proceeds to the Company of at least $1,000,000.
7. Miscellaneous.
7.1 Survival of Warranties. The warranties, representations and
covenants of the Company, the Investors and the Placement Agent contained in or
made pursuant to this Agreement shall survive the execution and delivery of this
Agreement and the Closing and shall in no way be affected by any investigation
of the subject matter thereof made by or on behalf of the Investors.
7.2 Successors and Assigns. Except as otherwise provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any Securities). Nothing in this Agreement express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
7.3 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Connecticut without giving effect to
conflict of law principles. The parties irrevocably consent to the exclusive
jurisdiction of the Superior Court of the State of Connecticut at Hartford,
Connecticut or the United States District Court for the District of Connecticut.
7.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one counterpart hereof.
7.5 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.6 Notices. Unless otherwise provided, all notices, consents or
other communications required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given (i) when
delivered personally, (ii) three business days after being mailed by first class
mail, postage prepaid, or (iii) one business day after being sent by a reputable
overnight delivery service, postage or delivery charges prepaid, to the parties
at their respective addresses stated on the signature page of this Agreement.
Notices may also be given by prepaid telegram or facsimile and shall be
effective on the date transmitted if confirmed within 24 hours thereafter by a
signed original sent in the manner provided in the preceding
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sentence. Any party may change its address for notice and the address to which
copies must be sent by giving notice of the new addresses to the other parties
in accordance with this Section, except that any such change of address notice
shall not be effective unless and until received.
7.7 Finder's Fee. Except the fees to be paid to the Placement
Agent under Section 4 of this Agreement, each party represents that it neither
is nor will be obligated for any finders' fee or commission in connection with
this transaction. The Company agrees to indemnify and hold harmless each
Investor from any liability for any finder's fee, commission or compensation in
the nature of a finders' fee (and the costs and expenses of defending against
such liability or asserted liability) incurred by the Company or for which the
Company or any of its officers, employees or representatives is responsible.
7.8 Expenses. Irrespective of whether a Closing is effected, each
party shall pay all costs and expenses that it incurs with respect to the
negotiation, execution, delivery and performance of this Agreement. If any
action at law or in equity is necessary to enforce or interpret the terms of
this Agreement, the prevailing party shall be entitled to reasonable attorney's
fees, costs and necessary disbursements in addition to any other relief to which
such party may be entitled.
7.9 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Majority
Investors and, as to any modification of Sections 4.4 or 7.7, the Placement
Agent. Any amendment or waiver effected in accordance with this paragraph shall
be binding upon each holder of any securities purchased under this Agreement at
the time outstanding (including securities into which such securities are
convertible), each future holder of all such securities, and the Company.
7.10 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
7.11 Entire Agreement. This Agreement and the documents referred
to herein constitute the entire agreement with respect to the subject matter
hereof among the parties, and no party shall be liable or bound to any other
party in any manner by any warranties, representations, or covenants except as
specifically set forth herein or therein.
7.12 Headings. The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed a part
of this Agreement.
7.13 Interpretation. The parties acknowledge that each has been
represented by counsel in connection with this Agreement, and that the
provisions of this Agreement shall be interpreted in a reasonable manner to
effect the intent of the parties, without regard to which party or party's
counsel drafted this Agreement.
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ACCENT COLOR SCIENCES, INC.
SERIES A CONVERTIBLE SUBORDINATED NOTES
BRIDGE LOAN
SIGNATURE PAGE
Please complete two copies of the Signature Page and return both copies to:
Pennsylvania Merchant Group, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇-▇▇▇▇, Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇.
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Purchasor's Name-Please Print Nominee Name (if appropriate)
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Social Security/Tax I.D. Number Telephone Number
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Fax Number
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Address City, State and Zip Code
_____/s/_________________________ ____________________________________
Signature Date
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PRINCIPAL AMOUNT TO BE PURCHASED $_______________
FUNDS SHOULD BE WIRED TO: SUMMIT BANK/TRUST, Attention: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Hackensack, NJ ABA #▇▇▇▇▇▇▇▇▇ GL A/C 477-02. For credit to the Account of Accent
Color Sciences, Inc. Trust Account #2970056498.
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AGREED TO AND ACCEPTED:
PENNSYLVANIA MERCHANT GROUP
By: /s/ Date:
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▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President - Administration
ACCENT COLOR SCIENCES, INC.
By:/s/ Date:
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Schedule A
Investors:
Original Principal
Name/Address Amount of Notes Number of Shares Warrants
Orbis Pension Trustees Limited $550,000.00 ---- 550,000 shares
The PMG Eagle Fund ---- 1,100,000 550,000 shares