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EXHIBIT 10.3
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
BY AND AMONG
GEM GLOBAL YIELD FUND LIMITED
(THE "PURCHASER")
AND
A SURE ECOMMERCE, INC.
(THE "COMPANY")
DATED AS OF JULY 13, 2000
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TABLE OF CONTENTS
Page
Article I Certain Definitions..................................... 1
Article II Purchase of Preferred Shares and Warrants............... 5
Article III Representations and Warranties.......................... 8
Article IV Other Agreements of the Parties.........................12
Article V Assignment of Rights and Assumption of Obligations......21
Article VI Termination.............................................21
Article VII Legal Fees and Default Interest Rate....................22
Article VIII Miscellaneous...........................................22
Exhibit A Form of Convertible Preferred Share
Exhibit B Form of Warrant
Exhibit C Form of Registration Rights Agreement
Exhibit D Conversion Procedures
Exhibit E Form of Escrow Agreement
Exhibit F Form of Power of Attorney
Exhibit G Form of Legal Opinion
Exhibit H Form of Termination Warrant
Schedule 1 List of Purchasers
Schedule 3.1(a) Subsidiaries
Schedule 3.1(c) Capitalization
Schedule 3.1(e) Conflicts
Schedule 3.1(f) Required Consents and Approvals
Schedule 3.1(g) Litigation
Schedule 3.1(h) No Defaults of Violations
Schedule 6.1 Form 8-K Disclosure Obligations
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SERIES A PREFERRED STOCK PURCHASE AGREEMENT
THIS AGREEMENT, dated as of July 13, 2000 (this "Agreement"), is by and
among A Sure eCommerce, Inc., a Nevada corporation, with its executive offices
at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇ ▇▇▇ ▇▇▇ (the
"Company"), and the purchasers listed on SCHEDULE 1 hereof (each individually,
the "Purchaser" and collectively, the "Purchasers").
WHEREAS, the Company desires to issue and sell to the Purchasers and
the Purchasers desire to acquire the Company's Series A Preferred Stock (the
"Preferred Shares").
IN CONSIDERATION of the mutual covenants, promises and agreements set
forth herein, and for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. Certain Definitions. As used in this Agreement, and unless
the context requires a different meaning, the following terms have the meanings
indicated:
"Affiliate" means, with respect to any Person, any Person
that, directly or indirectly, controls, is controlled by or is under common
control with such Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with") shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities by contract or
otherwise.
"Agreement" shall mean this Convertible Preferred Share
Purchase Agreement and the Exhibits and Schedules annexed hereto.
"Business Day" means any day except Saturday, Sunday and any
day which is a legal holiday or a day on which banking institutions in the State
of New York are authorized or required by law or other government actions to
close, between the hours of 9:30 a.m. and 6:00 p.m. New York Time.
"Certificate of Designations" means the Certificate of
Designations of Series A Preferred Stock annexed hereto as Exhibit A.
"Closing" shall have the meaning set forth in Section 2.2(b).
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"Closing Date" shall mean the date of Closing, as set forth in
Section 2.2(b).
"Code" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations thereunder as in effect on the date hereof.
"Commission" means the United States Securities and Exchange
Commission.
"Common Stock" means shares now or hereafter authorized of the
class of common stock, no par value, of the Company and stock of any other class
into which such shares may hereafter have been reclassified or changed.
"Company" shall have the meaning set forth in the introductory
paragraph.
"Disclosure Documents" means the disclosure package consisting
of the Company's Business Plan 2000, audited balance sheet as of August 31, 1999
and the related statements of income, cash flows and stockholders' equity for
the period ended August 31, 1999, and the unaudited balance sheet as of February
29, 2000 and the related statements of income, cash flows and stockholders'
equity for the six months ended February 29, 2000, and the Merger Agreement, all
of which have been delivered to the Purchasers in connection with the offering
by the Company of the Preferred Shares and the Schedules to this Agreement
furnished by or on behalf of the Company pursuant to Section 3.1.
"Effective Date" shall have the meaning set forth in Section
2.2(b).
"Escrow Agent" means ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP, ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇; Tel: ▇▇▇-▇▇▇-▇▇▇▇; Fax:
▇▇▇-▇▇▇-▇▇▇▇.
"Event of Default" shall have the meaning set forth in the
Preferred Shares.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"GEM" means Global Emerging Markets, Ltd. with its registered
address at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇; Phone: ▇▇▇-▇▇▇-▇▇▇▇;
Fax: ▇▇▇-▇▇▇-▇▇▇▇.
"▇▇▇▇" means GEM Advisors, Inc., with its registered address
at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇; Phone: ▇▇▇-▇▇▇-▇▇▇▇; Fax:
▇▇▇-▇▇▇-▇▇▇▇.
"HERZ" means Hertz Technology Group, Inc., a Delaware
corporation.
"Indemnified Party" shall have the meaning set forth in
Section 4.16(b).
"Indemnifying Party"shall have the meaning set forth in
Section 4.16(b).
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"KGL" shall have the meaning set forth in Section 4.28.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, encumbrance, charge or security interest of any kind in or on such asset
or the revenues or income thereon or therefrom.
"Limitations on Conversion" shall have the meaning set forth
in Section 4.19.
"Losses" shall have the meaning set forth in Section 4.16(a).
"Material" shall mean having a financial consequence in excess
of $100,000.
"Material Adverse Effect" shall have the meaning set forth in
Section 3.1(a).
"Merger Agreement" shall have the meaning set forth in Article
V.
"Minimum Stock Price" shall have the meaning set forth in
Section 5.1(h).
"Minimum Stock Price Determination Date" shall have the
meaning set forth in Section 5.1(h).
"NASD" means the National Association of Securities Dealers,
Inc.
"Nasdaq" shall mean the Nasdaq Stock Market, Inc.(R)
"OTCBB" shall mean the OTC Bulletin Board(R).
"Per Preferred Share Consideration" shall have the meaning set
forth in Section 2.2(a)
"Per Share Market Value" of the Common Stock means on any
particular date (a) the last sale price of shares of Common Stock on such date
or, if no such sale takes place on such date, the last sale price on the most
recent prior date, in each case as officially reported on the principal national
securities exchange on which the Common Stock is then listed or admitted to
trading, or (b) if the Common Stock is not then listed or admitted to trading on
any national securities exchange, the closing bid price per share as reported by
Nasdaq, or (c) if the Common Stock is not then listed or admitted to trading on
the Nasdaq, the closing bid price per share of the Common Stock on such date as
reported on the OTCBB or if there is no such price on such date, then the last
bid price on the date nearest preceding such date, or (d) if the Common Stock is
not quoted on the OTCBB, the closing bid price for a share of Common Stock on
such date in the over-the-counter market as reported by the National Quotation
Bureau Incorporated (or similar organization or agency succeeding to its
functions of reporting prices) or if there is no such price on such date, then
the last bid price on the date nearest preceding such date, or (e) if the Common
Stock is no longer publicly traded, the fair market value of a share of Common
Stock as determined by an Appraiser (as defined
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in Section 4(c)(iv) of the Preferred Share) selected in good faith by the
holders of a majority of principal amount of outstanding Preferred Shares;
provided, however, that the Company, after receipt of the determination by such
Appraiser, shall have the right to select an additional Appraiser, in which
case, the fair market value shall be equal to the average of the determinations
by each such Appraiser.
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Preferred Shares" means the Series A Preferred Stock of the
Company issued pursuant to the Certificate of Designations.
"Preferred Share Escrow Shares" shall have the meaning set
forth in Section 2.2(c).
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Purchase Price" shall have the meaning set forth in Section
2.2(a).
"Purchaser" and "Purchasers" shall have the meaning set forth
in the introductory paragraph.
"Required Approvals" shall have the meaning set forth in
Section 3.1(f).
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiaries" shall have the meaning set forth in Section
3.1(a).
"Termination Warrants" means the common stock purchase
warrants issued to the Purchasers and/or their assigns, in the form annexed
hereto as EXHIBIT H.
"Trading Day" means (a) a day on which the Common Stock is
quoted on Nasdaq, the OTCBB or the principal stock exchange on which the Common
Stock has been listed, or (b) if the Common Stock is not quoted on Nasdaq, the
OTCBB or any stock exchange, a day on which the Common Stock is quoted in the
over-the-counter market, as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its functions of
reporting prices).
"Transaction Documents" means this Agreement, the Registration
Rights Agreement annexed hereto as EXHIBIT C, the Escrow Agreement annexed
hereto as EXHIBIT E, the Power or
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Attorney annexed hereto as EXHIBIT F, and all other documents, instruments and
writings required to have been delivered by the Company at the Execution Date
pursuant to this Agreement.
"Underlying Shares" means the shares of Common Stock into
which the Preferred Shares are convertible in accordance with the terms hereof
and the Preferred Share.
"Warrant" means the common stock purchase warrant issued to
the Purchasers and/or their assigns, in the form annexed hereto as EXHIBIT B.
"Warrant Escrow Shares" shall have the meaning as set forth in
Section 2.2(c).
"Warrant Shares" means the shares of Common Stock for which
the Warrants can be exercised in accordance with the terms hereof and the
Warrant.
ARTICLE II
PURCHASE OF PREFERRED SHARES AND WARRANTS
Section 2.1. Execution of Documents; Delivery of Termination Warrants.
(a) As soon as practicable after the execution by all parties
(the "Execution Date") of the Transaction Documents and the execution and
delivery by the Company of the Termination Warrants, the Company shall, in
accordance with the Registration Rights Agreement, file a duly completed
registration statement on the appropriate form with the Commission to register
the resale of the Underlying Shares and the Warrant Shares under the Securities
Act.
(b) As consideration for entering into this Agreement, in the
event this Agreement is terminated for any reason pursuant to Section 6.1
herein, (i) the Company shall pay the Purchasers, within three (3) Business Days
of the date of termination, an aggregate of One Hundred Thousand Dollars
(US$100,000) in such allocation as set forth in SCHEDULE 1, and (ii) the
Purchasers shall retain the Termination Warrants and any and all rights and
privileges thereunder without condition or obligation to the Company.
Section 2.2. Purchase of Preferred Shares and Delivery of Warrants;
Closing.
(a) Subject to the terms and conditions set forth in this
Agreement, the Company hereby agrees to issue and sell to the Purchasers, and
the Purchasers hereby agree to purchase from the Company on the Closing Date the
amount of Preferred Shares and the number of Warrants listed opposite each of
the Purchasers' names on SCHEDULE 1. The Preferred Shares shall have the
respective rights, preferences and privileges set forth in the form of
Certificate of Designations annexed as EXHIBIT A, at a price per Preferred Share
of One Thousand Dollars (US$1,000) (the "Per Preferred Share Consideration").
The Per Preferred Share Consideration multiplied by the number of Preferred
Shares to be purchased by the Purchasers hereunder is hereinafter referred to as
the "Purchase Price". The total principal amount of Preferred Shares to be
purchased by the Purchasers
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and the total Purchase Price shall be Five Million Dollars (US$5,000,000). The
Warrants shall have the respective terms and conditions as set forth in the form
of Warrant annexed as EXHIBIT B.
(b) The closing of the purchase and sale of the Preferred
Shares and issuance of the Warrants (the "Closing") shall take place at the
offices of the Escrow Agent no later than five (5) Business Days after the
registration statement, in accordance with and subject to the Registration
Rights Agreement, the form of which is annexed as EXHIBIT C, is granted
effectiveness by the Commission, time being of the essence, unless the parties
agree in writing to extend such date. The effective date of the Registration
Statement (the "Effective Date") shall occur no later than one hundred-eighty
(180) days after the Execution Date (unless such day is not a Business Day, then
the next Business Day), unless all of the Purchasers agree in advance in writing
to extend such 180 day period and set forth the new effective date deadline. The
date of the Closing is hereinafter referred to as the "Closing Date".
(c) At the Closing, the Company shall deliver to the Escrow
Agent the following:
(i) original and duly executed Preferred Shares
registered in the names of the Purchasers in
the amounts set forth in SCHEDULE 1;
(ii) original and duly executed Warrants
registered in the names of the Purchasers in
the amounts proportionate to the principal
amount of Preferred Shares purchased by each
Purchaser as set forth in SCHEDULE 1;
(iii) The number of shares of duly issued Common
Stock of the Company equal to four (4) times
the number of shares of Common Stock
otherwise issuable as if the Preferred
Shares were converted in their entirety on
the Closing Date, in share denominations of
ten thousand (10,000) shares registered in
the name of each of the Purchasers in the
amounts proportionate to the principal
amount of Preferred Shares purchased by each
Purchaser set forth in SCHEDULE 1 for use in
the conversion of the Preferred Shares (the
"Preferred Share Escrow Shares");
(iv) The number of shares of duly issued Common
Stock of the Company equal to four (4) times
the number of shares of Common Stock
otherwise issuable as if the Warrants were
exercised in their entirety on the Closing
Date in share denominations of ten thousand
(10,000) shares registered in the name of
each of the Purchasers in the amounts
proportionate to the principal amount of
Preferred Shares purchased by each Purchaser
set forth in SCHEDULE 1 for use in the
exercise of the Warrants (the "Warrant
Escrow Shares");
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(v) the legal opinion in substantially the form
annexed hereto as EXHIBIT G, addressed to
the Purchasers and dated the Closing Date
from the - Counsel for the Company;
(vi) a certificate, dated the Closing Date,
signed by the Secretary or an Assistant
Secretary of the Company and certifying (i)
that attached thereto is a true, correct and
complete copy of (A) the Company's Articles
of Incorporation, as amended to the date
thereof, (B) the Company's By-Laws, as
amended to the date thereof, (C) resolutions
duly adopted by the Board of Directors of
the Company authorizing the execution and
delivery of this Agreement, the issuance and
sale of the Preferred Shares, Warrants and
the Underlying Shares and the appointment of
the Attorney-in-Fact pursuant to Section
4.15 attached hereto as EXHIBIT F, and (D) a
certificate of good standing from the
Secretary of State of Nevada and (ii) the
incumbency of officers executing this
Agreement; and
(vii) a certificate, dated the Closing Date,
signed by the President, certifying that the
Company's representations and warranties in
Article III are true and correct on the
Closing Date.
(viii) all other documents, instruments and
writings required to have been delivered or
necessary at or prior to Closing by the
Company pursuant to this Agreement.
(d) Upon receipt by the Escrow Agent of those items set forth
above, the Purchasers shall deliver the following to the Escrow Agent:
(i) the Purchase Price in United States dollars
in immediately available funds by wire
transfer to an account designated in writing
by the Escrow Agent prior to the Closing;
(ii) the Termination Warrants; and
(iii) all documents, instruments, and writings
required to have been delivered or necessary
at or prior to Closing by the Purchasers
pursuant to this Agreement.
(e) Upon receipt of all of the items set forth in
subparagraphs (c) and (d) of this Section, the Escrow Agent shall deliver the
Purchase Price, less the fees set forth in Section 4.28 to the Company in
accordance with its written instructions, and shall deliver the items set forth
in subparagraph (c), with the exception of the Preferred Share Escrow Shares and
Warrant Escrow
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Shares which shall be held in accordance with the terms of this Agreement, the
Preferred Share and the Escrow Agreement, to the Purchasers.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Purchasers as follows, all of which
survive Closing:
(a) Organization and Qualification. The Company is a
corporation, duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, with the requisite corporate
power and authority to own and use its properties and assets and to carry on its
business as currently conducted. The Company has no subsidiaries other than as
set forth in SCHEDULE 3.1(a) (collectively, the "Subsidiaries"). Each of the
Subsidiaries is a corporation, duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, with the full
corporate power and authority to own and use its properties and assets and to
carry on its business as currently conducted. Each of the Company and the
Subsidiaries is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the case may be,
could not reasonably be expected to have, individually or in the aggregate, a
material adverse effect on (a) the results of operations, assets, prospects, or
financial condition of the Company and the Subsidiaries, or (b) the Purchasers'
rights under this Agreement, the Escrow Agreement, the Preferred Shares and the
Warrants (a "Material Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated hereby and otherwise to carry out its obligations hereunder and
thereunder. The execution and delivery of this Agreement by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary action on the part of the Company. This
Agreement has been duly executed and delivered by the Company and constitutes
the valid and binding obligation of the Company enforceable against the Company
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable principles
of general application.
(c) Capitalization. The authorized, issued and outstanding
capital stock of the Company and each of the Subsidiaries is set forth in
SCHEDULE 3.1(c). No shares of Common Stock are entitled to preemptive or similar
rights. Except as specifically set forth in SCHEDULE 3.1(c), there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or, except as a result of
the purchase and sale of the Preferred
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Shares hereunder, securities, rights or obligations convertible into or
exchangeable for, or giving any person any right to subscribe for or acquire any
shares of Common Stock, or contracts, commitments, understandings, or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. Neither the Company nor any Subsidiary
is in violation of any of the provisions of its respective articles of
incorporation, bylaws or other charter documents or resolutions.
(d) Issuance of Preferred Shares and Warrants. The Preferred
Shares and Warrants have been duly and validly authorized for issuance, offer
and sale pursuant to this Agreement and, when issued and delivered as provided
hereunder against payment in accordance with the terms hereof, shall be valid
and binding obligations of the Company enforceable in accordance with their
terms. The Company has and at all times while the Preferred Shares and Warrants
are outstanding has and will continue to maintain an adequate reserve of shares
of Common Stock to enable it to perform its obligations under this Agreement,
the Preferred Shares and Warrants. When issued in accordance with the terms
hereof and the Preferred Shares and the Warrants, the Underlying Shares will be
duly authorized, validly issued, fully paid and nonassessable. There are not
outstanding any equity or equity equivalent security substantially similar to
the Preferred Shares, including any security with a floating conversion price
substantially similar to the Preferred Shares.
(e) No Conflicts. Except as set forth in SCHEDULE 3.1(e), the
execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
do not and will not (i) conflict with or violate any provision of its or its
Subsidiaries' articles of incorporation, resolutions or bylaws or (ii) be
subject to obtaining the consents referred to in Section 3.1(f), conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company is a party, or (iii) result in a violation of
any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company is
subject (including Federal and State securities laws and regulations), or by
which any property or asset of the Company is bound or affected, except in the
case of each of clauses (ii) and (iii), such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect. The business
of the Company is not being conducted in violation of any law, ordinance or
regulation of any governmental authority.
(f) Consents and Approvals. Except as set forth in SCHEDULE
3.1(f), neither the Company nor any Subsidiary is required to obtain any
consent, permit, waiver, authorization or order of, or make any filing or
registration with, any court or other federal, State, local or other govern
mental authority or other Person in connection with the execution, delivery and
performance by the Company of this Agreement, other than the applicable filings
under State and federal securities laws (collectively, the "Required
Approvals").
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(g) Litigation; Proceedings. Except as set forth in SCHEDULE
3.1(g), there is no action, suit, notice of violation, proceeding, inquiry or
investigation pending or threatened against or affecting the Company or any of
its Subsidiaries or any of their respective properties before or by any court,
governmental or administrative agency or regulatory authority (Federal, State,
county, local or foreign) which (i) relates to or challenges the legality,
validity or timely enforceability of this Agreement or the Preferred Shares and
Warrants, (ii) could, individually or in the aggregate, have a Material Adverse
Effect or (iii) could, individually or in the aggregate, materially impair the
ability of the Company to perform fully on a timely basis its obligations under
this Agreement.
(h) No Default or Violation. Except as set forth in SCHEDULE
3.1(h), either the Company nor any Subsidiary (i) is in default under or in
violation of any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound, except such conflicts or defaults as do not have a Material Adverse
Effect, (ii) is in violation of any order of any court, arbitrator or
governmental body, except for such violations as do not have a Material Adverse
Effect, or (iii) is in violation of any statute, rule or regulation of any
governmental authority which could (individually or in the aggregate) (x)
adversely affect the legality, validity or enforceability of this Agreement, (y)
have a Material Adverse Effect or (z) adversely impair the Company's ability or
obligation to perform fully on a timely basis its obligations under this
Agreement.
(i) Certain Fees. No fees or commission will be payable by the
Company to any investment banker, broker, placement agent or bank with respect
to the consummation of the transactions contemplated hereby except as provided
in Section 4.28.
(j) Disclosure Documents. The Disclosure Documents are
accurate and do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
Each of the Purchasers acknowledge and agree that the Company makes no
representation or warranty with respect to the transactions contemplated hereby
other than those specifically set forth in Section 3.1 herein.
Section 3.2. Representations and Warranties of the Purchasers. The
Purchasers hereby represent and warrant to the Company as follows:
(a) Organization and Qualification. Each of the Purchasers is
a corporation duly incorporated and validly existing and in good standing under
the laws of the jurisdiction of its incorporation.
(b) Authorization; Enforcement. Each of the Purchasers has the
requisite corporate power and authority to enter into and to consummate the
transactions contemplated hereby and otherwise to carry out its obligations
hereunder and thereunder. The execution and delivery of
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this Agreement and the purchase of the Preferred Shares and the Warrants by the
Purchasers hereunder have been duly authorized by all necessary action on the
part of each of the Purchasers. This Agreement has been duly executed and
delivered by each of the Purchasers or on its behalf and constitutes the valid
and legally binding obligation of the Purchasers, enforceable against each of
the Purchasers in accordance with its terms; except as such enforceability may
be limited by applicable bankruptcy, insolvency, liquidation, fraudulent
transfer, reorganization, moratorium and remedies or by other equitable
principles of general application or similar laws relating to or affecting
generally the enforcement of creditors' rights.
(c) Investment Intent. Each Purchaser is acquiring the
Preferred Shares, Warrants, Underlying Shares and the Warrant Shares for its own
account for investment purposes only and not with a view to or for distributing
or reselling such Preferred Shares, Warrants, Underlying Shares or Warrant
Shares or any part thereof or interest therein, without prejudice, however, to
the Purchasers' right, subject to the provisions of this Agreement, at all times
to sell or otherwise dispose of all or any part of such Preferred Shares,
Warrants, Underlying Shares or Warrant Shares in compliance with applicable
federal and State securities laws.
(d) Purchasers' Status. At the time each of the Purchasers was
offered the Preferred Shares and/or the Warrants, it was, and at the date
hereof, it is, and at the Closing Date, it will be, an "accredited investor" as
defined in Rule 501(a) under the Securities Act.
(e) Experience of Purchasers. Each of the Purchasers, either
alone or together with its representatives, has such knowledge, sophistication
and experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in the Preferred
Shares, and has so evaluated the merits and risks of such investment.
(f) Ability of Purchaser to Bear Risk of Investment. Each of
the Purchasers is able to bear the economic risk of an investment in the
Preferred Shares and, at the present time, is able to afford a complete loss of
such investment.
(g) Prohibited Transactions. The Preferred Shares to be
purchased by each of the Purchasers are not being acquired, directly or
indirectly, with the assets of any "employee benefit plan", within the meaning
of Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended.
(h) Access to Information. Each of the Purchasers acknowledges
receipt of the Disclosure Documents and further acknowledges that it has been
afforded (i) the opportunity to ask such questions as it has deemed necessary
of, and to receive answers from, representatives of the Company concerning the
terms and conditions of the offering of the Preferred Shares and the Warrants
and the merits and risks of investing in the Preferred Shares and the Warrants;
(ii) access to information about the Company and the Company's financial
condition, results of operations, business, properties, management and prospects
sufficient to enable it to evaluate its investment in the Preferred Shares and
the Warrants; and (iii) the opportunity to obtain such additional information
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which the Company possesses or can acquire which is necessary to make an
informed investment decision with respect to the Preferred Shares and the
Warrants.
(i) Reliance. Each of the Purchasers understands and
acknowledges that (i) the Preferred Shares and the Warrants are being offered
and sold, and the Underlying Shares and Warrant Shares are being offered, to it
without registration under the Securities Act in a transaction that is exempt
from the registration provisions of the Securities Act and (ii) the availability
of such exemption, depends in part on, and that the Company will rely upon the
accuracy and truthfulness of, the foregoing representations and each of the
Purchasers hereby consents to such reliance.
(j) Corporate Domicile. Each of the Purchasers is a foreign
corporation and has its residence or corporate domicile outside the United
States.
(k) Current Funds. Purchasers have, and will have at Closing,
readily available the current funds required to purchase the Preferred Shares.
(l) Acknowledgment of Counsel to the Company. Purchasers
acknowledge that KGL, for purposes of this transaction is acting as counsel to
the Company, notwithstanding KGL will act as Escrow Agent pursuant to this
Agreement and members of KGL are to be granted powers of attorney pursuant to
this Agreement.
The Company acknowledges and agrees that each of the Purchasers makes no
representation or warranty with respect to the transactions contemplated hereby
other than those specifically set forth in Section 3.2 herein.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
Section 4.1. Manner of Offering. The Preferred Shares and Warrants are
being issued pursuant to Rule 506 of Regulation D of the Securities Act. The
Preferred Shares, Warrants, Underlying Shares and the Warrant Shares will bear
restrictions on transfer, and will carry a restrictive legend with respect to
the exemption from registration under the Securities Act. The transfer and
resale of the Preferred Shares, the Warrants and the Underlying Shares may be
made only pursuant to registration under the Securities Act or an exemption from
such registration.
Section 4.2. Furnishing of Information. As long as each of the
Purchasers owns Preferred Shares, the Warrants, Underlying Shares or the Warrant
Shares, the Company will furnish to it, promptly after they have been prepared
all annual, quarterly reports and other reports and filings required by Section
13(a) or 15(d) of the Exchange Act.
Section 4.3. Notice of Certain Events. The Company shall on a
continuing basis (i) advise each of the Purchasers promptly after obtaining
knowledge thereof, and, if requested by any of the Purchasers, confirm such
advice in writing, of (A) the issuance by any State securities commission
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of any stop order suspending the qualification or exemption from qualification
of the Preferred Shares, the Warrants, the Underlying Shares or the Warrant
Shares for offering or sale in any jurisdiction, or the initiation of any
proceeding for such purpose by any State securities commission or other
regulatory authority, or (B) any event that makes any statement of a material
fact made in the Disclosure Documents untrue or that requires the making of any
additions to or changes in the Disclosure Documents in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading, (ii) use its best efforts to prevent the issuance of any stop
order or order suspending the qualification or exemption from qualification of
the Preferred Shares, the Warrants, the Underlying Shares or the Warrant Shares
under any State securities or Blue Sky laws, and (iii) if at any time any State
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the Preferred
Shares, the Warrants or the Common Stock under any such laws, use its best
efforts to obtain the withdrawal or lifting of such order at the earliest
possible time.
Section 4.4. Copies and Use of Disclosure Documents. The Company shall
furnish each of the Purchasers, without charge, as many copies of the Disclosure
Documents, and any amendments or supplements thereto, as each of the Purchasers
may reasonably request. The Company consents to the use of the Disclosure
Documents, and any amendments and supplements thereto, by each of the Purchasers
in connection with resales of the Preferred Shares, the Warrants, Underlying
Shares or the Warrant Shares other than pursuant to an effective registration
statement.
Section 4.5. Modification to Disclosure Documents. If any event shall
occur as a result of which, in the reasonable judgment of the Company or any of
the Purchasers, it becomes necessary or advisable to amend or supplement the
Disclosure Documents in order to make the statements therein, in the light of
the circumstances at the time the Disclosure Documents were delivered to any of
the Purchasers, not misleading, or if it is necessary to amend or supplement the
Disclosure Documents to comply with applicable law, the Company shall promptly
prepare an appropriate amendment or supplement to the Disclosure Documents (in
form and substance reasonably satisfactory to both the Purchasers and Company)
so that (i) as so amended or supplemented the Disclosure Documents will not
include an untrue statement of material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances existing at the time it is delivered to any of the Purchasers, not
misleading and (ii) the Disclosure Documents will comply with applicable law.
Section 4.6. [Reserved].
Section 4.7. Integration. The Company shall not and shall use its best
efforts to ensure that no Affiliate shall sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in Section
2 of the Securities Act) that would be integrated with the offer or sale of the
Preferred Shares, the Warrants, Underlying Shares, or the Warrant Shares in a
manner that would require the registration under the Securities Act of the sale
of the Preferred Shares and the Warrants to the Purchasers.
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Section 4.8. Furnishing of Rule 144A Materials. The Company shall, for
so long as any of the Preferred Shares, the Warrants, Underlying Shares or
Warrant Shares remain outstanding and during any period in which it is not
subject to Section 13 or 15(d) of the Exchange Act, make available to any
registered holder of Preferred Shares, the Warrants, Underlying Shares or
Warrant Shares in connection with any sale thereof and any prospective purchaser
of such Preferred Shares, Warrants, Underlying Shares or Warrant Shares from
such Person, the following information in accordance with Rule 144A(d)(4) under
the Securities Act: a brief statement of the nature of the business of the
Company and the products and services it offers and the Company's most recent
audited balance sheet and profit and loss and retained earnings statements, and
similar audited financial statements for such part of the two preceding fiscal
years as the Company has been in operation.
Section 4.9. Solicitation Materials. The Company shall not (i)
distribute any offering materials in connection with the offering and sale of
the Preferred Shares, the Warrants, Underlying Shares or Warrant Shares other
than the Disclosure Documents and any amendments and supplements thereto
prepared in compliance herewith or (ii) solicit any offer to buy or sell the
Preferred Shares, the Warrants, Underlying Shares or Warrant Shares by means of
any form of general solicitation or advertising.
Section 4.10 Subsequent Financial Statements. The Company shall furnish
to the Purchasers, promptly after they are filed with the Commission, a copy of
all financial statements for any period subsequent to the period covered by the
financial statements included in the Disclosure Documents until the earlier of
the full conversion of the Preferred Shares or the Maturity Date of the
Preferred Shares.
Section 4.11. Prohibition on Certain Actions. From the date hereof
through the Closing Date, the Company shall not and shall cause the Subsidiaries
not to, without the prior written consent of the Purchasers, (i) amend its
Articles of Incorporation, bylaws or other charter documents so as to adversely
affect any rights of the Purchasers; (ii) split, combine or reclassify its
outstanding capital stock; (iii) declare, authorize, set aside or pay any
dividend or other distribution with respect to the Common Stock; (iv) redeem,
repurchase or offer to repurchase or otherwise acquire shares of its Common
Stock; or (v) enter into any agreement with respect to any of the foregoing.
Section 4.12. Listing of Common Stock. The Company shall use its best
efforts to maintain the quote for its Common Stock on the national securities
exchange or market on which the Common Stock is listed during the period that
the Preferred Shares may be converted hereunder by the Purchasers or the
Warrants may be exercised, and shall provide to the Purchasers evidence of such
listing.
Section 4.13. Escrow. The Company and the Purchasers agree to enter
into, simultaneous with the execution of this Agreement, the escrow agreement
attached hereto and made part hereof as EXHIBIT E (the "Escrow Agreement").
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Section 4.14. Conversion and Exercise Procedures and Maintenance of
Escrowed Shares for Conversions and Exercises. EXHIBIT D attached hereto and
made a part hereof sets forth the procedures with respect to the conversion of
the Preferred Shares and the exercise of the Warrants, including the forms of
Notice of Conversion and Notice of Exercise to be provided upon conversion or
exercise, instructions as to the procedures for conversion or exercise, the form
of legal opinion, if necessary, that shall be rendered to the Company and such
other information and instructions as may be reasonably necessary to enable any
of the Purchasers to exercise its right of conversion or exercise smoothly and
expeditiously. The Company agrees that, at any time the conversion price of the
Preferred Shares is such that the number of Preferred Share Escrow Shares is
less than 200% of the number of shares of Common Stock that would be needed to
satisfy full conversion of all of the Preferred Shares given the then current
conversion price (the "Full Conversion Shares"), upon ten (10) Business Days
written notice of such circumstance to the Company by the Purchasers and/or
Escrow Agent, it will issue additional share certificates in the names of each
of the Purchasers in denominations of 10,000 shares, and deliver same to the
Escrow Agent, such that the new number of Preferred Share Escrow Shares is equal
to 200% of the Full Conversion Shares.
Section 4.15 Attorney-in-Fact. To effectuate the terms and provisions
of this Agreement, the Escrow Agreement, the Preferred Share and the Warrants,
the Company hereby agrees to give a power of attorney as is evidenced by EXHIBIT
F attached hereto. All acts done under such power of attorney are hereby
ratified and approved and neither the Attorney-in-Fact nor any designee or agent
thereof shall be liable for any acts of commission or omission, for any error of
judgment or for any mistake of fact or law, as long as the Attorney-in-Fact is
operating within the scope of the power of attorney and this Agreement and its
exhibits. The power of attorney being coupled with an interest shall be
irrevocable while any amount of the Preferred Share remains unpaid, any amount
of the Warrants remain unexercised or any portion of this Agreement or the
Escrow Agreement remains unsatisfied. In addition, the Company shall give the
Attorney-in-Fact a corporate resolution executed by the Board of Directors of
the Company which authorizes future issuances of the Underlying Shares for the
Preferred Shares, and which resolution states that it is irrevocable while any
of the Preferred Shares remain outstanding, any amount of the Warrants remain
unexercised or any portion of this Agreement or the Escrow Agreement remains
unsatisfied.
Section 4.16 Indemnification.
(a) Indemnification.
(i) The Company shall, notwithstanding
termination of this Agreement and without limitation as to time, indemnify and
hold harmless GEM, ▇▇▇▇ and each Purchaser, their respective officers,
directors, agents and employees of each of them, each Person who controls GEM,
▇▇▇▇ or each such Purchaser (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, costs of preparation and
attorneys' fees) and expenses (collectively, "Losses"), as incurred, arising out
of or relating to a
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breach or breaches of any representation, warrant, covenant or agreement by the
Company under this Agreement, the other Transaction Documents, the Preferred
Shares or the Warrants.
(ii) Each Purchaser, severally and not jointly,
shall notwithstanding termination of this Agreement and without limitation as to
time, indemnify and hold harmless the Company, its officers, directors, agents
and employees, each Person who controls the Company (within the meaning of
Section 15 of the Securities Act of Section 20 of the Exchange Act) and the
officers, directors, agents and employees of each such controlling Person, to
the fullest extent permitted by application law, from and against any and all
Losses, as incurred, arising out of, or relating to, a breach or breaches of any
representation, warranty, covenant or agreement by such Purchaser under this
Agreement, the other Transaction Documents, the Certificate of Designations or
the Warrants.
(b) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "Indemnified Party"), such Indemnified Party promptly shall notify the
Person from whom indemnity is sought (the "Indemnifying Party") in writing, and
the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed to
pay such fees and expenses; or (2) the Indemnifying Party shall have failed
promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3)
the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party (in which case, if such Indemnified Party notifies
the Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense of the claim against the Indemnified Party but will
retain the right to control the overall Proceedings out of which the claim arose
and such counsel employed by the Indemnified Party shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of
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which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party to which the
Indemnified Party is entitled hereunder (including reasonable fees and expenses
to the extent incurred in connection with investigating or preparing to defend
such Proceeding in a manner not inconsistent with this Section) shall be paid to
the Indemnified Party, as incurred, within ten (10) Business Days of written
notice thereof to the Indemnifying Party.
No right of indemnification under this Section 4.16 shall be
available as to a particular Indemnified Party if there is a non-appealable
final judicial determination that such Losses arise solely out of the negligence
or bad faith of such Indemnified Party in performing the obligations of such
Indemnified Party under this Agreement or a breach by such Indemnified Party of
its obligations under this Agreement.
(c) Contribution. If a claim for indemnification under Section
4.16(a) is unavailable to an Indemnified Party or is insufficient to hold such
Indemnified Party harmless for any Losses in respect of which this Section 4.16
would apply by its terms (other than by reason of exceptions provided in this
Section 4.16(c)), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses in such proportion as is
appropriate to reflect the relative benefits received by the Indemnifying Party
on the one hand and the Indemnified Party on the other and the relative fault of
the Indemnifying Party and Indemnified Party in connection with the actions or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and Indemnified
Party shall be determined by reference to, among other things, whether there was
a judicial determination that such Losses arise in part out of the negligence or
bad faith of the Indemnified Party in performing the obligations of such
Indemnified Party under this Agreement or the Indemnified Party's breach of its
obligations under this Agreement. The amount paid or payable by a party as a
result of any Losses shall be deemed to include any attorneys' or other fees or
expenses incurred by such party in connection with any Proceeding to the extent
such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party.
(d) Nonexclusive. The indemnity and contribution agreements
contained in this Section are in addition to any liability that the Indemnifying
Parties may have to the Indemnified Parties.
Section 4.17 Exclusivity. For a period of one (1) year from the date of
this Agreement, the Company shall not offer or issue any equity or equity
equivalent securities substantially similar to the Preferred Shares, including
any security with a floating conversion price substantially similar to the
Preferred Shares.
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Section 4.18 Blue Sky Qualification. In accordance with the
Registration Rights Agreement annexed hereto as EXHIBIT C, the Company shall
qualify the Underlying Shares and the Warrant Shares under the securities or
Blue Sky laws of such jurisdictions as any of the Purchasers may reasonably
request and shall continue such qualification at all times through the second
anniversary of the last Closing Date; provided, however, that neither the
Company nor its Subsidiaries shall be required in connection therewith to
qualify as a foreign corporation where they are not now so qualified or to take
any action that would subject the Company to general service of process in any
such jurisdiction where it is not then so subject or subject the Company to any
material tax in any such jurisdiction where it is not then so subject.
Section 4.19 Purchasers' Ownership of Common Stock. In addition to and
not in lieu of the limitations on conversion set forth in the Certificate of
Designations, the conversion and exercise rights of each of the Purchasers set
forth in the Certificate of Designations and the Warrants, as applicable, shall
be limited, solely to the extent required, from time to time, such that, unless
each of the Purchasers give written notice 75 days in advance to the Company of
their intention to exceed the Limitation on Conversions as defined herein, with
respect to all or a specified amount of the Preferred Shares and the
corresponding number of the Underlying Shares, in no instance shall the maximum
number of shares of Common Stock which the Purchasers (singularly, together with
any Persons who in the determination of such Purchasers, together with such
Purchasers, constitute a group as defined in Rule 13d-5 of the Exchange Act) may
receive in respect of any conversion of the Preferred Shares, or exercise of the
Warrants, exceed, at any one time, an amount equal to the remainder of (i) 4.99%
of the then issued and outstanding shares of Common Stock of the Company
following such conversion or exercise minus (ii) the number of shares of Common
Stock of the Company then owned by any of the Purchasers (including any shares
of Common Stock deemed beneficially owned due to ownership of the Preferred
Shares and Warrants) (the foregoing being herein referred to as the "Limitation
on Conversion"); provided, however, that if ten (10) Business Days have elapsed
since any of the Purchasers shall have declared an Event of Default (as that
term is defined in the Certificate of Designations) and the Company shall not
have cured such Event of Default, the provisions of this Section 4.19 shall be
null and void from and after such date. The Company shall, promptly upon its
receipt of a notice of conversion tendered by any of the Purchasers (or its sole
designee), as applicable, and upon its receipt of a notice of exercise under the
terms of the Warrants, notify such Purchaser by telephone and by facsimile of
the number of shares of Common Stock outstanding on such date and the number of
Underlying Shares which would be issuable to such Purchaser (or its sole
designee, as the case may be) if the conversion requested in such notice of
conversion or exercise requested in such notice of exercise were effected in
full, whereupon, notwithstanding anything to the contrary set forth in the
Certificate of Designations or the Warrants, such Purchaser may within one (1)
Business Day of its receipt of the Company notice required by this Section 4.19
by facsimile revoke such conversion or exercise to the extent (in whole or in
part) that it determines that such conversion or exercise would result in such
Purchaser owning shares of Common Stock in excess of the Limitation on
Conversion.
Section 4.20 Suspension of Trading in Common Stock. The Company shall
maintain trading in the shares of the Common Stock (and if suspended shall have
trading reinstated within ten (10)
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Trading Days) on such stock exchange or market upon which the Common Stock shall
then be listed for trading (other than as a result of the suspension of trading
in securities on such market generally or temporary suspensions pending the
release of material information).
Section 4.21 No Violation of Applicable Law. Notwithstanding any
provision of this Agreement to the contrary, if the redemption of the Preferred
Shares, the Warrants, the Underlying Shares or the Warrant Shares otherwise
required under this Agreement, the Preferred Share, the Warrant, or the
Registration Rights Agreement would be prohibited by the relevant provisions of
Nevada law, such redemption shall be effected as soon as it is permitted under
such law; provided, however, that interest payable by the Company with respect
to any such redemption shall continue to accrue in accordance with Section 4.20.
Section 4.22 Redemption Restrictions. Notwithstanding any provision of
this Agreement to the contrary, if any redemption of Preferred Shares, the
Warrants, Underlying Shares or the Warrant Shares otherwise required under this
Agreement, the Preferred Share, the Warrant, or the Registration Rights
Agreement would be prohibited in the absence of consent from any lender of the
Company or any of the Subsidiaries, or by the holders of any class of securities
of the Company, the Company shall use its best efforts to obtain such consent as
promptly as practicable after the redemption is required. Interest payable by
the Company with respect to any such redemption shall continue to accrue in
accordance with Section 4.20 until such consent is obtained. Nothing contained
in this Section 4.22 shall be construed as a waiver by any of the Purchasers of
any rights it may have by virtue of any breach of any representation or warranty
of the Company herein as to the absence of any requirement to obtain any such
consent.
Section 4.23 No Other Registration Rights. During the period commencing
the date hereof and ending on the earlier to occur of (i) the one year
anniversary of the Closing and (ii) the date the Registration Statement required
to be filed by the Company in accordance with the Registration Rights Agreement
is declared effective under the Securities Act by the Commission, the Company
may not file any registration statement that provides for the registration of
shares of Common Stock to be sold by other shareholders of the Company without
the prior written consent of the Purchasers or their assigns. Such registration
rights shall not apply to registration statements relating solely to (i)
employee benefit plans notwithstanding the inclusion of a resale prospectus for
securities received under such employee benefit plan, or (ii) business
combinations.
Section 4.24. Merger or Consolidation. Until the earlier of the full
conversion of the Preferred Shares or three (3) years from the Closing Date, the
Company and each Subsidiary will not, in a single transaction or a series of
related transactions, (i) consolidate with or merge with or into any other
Person, or (ii) permit any other Person to consolidate with or merge into it,
unless (w) either (A) the Company shall be the survivor of such merger or
consolidation or (B) the surviving Person shall expressly assume by supplemental
agreement all of the obligations of the Company under the Preferred Shares and
the Warrants and this Agreement; (x) immediately before and immediately after
giving effect to such transaction (including any indebtedness incurred or
anticipated to be incurred in connection with the transaction), no Default or
Event of Default shall
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have occurred and be continuing; (y) if the Company is not the surviving entity,
such surviving entity's common shares shall be listed on either The New York
Stock Exchange, American Stock Exchange, or Nasdaq National Market or Nasdaq
SmallCap Market and (z) the Company has delivered to the Purchasers an officers'
certificate and opinion of counsel, each stating that such consolidation, merger
or transfer complies with this Agreement, that the surviving Person agrees to be
bound thereby and that all conditions precedent in this Agreement relating to
such transactions have been satisfied.
Section 4.25 Registration of Underlying Shares and Warrant Shares.
Pursuant to the terms of the Registration Rights Agreement between the Company
and the Purchasers, the Company shall cause the Underlying Shares and Warrant
Shares to be registered under the Securities Act, and so long as any Preferred
Shares remain outstanding or any Warrants remain unexercised, the Company agrees
to keep such registration current with the Commission and with such states of
the United States as the Holders (as that term is defined in the Preferred
Share) of the Preferred Share or Warrants shall reasonably request in writing.
All costs and expenses of registration shall be borne by the Company.
Section 4.26 Liquidated Damages. The Company understands and agrees
that an Event of Default as contained in this Agreement, the Transaction
Documents and/or the Certificate of Designations will result in substantial
economic loss to the Purchasers which will be extremely difficult to calculate
with precision. Therefore, after the Closing, if for any reason the Company
fails to cure any Event of Default within the time given to cure such Event of
Default, if any, as compensation and liquidated damages for such default, and
not as a penalty, the Company agrees to pay liquidated damages to the Purchasers
in an amount equal to the two times (2x) the Purchase Price. The Company shall
upon demand pay the Purchasers, such liquidated damages by wire transfer in
immediately available funds to an account designated by the Purchasers. Nothing
herein shall limit the right of any of the Purchasers to pursue actual damages
(less the amount of any liquidated damages received pursuant to the foregoing)
for the Company's failure to cure an Event of Default, consistent with the terms
of this Agreement. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS
AGREEMENT, THE COMPANY'S OBLIGATIONS UNDER THIS SECTION SHALL SURVIVE ANY
TERMINATION OF THIS AGREEMENT.
Section 4.27 [Reserved].
Section 4.28. Fees. The Company will pay the following fees and
expenses in connection with this transaction: (a) US$15,000 to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇, LLP ("KGL") for document production fees, receipt of which is
acknowledged, (b) $500 to KGL for expenses, receipt of which is acknowledged,
and (c) US$5,000 to KGL as escrow agent fee. All fees and expenses will be paid
at Closing and the Escrow Agent shall deduct such fees and expenses directly
from escrow.
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ARTICLE V
ASSIGNMENT OF RIGHTS AND ASSUMPTION OF OBLIGATIONS
It shall be a condition to Closing that, as of the Closing Date, (i)
the Company's Common Stock be registered under Section 12 of the Exchange Act,
and (ii) the Company's Common Stock be listed for trading on a national
securities exchange, Nasdaq or the OTCBB; provided, however, that this condition
shall be met upon the closing of the merger pursuant to the Agreement and Plan
of Merger (the "Merger Agreement") by and among, the Company, HERZ, Asure
Acquisition Corporation, a Delaware corporation, and ▇▇▇ ▇. ▇▇▇▇▇, dated July
13, 2000, which Merger Agreement shall require HERZ to assume the obligations of
the Company hereunder.
Upon the closing of the merger pursuant to the Merger Agreement, (x)
this Agreement and the Exhibits hereto shall be deemed to have been amended to
reflect HERZ as the issuer of the Preferred Shares, the Warrants, the Underlying
Shares, and the Warrant Shares, (y) the documents to be executed and delivered
at the Closing shall be amended to reflect this Article V, and (z) the
Disclosure Documents shall also include HERZ's (A) most recent Annual Report on
Form 10-KSB, as filed with the SEC, (B) the most recent Quarterly Reports on
Form 10-QSB since its most recent Annual Report on Form 10-KSB as filed with the
SEC, (C) its most recent Proxy Statement as filed with the SEC, and (D) any
Current Reports on Form 8-K as filed with the SEC since its most recent Annual
Report on Form 10-KSB, copies of which have been made available to the
Purchasers.
ARTICLE VI
TERMINATION
Section 6.1. Termination by the Company or the Purchasers. This
Agreement shall be automatically terminated prior to Closing if:
(a) there shall be in effect any statute, rule, law or
regulation, including an amendment to Regulation D or an interpretive release
promulgated or issued thereunder, that prohibits the consummation of the Closing
or if the consummation of the Closing would violate any non-appealable final
judgment, order, decree, ruling or injunction of any court of or governmental
authority having competent jurisdiction;
(b) the Closing shall not have occurred by 5:30 Eastern Time
one hundred-eighty (180) days after the Execution Date (unless such day is not a
Business Day, then the next Business Day);
(c) the Company's Common Stock is not registered under Section
12 of the Exchange Act;
(d) the Company is not current in its reporting obligations
under Section 13 or 15(d) of the Exchange Act;
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(e) an event occurs prior to the Closing requiring the Company
to report such event to the SEC on Form 8-K and not otherwise set forth in
SCHEDULE 6.1 provided however such events shall only include the following items
under Form 8-K: Item 1; Item 2; Item 3; or Item 4 (however, as to Item 4, only
if requiring disclosure under Item 304 (a)(1)(iv) under Regulation on S-K); or
(f) trading in the Common Stock has been suspended, delisted,
or otherwise ceased by the Commission or the NASD or other exchange or market on
which the Common Stock is listed or quoted (except for any suspension of trading
of limited duration solely to permit dissemination of material information
regarding the Company) and not reinstated within ten (10) Trading Days.
Section 6.2. Termination by the Company. This Agreement may be
terminated prior to Closing by the Company, by giving written notice of such
termination to the Purchasers, if any of the Purchasers have materially breached
any representation, warranty, covenant or agreement contained in this Agreement
or the Registration Rights Agreement and such breach is not cured within ten
(10) Business Days following receipt by such Purchaser of notice of such breach
and the other Purchasers decline to be substituted for the breaching Purchaser's
investment.
ARTICLE VII
LEGAL FEES AND DEFAULT INTEREST RATE
In the event any Party commences legal action to enforce its rights
under this Agreement, the Preferred Shares, the Warrants or the Escrow
Agreement, the non-prevailing party shall pay all reasonable costs and expenses
(including but not limited to reasonable attorney's fees, accountant's fees,
appraiser's fees and investigative fees) incurred in enforcing such rights. In
the event of an uncured Default by any party hereunder, interest shall accrue on
all unpaid amounts due the aggrieved party at the rate of 15% per annum,
compounded annually.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Fees and Expenses. Except as set forth above, each party
shall pay the fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this Agreement.
The Company shall pay the fees of the Escrow Agent and all stamp and other taxes
and duties levied in connection with the issuance of the Preferred Shares and
Warrants (and upon conversion or exercise thereof, the Underlying Shares and
Warrant Shares) pursuant hereto. Each of the Purchasers shall be responsible for
its own tax liability that may arise as a result of the investment hereunder or
the transactions contemplated by this Agreement. Whether or not the transactions
contemplated by this Agreement are consummated or this Agreement is terminated,
the Company shall pay (i) all costs, expenses, fees and all taxes incident to
and in connection with: (A) the preparation, printing and distribution of the
Registration Statement and all amendments and
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supplements thereto (including, without limitation, financial statements and
exhibits), and all preliminary and final Blue Sky memoranda and all other
agreements, memoranda, correspondence and other documents prepared and delivered
in connection herewith, (B) the issuance and delivery of the Preferred Shares
and Warrants and, upon conversion or exercise thereof, the Underlying Shares and
the Warrant Shares, (C) the exemption from registration of the Preferred Shares
and Warrants and, upon conversion or exercise thereof, the Underlying Shares and
Warrant Shares for offer and sale to the Purchasers under the securities or Blue
Sky laws of the applicable jurisdiction, (D) furnishing such copies of the
Registration Statement and all amendments and supplements thereto, as may
reasonably be requested for use in connection with resales of the Preferred
Shares and Warrants and, upon conversion or exercise thereof, the Underlying
Shares and the Warrant Shares, and (E) the preparation of certificates for the
Preferred Shares and Warrants and, upon conversion or exercise thereof, the
Underlying Shares and Warrant Shares (including, without limitation, printing
and engraving thereof), (ii) all fees and expenses of the counsel and
accountants of the Company and (iii) all expenses and listing fees on securities
exchanges, if any.
Section 8.2. Entire Agreement; Amendments. This Agreement, together
with the Exhibits, Annexes and Schedules hereto, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such matters. This Agreement shall be deemed to have been drafted and
negotiated by both parties hereto and no presumptions as to interpretation,
construction or enforceability shall be made by or against either party in such
regard.
Section 8.3. Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been made upon facsimile transmission (with transmission confirmation report) at
the number designated below (if delivered on a Business Day during normal
business hours where such notice is to be received), or the first Business Day
following such delivery (if delivered other than on a Business Day during normal
business hours where such notice is to be received) whichever shall first occur.
The addresses for such communications shall be:
If to the Company: A Sure eCommerce, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇, President
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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With copies to: ▇▇▇▇▇▇ Gottbetter & ▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Purchasers: See Schedule 1 - Schedule of
Purchasers (attached hereto)
If to Escrow Agent: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or such other address as may be designated in writing hereafter, in the same
manner, by such person.
Section 8.5 Amendments; Waivers. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by both the Company and the Purchasers, or, in the case of a waiver,
by the party against whom enforcement of any such waiver is sought. No waiver of
any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
Section 8.6. Headings. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
Section 8.7. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and permitted
assigns. The assignment by a party of this Agreement or any rights hereunder
shall not affect the obligations of such party under this Agreement.
Section 8.8. No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
Section 8.9. Governing Law; Venue; Service of Process. The parties
hereto acknowledge that the transactions contemplated by this Agreement and the
exhibits hereto bear a reasonable relation to the State of New York. The parties
hereto agree that the internal laws of the State of New York shall govern this
Agreement and the exhibits hereto, including, but not limited to, the
enforcement of the amount of interest to be charged on the outstanding principal
amount of the
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Preferred Shares and as to all issues related to usury. Any action to enforce
the terms of this Agreement or any of its exhibits shall be exclusively brought
in the State and/or federal courts in the State and County of New York. Service
of process in any action by Purchasers to enforce the terms of this Agreement
may be made by serving a copy of the summons and complaint, in addition to any
other relevant documents, by commercial overnight courier to the Company at its
principal address set forth in this Agreement.
Section 8.10. Survival. The representations and warranties of the
Company and the Purchasers contained in Article III and the agreements and
covenants of the parties contained in Article IV and this Article VIII shall
survive the Closing (or any earlier termination of this Agreement).
Section 8.11. Counterpart Signatures. This Agreement may be executed in
two or more counterparts, all of which when taken together 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, it being understood
that both parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission, such signature shall create a
valid and binding obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as if such
facsimile signature page were an original thereof.
Section 8.12. Publicity. The Company and the Purchasers shall consult
with each other in issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby and neither
party shall issue any such press release or otherwise make any such public
statement without the prior written consent of the other, which consent shall
not be unreasonably withheld or delayed, unless counsel for the disclosing party
deems such public statement to be required by applicable federal and/or State
securities laws. Except as otherwise required by applicable law or regulation,
the Company will not disclose to any third party the names of the Purchasers.
Section 8.13. Severability. In case any one or more of the provisions
of this Agreement shall be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this Agreement shall
not in any way be affected or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
Section 8.14. Limitation Remedies. With respect to claims by the
Company, or persons acting by or through the Company, for remedies at law or at
equity, relating to or arising out of a breach of this Agreement, liability, if
any, shall, in no event, include loss of profits, or incidental, indirect,
exemplary, punitive, special or consequential damages of any kind.
[ SIGNATURE PAGE FOLLOWS ]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first indicated above.
Company:
A SURE ECOMMERCE, INC.
By: /s/ ▇.▇. ▇▇▇▇▇▇
____________________________________________
Name: ▇.▇. ▇▇▇▇▇▇
Title: Chairman
Purchasers:
GEM GLOBAL YIELD FUND LIMITED
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
____________________________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Director
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SCHEDULE 1
Full Amount of Number of Termination Termination
Preferred Shares to be Warrant Shares Amount
Name and Address of Purchaser Purchased Exercisable
GEM Global Yield Fund Limited $5,000,000 500,000 US$100,000
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇
Tel: ▇▇.▇▇▇.▇▇▇.▇▇▇▇
Fax: ▇▇.▇▇▇.▇▇▇.▇▇▇▇
[Other Schedules and Exhibits Omitted]