EXHIBIT 4.14
NOTE AND WARRANT PURCHASE AGREEMENT
Dated as of July 2, 1999
by and among
IFS INTERNATIONAL, INC.
and
THE PURCHASERS LISTED ON EXHIBIT A HERETO
vi
TABLE OF CONTENTS
Page
ARTICLE I Definitions.....................................................................................1
Section 1.1 Definitions........................................................................1
(a) "Material Adverse Effect"..............................................................1
(b) "Note Shares"..........................................................................1
(c) "Registration Statement"...............................................................2
(d) "Securities"...........................................................................2
(e) "VWAP".................................................................................2
(f) "Warrant Shares".......................................................................2
ARTICLE II Purchase and Sale of Notes and Warrants.........................................................2
Section 2.1 Purchase and Sale of the Notes and Warrants........................................2
Section 2.2 The Securities.....................................................................2
Section 2.3 Purchase Price and Closing.........................................................2
ARTICLE III Representations and Warranties..................................................................2
Section 3.1 Representation and Warranties of the Company.......................................3
(a) Organization, Good Standing and Power..................................................3
(b) Authorization; Enforcement.............................................................3
(c) Capitalization.........................................................................3
(d) Issuance of Securities.................................................................4
(e) No Conflicts...........................................................................4
(f) Commission Documents, Financial Statements.............................................5
(g) Subsidiaries...........................................................................5
(h) No Material Adverse Change.............................................................6
(i) No Undisclosed Liabilities.............................................................6
(j) No Undisclosed Events or Circumstances.................................................6
(k) Indebtedness...........................................................................6
(l) Title to Assets........................................................................6
(m) Actions Pending........................................................................7
(n) Compliance with Law....................................................................7
(o) Taxes..................................................................................7
(p) Certain Fees...........................................................................7
(q) Disclosure.............................................................................7
(r) Operation of Business..................................................................8
(s) Environmental Compliance...............................................................8
(t) Books and Record: Internal Accounting Controls.........................................8
(u) Material Agreements....................................................................9
(v) Transactions with Affiliates...........................................................9
(w) Securities Act of 1933.................................................................9
(x) Employees..............................................................................9
(y) Absence of Certain Developments.......................................................10
(z) Use of Proceeds.......................................................................11
Section 3.2 Representations and Warranties of the Purchasers..................................12
(a) Organization and Standing of the Purchasers...........................................12
(b) Authorization and Power...............................................................12
(c) No Conflicts..........................................................................12
(d) Acquisition for Investment............................................................13
(e) Accredited Purchasers.................................................................13
(f) Information...........................................................................13
(g) General...............................................................................13
(h) Shorting..............................................................................14
ARTICLE IV Covenants......................................................................................14
Section 4.1 Securities Compliance.............................................................14
Section 4.2 Registration and Listing..........................................................14
Section 4.3 Beneficial Ownership..............................................................14
Section 4.4 Legends...........................................................................15
Section 4.5 Registration Statement............................................................15
Section 4.6 Compliance with Laws..............................................................15
Section 4.7 Keeping of Records and Books of Account...........................................16
Section 4.8 Intentionally Omitted.............................................................16
Section 4.9 Amendments........................................................................16
Section 4.10 Other Agreements.................................................................16
Section 4.11 Reservation of Shares............................................................16
ARTICLE V Conditions to Closing..........................................................................16
Section 5.1 Conditions Precedent to the Obligation
of the Company to Sell the Securities.
(a) Accuracy of Each of the Purchaser's Representations
and Warranties...............................................................16
(b) Performance by the Purchasers.........................................................17
(c) No Injunction.........................................................................17
` Section 5.2 Conditions Precedent to the Obligation of the Purchasers to Close.................17
(a) Accuracy of the Company's Representations and Warranties..............................17
(b) Performance by the Company............................................................17
(c) No Suspension, Etc....................................................................17
(d) No Injunction.........................................................................17
(e) No Proceedings or Litigation..........................................................17
(f) No Material Adverse Effect............................................................18
(g) Opinion of Counsel, Etc...............................................................18
(h) Registration Rights Agreement.........................................................18
(i) Resolutions...........................................................................18
(j) Reservation of Shares.................................................................18
(k) Secretary's Certificate...............................................................18
(l) Certificates..........................................................................18
ARTICLE VI Intentionally Omitted..........................................................................19
ARTICLE VII Indemnification......................................................................................19
Section 7.1 General Indemnity.................................................................19
Section 7.2 Indemnification Procedure.........................................................19
ARTICLE VIII Miscellaneous..................................................................................20
Section 8.1 Fees and Expenses...............................................................20
Section 8.2 Specific Enforcement, Consent to Jurisdiction...................................20
Section 8.3 Entire Agreement; Amendment.....................................................21
Section 8.4 Notices.........................................................................21
Section 8.5 Waivers.........................................................................22
Section 8.6 Headings........................................................................22
Section 8.7 Successors and Assigns..........................................................22
Section 8.8 No Third Party Beneficiaries....................................................22
Section 8.9 Governing Law...................................................................23
Section 8.10 Survival.........................................................................23
Section 8.11 Counterparts.....................................................................23
Section 8.12 Publicity........................................................................23
Section 8.13 Severability.....................................................................23
Section 8.14 Further Assurances...............................................................23
Schedules
Schedule 3.1(c) Capitalization ...
Schedule 3.1(g) Subsidiaries
Schedule 3.1(i) No Undisclosed Liabilities
Schedule 3.1(j) No Undisclosed Events or Circumstances
Schedule 3.1(k) Indebtedness
Schedule 3.1(l) Title to Assets
Schedule 3.1(o) Taxes
Schedule 3.1(p) Certain Fees
Schedule 3.1(r) Operation of Business
Schedule 3.1(u) Material Agreements
Schedule 3.1(x) Employees
Schedule 3.1(y) Absence of Certain Developments
Exhibits
Exhibit A List of Purchasers
Exhibit B Form of Note
Exhibit C Form of Warrant
Exhibit D Form of Registration Rights Agreement
Exhibit E Form of Opinion of Counsel
NOTE AND WARRANT PURCHASE AGREEMENT
This NOTE AND WARRANT PURCHASE AGREEMENT (this "Agreement") is dated as
of July 2, 1999 by and among IFS International, Inc., a Delaware corporation
(the "Company") and the entities listed on Exhibit A attached hereto (each a
"Purchaser" and collectively referred to herein as the "Purchasers").
RECITALS
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Purchasers,
and the Purchasers shall purchase from the Company, (i) separate convertible
promissory notes in the aggregate principal amount of $1,000,000 bearing
interest at the rate of 10% per annum, due July 6, 2001, each convertible into
shares of the Company's common stock, par value $.001 per share (the "Common
Stock"), in the form attached hereto as Exhibit B (the "Notes"), and (ii)
warrants to purchase up to 100,000 shares of Common Stock, in the form attached
hereto as Exhibit C (the "Warrants").
WHEREAS, such investments will be made in reliance upon the provisions
of Section 4(2) of the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "Securities Act"), including Regulation
D ("Regulation D"), and/or upon such other exemption from the registration
requirements of the Securities Act as may be available with respect to any or
all of the investments to be made hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Definitions
Section I.1 Definitions.
(a) "Material Adverse Effect" shall mean any effect on the
business, operations, prospects, properties or financial condition of the
Company that is material and adverse to the Company and its subsidiaries, taken
as a whole and/or any condition, circumstance, or situation that would prohibit
or otherwise interfere with the ability of the Company to enter into and perform
any of its obligations under this Agreement or the Registration Rights Agreement
in any material respect.
(b) "Note Shares" shall mean any shares of Common Stock
issuable upon conversion of any Note or Notes or otherwise issuable pursuant to
any Note or Notes.
-8-
(c) "Registration Statement" shall mean the registration
statement under the Securities Act, to be filed with the Securities and Exchange
Commission for the registration of the Note Shares and Warrant Shares.
(d) "Securities" shall mean, collectively, the Notes, the
Warrants, the Note Shares and the Warrant Shares.
(e) "VWAP" shall mean the daily volume weighted average price
(based on a trading day from 9:00 a.m. to 4:00 p.m. eastern standard time) of
the Common Stock on the relevant exchange as reported by Bloomberg Financial
using the AQR function.
(f) "Warrant Shares" shall mean any shares of Common Stock
issuable upon exercise of any Warrant or Warrants or otherwise issuable pursuant
to any Warrant or Warrants.
ARTICLE II
Purchase and Sale of Notes and Warrants
Section II.1 Purchase and Sale of the Notes and Warrants. Subject to
the terms and conditions of this Agreement, the Company hereby issues and sells
to the Purchasers and each Purchaser hereby severally purchases from the Company
the amount of Notes and Warrants set forth opposite each Purchaser's name on
Exhibit A hereto.
Section II.2 The Securities. The Company has authorized and has
reserved and covenants to continue to reserve, free of preemptive rights and
other similar contractual rights of stockholders, a sufficient number of its
authorized but unissued shares of its Common Stock, to effect the conversion of
the Notes and exercise of the Warrants.
Section II.3 Purchase Price and Closing. The Company agrees to issue
and sell to the Purchasers and, in consideration of and in express reliance upon
the representations, warranties, covenants, terms and conditions of this
Agreement, the Purchasers, severally but not jointly, agree to purchase that
Notes and Warrants to be issued under this Agreement for an aggregate purchase
price equal to $1,000,000. The closing under this Agreement shall take place at
the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇ Flattau & Klimpl, LLP (the "Escrow Agent"), ▇▇▇▇
▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the "Closing") at 10:00 a.m.
E.S.T. on (i) July 2, 1999 or (ii) such other time and place or on such date as
the Purchasers and the Company may agree upon (the "Closing Date"). Each party
shall deliver all documents, instruments and writings required to be delivered
by such party pursuant to this Agreement at or prior to the Closing. Each of the
Purchasers shall pay the amount set forth opposite such purchaser's name on
Exhibit A by delivering good funds in United States Dollars by check, wire
transfer or as the Company shall otherwise agree, to the Escrow Agent who shall
deliver such amounts less the fees and expenses set forth in Section 8.1 hereof
to the Company against delivery of the certificates representing the Notes and
Warrants that each Purchaser is purchasing.
ARTICLE III
Representations and Warranties
Section III.1 Representation and Warranties of the Company. The Company
hereby makes the following representations and warranties to the Purchasers:
(a) Organization, Good Standing and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has the requisite corporate power to own,
lease and operate its properties and assets and to conduct its business as it is
now being conducted. The Company does not have any subsidiaries (as defined in
Section 3.1(g)) except as set forth on Schedule 3.1(g), in the Company's most
recent Form 10-K, including the accompanying financial statements (the "Form
10-K"), or in the Company's most recent Form 10-Q (the "Form 10-Q"), or in the
Company's filings on Form 8-K or public filings made by the Company with the
Securities and Exchange Commission (the "Commission"), pursuant to the
Securities Act or the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), including the Commission Documents referred to in Section 3.1(f) below
(the "Commission Filings"). The Company and each such subsidiary is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary except for any jurisdiction in
which the failure to be so qualified will not have a material adverse effect on
the Company's financial condition.
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and perform this Agreement, the
Registration Rights Agreement in the form attached hereto as Exhibit D (the
"Registration Rights Agreement"), the Notes and Warrants (collectively, the
"Transaction Documents") and to issue and sell the Notes and Warrants in
accordance with the terms hereof. The execution, delivery and performance of
each of the Transaction Documents by the Company and the consummation by it of
the transactions contemplated thereby have been duly and validly authorized by
all necessary corporate action, and no further consent or authorization of the
Company or its Board of Directors or stockholders is required. Each of the
Transaction Documents has been duly executed and delivered by the Company. Each
of the Transaction Documents constitutes, or shall constitute when executed and
delivered, a valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditor's rights and remedies or by
other equitable principles of general application.
(c) Capitalization. The authorized capital stock of the
Company and the shares thereof issued and outstanding as of the date hereof are
set forth, on Schedule 3.1(c) hereto or in the Commission Filings. All of the
outstanding shares of the Company's Common Stock have been duly and validly
authorized. Except as set forth on Schedule 3.1(c) hereto or in the Commission
Filings, no shares of Common Stock are entitled to preemptive rights or
registration rights and there are no outstanding options, warrants, scrip,
rights to subscribe to, call or commitments of any character whatsoever relating
to, or securities or rights convertible into, any shares of capital stock of the
Company. Furthermore, except as set forth in this Agreement and the Registration
Rights Agreement and as set forth on Schedule 3.1(c) hereto or in the Commission
Filings, there are no contracts, commitments, understandings, or arrangements by
which the Company is or may become bound to issue additional shares of the
capital stock of the Company or options, securities or rights convertible into
shares of capital stock of the Company. Except for customary transfer
restrictions contained in agreements entered into by the Company in order to
sell restricted securities or as provided on Schedule 3.1(c) hereto or in the
Commission Filings, the Company is not a party to any agreement granting
registration or anti-dilution rights to any person with respect to any of its
equity or debt securities. The Company is not a party to, and it has no
knowledge of, any agreement restricting the voting or transfer of any shares of
the capital stock of the Company. The offer and sale of all capital stock,
convertible securities, rights, warrants, or options of the Company issued prior
to the Closing complied with all applicable Federal and state securities laws,
and no stockholder has a right of rescission or damages with respect thereto
which would have a Material Adverse Effect. The Company has furnished or made
available to the Purchasers true and correct copies of the Company's Certificate
of Incorporation as in effect on the date hereof (the "Articles"), and the
Company's Bylaws as in effect on the date hereof (the "Bylaws").
(d) Issuance of Securities. The Notes and Warrants to be
issued under this Agreement have been duly authorized by all necessary corporate
action and, when issued and paid for in accordance with the terms hereof, the
Notes and Warrants shall be validly issued and outstanding, fully paid and
nonassessable, free and clear of all liens, encumbrances, and rights of first
refusal of any kind. When the Note Shares and the Warrant Shares are issued in
accordance with the terms of the Notes and Warrants, respectively, such shares
will be duly authorized by all necessary corporate action and validly issued and
outstanding, fully paid and nonassessable, and the Purchasers shall be entitled
to all rights accorded to a holder of Common Stock.
(e) No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated therein do not (i) violate any provision of the
Company's Articles or Bylaws, (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, mortgage, deed of trust, indenture,
note, bond, license, lease agreement, instrument or obligation to which the
Company is a party, (iii) create or impose a lien, charge or encumbrance on any
property of the Company under any agreement or any commitment to which the
Company is a party or by which the Company is bound or by which any of its
respective properties or assets are bound, or (iv) result in a violation of any
federal, state, local or foreign statute, rule, regulation, order, judgment or
decree (including Federal and state securities laws and regulations) applicable
to the Company or any of its subsidiaries or by which any property or asset of
the Company or any of its subsidiaries are bound or affected, except for such
conflicts, defaults, terminations, amendments, acceleration, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect. The Company is not required under Federal, state or local law,
rule or regulation to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under the Transaction
Documents, or issue and sell the Notes, the Warrants, the Note Shares and the
Warrant Shares in accordance with the terms hereof (other than any filings which
may be required to be made by the Company with the Commission, the National
Association of Securities Dealers, Inc. (the "NASD"), or state securities
administrators subsequent to the Closing, and, any registration statement which
may be filed pursuant hereto); provided that, for purposes of the representation
made in this sentence, the Company is assuming and relying upon the accuracy of
the relevant representations and agreements of each of the Purchasers herein.
(f) Commission Documents, Financial Statements. The Common
Stock of the Company is registered pursuant to Section 12(b) or 12(g) of the
Exchange Act and the Company has timely filed all reports, schedules, forms,
statements and other documents required to be filed by it with the Commission
pursuant to the reporting requirements of the Exchange Act, including material
filed pursuant to Section 13(a), 14 or 15(d) of the Exchange Act (all of the
foregoing including filings incorporated by reference therein being referred to
herein as the "Commission Documents"). The Company has delivered to the
Purchasers true and complete copies of the Commission Documents filed with the
Commission since July 31, 1997 and prior to the Closing Date. The Company has
not provided to the Purchasers any information which, according to applicable
law, rule or regulation, should have been disclosed publicly by the Company but
which has not been so disclosed, other than with respect to the transactions
contemplated by this Agreement. As of their respective dates, the Form 10-K for
the year ended April 30, 1998 and the Forms 10-Q for the fiscal quarters ended
January 31,1999, October 31, 1998 and July 31, 1998 complied in all material
respects with the requirements of the Exchange Act and the rules and regulations
of the Commission promulgated thereunder and other federal, state and local
laws, rules and regulations applicable to such documents, and, as of their
respective dates, none of the Form 10-K and the Form 10-Q referred to above
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the Commission
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission or other
applicable rules and regulations with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis during the periods involved (except (i)
as may be otherwise indicated in such financial statements or the notes thereto
or (ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements), and fairly present
in all material respects the financial position of the Company and its
subsidiaries as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).
(g) Subsidiaries. Schedule 3.1(g) hereto or the Commission
Filings sets forth each subsidiary of the Company, showing the jurisdiction of
its incorporation or organization and showing the percentage of the Company's
ownership of the outstanding stock or other interests of such subsidiary. For
the purposes of this Agreement, "subsidiary" shall mean any corporation or other
entity of which at least a majority of the securities or other ownership
interest having ordinary voting power (absolutely or contingently) for the
election of directors or other persons performing similar functions are at the
time owned directly or indirectly by the Company and/or any of its other
subsidiaries. Except as set forth in the Commission Filings, none of such
subsidiaries is a "significant subsidiary" as defined in Regulation S-X.
(h) No Material Adverse Change. Since January 31, 1999, the
date through which the most recent quarterly report of the Company on Form 10-Q
has been prepared and filed with the Commission, a copy of which is included in
the Commission Documents, the Company has not experienced or suffered any
Material Adverse Effect.
(i) No Undisclosed Liabilities. Except as disclosed on
Schedule 3.1(i) hereto, neither the Company nor any of its subsidiaries has any
liabilities, obligations, claims or losses (whether liquidated or unliquidated,
secured or unsecured, absolute, accrued, contingent or otherwise) that would be
required to be disclosed on a balance sheet of the Company or any subsidiary
(including the notes thereto) in conformity with GAAP not disclosed in the
Commission Documents, other than those incurred in the ordinary course of the
Company's or its subsidiaries respective businesses since January 31, 1999 and
which, individually or in the aggregate, do not or would not have a Material
Adverse Effect on the Company or its subsidiaries.
(j) No Undisclosed Events or Circumstances. Except as
disclosed on Schedule 3.1(j) hereto, no event or circumstance has occurred or
exists with respect to the Company or its subsidiaries or their respective
businesses, properties, prospects, operations or financial condition, which,
under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.
(k) Indebtedness. Schedule 3.1(k) hereto or the Commission
Filings sets forth as of the date hereof all outstanding secured and unsecured
Indebtedness (as defined hereinafter) of the Company or any subsidiary, or for
which the Company or any subsidiary has commitments. For the purposes of this
Agreement, "Indebtedness" shall mean (a) any liabilities for borrowed money or
amounts owed in excess of $25,000 (other than trade accounts payable incurred in
the ordinary course of business), (b) all guaranties, endorsements and other
contingent obligations in respect of Indebtedness of others, whether or not the
same are or should be reflected in the Company's balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business; and
(c) the present value of any lease payments in excess of $25,000 due under
leases required to be capitalized in accordance with GAAP. Neither the Company
nor any subsidiary is in default with respect to any Indebtedness.
(l) Title to Assets. Each of the Company and its subsidiaries
has good and marketable title to all of its real and personal property reflected
in the Commission Documents, free of any mortgages, pledges, charges, liens,
security interests or other encumbrances, except for those indicated on Schedule
3.1(l) hereto or such that could not reasonably be expected to cause a Material
Adverse Effect on the Company's financial condition or operating results. All
said leases of the Company and each of its subsidiaries are valid and subsisting
and in full force and effect in all material respects.
(m) Actions Pending. There is no action, suit, claim,
investigation or proceeding pending or, to the knowledge of the Company,
threatened against the Company or any subsidiary which questions the validity of
this Agreement or the transactions contemplated hereby or any action taken or to
be taken pursuant hereto or thereto. There is no action, suit, claim,
investigation or proceeding pending or, to the knowledge of the Company,
threatened, against or involving the Company, any subsidiary or any of their
respective properties or assets and which, if adversely determined, is
reasonably likely to result in a Material Adverse Effect. There are no
outstanding orders, judgments, injunctions, awards or decrees of any court,
arbitrator or governmental or regulatory body against the Company or any
subsidiary or any officers or directors of the Company or subsidiary in their
capacities as such.
(n) Compliance with Law. The business of the Company and the
subsidiaries has been and is presently being conducted in accordance with all
applicable federal, state and local governmental laws, rules, regulations and
ordinances, or such that, individually or in the aggregate, could not reasonably
be expected to cause a Material Adverse Effect. The Company and each of its
subsidiaries have all franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals necessary for the
conduct of its business as now being conducted by it unless the failure to
possess such franchises, permits, licenses, consents and other governmental or
regulatory authorizations and approvals, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
(o) Taxes. Except as set forth on Schedule 3.1(o) hereto, the
Company and each of the subsidiaries has accurately prepared and filed all
federal, state and other tax returns required by law to be filed by it, has paid
or made provisions for the payment of all taxes shown to be due and all
additional assessments, and adequate provisions have been and are reflected in
the financial statements of the Company and the subsidiaries for all current
taxes and other charges to which the Company or any subsidiary is subject and
which are not currently due and payable. None of the federal income tax returns
of the Company or any subsidiary have been audited by the Internal Revenue
Service. The Company has no knowledge of any additional assessments, adjustments
or contingent tax liability (whether federal or state) pending or threatened
against the Company or any subsidiary for any period, nor of any basis for any
such assessment, adjustment or contingency.
(p) Certain Fees. Except as set forth on Schedule 3.1(p)
hereto, no brokers, finders or financial advisory fees or commissions will be
payable by the Company or any subsidiary with respect to the transactions
contemplated by this Agreement.
(q) Disclosure. To the best of the Company's knowledge,
neither this Agreement (including the Schedules hereto) nor any other documents,
certificates or instruments furnished to the Purchasers by or on behalf of the
Company or any subsidiary in connection with the transactions contemplated by
this Agreement contain any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements made herein or
therein, in the light of the circumstances under which they were made herein or
therein, not misleading.
(r) Operation of Business. The Company and each of the
subsidiaries owns or possesses all patents, trademarks, service marks, trade
names, copyrights, licenses and authorizations as set forth on Schedule 3.1(r)
hereto or in the Commission Filings, and all rights with respect to the
foregoing, which are necessary for the conduct of its business as now conducted
without any conflict with the rights of others, except to the extent that a
Material Adverse Effect could not reasonably be expected to result from such
conflict.
(s) Environmental Compliance. The Company and each of its
subsidiaries have obtained all material approvals, authorization, certificates,
consents, licenses, orders and permits or other similar authorizations of all
governmental authorities, or from any other person, that are required under any
Environmental Laws. "Environmental Laws" shall mean all applicable laws relating
to the protection of the environment including, without limitation, all
requirements pertaining to reporting, licensing, permitting, controlling,
investigating or remediating emissions, discharges, releases or threatened
releases of hazardous substances, chemical substances, pollutants, contaminants
or toxic substances, materials or wastes, whether solid, liquid or gaseous in
nature, into the air, surface water, groundwater or land, or relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of hazardous substances, chemical substances, pollutants,
contaminants or toxic substances, material or wastes, whether solid, liquid or
gaseous in nature. Except as set forth on Schedule 3.1(s) hereto, the Company
has all necessary governmental approvals required under all Environmental Laws
and used in its business or in the business of any of its subsidiaries. The
Company and each of its subsidiaries are also in compliance with all other
limitations, restrictions, conditions, standards, requirements, schedules and
timetables required or imposed under all Environmental Laws. Except for such
instances as would not individually or in the aggregate have a Material Adverse
Effect, there are no past or present events, conditions, circumstances,
incidents, actions or omissions relating to or in any way affecting the Company
or its subsidiaries that violate or could reasonably be expected to violate any
Environmental Law after the Closing or that could reasonably be expected to give
rise to any environmental liability, or otherwise form the basis of any claim,
action, demand, suit, proceeding, hearing, study or investigation (i) under any
Environmental Law, or (ii) based on or related to the presence, manufacture,
processing, distribution, use, treatment, storage (including without limitation
underground storage tanks), disposal, transport or handling, or the emission,
discharge, release or threatened release of any hazardous substance.
(t) Books and Record: Internal Accounting Controls. The
records and documents of the Company and its subsidiaries accurately reflect in
all material respects the information relating to the business of the Company
and the subsidiaries, the location and collection of their assets, and the
nature of all transactions giving rise to the obligations or accounts receivable
of the Company or any subsidiary. The Company and each of its subsidiaries
maintain a system of internal accounting controls sufficient, in the judgment of
the Company's board of directors, to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate actions is taken
with respect to any differences.
(u) Material Agreements. Except as set forth on Schedule
3.1(u) hereto or in the Commission Filings, neither the Company nor any
subsidiary is a party to any written or oral contract, instrument, agreement,
commitment, obligation, plan or arrangement, a copy of which would be required
to be filed with the Commission as an exhibit to a registration statement on
Form S-3 or applicable form (collectively, "Material Agreements") if the Company
or any subsidiary were registering securities under the Securities Act. The
Company and each of its subsidiaries has in all material respects performed all
the obligations required to be performed by them to date under the foregoing
agreements, have received no notice of default and, to the best of the Company's
knowledge are not in default under any Material Agreement now in effect, the
result of which could reasonably be expected to cause a Material Adverse Effect.
(v) Transactions with Affiliates. Except as set forth in the
Commission Filings, there are no loans, leases, agreements, contracts, royalty
agreements, management contracts or arrangements or other continuing
transactions exceeding $50,000 between (a) the Company, any subsidiary or any of
their respective customers or suppliers on the one hand, and (b) on the other
hand, any officer, employee, consultant or director of the Company, or any of
its subsidiaries, or any person who would be covered by Item 404(a) of
Regulation S-K or any corporation or other entity controlled by such officer,
employee, consultant, director or person.
(w) Securities Act of 1933. The Company has complied and will
comply with all applicable Federal and state securities laws in connection with
the offer, issuance and sale of the Notes, Warrants and other securities
hereunder. Neither the Company nor anyone acting on its behalf, directly or
indirectly, has or will sell, offer to sell or solicit offers to buy the
Securities or similar securities to, or solicit offers with respect thereto
from, or enter into any preliminary conversations or negotiations relating
thereto with, any person, so as to bring the issuance and sale of the Securities
under the registration provisions of the Securities Act and applicable state
securities laws. Neither the Company nor any of its affiliates, nor any person
acting on its or their behalf, has engaged in any form of general solicitation
or general advertising (within the meaning of Regulation D under the Securities
Act) in connection with the offer or sale of the Notes, Warrants and other
securities hereunder.
(x) Employees. Neither the Company nor any subsidiary has any
collective bargaining arrangements or agreements covering any of its employees.
Except as set forth on Schedule 3.1(x) hereto, neither the Company nor any
subsidiary has any employment contract, agreement regarding proprietary
information, noncompetition agreement, nonsolicitation agreement,
confidentiality agreement, or any other similar contract or restrictive
covenant, relating to the right of any officer, employee or consultant to be
employed or engaged by the Company or such subsidiary. Since January 31, 1999,
except as disclosed in Schedule 3.1(x) hereto, no officer, consultant or key
employee of the Company or any subsidiary whose termination, either individually
or in the aggregate, could reasonably be expected to have a Material Adverse
Effect, has terminated or, to the knowledge of the Company, has any present
intention of terminating his or her employment or engagement with the Company or
any subsidiary.
(y) Absence of Certain Developments. Except as provided on
Schedule 3.1(y) hereto, since January 31, 1999 neither the Company nor any
subsidiary has:
(i) issued any stock, bonds or other corporate securities
or any rights, options or warrants with respect thereto;
(ii) borrowed any amount or incurred or become subject to any
liabilities (absolute or contingent) except current liabilities incurred in the
ordinary course of business which are comparable in nature and amount to the
current liabilities incurred in the ordinary course of business during the
comparable portion of its prior fiscal year, as adjusted to reflect the current
nature and volume of the Company's or such subsidiary's business;
(iii) discharged or satisfied any lien or encumbrance or paid
any obligation or liability (absolute or contingent), other than current
liabilities paid in the ordinary course of business;
(iv) declared or made any payment or distribution of cash or
other property to stockholders with respect to its stock, or purchased or
redeemed, or made any agreements so to purchase or redeem, any shares of its
capital stock;
(v) sold, assigned or transferred any other tangible assets,
or canceled any debts or claims, except in the ordinary course of business;
(vi) sold, assigned or transferred any patent rights,
trademarks, trade names, copyrights, trade secrets or other intangible assets or
intellectual property rights, or disclosed any proprietary confidential
information to any person except to customers in the ordinary course of business
or to the Purchasers or their representatives;
(vii) suffered any substantial losses or waived any rights of
material value, whether or not in the ordinary course of business, or suffered
the loss of any material amount of prospective business;
(viii) made any changes in employee compensation except in the
ordinary course of business and consistent with past practices;
(ix) made capital expenditures or commitments therefor that
aggregate in excess of $100,000;
(x) entered into any other transaction other than in the
ordinary course of business, or entered into any other material transaction,
whether or not in the ordinary course of business;
(xi) made charitable contributions or pledges in excess of
$25,000;
(xii) suffered any material damage, destruction or casualty
loss, whether or not covered by insurance;
(xiii) experienced any material problems with labor or
management in connection with the terms and conditions of their employment;
(xiv) effected any two or more events of the foregoing kind
which in the aggregate would be material to the Company or its subsidiaries; or
(xv) entered into an agreement, written or otherwise, to take
any of the foregoing actions.
(z) Use of Proceeds. The proceeds from the sale of the
Securities will be used by the Company and its subsidiaries for general
corporate purposes.
(aa) Public Utility Holding Company Act and Investment Company
Act Status. The Company is not a "holding company" or a "public utility company"
as such terms are defined in the Public Utility Holding Company Act of 1935, as
amended. The Company is not, and as a result of and immediately upon Closing
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
(bb) ERISA. No liability to the Pension Benefit Guaranty
Corporation has been incurred with respect to any Plan by the Company or any of
its subsidiaries which has had or could reasonably be expected to have a
Material Adverse Effect on the Company and its subsidiaries. The execution and
delivery of this Agreement and the issue and sale of the Securities will not
involve any transaction which is subject to the prohibitions of Section 406 of
ERISA or in connection with which a tax could be imposed pursuant to Section
4975 of the Internal Revenue Code of 1986, as amended, provided that, if any of
the Purchasers, or any person or entity that owns a beneficial interest in any
of the Purchasers, is an "employee pension benefit plan" (within the meaning of
Section 3(2) of ERISA) with respect to which the Company is a "party in
interest" (within the meaning of Section 3(14) of ERISA), the requirements of
Sections 407(d)(5) and 408(e) of ERISA, if applicable, are met. As used in this
Section 3.1(bb), the term "Plan" shall mean an "employee pension benefit plan"
(as defined in Section 3 of ERISA) which is or has been established or
maintained, or to which contributions are or have been made, by the Company or
any subsidiary or by any trade or business, whether or not incorporated, which,
together with the Company or any subsidiary, is under common control, as
described in Section 414(b) or (c) of the Code.
(cc) Acknowledgment Regarding Purchasers' Purchase of
Securities. The Company acknowledges and agrees that each of the Purchasers is
acting individually and solely in the capacity of arm's length purchaser with
respect to this Agreement, the other Transaction Documents and the transactions
contemplated hereunder and thereunder. The Company further acknowledges that
each of the Purchasers is not acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to this Agreement, the
Registration Rights Agreement and the transactions contemplated hereunder and
thereunder and any advice given by any of the Purchasers or any of their
representatives or agents in connection with this Agreement, the Registration
Rights Agreement and the transactions contemplated hereunder and thereunder is
merely incidental to such Purchaser's purchase of the Securities.
(dd) Dilutive Effect. The Company understands and acknowledges
that the number of Note Shares and Warrant Shares issuable upon conversion of
the Notes and exercise of the Warrants, respectively, will increase in certain
circumstances. The Company further acknowledges that its obligation to issue the
Note Shares and Warrant Shares upon conversion of the Note Shares and exercise
of the Warrants, respectively, in accordance with this Agreement, the Notes and
the Warrants, as applicable, is, in each case, absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interest of other stockholders of the Company.
Section III.2 Representations and Warranties of the Purchasers. The
Purchasers hereby severally and not jointly make the following representations
and warranties to the Company:
(a) Organization and Standing of the Purchasers. Such
Purchaser is a corporation duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation.
(b) Authorization and Power. Such Purchaser has the requisite
power and authority to enter into and perform this Agreement and to purchase the
Securities being sold to it hereunder. The execution, delivery and performance
of this Agreement and the Registration Rights Agreement by such Purchaser and
the consummation by it of the transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate action. Each of this Agreement
and the Registration Rights Agreement constitutes, or shall constitute when
executed and delivered, a valid and binding obligation of such Purchaser
enforceable against such Purchaser in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership, or
similar laws relating to, or affecting generally the enforcement of, creditor's
rights and remedies or by other equitable principles of general application.
(c) No Conflicts. The execution, delivery and performance of
this Agreement and the Registration Rights Agreement and the consummation by
such Purchaser of the transactions contemplated hereby and thereby or relating
hereto do not and will not (i) result in a violation of such Purchaser's charter
documents or bylaws or (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of any agreement, indenture or instrument to which such Purchaser
is a party, or result in a violation of any law, rule, or regulation, or any
order, judgment or decree of any court or governmental agency applicable to such
Purchaser or its properties, except for such conflicts, defaults and violations
as would not, individually or in the aggregate, prohibit or otherwise interfere
with the ability of such Purchaser to enter into and perform its obligations
under this Agreement in any material respect. Such Purchaser is not required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement or the
Registration Rights Agreement or to purchase the Notes, the Warrants or the
Warrant Shares in accordance with the terms hereof, provided that for purposes
of the representation made in this sentence, such Purchaser is assuming and
relying upon the accuracy of the relevant representations and agreements of the
Company herein.
(d) Acquisition for Investment. Such Purchaser is purchasing
the Securities solely for its own account for the purpose of investment. Such
Purchaser does not have a present arrangement or intention to effect any
organized distribution of the Securities to or through any person or entity and
agrees to not to sell, assign or otherwise transfer any of its Securities except
in accordance with Federal and state securities laws applicable to such
disposition. Such Purchaser acknowledges that it is able to bear the financial
risks associated with an investment in the Securities and that it has been given
full access to such records of the Company and the subsidiaries and to the
officers of the Company and the subsidiaries as it has deemed necessary or
appropriate to conduct its due diligence investigation. Such Purchaser is
capable of evaluating the risks and merits of an investment in the Securities by
virtue of its experience as an investor and its knowledge, experience, and
sophistication in financial and business matters and such Purchaser is capable
of bearing the entire loss of its investment in the Securities.
(e) Accredited Purchasers. Such Purchaser is an "accredited
investor" as defined in Regulation D promulgated under the Securities Act.
(f) Information. Such Purchaser and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Securities which have been requested by such Purchaser. Such Purchaser and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company. Such Purchaser has sought such accounting, legal and tax advice as it
has considered necessary to make an informed investment decision with respect to
its acquisition of the Securities. Such Purchaser understands that it (and not
the Company) shall be responsible for its own tax liabilities that may arise as
a result of this investment or the transactions contemplated by this Agreement.
(g) General. Such Purchaser understands that the Securities
are being offered and sold in reliance on a transactional exemption from the
registration requirement of Federal and state securities laws and the Company is
relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of such Purchaser set forth
herein in order to determine the applicability of such exemptions and the
suitability of such Purchaser to acquire the Securities.
(h) Shorting. Such Purchaser and any and all of its agents and
affiliates will comply with all Commission regulations regarding shorting.
Furthermore, as of the Closing Date, neither Purchaser, its agents nor any of
its affiliates has a short position in the Company's Common Stock.
ARTICLE IV
Covenants
The Company covenants with each of the Purchasers as follows, which
covenants are for the benefit of the Purchasers and their permitted assignees
(as defined herein).
Section IV.1 Securities Compliance.
(a) The Company shall notify the Commission and NASD, if
applicable, in accordance with their rules and regulations, of the transactions
contemplated by this Agreement, and shall take all other necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation, for the legal and valid issuance of the Securities to the Purchasers
or subsequent holders.
(b) The Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of
each of the Purchasers set forth herein in order to determine the applicability
of Federal and state securities laws exemptions and the suitability of each of
the Purchasers to acquire the Securities.
Section IV.2 Registration and Listing. The Company will take all action
necessary to cause its Common Stock to continue to be registered under Sections
12(b) or 12(g) of the Exchange Act, will comply in all respects with its
reporting and filing obligations under the Exchange Act, will comply with all
requirements related to any registration statement filed pursuant to this
Agreement, and will not take any action or file any document (whether or not
permitted by the Securities Act or the rules promulgated thereunder) to
terminate or suspend such registration or to terminate or suspend its reporting
and filing obligations under the Exchange Act or Securities Act, except as
permitted herein. The Company will take all action necessary to continue the
listing or trading of its Common Stock on the Nasdaq Small Cap Market or any
relevant market or system, if applicable, and will comply in all respects with
the Company's reporting, filing and other obligations under the bylaws or rules
of the NASD or any relevant market or system.
Section IV.3 Beneficial Ownership. Notwithstanding the provisions
hereof, in no event (except with respect to an automatic conversion of the Notes
as provided in the Notes) shall the Company be obligated to convert any portion
of the Notes to the extent after such conversion, the sum of (1) the number of
shares of Common Stock beneficially owned by the Purchasers and their affiliates
(other than shares of Common Stock which may be deemed beneficially owned
through the ownership of the unconverted portion of the Notes and the
unexercised portion of any Warrants), and (2) the number of shares of Common
Stock issuable upon the conversion of the Notes and exercise of the Warrants
with respect to which the determination of this proviso is being made, would
result in beneficial ownership by the Purchasers and their affiliates of more
than 4.99% of the outstanding shares of Common Stock. For purposes of the
proviso to the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Exchange Act, except as
otherwise provided in clause (1) of such proviso. The preceding shall not
interfere with a Purchaser's right to convert the Notes or exercise the Warrants
which in the aggregate total more than 4.99% of the outstanding shares of Common
Stock, over time, as long as no single Purchaser owns more than 4.99% of the
outstanding Common Stock at any given time.
Section IV.4 Legends. Unless otherwise provided below, each certificate
representing the Notes, the Warrants, the Note Shares and the Warrant Shares
shall bear the following legend or equivalent:
"THE SALE AND ISSUANCE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE
SECURITIES LAW OF ANY STATE OR OTHER JURISDICTION. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED,
HYPOTHECATED OR OTHERWISE DISPOSED OF, UNLESS PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO A TRANSACTION THAT IS EXEMPT FROM, OR NOT SUBJECT
TO, SUCH REGISTRATION UNDER THE SECURITIES ACT OR ANY
APPLICABLE STATE SECURITIES LAWS."
Section IV.5 Registration Statement. The Company shall cause to be
filed the Registration Statement, which Registration Statement shall provide for
the resale of the Securities purchased by and issued to the Purchasers in
accordance of this Agreement and the Registration Rights Agreement. The Company
shall take all action necessary to cause such Registration Statement to be
declared effective by the Commission in accordance with the Registration Rights
Agreement.
Section IV.6 Compliance with Laws. The Company shall comply, and cause
each subsidiary to comply, with all applicable laws, rules, regulations and
orders, noncompliance with which could have a Material Adverse Effect.
Section IV.7 Keeping of Records and Books of Account. The Company shall
keep and cause each subsidiary to keep adequate records and books of account, in
which complete entries will be made in accordance with GAAP consistently
applied, reflecting all financial transactions of the Company and its
subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
Section IV.8 Intentionally Omitted.
Section IV.9 Amendments. The Company shall not amend or waive any
provision of the Articles of Incorporation or Bylaws of the Company in any way
that would adversely affect the dividend rights or voting rights of the holders
of any Securities.
Section IV.10 Other Agreements. The Company shall not enter into any
agreement in which the terms of such agreement would restrict or impair the
right or ability to perform of the Company or any subsidiary under this
Agreement or the Articles of Incorporation of the Company. So long as any of the
Purchasers are the beneficial owners of any Notes, Warrants, Note Shares or
Warrant Shares, the Company is restricted from issuing any Common Stock or any
financial instruments convertible into shares of Common Stock for a period
commencing as of the date hereof and ending on the earlier of (i) 120 days
following the Closing Date or (ii) 14 calendar days after the effective date of
the Registration Statement without the prior consent of the Purchasers.
Section IV.11 Reservation of Shares. So long as any of the Notes or
Warrants remain outstanding, the Company shall take all action necessary to at
all times have authorized, and reserved for the purpose of issuance, no less
than 175% of the aggregate number of shares of Common Stock needed to provide
for the issuance of the Note Shares and Warrant Shares.
ARTICLE V
Conditions to Closing
Section V.1 Conditions Precedent to the Obligation of the Company to
Sell the Securities. The obligation hereunder of the Company to issue and sell
the Securities to the Purchasers is subject to the satisfaction or waiver, at or
before the Closing, of each of the conditions set forth below. These conditions
are for the Company's sole benefit and may be waived by the Company at any time
in its sole discretion.
(a) Accuracy of Each of the Purchaser's Representations and
Warranties. The representations and warranties of each Purchaser shall be true
and correct in all material respects as of the date when made and as of the
Closing as though made at that time, except for representations and warranties
that are expressly made as of a particular date.
(b) Performance by the Purchasers. The Purchasers shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Purchasers at or prior to the Closing.
(c) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement.
Section V.2 Conditions Precedent to the Obligation of the Purchasers to
Close. The obligation hereunder of the Purchasers to enter this Agreement is
subject to the satisfaction or waiver, at or before the Closing, of each of the
conditions set forth below. These conditions are for each Purchaser's sole
benefit and may be waived by such Purchaser at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties.
Each of the representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of the Closing
as though made at that time (except for representations and warranties that
speak as of a particular date).
(b) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing.
(c) No Suspension, Etc. From the date hereof to the Closing
Date, trading in the Company's Common Stock shall not have been suspended by the
Commission or NASDAQ (except for any suspension of trading of limited duration
agreed to by the Company, which suspension shall be terminated prior to
Closing), and, at any time prior to the Closing, trading in securities generally
as reported by NASDAQ shall not have been suspended or limited, or minimum
prices shall not have been established on securities whose trades are reported
by NASDAQ, or on the New York Stock Exchange, nor shall a banking moratorium
have been declared either by the United States or New York State authorities,
nor shall there have occurred any material outbreak or escalation of hostilities
or other national or international calamity or crisis of such magnitude in its
effect on, or any material adverse change in any financial market which, in each
case, in the judgment of a Purchaser, makes it impracticable or inadvisable to
purchase the Notes and Warrants.
(d) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement.
(e) No Proceedings or Litigation. No action, suit or
proceeding before any arbitrator or any governmental authority shall have been
commenced, and no investigation by any governmental authority shall have been
threatened, against the Company or any subsidiary, or any of the officers,
directors or affiliates of the Company or any subsidiary seeking to restrain,
prevent or change the transactions contemplated by this Agreement, or seeking
damages in connection with such transactions.
(f) No Material Adverse Effect. From the date hereof to the
Closing Date, no event resulting in a Material Adverse Effect has occurred.
(g) Opinion of Counsel, Etc. At the Closing, the Purchasers
shall have received an opinion of counsel to the Company, dated the date of
Closing, in the form of Exhibit E hereto, and such other certificates and
documents as the Purchasers or their counsel shall reasonably require incident
to the Closing.
(h) Registration Rights Agreement. At the Closing the Company
shall have executed and delivered the Registration Rights Agreement to each
Purchaser.
(i) Resolutions. The Board of Directors of the Company shall
have adopted resolutions consistent with Section 3.1(b) above in a form
reasonably acceptable to each Purchaser (the "Resolutions").
(j) Reservation of Shares. As of the Closing Date, the Company
shall have reserved out of its authorized and unissued Common Stock, solely for
the purpose of effecting the conversion of the Notes and the exercise of the
Warrants, a number of shares of Common Stock equal to at least 175% of the
aggregate number of Note Shares and Warrant Shares issuable upon conversion of
the Notes and exercise of the Warrants assuming such Notes and Warrants were
converted or exercised on the Closing Date (and assuming all such Notes and
Warrants were fully convertible and exercisable on such date regardless of any
limitation on the timing or amount of such conversion exercises).
(k) Secretary's Certificate. The Company shall have delivered
to each Purchaser a secretary's certificate, dated as of the Closing Date, as to
(i) the Resolutions, (ii) the Articles, (iii) the Bylaws, each as in effect at
the Closing, and (iv) the authority and incumbency of the officers of the
Company executing this Agreement, the Registration Rights Agreement, the Notes
and the Warrants and any other documents required to be executed or delivered in
connection therewith.
(l) Certificates. At the Closing the Company shall have
executed and delivered to the Purchasers the Notes and Warrants (in such
denomination as the Purchasers shall request) representing the amount of
Securities being purchased by such Purchaser hereunder.
ARTICLE VI
Intentionally Omitted.
ARTICLE VII
Indemnification
Section VII.1 General Indemnity. The Company agrees to indemnify and
hold harmless each Purchaser (and its directors, officers, affiliates, agents,
successors and assigns but excluding consequential damages) from and against any
and all actual losses, liabilities, deficiencies, costs, damages and reasonable
expenses (including, without limitation, reasonable attorney's fees, charges and
disbursements) incurred by such Purchaser as a result of any breach of the
covenants made by the Company herein. Each Purchaser severally agrees to
indemnify and hold harmless the Company and its directors, officers, affiliates,
agents, successors and assigns from and against any and all actual losses,
liabilities, deficiencies, costs, damages and expenses (including, without
limitation, reasonable attorneys fees, charges and disbursements but excluding
consequential damages) incurred by the Company as result of any breach of the
covenants made by such Purchaser herein.
Section VII.2 Indemnification Procedure. Any party entitled to
indemnification under this Article VII (an "indemnified party") will give
written notice to the indemnifying party of any matters giving rise to a claim
for indemnification; provided, that the failure of any party entitled to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Article VII except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any action, proceeding or claim is brought against an
indemnified party in respect of which indemnification is sought hereunder, the
indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of the indemnified party a conflict of interest between it
and the indemnifying party may exist with respect of such action, proceeding or
claim, to assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. In the event that the indemnifying party advises an
indemnified party that it will contest such a claim for indemnification
hereunder, or fails, within thirty (30) days of receipt of any indemnification
notice to notify, in writing, such person of its election to defend, settle or
compromise, at its sole cost and expense, any action, proceeding or claim (or
discontinues its defense at any time after it commences such defense), then the
indemnified party may, at its option, defend, settle or otherwise compromise or
pay such action or claim. In any event, unless and until the indemnifying party
elects in writing to assume and does so assume the defense of any such claim,
proceeding or action, the indemnified party's costs and expenses arising out of
the defense, settlement or compromise of any such action, claim or proceeding
shall be losses subject to indemnification hereunder. The indemnified party
shall cooperate fully with the indemnifying party in connection with any
negotiation or defense of any such action or claim by the indemnifying party and
shall furnish to the indemnifying party all information reasonably available to
the indemnified party which relates to such action or claim. The indemnifying
party shall keep the indemnified party fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. If
the indemnifying party elects to defend any such action or claim, then the
indemnified party shall be entitled to participate in such defense with counsel
of its choice at its sole cost and expense. The indemnifying party shall not be
liable for any settlement of any action, claim or proceeding effected without
its prior written consent. Notwithstanding anything in this Article VII to the
contrary, the indemnifying party shall not, without the indemnified party's
prior written consent (which consent shall not be unreasonable withheld), settle
or compromise any claim or consent to entry of any judgment in respect thereof
which imposes any future obligation on the indemnified party or which does not
include, as an unconditional term thereof, the giving by the claimant or the
plaintiff to the indemnified party of a release from all liability in respect of
such claim. The indemnification required by this Article VII shall be made by
periodic payments of the amount thereof during the course of investigation or
defense, as and when bills are received or expense, loss, damage or liability is
incurred, so long as the indemnified party irrevocably agrees to refund such
moneys if it is ultimately determined by a court of competent jurisdiction that
such party was not entitled to indemnification. The indemnity agreements
contained herein shall be in addition to (a) any cause of action or similar
rights of the indemnified party against the indemnifying party or others, and
(b) any liabilities the indemnifying party may be subject to pursuant to the
law.
ARTICLE VIII
Miscellaneous
Section VIII.1 Fees and Expenses. The Company shall pay to Gilston
Corporation, Ltd. or its assignees an amount equal to (i) 2.5% of the aggregate
principal amount of the Notes in cash and (ii) 7.5% of the aggregate principal
amount of the Notes in convertible promissory notes on the same terms as the
Notes issued to the Purchasers. In addition, the Company shall issue to Gilston
Corporation, Ltd., or its assignees, warrants to purchase 100,000 shares of
Common Stock on the same terms as the Warrants issued to the Purchasers. The
Company shall pay, at the Closing, all reasonable attorneys fees and expenses
(exclusive of disbursements and out-of-pocket expenses) incurred by the
Purchasers up to 1% of the aggregate principal amount of the Notes in cash in
connection with the preparation, negotiation, execution and delivery of this
Agreement. In addition, the Company shall pay all reasonable fees and expenses
incurred by the Purchasers in connection with any amendments, modifications or
waivers of this Agreement or the Registration Rights Agreement or incurred in
connection with the enforcement of this Agreement and the Registration Rights
Agreement, including, without limitation, all reasonable attorneys fees and
expenses. The Company shall pay all stamp or other similar taxes and duties
levied in connection with issuance of the Securities pursuant hereto.
Section VIII.2 Specific Enforcement, Consent to Jurisdiction.
(a The Company and each Purchaser acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement or the Registration Rights Agreement were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent or
cure breaches of the provisions of this Agreement or the Registration Rights
Agreement and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.
(b Each of the Company and each Purchaser (i) hereby
irrevocably submits to the jurisdiction of the United States District Court and
other courts of the United States sitting in the Southern District of New York
for the purposes of any suit, action or proceeding arising out of or relating to
this Agreement or the Registration Rights Agreement and (ii) hereby waives, and
agrees not to assert in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. Each of the Company and each
Purchaser consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing in this
Section shall affect or limit any right to serve process in any other manner
permitted by law.
Section VIII.3 Entire Agreement; Amendment. This Agreement contains the
entire understanding of the parties with respect to the matters covered hereby,
supersedes all prior agreements with respect to subject matter hereof and,
except as specifically set forth herein or in the Registration Rights Agreement,
neither the Company nor any Purchaser makes any representations, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by a written instrument signed by
the party against whom enforcement of any such amendment or waiver is sought.
Section VIII.4 Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery, by telex (with correct answer
back received), telecopy, facsimile or e-mail at the address or 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) or (b) on the second business day following
the date of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be:
If to the Company: IFS International, Inc.
Rensselaer Technology Park
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If to the Purchasers: at the address set forth on Exhibit A attached hereto
with copies to:
▇▇▇▇▇▇ ▇▇▇▇▇▇ Flattau & Klimpl, LLP
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Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
E-mail: ▇▇▇▇▇▇▇▇@▇▇▇▇.▇▇▇
Any party hereto may from time to time change its address for notices
by giving at least ten (10) days written notice of such changed address to the
other party hereto.
Section VIII.5 Waivers. No waiver by either party 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
provisions, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
Section VIII.6 Headings. The article, section and subsection headings
in this Agreement are for convenience only and shall not constitute a part of
this Agreement for any other purpose and shall not be deemed to limit or affect
any of the provisions hereof.
Section VIII.7 Successors and Assigns. The Purchasers may not assign
this Agreement to any person (other than to an affiliate of such Purchaser)
without the prior consent of the Company, which consent will not be unreasonably
withheld. This Agreement shall be binding upon and inure to the benefit of the
parties and their successors and assigns. The parties hereto may not amend this
Agreement or any rights or obligations hereunder without the prior written
consent of the Company and each Purchaser to be affected by the amendment. After
Closing, the assignment by a party to this Agreement of any rights hereunder
shall not affect the obligations of such party under this Agreement.
Section VIII.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 VIII.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to the choice of law provisions.
Section VIII.10 Survival. The representations and warranties of the
Company and the Purchasers contained in Article III shall survive the execution
and delivery hereof and the Closing until the date three years from the Closing
Date, and the agreements and covenants set forth in Articles II, IV, VI, VII and
VIII of this Agreement shall survive the execution and delivery hereof and the
Closing hereunder.
Section VIII.11 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and shall become effective when counterparts have been signed by
each party and delivered to the other parties hereto, it being understood that
all parties need not sign the same counterpart. In the event any signature is
delivered by facsimile transmission, the party using such means of delivery
shall cause four additional executed signature pages to be physically delivered
to the other parties within five days of the execution and delivery hereof.
Section VIII.12 Publicity. Prior to the Closing, neither the Company
nor the Purchasers shall issue any press release or otherwise make any public
statement or announcement with respect to this Agreement or the transactions
contemplated hereby or the existence of this Agreement. In the event the Company
is required by law, based upon an opinion of the Company's counsel, that the
Company must issue a press release or otherwise make a public statement or
announcement with respect to this Agreement prior to the Closing, the Company
will use its best efforts to consult with the Purchasers on the form and
substance of such press release. After the Closing, the Company may issue a
press release or otherwise make a public statement or announcement with respect
to this Agreement or the transactions contemplated hereby or the existence of
this Agreement; provided, that prior to issuing any such press release, making
any such public statement or announcement, the Company obtains the prior consent
of the Purchasers, which consent shall not be unreasonably withheld or delayed.
Section VIII.13 Severability. The provisions of this Agreement are
severable and, in the event that any court of competent jurisdiction shall
determine that any one or more of the provisions or part of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement, and this Agreement shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of such provision, had
never been contained herein, so that such provisions would be valid, legal and
enforceable to the maximum extent possible.
Section VIII.14 Further Assurances. From and after the date of this
Agreement, upon the request of the Purchasers or the Company, each of the
Company and the Purchasers shall execute and deliver such instrument, documents
and other writings as may be reasonably necessary or desirable to confirm and
carry out and to effectuate fully the intent and purposes of this Agreement, the
Notes, the Warrants, the Note Shares, the Warrant Shares and the Registration
Rights Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorize officer as of the date first above
written.
IFS INTERNATIONAL, INC.
By:
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Executive Vice President
GILSTON CORPORATION, LTD.
By:_____________________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:
MANCHESTER ASSET MANAGEMENT, LTD.
By:_____________________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:
HEADWATERS CAPITAL
By:_____________________________________
Name:
Title:
459460-7
IFS INTERNATIONAL, INC.
DISCLOSURE SCHEDULES
RELATING TO THE NOTE AND WARRANT
PURCHASE AGREEMENT, DATED AS OF JULY 2, 1999
AMONG IFS INTERNATIONAL, INC. AND
THE PURCHASERS NAMED HEREIN
ALL SECTION AND SUBSECTION NUMBERS AND LETTERS RELATE AND COINCIDE TO SUCH
NUMBERS AND LETTERS AS SET FORTH IN THE NOTE AND WARRANT PURCHASE AGREEMENT (THE
"AGREEMENT"). ANY TERMS REQUIRING DEFINITION HEREIN ARE DEFINED IN THE
AGREEMENT.
ALL REPRESENTATIONS AND WARRANTIES SET FORTH IN THE AGREEMENT ARE MODIFIED IN
THEIR ENTIRETY BY THESE DISCLOSURE SCHEDULES. THE DISCLOSURES CONTAINED IN THESE
DISCLOSURE SCHEDULES SHALL BE READ IN THEIR ENTIRETY, AND ALL THE DISCLOSURES
SHALL BE READ TOGETHER; PROVIDED, HOWEVER, THAT DISCLOSURE OF THE INFORMATION IN
ONE SECTION OF THE DISCLOSURE SCHEDULE SHALL NOT BE DEEMED TO RELATE TO OR
QUALIFY ANY OTHER SECTION UNLESS THE RELEVANCE OF SUCH MATTER TO ANOTHER SECTION
IS READILY APPARENT.
Exhibit A
List of Purchasers
Amount of Notes Purchase
Investor Name Address &Warrants Purchased Price
Gilston Corporation, Ltd. Charlotte House Notes: $250,000 $250,000
Charlotte Street Warrants: 25,000
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Manchester Asset Management, Ltd. Charlotte House Notes: $250,000 $250,000
Charlotte Street Warrants: 25,000
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Headwaters Capital ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Notes: $500,000 $500,000
Suite 500 Warrants: 50,000
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