REGULATION S
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") dated as of January ,
2001, is made by and among Nexsan Corporation, a Delaware corporation (the
"Company"), the Company's wholly-owned subsidiary Nexsan Technologies Limited, a
United Kingdom corporation ("Nexsan"), and ▇▇▇▇▇▇ ▇▇▇▇▇ (the "Control
Shareholder"), and the purchasers set forth on Schedule A hereto (each an
"Investor' and, collectively, the "Investors").
W I T N E S S E T H:
WHEREAS, the Investors have reviewed a copy of Nexsan's business plan dated
December 14, 2000, a copy of which is attached hereto as Exhibit A (the
"Business Plan"); and
WHEREAS, on the basis of the information contained in the Business Plan,
the Investors desire to acquire an equity interest in the Company; and
WHEREAS, the Company has made a separate offering under Regulation D
promulgated under the Securities Act of 1933, as amended (the "Securities Act"),
and desires to make this offering (the "Offering") pursuant to Regulation S
under the Securities Act; and
WHEREAS, subject to the terms and conditions set forth in this Agreement,
the Company desires to issue and sell to the Investors and the Investors desire
to purchase from the Company shares (each a "Share" and, collectively, the
"Shares") of the Company's common stock, par value $.001 per share ("Common
Stock"), on the Closing Date (as hereafter defined, upon the terms and subject
to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
PURCHASE OF SHARES
1.01 Purchase. At the Closing provided for and defined in Section 1.02
hereof, the Company shall issue and sell to the Investors, and the Investors
shall purchase from the Company the Shares at a purchase price of $.66 per
Share, and the Company shall issue to the Investors certificates evidencing the
Shares.
1.02 Closing. Subject to the provisions of Articles VII and VIII hereof,
the Closing of the transactions contemplated hereby shall take place at the
offices of ▇▇▇▇▇ ▇▇▇▇ LLP, 30 Rockefeller Plaza, New York, New York, on January
4, 2000 or at such other place or on such other day as the parties may mutually
agree. At the Closing, the Company shall deliver to the Investors certificates
representing the Shares to be purchased by said Investors pursuant to Section
1.01 hereof, free of all claims, liens and encumbrances whatsoever, and all
other documents required to be delivered by the Company to the Investors as
described herein, and all other documents required to be delivered hereby and
each Investor shall deliver to the Company the aggregate amount required to be
paid pursuant to Section 1.01 hereof for the Shares to be purchased in checks
made payable to the Company, or in immediately available federal funds by wire
transfer.
ARTICLE II
DEFINITIONS
2.01. Definitions. For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
"Adverse Consequences" means all claims, losses, damages, liabilities, fees
and expenses, including, without limitation, settlement costs and any legal,
accounting or other fees and expenses, suffered or incurred by the Investors in
connection with any breach of this Agreement as provided in ARTICLE X hereof.
The term "Affiliate" means, with respect to any Person, any other Person
that directly or indirectly controls or is controlled by or under common control
with such Person. For the purposes of this definition, "control," when used with
respect to any Person, means the possession, direct or indirect, 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;
and the terms of "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing.
"Balance Sheet" means the unaudited consolidated balance sheet of the
Company referred to in Section 3.06(ii) of this Agreement.
"Beechtree" means Beechtree Capital, Ltd.
"Beechtree Consulting Agreement" means the consulting agreement between the
Company and Beechtree referred to in section 5.07 hereof.
"Business Plan" means the business plan prepared by the Company dated
December 14, 2000, describing the business and financial condition of the
Company and setting forth certain revenue and earnings projections of the
Company, a copy of which is attached hereto as Exhibit A.
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"Closing" means the closing referred to in Section 1.02 of this Agreement.
"Closing Date" means the date on which the Closing occurs.
"Company" means Nexsan Technologies Incorporated, a corporation formed
under the laws of the State of Delaware.
"Company Affiliate" means each Affiliate of the Company.
"Company Subsidiary" means any corporation of which the Company (a)
directly or indirectly owns or controls at the time outstanding shares of stock
which have in ordinary circumstances (not dependent upon the happening of a
contingency) voting power to elect a majority of the board of directors of said
corporation, or (b) of which shares of stock of the character described in the
foregoing clause (a) shall at the time be owned or controlled directly or
indirectly by the Company and one or more Company Subsidiaries as defined in the
foregoing clause (a) or by one or more such Company Subsidiaries.
"Control Shareholder" means ▇▇▇▇▇▇ ▇▇▇▇▇, the principal shareholder of
Nexsan Technologies, Inc."
"Direct" means Direct Brokerage Inc.
"Direct Services Agreement" means the services agreement between the
Company and Direct referred to in Section 5.12 hereof.
"Disclosure Schedule" means the document delivered by the Company to the
Investors simultaneously with the execution hereof containing the information
required to be included therein pursuant to this Agreement.
"Material." The word "material," when used herein in reference to the
Company or any Company Subsidiaries, means material in respect of the Company
and Company Subsidiaries taken as a whole and in each and every case is used as
such word is used in the Federal securities laws. Inclusion of information on a
schedule delivered pursuant to this Agreement does not constitute an admission
or acknowledgment of the materiality of such information.
"Material Adverse Effect" means any action or failure to act that either:
(i) adversely affect the legality, validity or enforceability of this Agreement,
(ii) have a material adverse effect on the results of operations, assets,
prospects, or financial condition of the Company and the Company Subsidiaries,
taken as a whole, or (iii) adversely impairs the Company's ability to perform
fully on a timely basis its obligations under this Agreement.
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"Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
"Prospectus" means the prospectus included in the Registration Statement.
"Registration Rights Agreement" means the Registration Rights Agreement
entered into by the Company and the Investors dated the date hereof whereby the
Company agrees to register the Shares for public resale under the Securities
Act, a copy of which is attached hereto as Exhibit D.
"Registration Statement" means the registration statement referred to in
Section 5.13 of this Agreement.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Transactions Documents" means this Stock Purchase Agreement, the
Registration Rights Agreement executed by the Company and the Investors
simultaneous herewith, the Beechtree Consulting Agreement and the Direct
Services Agreement.
The plural of any defined term shall have a meaning correlative to such
defined term.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY, NEXSAN AND THE CONTROL SHAREHOLDER
The Company, Nexsan and the Control Shareholder hereby jointly and
severally represent and warrant to the Investors as follows:
3.01 Corporate Organization; Etc. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority to carry on its business as
it is now being conducted and to own the properties and assets it now owns; is
duly qualified or licensed to do business as a foreign corporation in good
standing in the jurisdictions listed in Section 3.01 of the Disclosure Schedule,
which are all the jurisdictions in which such qualification is required except
jurisdictions in which the Company's failure to qualify to do business will have
no "Material Adverse Effect" on the business, prospects, operations, properties,
assets or condition (financial or otherwise) of the Company and
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the Company Subsidiaries. True and complete copies of the Certificate of
Incorporation and By-Laws of the Company are attached hereto as Exhibits B and
C, respectively.
3.02 Capitalization of the Company. As of the date of this Agreement, the
authorized capital stock of the Company consists of 90,000,000 shares of Common
Stock, $.001 par value per share, of which 9,050,000 shares are issued and
outstanding, and 10,000,000 shares of blank check preferred stock, $.001 par
value per share, of which no shares are outstanding, and no options to purchase
shares of Common Stock issued pursuant to the Company's 2000 Share Option Plan.
All issued and outstanding shares of capital stock of the Company are validly
issued, fully paid and nonassessable. No shares of Common Stock are entitled to
preemptive or similar rights, nor is any holder of the Common Stock entitled to
preemptive or similar rights arising out of any agreement or understanding with
the Company by virtue of any of the Transaction Documents. Except as disclosed
in Schedule 3.02(a), there are no outstanding options, warrants, script rights
to subscribe to, calls or commitments of any character whatsoever relating to,
or, 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 Company 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. To the knowledge of the Company, except as specifically
disclosed in Section 3.02(a) of the Disclosure Schedule, no Person beneficially
owns (as determined pursuant to Rule 13d-3 promulgated under the Securities
Exchange Act) or has the right to acquire by agreement with or by obligation
binding upon the Company, beneficial ownership of in excess of 5% of the Common
Stock. Except for the registration rights granted to the Investors and to the
certain members of the Company's management named in the Registration Rights
Agreement, there are no agreements or arrangements under which the Company or
any Company Subsidiary is obligated to register the sale of any of their
securities under the Securities Act.
3.03 Subsidiaries and Affiliates. Section 3.03(a) of the Disclosure
Schedule sets forth the name, jurisdiction of incorporation and capitalization
of each Company Subsidiary and the jurisdictions in which each Company
Subsidiary is qualified to do business. Except as disclosed in Section 3.03(b)
of the Disclosure Schedule, the Company does not own, directly or indirectly,
any capital stock or other equity securities of any corporation or have any
direct or indirect equity or ownership interest in any business not listed in
Section 3.03(a) of the Disclosure Schedule. Except as and to the extent set
forth in Section 3.03(a) of the Disclosure Schedule, all the outstanding capital
stock of each Company Subsidiary is owned directly or indirectly by the Company
free and clear of all liens, options or encumbrances of any kind and all
material claims or charges of any kind, and is validly issued, fully paid and
nonassessable, and there are no outstanding options, rights or agreements of any
kind relating to the issuance, sale or transfer of any capital stock or other
equity securities of any such Company Subsidiary to any person except the
Company. Each Company Subsidiary (i) is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation; and (ii) has full corporate power and authority to carry on its
business as it
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is now being conducted and to own the properties and assets it now owns. Each
Company Subsidiary is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction listed opposite the name of such
Company Subsidiary in Section 3.03(a) of the Disclosure Schedule, which are the
only jurisdictions in which the properties owned or leased or the nature of the
business conducted by it makes such qualification necessary. The Company has
heretofore delivered to Beechtree complete and correct copies of the certificate
of incorporation and by-laws of each Company Subsidiary, as presently in effect.
3.04 Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by this Agreement and otherwise to carry out its obligations
hereunder. The execution and delivery of this Agreement by the Company and the
consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary action on the part of the Company. This Agreement
has been duly executed by the Company and when delivered in accordance with the
terms hereof shall constitute the legal, 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 or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application. Neither the Company nor any
Subsidiary is in violation of any of the provisions of its respective
certificate of incorporation, by-laws or other charter documents.
3.05 No Violation. Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will violate any
provision of the Certificate of Incorporation or By-Laws of the Company or any
Company Subsidiary, or, except as specified in Section 3.05 of the Disclosure
Schedule, violate, or be in conflict with, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination of, or accelerate the performance required by, or
cause the acceleration of the maturity of any debt or obligation pursuant to, or
result in the creation or imposition of any security interest, lien or other
encumbrance upon any property or assets of the Company or any Company Subsidiary
under, any agreement or commitment to which the Company or any Company
Subsidiary is a party or by which the Company or any Company Subsidiary is
bound, or to which the property of the Company or any Company Subsidiary is
subject, or violate any statute or law or any judgment, decree, order,
regulation or rule of any court or governmental authority.
3.06 Financial Statements. Attached hereto as Schedule B is: (i) an
unaudited balance sheet of the Company's wholly-owned subsidiary, Nexsan
Technologies Limited, a United Kingdom corporation as at March 31, 2000; and
statements of income, changes in stockholders'
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equity and changes in financial position of Nexsan Technologies Limited for the
fiscal year then ended; and (ii) an unaudited balance sheet of Nexsan
Technologies Limited as at September 30, 2000 (the "Balance Sheet"), and
unaudited consolidated statements of income, changes in stockholders' equity and
changes in financial position of Nexsan Technologies Limited for the six (6)
month period then ended. The financial statements set forth in Schedule B do not
include financial information relating to the Company nor the Company's
wholly-owned United States subsidiary, Nexsan Technologies Corp. The financial
statements are prepared in British Pounds Sterling in accordance with United
States generally accepted accounting principles. Such consolidated balance
sheets and the notes thereto are true, complete and accurate and fairly present
the consolidated assets, liabilities and financial condition of Nexsan
Technologies Limited as at the respective dates thereof, and such statements of
income, changes in stockholders' equity and changes in financial position and
the notes thereto are true, complete and accurate and fairly present the results
of operations for the periods therein referred to; all in accordance with United
States generally accepted accounting principles consistently applied throughout
the periods involved except, in the case of unaudited statements, for normally
recurring year-end adjustments, which adjustments will not be material either
individually or in the aggregate.
3.07. No Undisclosed Liabilities; Etc. Neither the Company nor any Company
Subsidiary has any material liabilities or obligations of any nature (absolute,
accrued, contingent or otherwise) which were not fully reflected or reserved
against in the Balance Sheet, except for liabilities and obligations incurred in
the ordinary course of business and consistent with past practice since the date
thereof; and the reserves reflected in the Balance Sheet are adequate,
appropriate and reasonable.
3.08 Accounts Receivable. All accounts receivable of the Company and each
Company Subsidiary, whether reflected in the Balance Sheet or otherwise,
represent sales actually made in the ordinary course of business, and are
current and collectible net of any reserves shown on the Balance Sheet (which
reserves are adequate and were calculated consistent with past practice).
3.09 Absence of Certain Changes. Except as set forth in Section 3.09 of the
Disclosure Schedule, since the date of the Balance Sheet, neither the Company
nor any Company Subsidiary has effected, suffered or granted (as the case may
be):
(a) any change in the assets, liabilities, financial condition or
operating results from that reflected in the Financial Statements, except
changes in the ordinary course of business that have not been, in the aggregate,
materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting its assets, properties, financial
condition, operations, results, prospects or business (as such business is
presently conducted and as it is proposed to be conducted);
(c) any waiver of a valuable right or of a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or encumbrance or
payment of any obligation, except in the ordinary course of business and that is
not
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material to its assets, properties, financial condition, operating results or
business (as such business is presently conducted and as it is proposed to be
conducted);
(e) any material change or amendment to a material contract or
arrangement by which the Company or any Company Subsidiary or any of their
respective assets or properties are bound or subject;
(f) any material change in any compensation arrangement or agreement
with any employee;
(g) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
(h) any resignation or termination of employment of any key officer;
and the Company, to the best of its knowledge, does not know of the impending
resignation or termination of employment of any such officer;
(i) receipt of notice that there has been a loss of, or material order
cancellation by, any major customer;
(j) any mortgage, pledge, transfer of a security interest in, or lien,
created, with respect to any material properties or assets, except liens for
taxes not yet due or payable;
(k) any loans or guarantees made to or for the benefit of the
employees, officers or directors, or any members of their immediate families,
other than travel advances and other advances made in the ordinary course of its
business;
(1) any declaration, setting aside or payment or other distribution in
respect of any capital stock, or any direct or indirect redemption, purchase or
other acquisition of any of such stock;
(m) to the best of the Company's knowledge, any other event or
condition of any character that might materially and adversely affect the
assets, properties, financial condition, operating results or business of the
Company or any Company Subsidiary (as such business is presently conducted and
as it is proposed to be conducted); or
(n) any agreement or commitment by the Company or any Company
Subsidiary to do any of the things described in this Section 3.09.
3.10 Title to Properties; Encumbrances. Each of the Company and the Company
Subsidiaries has good, valid and marketable title to all the properties and
assets which it purports to own (real, personal and mixed, tangible and
intangible), including, without limitation, all the properties and assets
reflected in the Balance Sheet (except for personal property having an aggregate
book value not in excess of $10,000 sold since the
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date of the Balance Sheet in the ordinary course of business and consistent with
past practice), and all the properties and assets purchased by the Company and
Company Subsidiaries since the date of the Balance Sheet, which subsequently
acquired properties and assets (other than inventory and short term investments)
are listed in Section 3.10 of the Disclosure Schedule. All properties and assets
reflected in the Balance Sheet have a fair market or realizable value at least
equal to the value thereof as reflected therein, and all such properties and
assets are free and clear of all title defects or objections, liens, claims,
charges, security interests or other encumbrances of any nature whatsoever
including, without limitation leases, chattel mortgages, conditional sales
contracts, collateral security arrangements and other title or interest
retention arrangements, and are not, in the case of real property, subject to
any rights of way, building use restrictions, exceptions, variances,
reservations or limitations of any nature whatsoever except, with respect to all
such properties and assets, (a) liens shown on the Balance Sheet as securing
specified liabilities or obligations and liens incurred in connection with the
purchase of property and/or assets, if such purchase was effected after the date
of the Balance Sheet, with respect to which no default exists; (b) minor
imperfections of title, if any, none of which are substantial in amount,
materially detract from the value or impair the use of the property subject
thereto, or impair the operations of the Company or any Company Subsidiary and
which have arisen only in the ordinary course of business and consistent with
past practice since the date of the Balance Sheet; and (c) liens for current
taxes not yet due. The rights, properties and other assets presently owned,
leased or licensed by the Company and/or the Company Subsidiaries and described
elsewhere in this Agreement include all rights, properties and other assets
necessary to permit the Company and the Company Subsidiaries to conduct their
businesses in all material respects in the same manner as their businesses have
been conducted prior to the date hereof.
3.11 Plant and Equipment. The plants, structures and equipment of the
Company and each Company Subsidiary are structurally sound with no known defects
and are in good operating condition and repair and are adequate for the uses to
which they are being put; and none of such plants, structures or equipment are
in need of maintenance or repairs except for ordinary, routine maintenance and
repairs which are not material in nature or cost. Except as set forth in Section
3.11 of the Disclosure Schedule, neither the Company nor any Company Subsidiary
has received notification that it is in violation of any applicable building,
zoning, anti-pollution, health or other law, ordinance or regulation in respect
of its plants or structures or their operations and no such violation exists.
3.12 Patents, Trademarks, Trade Names, Etc. The Company and each Company
Subsidiary has sufficient title and ownership of all patents, trademarks,
service marks, trade names, copyrights, trade secrets, information, proprietary
rights and processes necessary for its business as now conducted without any
conflict with or infringement of the rights of others. Section 3.12 of the
Disclosure Schedule contains an accurate and complete description of (a) all
patents, trademarks, trade names and copyrights used or proposed to be used by
the Company or any Company Subsidiary, all applications therefor, and a summary
of the terms of all licenses and other agreements relating thereto and (b) a
summary of the terms of all agreements relating to technology,
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know-how or processes which the Company or any Company Subsidiary is licensed or
authorized to use by others. Except as set forth in Section 3.12 of the
Disclosure Schedule, the Company and each Company Subsidiary has the sole and
exclusive right to use the patents, trademarks, trade names, copyrights,
technology, know-how and processes referred to in the Disclosure Schedule, and
the consummation of the transactions contemplated hereby will not alter or
impair any such rights; no claims have been asserted by any person to the use of
any such patents, trademarks, trade names, copyrights, technology, know-how or
processes or challenging or questioning the validity or effectiveness of any
such license or agreement, and the Company does not know of any valid basis for
any such claim; and the use of such patents, trademarks, trade names,
copyrights, technology, know-how or processes by the Company or any Company
Subsidiary does not infringe on the rights of any person.
3.13 Agreements in Full Force and Effect; Action.
(a) Section 3.13 of the Disclosure Schedule sets forth a list of all
contracts material to the business and operations of the Company and each
Company Subsidiary. All contracts, agreements, plans, leases, policies and
licenses referred to in the Disclosure Schedule are valid and in full force and
effect, and true copies thereof have been initialed and heretofore delivered to
Beechtree.
(b) Except for agreements explicitly contemplated hereby and disclosed
herein, there are no agreements, understandings or proposed transactions between
the Company or any Company Subsidiary and any of their respective officers,
directors, affiliates, or any affiliate thereof.
(c) There are no agreements, understandings, instruments, contracts,
proposed transactions, judgments, orders, writs or decrees to which the Company
or any Company Subsidiary is a party or by which any of them is bound that may
involve (i) obligations (contingent or otherwise) of, or payments to the Company
in excess of, in the aggregate, $5,000, or (ii) the license of any patent,
copyright, trade secret or other proprietary right to or from the Company or any
Company Subsidiary, or (iii) provisions restricting or affecting the
development, manufacture or distribution of the Company's or any Company
Subsidiary's products or services, or (iv) indemnification by the Company or any
Company Subsidiary with respect to infringements of proprietary rights.
(d) Neither the Company nor any Company Subsidiary has (i) declared or
paid any dividends or authorized or made any distribution upon or with respect
to any class or series of its capital stock, (ii) incurred any indebtedness for
money borrowed or any other liabilities individually in excess of $25,000 or, in
the case of indebtedness and/or liabilities individually less than $5,000, in
excess of $50,000 in the aggregate, (iii) made any loans or advances to any
person, other than ordinary advances for travel expenses, or (iv) sold,
exchanged or otherwise disposed of any of its assets or rights, other than the
sale of its inventory in the ordinary course of business.
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(e) For the purposes of subsections (c) and (d) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
(f) Neither the Company nor any Company Subsidiary is a party to nor
are any of them bound by any contract, agreement or instrument, or subject to
any restriction under their respective Certificates of Incorporation or By-Laws
(or other organizational documents) that adversely affects their business as now
conducted or as proposed to be conducted in the Business Plan, its properties or
its financial condition.
(g) Neither the Company nor any Company Subsidiary has engaged in the
past three (3) months in any discussion (i) with any representative of any
corporation or corporations regarding the consolidation or merger of the Company
or any Company Subsidiary with or into any such corporation or corporations,
(ii) with any corporation, partnership, association or other business entity or
any individual regarding the sale, conveyance or disposition of all or
substantially all of the assets of the Company or any Company Subsidiary or a
transaction or series of related transactions in which more than fifty percent
(50%) of the voting power of the Company or any Company Subsidiary is disposed
of, or (iii) regarding any other form of acquisition, liquidation, dissolution
or winding up of the Company or any Company Subsidiary.
3.14 Related-Party Transactions. No employee, officer, or director of the
Company or any Company Subsidiary or member of his or her immediate family is
indebted to the Company or any Company Subsidiary, nor is the Company or any
Company Subsidiary indebted (or committed to make loans or extend or guarantee
credit) to any of them. To the best of the Company's knowledge, none of such
persons has any direct or indirect ownership interest in any firm or corporation
with which the Company or any Company Subsidiary is affiliated or with which the
Company has a business relationship, or any firm or corporation that competes
with the Company, except that employees, officers, or directors of the Company
and members of their immediate families may own, directly or indirectly, up to
two percent (2%) of the issued and outstanding securities in companies, the
securities of which are regularly traded on a national securities exchange or in
the over-the-counter market, that may compete with the Company. No member of the
immediate family of any officer or director of the Company is directly or
indirectly interested in any material contract with the Company.
3.15 Permits. The Company and each Company Subsidiary has all franchises,
permits, licenses and similar authority necessary for the conduct of its
business as now being conducted by it, the lack of which could materially and
adversely affect the business, properties, prospects, or financial condition of
the Company or any Company Subsidiary, and the Company believes it can obtain,
without undue burden or expense, any similar authority for the conduct of its
business as planned to be conducted. Neither the Company nor any Company
Subsidiary is in default in any material respect under any of such franchises,
permits, licenses, or other similar authority.
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3.16 Environmental and Safety Laws. To the best of its knowledge, neither
the Company nor any Company Subsidiary is in violation of any applicable
statute, law or regulation relating to the environment or occupational health
and safety, and to the best of its knowledge, no material expenditures are or
will be required in order to comply with any such existing statute, law or
regulation.
3.17 Manufacturing and Marketing Rights. Except as Described in Section
3.17 of the Disclosure Schedule, neither the Company nor any Company Subsidiary
has granted rights to manufacture, produce, assemble, license, market, or sell
its products to any other person and is not bound by any agreement that affects
the Company's or any Company Subsidiary's exclusive right to develop,
manufacture, assemble, distribute, market or sell its products.
3.18 Use of Proceeds. The proceeds from the sale of the Shares shall be
applied substantially as set forth in Section 3.18 of the Disclosure Schedule.
3.19 Business Plan. The Business Plan previously delivered to each Investor
has been prepared in good faith by the Company and does not contain any untrue
statement of a material fact nor does it omit to state a material fact necessary
to make the statements made therein not misleading, except that with respect to
projections contained in the Business Plan, the Company represents only that
such projections were prepared in good faith and that the Company reasonably
believes there is a reasonable basis for such projections.
3.20 Employee Benefit Plans. The Company does not have any Employee Benefit
Plan as defined in the Employee Retirement Income Security Act of 1974.
3.21 Tax Returns; Payments and Elections. The Company and each Company
Subsidiary has filed all tax returns and reports as required by law. These
returns and reports are true and correct in all material respects. The Company
and each Company Subsidiary has paid all taxes and other assessments due, except
those contested by it in good faith that are listed in Section 3.21 of the
Schedule of Exceptions. The provision for taxes of the Company (and each Company
Subsidiary) as shown in the Financial Statements is adequate for taxes due or
accrued as of the date thereof. The Company has not elected pursuant to the
Internal Revenue Code of 1986, as amended (the "Code"), to be treated as a
Subchapter S corporation or a collapsible corporation pursuant to Section
1362(a) or Section 341(f) of the Code, nor has it made any other elections
pursuant to the Code (other than elections that relate solely to methods of
accounting, depreciation or amortization) that would have a material effect on
the Company, its financial condition, its business as presently conducted or
proposed to be conducted or any of its properties or material assets.
3.22 Insurance. The Company and each Company Subsidiary has in full force
and effect fire and casualty insurance policies, with extended coverage,
12
sufficient in amount (subject to reasonable deductibles) to allow it to replace
any of its properties that might be damaged or destroyed. On the Closing Date,
the Company will have in full force and effect term life insurance, payable to
the Company, on the lives of each of ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ and Diamond
Lauffin in an amount of no less than $1,000,000 and no more than $3,000,000 for
each such person. The Company has in full force and effect products liability
and errors and omissions insurance in amounts customary for companies similarly
situated.
3.23 Minute Books. The minute books of the Company and each Company
Subsidiary have been delivered to Beechtree and contain a complete summary of
all meetings of directors and stockholders since the time of incorporation and
reflect all transactions referred to in such minutes accurately in all material
respects.
3.24 Labor Agreements and Actions. Neither the Company nor any Company
Subsidiary is bound by or subject to (and none of their respective assets or
properties is bound by or subject to) any written or oral, express or implied,
contract, commitment or arrangement with any labor union, and no labor union has
requested or, to the best of the Company's knowledge, has sought to represent
any of the employees, representatives or agents of the Company or any Company
Subsidiary. There is no strike or other labor dispute involving the Company or
any Company Subsidiary pending, or to the best of the Company's knowledge,
threatened, that could have a material adverse effect on the assets, properties,
financial condition, operating results, or business of the Company or any
Company Subsidiary (as such business is presently conducted and as it is
proposed to be conducted), nor is the Company aware of any labor organization
activity involving its employees. The Company is not aware that any officer or
key employee, or that any group of key employees, intends to terminate their
employment with the Company or any Company Subsidiary, nor does the Company or
any Company Subsidiary have a present intention to terminate the employment of
any of the foregoing. The employment of each officer and employee of the Company
and any Company Subsidiary is terminable at the will of the Company. To the best
of its knowledge, the Company and each Company Subsidiary has complied in all
material respects with all applicable state and federal equal employment
opportunity and other laws related to employment.
3.25 Litigation. There is no action, suit, proceeding or investigation
pending or currently threatened against the Company or any Company Subsidiary
that questions the validity of this Agreement or the Registration Rights
Agreement, or the right of the Company to enter into such agreements, or to
consummate the transactions contemplated hereby or thereby, or that might
result, either individually or in the aggregate, in any material adverse changes
in the assets, condition, affairs or prospects of the Company or any Company
Subsidiary, financially or otherwise, or any change in the current equity
ownership of the Company or any Company Subsidiary, nor is the Company aware
that there is any basis for the foregoing. The foregoing includes, without
limitation, actions, suits, proceedings or investigations pending or threatened
(or any basis therefor known to the Company) involving the prior employment of
any of the Company's or any Company Subsidiary's employees, their use in
connection with the
13
Company's or any Company Subsidiary's business of any information or techniques
allegedly proprietary to any of their former employers, or their obligations
under any agreements with prior employers. Neither the Company nor any Company
Subsidiary is a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company or any Company Subsidiary currently pending or that the Company or any
Company Subsidiary intends to initiate.
3.26 Governmental Consents. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
this Agreement.
3.27 Offering. Subject in part to the truth and accuracy of each Investor's
representations set forth in Article IV of this Agreement, the offer, sale and
issuance of the Shares as contemplated by this Agreement are exempt from the
registration requirements of the Act, and neither the Company nor any authorized
agent acting on its behalf will take any action hereafter that would cause the
loss of such exemption.
3.28 Valid Issuance of Shares. The Shares that are being purchased by the
Investors hereunder, when issued, sold and delivered in accordance with the
terms of this Agreement for the consideration expressed herein, will be duly and
validly issued, fully paid, and nonassessable, and will be free of restrictions
on transfer other than restrictions on transfer under this Agreement and under
applicable state and federal securities laws.
3.29 Compliance with Other Instruments.
(a) Neither the Company nor any Company Subsidiary is in violation or
default in any material respect of any provision of its Certificate of
Incorporation or By-Laws or other organizational documents, as the case may be,,
or in any material respect of any instrument, judgment, order, writ, decree or
contract to which it is a party or by which it is bound, or, to the best of its
knowledge, of any provision of any federal or state statute, rule or regulation
applicable to the Company. The execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby will not
result in any such violation or be in conflict with or constitute, with or
without the passage of time and giving of notice, either a default under any
such provision, instrument, judgment, order, writ, decree or contract or an
event that results in the creation of any lien, charge or encumbrance upon any
assets of the Company or the suspension, revocation, impairment, forfeiture, or
nonrenewal of any material permit, license, authorization, or approval
applicable to the Company, its business or operations or any of its assets or
properties.
(b) The Company and each Company Subsidiary has avoided every
condition, and has not performed any act, the occurrence of which would result
in
14
the Company's loss of any right granted under any license, distribution or other
agreement.
3.30 Compliance with Law. The operations of the Company and the Company
Subsidiaries have been conducted in accordance with all applicable laws,
regulations and other requirements of all national governmental authorities, and
of all states, municipalities and other political subdivisions and agencies
thereof, having jurisdiction over the Company and the Company Subsidiaries,
including, without limitation, all such laws, regulations and requirements
relating to antitrust, consumer protection, currency exchange, equal
opportunity, health, occupational safety, pension, securities and
trading-with-the-enemy matters. Neither the Company nor any Company Subsidiary
has received any notification of any asserted present or past failure by the
Company or any Company Subsidiary to comply with such laws, rules or
regulations.
3.31 Backlog. At November 30, 2000, the Company's backlog of firm orders
for products and services was $146,311.
3.32 Brokers and Finders. Except for certain fees payable to Direct
pursuant to the terms of a Placement Agency Agreement dated the date hereof
between Direct and the Company, neither the Company nor any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated by this Agreement. The Company agrees to
indemnify and hold the Investors and their officers, directors, employees and
agents harmless against any liability for commissions, fees or other
compensation to any broker or financial advisor or other person or firm (and the
costs and expenses of defending against such liability) for which the Company or
any Company Subsidiary, or any of their respective employees or representatives,
are responsible.
3.32 Disclosure. The Company has fully provided each Investor with all the
information that such Investor has requested for deciding whether to purchase
the Shares and all information that the Company believes is reasonably necessary
to enable such Investor to make such decision. Neither this Agreement nor any
other statements or certificates made or delivered in connection herewith or
therewith contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements herein or therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each Investor hereby represents and warrants to the Company, severally
as to itself, as follows:
4.01 Organization; Authority. The Investor, if a corporation or other legal
entity, was organized, and is validly existing and in good standing under the
laws of
15
the jurisdiction of its organization with the requisite power and authority to
enter into and to consummate the transactions contemplated by this Agreement and
to carry out its obligations hereunder. The acquisition of the Shares to be
acquired hereunder by the Investor has been duly authorized by all necessary
action on the part of the Investor. This Agreement has been duly executed and
delivered by each Investor and constitutes the valid and legally binding
obligation of the Investor, enforceable against it in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of equity.
4.02 Purchase Entirely for Own Account. This Agreement is made with each
Investor in reliance upon the Investor's representation to the Company, which by
the Investor's execution of this Agreement the Investor hereby confirms, that
the Shares to be received by the Investor will be acquired for investment for
such Investor's own account, not as a nominee or agent, and not with a view to
the resale or distribution of any part thereof, and that such Investor has no
present intention of selling, granting any participation in, or otherwise
distributing the same, without in any way limiting the Investors' right to
resell the Shares pursuant to the Registration Statement. By executing this
Agreement, the Investor further represents that such Investor does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to any of the Shares.
4.03 Disclosure of Information. The Investor believes it has received all
the information it considers necessary or appropriate for deciding whether to
purchase the Shares. Each Investor further represents that it has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the offering of the Shares and the business, properties,
prospects and financial condition of the Company. The foregoing, however, does
not limit or modify the representations and warranties of the Company in Section
3 of this Agreement or the right of the Investors to rely thereon.
4.04 Brokers. No Investor has entered into an agreement for the payment of
any broker's or finder's fee or commission in connection with the purchase or
sale of the Shares. Each Investor agrees to indemnify and hold the Company and
its officers, directors, employees and agents harmless against any liability for
commissions, fees or other compensation in the nature of a broker's or finder's
fee to any broker or other nature of a broker's or finder's fee to any broker or
other person or firm (and the costs and expenses of defending against such
liability) for which the Investor, or any of its employees or representatives,
are responsible.
4.05 No Registration. Each Investor is aware that the Offering has not been
registered under the Securities Act, or any state securities laws or regulations
in reliance upon exemptions pursuant to Regulation S under the Securities Act,
and similar exemptions under state law. The Investor will not offer or sell the
Shares in the United States unless they are registered or are exempt from
registration under the Securities Act, and any applicable state securities laws
or regulations. Other than as provided in the
16
Registration Rights Agreement, the Company has no obligation to register the
Shares under the Securities Act.
4.06 Legend. Each Investor is also aware that a legend will be placed on
any certificate or certificates evidencing the Shares stating that they have not
been registered under the Securities Act and setting forth or referring to the
restrictions on transfers and sales thereof. The Company will place stop
transfer instructions against the Shares and the certificates therefor to
restrict the transfer thereof, except as may be prescribed by the Securities
Act.
4.07 Knowledge. Each Investor, or his adviser, has such knowledge and
experience in financial and business matters that he is capable of evaluating
the merits and risks of, and protecting his interests in connection with, an
investment in the Shares. Each Investor is aware of the risks involved in his
investment herein.
4.08 No Other Representations. Except as set forth in the Offering
Documents or herein, no representations, assurances or warranties have been made
to the Investor, or his adviser, by the Company or by the Placement Agent, or by
any of their respective officers, directors, agents, employees or affiliates,
nor anyone else on their behalf, concerning, among others, the future
profitability of the Company or the Subscriber's investment in it, and in
entering into this transaction the Subscriber is not relying upon any
information, other than that contained in the Documents and the attachments
thereto and representations herein, and the results of his, or his adviser's,
own independent investigation.
4.09 Reoffer. The Investor will not offer or sell the Shares (which term
shall include any pre-arrangement for a purchase by a U.S. person or other
person in the U.S.) directly or indirectly, in the United States or to any
natural person who is a resident of the United States or to any other "U.S.
person" (as defined in Section 4.10 below) or for the account or benefit of any
"U.S. person" (other than a "distributor", as defined in Regulation S) at any
time on or prior to one year following the Closing and thereafter only if
registered under the Securities Act and all applicable state laws or an
exemption from the registration requirements of the Securities Act and similar
state laws is available.
4.10 Not a U.S. Person. The Investor is neither a U.S. person nor acquiring
the Shares for the account or benefit of any U.S. person. An Investor, if other
than a natural person, was not formed for the purpose of acquiring the Notes,
the Shares.
The Investor understands that a "U.S. person", as defined by Regulation S
in Rules 901 through 905 promulgated under the Securities Act ("Regulation S"),
includes any natural person resident in the United States; any partnership or
corporation organized or incorporated under the laws of the United States; any
estate of which any executor or administrator is a "U.S. person"; any trust of
which any trustee is a "U.S. person"; any agency or branch of a foreign entity
located in the United States; any non-discretionary account or
17
similar account (other than an estate or trust) held by a dealer or other
fiduciary for the benefit or account of a "U.S. person"; any discretionary
account or similar account (other than an estate or trust) held by a dealer or
other fiduciary organized, incorporated, or (if an individual) resident in the
United States; and any partnership or corporation organized or incorporated
under the laws of a jurisdiction other than the United States which was formed
by a "U.S. person" principally for the purpose of investing in securities not
registered under the Act, unless it is organized or incorporated, and owned, by
accredited investors (as defined in Rule 501(a) of Regulation D promulgated
under the Act) who are not natural persons, estates or trusts.
4.11 Situs. The Investor is making this subscription from his residence or
offices at the address set forth below. The Investor understands that the
exemption afforded by Regulation S requires that the purchasers of the
securities not be in the United States when the offer is made. The purchase of
the Shares hereunder by the Investor is in accordance with all securities and
other laws of the jurisdiction in which it is incorporated or legally resident.
This Agreement has not been executed or delivered by the Subscriber in the
United States.
4.12 Preexisting Relationship. Each Investor either (a) has a preexisting
personal or business relationship with the Company or any of its officers,
directors or controlling persons or an affiliate of the Company, or with Direct,
or (b) by reason of his business or financial experience or the business or
financial experience of his professional advisor(s) who is (are) unaffiliated
with and who is (are) not compensated, directly or indirectly, by the Company,
or any affiliate or selling agent of the Company, or with Direct, the Investor
can reasonably by assumed to have the capacity to protect its own interests in
connection with this transaction.
4.13 Confidentiality. Each Investor shall keep confidential and shall not
use the trade secrets and other non-public information provided to him by the
Company or its agents in connection with the transactions contemplated hereby.
4.14 Representations and Warranties at Closing. Except as expressly herein
otherwise provided, the representations and warranties of the Investors set
forth in this Agreement shall be true on and as of the Closing as though such
representations and warranties were made on and as of such time.
4.15 Reliance. Each Investor understands and acknowledges that (i) the
Shares to be acquired by him hereunder are being offered and sold to him without
registration under the Securities Act in a private placement that is exempt from
the registration provisions of the Securities Act and (ii) the availability of
such exemption, depends in part on, and the Company will rely upon the accuracy
and truthfulness of, the foregoing representations and the Investor hereby
consents to such reliance.
The Company acknowledges and agrees that the Investors make no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Article IV.
18
ARTICLE V
OTHER AGREEMENTS OF THE PARTIES
5.01 Transfer Restrictions. (a) The Shares may only be disposed of pursuant
to an effective registration statement under the Securities Act, to the Company
or pursuant to an available exemption from or in a transaction not subject to
the registration requirements thereof. In connection with any transfer of any
Shares other than pursuant to an effective registration statement or to the
Company, the Company may require the transferor thereof to provide to the
Company an opinion of counsel selected by the transferor, the form and substance
of which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration under the Securities Act.
Notwithstanding the foregoing, the Company hereby consents to and agrees to
register any transfer of Shares by an Investor to an Affiliate of the Investor,
or any transfers among any such Affiliates the transferee certifies to the
Company that it is an "accredited investor" as defined in Rule 501(a) under the
Securities Act and that it is acquiring any such Shares in accordance with the
representation provided by the original Investor in Article IV. Any Affiliate
transferee shall have the rights of an Investor under this Agreement.
(b) Each Investor agrees to the imprinting, so long as is required by
this Section 5.01(b), of the following legend on the Securities:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") AND REGULATION S THEREUNDER, AND, ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS."
The Company agrees that it will provide each Investor, upon request, with a
certificate or certificates representing the Shares free from such legend at
such time as such legend is no longer required hereunder. The Company may not
make any notation on its records or give instructions to any transfer agent of
the Company which enlarge the restrictions of transfer set forth in this Section
5.01(b).
5.02 Furnishing of Information. As long as any Investor owns Shares, the
Company covenants that, after such time as it becomes subject to the reporting
requirements of the Exchange Act, it shall timely file (or obtain extensions in
respect
19
thereof and file within the applicable grace period) all reports required to be
filed by the Company after the date hereof pursuant to Section 13(a) or 15(d) of
the Exchange Act. If at any time prior to the date on which an Investor may
resell all of its Shares without volume restrictions pursuant to Rule 144(k)
promulgated under the Securities Act (as determined by counsel to the Company
pursuant to a written opinion letter to such effect, addressed and acceptable to
the Company's transfer agent for the benefit of and enforceable by the Investor)
the Company is not required to file reports pursuant to Section 13(a) or 15(d)
of the Exchange Act, it will prepare and furnish to the Investor and make
publicly available in accordance with Rule 144(c) promulgated under the
Securities Act annual and quarterly financial statements, together with a
discussion and analysis of such financial statements in form and substance
substantially similar to those that would otherwise be required to be included
in reports required by Section 13(a) or 15(d) of the Exchange Act in the time
period that such filings would have been required to have been made under the
Exchange Act. The Company further covenants that it will take such further
action as an Investor may reasonably request, all to the extent required from
time to time to enable such person to sell Shares without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act, including the legal opinion referenced
above in this Section. Upon the request of any such person, the Company shall
deliver to such person a written certification of a duly authorized officer as
to whether it has complied with such requirements. In connection with any future
access or diligence of the Company by an Investor, the Company agrees that its
will not furnish to the Investor any non-public information unless it first
discloses in writing that such information is of such character and the Investor
thereafter agrees to receive such information.
5.03 Blue Sky Laws. In accordance with the Registration Rights Agreement,
the Company shall qualify the Shares under the securities or Blue Sky laws of
such jurisdictions as any Investor may request and shall continue such
qualification at all times until the Investor notifies the Company in writing
that it no longer owns Shares; provided, however, that neither the Company nor
the Company 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.
5.04 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 Shares in
a manner that would require the registration under the Securities Act of the
issue or sale of the Shares to the Investor.
5.05 No Sales of Company Securities. The Company shall not, without the
prior written consent of Beechtree, offer for sale or sell any securities until
a date which is six months after the date upon which the SEC declares the
Registration Statement effective.
20
5.06 Use of Proceeds. Unless otherwise agrees to in writing by Beechtree,
the Company shall use all of the proceeds from the sale of the Shares as
described in Section 3.18 of the Disclosure Schedule. Pending application of the
proceeds derived from the sale of the Shares, the Company will invest such
proceeds in interest bearing accounts and/or short-term, investment grade
interest bearing securities.
5.07 Consulting Agreement with Beechtree Capital, Ltd. At the Closing, the
Company will execute and deliver to Beechtree the form of Consulting Agreement,
a copy of which is attached hereto as Exhibit E (the "Consulting Agreement"),
pursuant to which the Company engages Beechtree to provide certain financial and
business advisory services for a period of five years after the Closing Date for
the compensation and on the other terms and conditions therein set forth.
5.08 Lock-Up of Outstanding Common Stock. On or before the Closing Date,
the Company will have entered into a lock-up agreement with each person holding
shares of Common Stock immediately prior to the Closing, a copy of the form of
which is attached hereto as Exhibit F (the "Lock-Up Agreement"), pursuant to
which such holder agrees, except as provided therein, to refrain from selling or
otherwise disposing of his shares of Common Stock for a one-year period
commencing on the Closing Date. The Company will deliver to Beechtree a copy of
each such Lock-Up Agreement at the Closing.
5.09 Management Employment Agreements. On or before the Closing Date, the
Company will have entered into an employment agreement, in form and substance
reasonably satisfactory to the Company and Beechtree, with each of the persons
named on Exhibit G hereto providing for the employment by the Company of such
persons commencing upon the Closing.
5.10 Notice of Breaches. Each of the Company and the Investors shall give
prompt written notice to the other of any breach by it of any representation,
warranty or other agreement contained in the Transaction Documents, as well as
any events or occurrences arising after the date hereof, which would reasonably
be likely to cause any representation or warranty or other agreement of such
party, as the case may be, contained in the Transaction Documents to be
incorrect or breached as of such Closing Date. However, no disclosure by either
party pursuant to this Section shall be deemed to cure any breach of any
representation, warranty or other agreement contained in the Transaction
Documents.
Notwithstanding the generality of the foregoing, the Company shall promptly
notify Beechtree of any notice or claim (written or oral) that it receives from
any lender of the Company to the effect that the consummation of the
transactions contemplated by the Transaction Documents violates or would violate
any written agreement or understanding between the Investors and the Company,
and the Company shall promptly furnish by facsimile to Beechtree a copy of any
written statement in support of or relating to such claim or notice.
21
5.11 Board of Director and Committee Representation. (a) The Company shall
use its best efforts to cause and maintain the election to the Board of
Directors of one representative selected by Beechtree and one representative of
Direct, should Direct so desire, for a period of five years after the Closing
Date. To the extent permitted by law and the applicable exchange on which the
Company's stock is trading, the Control Shareholder agrees to vote any and all
shares of Common Stock and other voting securities of the Company registered in
his name in favor of Beechtree's and Direct's respective nominees to the Board.
(b) The Company shall use its best efforts to appoint each of
Beechtree's and Direct's respective nominees to the Board to serve on its
Executive Committee of the Board of Directors, which such committee shall
consist of up to five (5) persons, for a period of five (5) years. To the extent
permitted by law and the applicable exchange on which the Company's stock is
trading, the Control Shareholder agrees to vote any and all shares of Common
Stock and other voting securities of the Company registered in his name in favor
of Beechtree's and Direct's respective nominees to the Executive Committee.
(c) The Company shall use its best efforts to appoint each of
Beechtree's and Direct's respective nominees to the Board to serve on its Audit
Committee of the Board of Directors, which such committee shall consist of up to
five (5) persons, for a period of five (5) years. To the extent permitted by law
and the applicable exchange on which the Company's stock is trading, the Control
Shareholder agrees to vote any and all shares of Common Stock and other voting
securities of the Company registered in his name in favor of Beechtree's and
Direct's respective nominees to the Audit Committee.
5.12 Consulting Agreement with Direct. As soon as reasonably practicable
after the Closing, the Company shall enter into a services agreement with Direct
in the form attached hereto as Exhibit H.
5.13 No Registration of Other Securities. Except for the Shares and other
"Registrable Securities" (as such term is defined in the Registration Rights
Agreement) to be registered by the Company in the "Registration Statement" (as
such term is defined in the Registration Rights Agreement) in accordance with
the Registration Rights Agreement, the Company shall not, without the prior
written consent of Beechtree, (i) issue or sell any of its or any of its
Affiliates' equity or equity-equivalent securities pursuant to Regulation S
promulgated under the Securities Act, or (ii) register for resale any securities
of the Company for a period of not less than one year after the date that the
Registration Statement covering the Registrable Securities is declared effective
by the SEC.
5.14 Certain Securities Laws Disclosures; Publicity. The Company and
Beechtree 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
22
or delayed, except that no prior consent shall be required if such disclosure is
required by law, in which such case the disclosing party shall provide the other
party with prior notice of such public statement.
5.14 Review and Approval of Company Budget. One month prior to the
conclusion of the 2000 calendar year, the Company shall furnish to Beechtree a
copy of the Company's proposed budget for the 2001 calendar year. Beechtree, as
representative of the Investors, shall have the right to review and approve said
budget. Beechtree shall communicate its comments on said budget, if any, to the
Company in writing two weeks prior to the conclusion of calendar year 2000. The
Company shall deliver to Beechtree a revised budget for calendar year 2001 that
reflects the changes requested by Beechtree one week prior to the conclusion of
the 2000 calendar year.
ARTICLE VI
COVENANTS OF THE COMPANY
The Company hereby covenants and agrees with each Investor as follows:
6.01 Full Access. The Company shall, and shall cause each Company
Subsidiary to, afford to Beechtree, its counsel, accountants and other
representatives full access to the plants, offices, warehouses, properties,
books and records of the Company and each Company Subsidiary in order that
Beechtree may have full opportunity to make such investigations as it shall
desire to make of the affairs of the Company and the Company Subsidiaries; and
the Company will cause its officers and accountants to furnish such additional
financial and operating data and other information as the Investors'
Representative shall from time to time request, provided, however, that any such
investigation shall be conducted in such a manner as not to interfere
unreasonably with the operation of the businesses of the Company and the Company
Subsidiaries.
6.02 Consents of Company Lenders, Etc. The Company shall, and shall cause
each Company Subsidiary to, use its best efforts to obtain at the earliest
practicable date and prior to the Closing all consents necessary to the
consummation of the transactions contemplated hereby and will provide to
Beechtree copies of each such consent promptly after it is obtained.
6.03 Other Transactions. Neither the Company nor its Board of Directors
shall enter into any discussions concerning, or approve or recommend to the
holders of any shares of its capital stock, any merger, consolidation,
disposition of all or substantially all of its business, properties or assets
(other than pursuant to this Agreement), any tender offer, acquisition or other
business combination, or proposal therefor, or furnish or cause to be furnished
any information concerning the business, properties or assets of the Company to
any party in connection with any tender offer or other transaction involving the
acquisition of the Company or all or any substantial part of its assets by any
person other than the Investors or their duly authorized representatives.
23
6.04 Covenant to Satisfy Conditions. Each of the Company and the Company
Subsidiaries will use its best efforts to insure that the conditions set forth
in Article VI hereof are satisfied, insofar as such matters are within the
control of any of them.
6.05 Certificates. At the Closing, the Company will furnish Beechtree with
such certificates of its officers and others to evidence compliance with the
covenants set forth in this Article VI as may be reasonably requested by
Beechtree.
ARTICLE VII
CONDITIONS TO THE COMPANY'S OBLIGATIONS
Each and every obligation of the Company under this Agreement to be
performed on or before the Closing shall be subject to the satisfaction, on or
before the Closing, of each of the following conditions, unless waived in
writing by the Company:
7.01 Representations and Warranties True. The representations and
warranties of each Investor contained herein shall be in all material respects
true and accurate as of the date when made and at and as of the Closing as
though such representations and warranties were made at and as of such date,
except for changes expressly permitted or contemplated by the terms of this
Agreement.
7.02 Performance. Each Investor shall have performed and complied with all
agreements, obligations and conditions required by this Agreement to be
performed or complied with by them on or prior to the Closing.
7.03 No Governmental Proceeding or Litigation. No suit, action,
investigation, inquiry or other proceeding by any governmental body or other
person or legal or administrative proceeding shall have been instituted or
threatened which questions the validity or legality of the transactions
contemplated hereby.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF THE INVESTORS
Each and every obligation of the Investors under this Agreement to be
performed on or before the Closing shall be subject to the satisfaction, on or
before the Closing, of each of the following conditions, unless waived in
writing by Beechtree:
8.01 Representations and Warranties True. The representations and
warranties contained in Article III hereof, the Disclosure Schedule and in all
certificates and other documents delivered and to be delivered by the Company,
the Control Shareholder and each Company Subsidiary to the Investors or their
representatives pursuant hereto or in connection with the transactions
contemplated hereby shall be true, complete and accurate as of the date when
made and at and as of the Closing Date as
24
though such representations and warranties were made at and as of such date,
except for changes expressly permitted or contemplated by the terms of this
Agreement.
8.02 Performance. The Company and each Company Subsidiary shall have
performed and complied with all agreements, obligations and conditions required
by this Agreement to be performed or complied with by them on or prior to the
Closing.
8.03 Investigations; Etc. Neither any investigation of the Company and the
Company Subsidiaries by the Investors or Beechtree, nor the Disclosure Schedule
or any supplement thereto nor any other document delivered to the Investors or
Beechtree as contemplated by this Agreement, shall have revealed any facts or
circumstances which, in the sole and exclusive judgment of any of the Investors
or Beechtree, reflect in a material adverse way on the financial condition,
assets, liabilities (absolute, accrued, contingent or otherwise), reserves,
business, operations or prospects of the Company or any Company Subsidiary.
8.04 No Proceeding or Litigation. There shall not be threatened, instituted
or pending any suit, action, investigation, inquiry or other proceeding by or
before any United States or foreign court or governmental or other regulatory or
administrative agency or commission requesting or looking toward an order,
judgment or decree which (a) in the judgment of Beechtree might have a material
adverse effect on the Investors or any of their affiliates or (b) in the sole
and exclusive judgment of Beechtree might have a material adverse effect on the
business or financial condition of the Company or any Company Subsidiary.
8.05 Material Change. From the date of the Balance Sheet to the Closing
Date, neither the Company nor any Company Subsidiary shall have suffered any
material adverse change (whether or not such change is referred to or described
in any supplement to the Disclosure Schedule) in its business, prospects,
financial condition, working capital, assets, liabilities (absolute, accrued,
contingent or otherwise), reserves or operations.
8.06 Opinion of the Company's Counsel. The Company shall have delivered an
opinion in favor of the Investors from each of ▇▇▇▇▇ ▇▇▇▇ LLC, as to matters of
United States law, and ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, as to matters of United Kingdom
law, dated as of the Closing Date, comprising the matters set forth in Exhibit I
hereto.
8.07 Consents Obtained. All consents referred to in Sections 3.05, 3.26 and
3.29 shall have been obtained.
25
ARTICLE IX
CONDUCT OF THE COMPANY'S BUSINESS PENDING THE CLOSING
Pending the Closing, and except as otherwise expressly consented to or
approved by Beechtree in writing:
9.01. Regular Course of Business. Each of the Company and the Company
Subsidiaries will carry on its respective business diligently and substantially
in the same manner as heretofore conducted, and neither the Company nor any
Company Subsidiary shall institute any new methods of manufacture, purchase,
sale, lease, management, accounting or operation or engage in any transaction or
activity, enter into any agreement or make any commitment, except in the
ordinary course of business and consistent with past practice.
9.02. Amendments. No change or amendment shall be made in the Certificate
of Incorporation or By-Laws of the Company or any Company Subsidiary.
9.03. Capital Changes; Dividends; Redemptions. Neither the Company nor any
Company Subsidiary shall, for a period of one year after the Closing Date
without the prior written consent of Beechtree, issue or sell any shares of its
capital stock or other securities except pursuant to the valid conversion of
securities or exercise of options described in Section 3.02, acquire directly or
indirectly, by redemption or otherwise, any such capital stock, reclassify or
split-up any such capital stock, declare or pay any dividends thereon in cash,
securities or other property or make any other distribution with respect
thereto, or grant or enter into any options, warrants, calls or commitments of
any kind with respect thereto.
9.04. Subsidiaries. Neither the Company nor any Company Subsidiary will
organize any new subsidiary, acquire any capital stock or other equity
securities of any corporation or acquire any equity or ownership interest in any
business.
9.05. Organization. Each of the Company and the Company Subsidiaries shall
use its best efforts to preserve its corporate existence and business
organization intact.
9.06. Certain Changes. Neither the Company nor any Company Subsidiary
shall, without the prior written consent of Beechtree:
(a) Borrow or agree to borrow any funds or incur, or assume or become
subject to, whether directly or by way of guarantee or otherwise, any obligation
or liability (absolute or contingent), except obligations and liabilities
incurred in the ordinary course of business and consistent with past practice;
(b) Pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, contingent or otherwise), other than the payment, discharge
or satisfaction in the ordinary course of business and consistent with past
practice of liabilities or obligations reflected or reserved against in the
Balance Sheet or incurred in the ordinary course of business and consistent with
past practice since the date of the Balance Sheet;
26
(c) Permit or allow any of its property or assets (real, personal or
mixed, tangible or intangible) to be subjected to any mortgage, pledge, lien or
encumbrance, except for those of a kind permitted under Section 3.10 hereof;
(e) Grant any general increase in the compensation of officers or
employees (including any such increase pursuant to any bonus, pension, profit
sharing or other plan or commitment) or any increase in the compensation payable
or to become payable to any officer or employee;
(i) Pay, loan or advance any amount to, or sell transfer or lease any
properties or assets to, or enter into any agreement or arrangement with, any of
its officers, directors agents or any affiliate or Associate of any of its
officers, directors or agents, except for directors' fees and compensation to
officers at rates not exceeding the rates of compensation paid during the fiscal
year ended March 31, 2000.
(k) Agree, whether in writing or otherwise, to do any of the
foregoing. 9.07 Compliance With Laws. The Company and each Company Subsidiary
shall duly comply with all laws applicable to it and its properties, operations,
business and employees.
ARTICLE X
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
BREACHES; INDEMNIFICATION BY NEXSAN; ARBITRATION
10.01. Investigations; Survival of Warranties. All of the representations
and warranties of the Company, Nexsan and the Control Shareholder on the one
hand, and the Investors, on the other hand, contained herein or in any
certificates or other documents delivered prior to or at the Closing shall not
be deemed waived or otherwise affected by any investigation made by any party
hereto. Each and every such representation and warranty shall survive the
Closing hereunder and continue in full force and effect for three years
thereafter, even if the damaged party knew or had reason to know of any
misrepresentation or breach of warranty at the time of Closing.
10.02. Indemnification by Nexsan. (a) Subject to the provisions of Sections
10.01, relating to the survival of the representations and warranties made by
the Company, Nexsan and the Control Shareholder in this Agreement, and Sections
10.02(b) and 10.03, below, Nexsan shall indemnify and hold harmless the
Investors in respect of any and all Adverse Consequences reasonably suffered or
incurred by the Investors through and after the date of the claim for
indemnification (including any Adverse Consequences the Investors may suffer
after the end of the survival period set forth in Section 10.01, above,) in
connection with each and all of the following:
27
(i) the breach of any representation or warranty made by the
Company, Nexsan and the Control Shareholder in this Agreement that results in a
Material Adverse Effect;
(ii) the breach of any covenant, agreement or obligation of the
Company, Nexsan and the Control Shareholder in this Agreement that results in a
Material Adverse Effect; and
(iii) any misrepresentation contained in any statement or
certificate furnished by the Company, Nexsan and the Control Shareholder in this
Agreement that results in a Material Adverse Effect.
(b) Claims for Indemnification. Whenever any claim shall arise for
indemnification hereunder, the Investors shall promptly notify Nexsan in writing
in accordance with Section 12.03 hereof, of the claim and, when known, the facts
constituting the basis for such claim. In the event of any claim by a third
party, the notice to the Company shall specify, if known, a reasonable estimate
of the amount of the liability arising therefrom.
10.03. Arbitration. The determination as to whether any breach or alleged
breach of this Agreement shall result in a Material Adverse Effect on the
Company and the amount and nature of any remedy or dollar amount of
indemnification shall be settled by arbitration before a single arbitrator in
the City and State of New York, Borough of Manhattan, in accordance with the
rules of the American Arbitration Association. The arbitrator's determination
shall be final and binding on the parties. If the parties are unable to agree on
an arbitrator within 30 days following notice of the dispute, then each of the
parties shall select an arbitrator, and those two persons shall in turn, select
the third arbitrator who shall act as the sole arbitrator of the dispute. Any
judgment on the award rendered by the arbitrator in such arbitration proceeding
may be entered in any court having jurisdiction thereof. The fees and expenses
of the arbitration shall be borne as determined by the arbitrator. The
arbitrator will not be authorized to award punitive damages.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
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ARTICLE XI
TERMINATION AND ABANDONMENT
11.01. Methods of Termination. The transactions contemplated herein may be
terminated and/or abandoned at any time but not later than the Closing:
(a) By mutual consent of the respective Boards of Directors of the
Company and Beechtree; or
(b) By any of the Investors prior to January 4, 2000, or such later
date as may be established pursuant to Section 1.02 hereof, if any of the
conditions provided for in Article VIII of this Agreement shall not have been
met or waived in writing by the Investors prior to such date; or
(c) By the Board of Directors of the Company prior to January 4,
2000, or such later date as may be established pursuant to Section 1.02 hereof,
if any of the conditions provided for in Article VII of this Agreement shall not
have been met or waived in writing by the Company prior to such date.
11.02. Procedure Upon Termination. In the event of termination and
abandonment by Beechtree or by the Board of Directors of the Company, or both,
pursuant to Section 11.01 hereof, written notice thereof shall forthwith be
given to the other party and the transactions contemplated by this Agreement
shall be terminated and/or abandoned, without further action by any Investor or
the Company. If the transactions contemplated by this Agreement are terminated
and/or abandoned as provided herein:
(a) Each party will redeliver all documents, work papers and other
material of any other party relating to the transactions contemplated hereby,
whether so obtained before or after the execution hereof, to the party
furnishing the same;
(b) No party hereto shall have any liability or further obligation
to any other party to this Agreement except as stated in subparagraphs (a) and
(b) of this Section 11.02, provided, however, that (i) if such termination
and/or abandonment is a result of the failure of any condition set forth in
Article VIII hereof, other than the condition set forth in Section 8.10, then
Beechtree shall be entitled to recover from the Company all out-of-pocket costs
which Beechtree has incurred (including reasonable attorney's fees and
expenses).
ARTICLE XII
MISCELLANEOUS
12.01. Fees and Expenses. Upon the Closing, the Company shall pay to
Beechtree and Direct, forthwith and without further notice (i) $15,000 for its
legal fees and disbursements in connection with the preparation and negotiation
of the Transaction Documents, (ii) $7,000 for their due diligence expenses and
disbursements in connection with the transactions contemplated hereby and (iii)
up to $50,000 for other expenses actually incurred by Beechtree and Direct in
the Company's behalf. The Company agrees to pay to Beechtree and Direct any
other expenses which they may incur in the
29
Company's behalf upon the earlier of the sale by the Company of a minimum of
$3.5 million of its securities or six (6) months from the date hereof. The
Company's covenant and promise to repay Beechtree and Direct the fees and
expenses incurred by them in its behalf shall be unconditional, irrevocable,
without set-off or counterclaim and shall require no further notice on the part
of Beechtree or Direct. The Company shall pay all stamp and other taxes and
duties levied in connection with the issuance of the Shares pursuant hereto. The
Investors shall be responsible for their own tax liability that may arise as a
result of the investment hereunder or the transactions contemplated by this
Agreement.
12.02. Entire Agreement; Amendments. This Agreement, together with the
Exhibits 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.
12.03. Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 4:30 p.m. (New York City
time) on a Business Day, (ii) the Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified in the Purchase Agreement later than 4:30 p.m. (New
York City time) on any date and earlier than 11:59 p.m. (New York City time) on
such date, (iii) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as follows:
If to the Company: Nexsan Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to: ▇▇▇▇▇ ▇▇▇▇ LLP
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
5 St. Michael's Court
St. Michael's Lane
Derby DE1 3JH
England
30
Attn.: Mr. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile no. ▇▇▇ ▇▇ (▇)▇▇▇▇ ▇▇▇▇▇▇
If to an Investor: Beechtree Capital, Ltd.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: Chairman
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to (for
communications to
the Investor): Ruffa & Ruffa, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile No.:
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
12.04. 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 Beechtree; 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.
12.05. 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.
12.06. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Investor. No Investor may assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the Company. The assignment by a party of this Agreement or any
rights hereunder shall not affect the obligations of such party under this
Agreement.
12.07. 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.
31
12.08. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to the principles of conflicts of law thereof. Each party hereby
irrevocably submits to the non-exclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of the any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and 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 contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
12.09. Execution. 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.
12.10. Construction. The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement. Any reference to any federal, state or local statute or law
shall be deemed to also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The word "including" shall
mean including without limitation. The parties intend that each representation,
warranty or covenant contained herein shall have independent significance. If
any party has breached any representation, warranty or covenant herein in any
respect, the fact that there exists another representation, warranty or covenant
relating to the same subject matter (regardless of the relative levels of
specificity) which the party has not breached shall not detract from or mitigate
the fact that the party is in breach of the first representation, warranty or
covenant.
12.11. 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.
32
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE COMPANY:
NEXSAN CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇, Chief Executive Officer
CONTROL SHAREHOLDER:
▇▇▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------------
NEXSAN:
NEXSAN TECHNOLOGIES, LTD.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------
AS TO SECTION 12.01:
BEECHTREE CAPITAL, LTD.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------
33
INVESTOR SIGNATURE PAGE
The undersigned hereby subscribes to purchase ______ Shares at a price of
$.66 per Share for an aggregate purchase price of $______ . Payment of the
aggregate purchase for the Shares (please check one of the following):
______ Is included herewith in the form of a bank, cashier's or
certified check;
or
______ Has been wire transferred to the escrow account referenced in
Schedule A to the Offering Memorandum.
FOR INDIVIDUALS:
--------------------------------
Print Name
--------------------------------
Dated: ___________, 2000 Signature
--------------------------------
Print Name
--------------------------------
Dated: ___________, 2000 Signature
FOR CORPORATIONS:
--------------------------------
Name of Company
--------------------------------
Name of Executive Officer of Company
Dated: ___________, 2000 ________________________________
Signature of Executive Officer
FOR PARTNERSHIPS:
--------------------------------
Name of Partnership
--------------------------------
Name of Authorized Partner
Dated: ___________, 2000 ________________________________
Signature of Authorized Partner
FOR TRUSTS:
--------------------------------
Name of Trust
--------------------------------
Name of Authorized Trustee
Dated: ___________, 2000 ________________________________
Signature of Authorized Trust
34
SCHEDULE A
INVESTORS
Name, Address and Tax Identification No. Signature
---------------------------------------- ---------