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EPL Technologies, Inc.
Exhibit 4.4
Series D Preferred Stock - Securities Purchase Agreement
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EXHIBIT 4.4
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of November
6, 1997, by and among EPL Technologies, Inc., a Colorado corporation, with
headquarters located at 2 International Plaza, Suite 245 Philadelphia, PA
19113-1507 (the "COMPANY"), and each of the purchasers set forth on the
signature pages hereto (the "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Section
4(2) of the Securities Act of 1933, as amended, (the "1933 ACT"), and Rule 506
under Regulation D ("REGULATION D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the 1933 Act;
B. The Company has authorized a new series of preferred stock, designated
as its Series D Convertible Preferred Stock (the "PREFERRED STOCK"), having the
voting powers, preferences and rights set forth in the Certificate of
Designation, Number, Voting Powers, Preferences and Rights of the Series D
Convertible Preferred Stock attached hereto as EXHIBIT "A" (the "CERTIFICATE OF
DESIGNATION");
C. The Preferred Stock is convertible into shares of Common Stock, par
value $.001 per share, of the Company (the "COMMON STOCK"), upon the terms and
subject to the limitations and conditions set forth in the Certificate of
Designation;
D. The Company has authorized the issuance to the Buyers of 403,228
warrants, in the form attached hereto as EXHIBIT "B" (the "WARRANTS");
E. The Buyers desire to purchase from the Company and the Company desires
to issue and sell to the Buyers, upon the terms and conditions and in reliance
on the representations and warranties set forth in this Agreement, (i) an
aggregate of Twelve Thousand (12,500) shares of Preferred Stock, and (ii)
Warrants to purchase 403,228 shares of Common Stock for an aggregate purchase
price of Twelve Million Five Hundred Thousand Dollars ($12,500,000);
F. Each Buyer wishes to purchase from the Company, upon the terms and
conditions stated in this Agreement, the number of shares of Preferred Stock and
Warrants set forth immediately below its name on the signature pages hereto;
G. Contemporaneous with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement, in
the form attached hereto as EXHIBIT "C" (the "REGISTRATION RIGHTS AGREEMENT"),
pursuant to which the Company has agreed to provide to the Buyers certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws;
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NOW THEREFORE, the Company and each of the Buyers (severally and not
jointly) hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS.
a. Purchase of Preferred Shares and Warrants. The Company shall
issue and sell to each Buyer and each Buyer severally agrees to purchase from
the Company such number of shares of Preferred Stock (together with any
Preferred Stock issued in replacement thereof or as a dividend thereon or
otherwise with respect thereto in accordance with the terms thereof, the
"PREFERRED SHARES") and Warrants, at the aggregate purchase price thereof (the
"PURCHASE PRICE") as is set forth immediately below such Buyer's name on the
signature pages hereto. The issuance, sale and purchase of the Preferred Shares
and Warrants shall take place at the closing (the "CLOSING"). Subject to the
satisfaction (or waiver) of the conditions thereto set forth in Section 6 and
Section 7 below, at the Closing, the Company shall issue and sell to each Buyer
and each Buyer shall purchase from the Company the aggregate number of Preferred
Shares and Warrants which such Buyer is purchasing hereunder for the Purchase
Price. The aggregate number of Preferred Shares to be issued at the Closing is
Twelve Thousand Five Hundred (12,500) and the aggregate number of Warrants to be
issued at the Closing is Four Hundred Three Thousand Two Hundred Twenty Eight
(403,228) for an aggregate purchase price of Twelve Million Five Hundred
Thousand Dollars ($12,500,000).
b. Form of Payment. On the Closing Date (as defined below), (i)
each Buyer shall pay the Purchase Price for the Preferred Shares and Warrants to
be issued and sold to it at the Closing by wire transfer of immediately
available funds to the Company, in accordance with the Company's written wiring
instructions, against delivery of a duly executed certificate(s) representing
such number of Preferred Shares and Warrants which such Buyer is purchasing, and
(ii) the Company shall deliver such certificate(s) and Warrants against delivery
of such Purchase Price.
c. Closing Date. Subject to the satisfaction (or waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, the date and time
of the issuance and sale of the Preferred Shares and Warrants pursuant to this
Agreement shall be 12:00 noon Eastern Standard Time on November 10, 1997 or such
other mutually agreed upon date or time (the "CLOSING DATE"). The Closing shall
occur on the Closing Date at the offices of Ballard Spahr Andrews & Ingersoll in
Philadelphia, Pennsylvania.
2. BUYERS' REPRESENTATIONS AND WARRANTIES.
Each Buyer severally (and not jointly) represents and warrants to the
Company solely as to such Buyer that:
a. Investment Purpose. As of the date hereof, the Buyer is
purchasing the Preferred Shares and the shares of Common Stock issuable upon
conversion thereof (the "CONVERSION SHARES") and the Warrants and the shares of
Common Stock issuable upon exercise thereof (the "WARRANTS SHARES", and
collectively with the Preferred Shares, Conversion Shares and Warrants, the
"SECURITIES") for its own account for investment only and not with a present
view
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towards the public sale or distribution thereof, except pursuant to sales
registered or exempted under the 1933 Act.
b. Accredited Investor Status. The Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D.
c. Reliance on Exemptions. The Buyer understands that the
Securities are being offered and sold to it in reliance upon specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying upon the truth and accuracy of, and the
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Securities.
d. Information. The Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by the Buyer or its advisors. The Buyer and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company and have received what the Buyer believes to be satisfactory answers to
any such inquiries. Neither such inquiries nor any other due diligence
investigation conducted by Buyer or any of its advisors or representatives shall
modify, amend or affect Buyer's right to rely on the Company's representations
and warranties contained in Section 3 below. The Buyer acknowledges receipt of
the "Risk Factors" attached hereto as Exhibit E and understands that its
investment in the Securities involves a significant degree of risk.
e. Governmental Review. The Buyer understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities.
f. Transfer or Resale. The Buyer understands that (i) except as
provided in the Registration Rights Agreement, the Securities have not been and
are not being registered under the 1933 Act or any applicable state securities
laws and consequently the Buyer may have to bear the risk of owning the
Securities for an indefinite period of time, and the Securities may not be
transferred unless (a) subsequently included in an effective registration
statement thereunder, (b) the Buyer shall have delivered to the Company an
opinion of counsel (which opinion shall be reasonably acceptable to the Company)
to the effect that the Securities to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration; (c) sold pursuant
to Rule 144 promulgated under the 1933 Act (or a successor rule) or (d) sold or
transferred to an affiliate (as defined in Rule 144) of the Buyer; (ii) any sale
of such Securities made in reliance on Rule 144 may be made only in accordance
with the terms of said Rule and further, if said Rule is not applicable, any
resale of such Securities under circumstances in which the seller (or the person
through whom the sale is made) may be deemed to be an underwriter (as that term
is defined in the 1933 Act) may require compliance with some other exemption
under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii)
neither the Company nor any other person is under any obligation to register
such Securities under the 1933 Act or any state securities laws or to comply
with the terms and conditions of any exemption thereunder (in each case, other
than pursuant to the Registration
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Rights Agreement). Notwithstanding the foregoing or anything else contained
herein to the contrary, the Securities may be pledged as collateral in
connection with a bona fide margin account or other lending arrangement.
g. Legends. The Buyer understands that the certificates
representing the Preferred Shares, Warrants and, until such time as the
Conversion Shares and Warrants Shares have been registered under the 1933 Act,
as contemplated by the Registration Rights Agreement, the Conversion Shares and
Warrant Shares, may bear a restrictive legend in substantially the following
form (and a stop-transfer order may be placed against transfer of the
certificates for such Securities):
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The securities
have been acquired for investment and may not be sold, transferred or
assigned in the absence of an effective registration statement for the
securities under said Act, or an opinion of counsel, in form, substance
and scope reasonably acceptable to the Company, that registration is
not required under said Act or unless sold pursuant to Rule 144 under
said Act."
The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any certificate upon which it
is stamped, if, unless otherwise required by applicable state securities laws,
(a) the Securities represented by such certificate are registered for sale under
an effective registration statement filed under the 1933 Act, or (b) such holder
provides the Company with an opinion of counsel, in form, substance and scope
reasonably acceptable to the Company, to the effect that a public sale or
transfer of such Securities may be made without registration under the 1933 Act
or (c) such holder provides the Company with reasonable assurances that such
Security can be sold pursuant to Rule 144 under the 1933 Act (or a successor
rule thereto) without any restriction as to the number of Securities acquired as
of a particular date that can then be immediately sold. The Buyer agrees to sell
all Securities, including those represented by a certificate(s) from which the
legend has been removed, in compliance with applicable prospectus delivery
requirements, if any, and its covenant under Section 4(d) of the Registration
Rights Agreement, or otherwise in compliance with the requirements for an
exemption from registration under the 1933 Act.
h. Authorization; Enforcement. This Agreement and the Registration
Rights Agreement have been duly and validly authorized, executed and delivered
on behalf of the Buyer and are valid and binding agreements of the Buyer
enforceable in accordance with their terms subject to the effect of any
applicable bankruptcy, insolvency, reorganization, or moratorium or similar laws
affecting the rights of creditors generally and the application of general
principles of equity.
i. Residency. The Buyer is a resident of the jurisdiction set forth
immediately below such Buyer's name on the signature pages hereto.
j. No General Solicitation. Neither the Buyers nor any person
acting on the Buyers' behalf (if any) has conducted any "general solicitation,"
as such term is defined in Regulation D, with respect to any of the Securities
being offered hereby.
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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each Buyer that:
a. Organization and Qualification. The Company and each of its
Subsidiaries (as defined below), if any, is duly organized, validly existing and
in good standing under the laws of the jurisdiction in which it is organized,
with full power and authority (corporate and other) to own, lease, use and
operate its properties and to carry on its business as and where now owned,
leased, used, operated and conducted. SCHEDULE 3(a) sets forth a list of all of
the Subsidiaries of the Company and the jurisdiction in which each is organized.
The Company and each of its Subsidiaries is duly qualified to do business and is
in good standing in every jurisdiction in which the nature of the business
conducted by it makes such qualification necessary except where the failure to
be so qualified or in good standing would not have a Material Adverse Effect.
"MATERIAL ADVERSE EFFECT" means any material adverse effect on the business,
operations, assets or financial condition of the Company or its Subsidiaries, if
any, taken as a whole, or on the transactions contemplated hereby or by the
agreements or instruments to be entered into in connection herewith.
"SUBSIDIARIES" means any corporation or other organization, whether incorporated
or unincorporated, in which the Company owns, directly or indirectly, any equity
or other ownership interest.
b. Authorization; Enforcement. (i) The Company has all requisite
corporate power and authority to file and perform its obligations under the
Certificate of Designation and to enter into, and to perform its obligations
under, this Agreement, the Registration Rights Agreement and the Warrants and to
consummate the transactions contemplated hereby and thereby and to issue the
Securities, in accordance with the terms hereof and thereof, (ii) the execution
and delivery of this Agreement, the Registration Rights Agreement and the
Warrants by the Company and the consummation by it of the transactions
contemplated hereby and thereby (including without limitation the filing of the
Certificate of Designation, the issuance of the Preferred Shares and the
Warrants and the issuance and reservation for issuance of the Conversion Shares
and Warrant Shares issuable upon conversion or exercise thereof) have been duly
authorized by the Company's Board of Directors and no further consent or
authorization of the Company, its Board or Directors, or its shareholders is
required, (iii) this Agreement has been duly executed and delivered and the
Certificate of Designation has been duly filed by the Company, and (iv) each of
this Agreement and the Certificate of Designation constitutes, and upon
execution and delivery by the Company of the Registration Rights Agreement and
the Warrants, each such agreement will constitute, a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, subject to the effect of any applicable bankruptcy, insolvency,
reorganization, or moratorium or similar laws affecting the rights of creditors
generally and the application of general principles of equity.
c. Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of (i) 50,000,0000 shares of Common Stock of which
17,956,299 shares are issued and outstanding, 4,514,500 shares are reserved for
issuance pursuant to the Company's stock option plans, 3,246,278 shares are
reserved for issuance pursuant to securities (other than the Preferred Shares
and the Warrants) exercisable for, or convertible into or exchangeable for
shares of Common Stock and 3,629,032 shares are reserved for issuance upon
conversion of the Preferred
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Shares and exercise of the Warrants (subject to adjustment pursuant to the
Company's covenant set forth in Section 4(h) below); (ii) 3,250,000 shares of
Series A 10% Cumulative Preferred Stock, par value $1.00 per share, of which
2,113,000 shares are issued and outstanding, (iii) 531,915 shares of Series B
10% Cumulative Convertible Preferred Stock, par value $.01 per share, of which
no shares are issued and outstanding, (iv) 144,444 shares of Series C
Convertible Preferred Stock, par value $.01 per share, of which 144,444 shares
are issued and outstanding, and (v) 4,000,000 shares of board designated
preferred stock, par value $0.01 per share, of which 144,444 shares have been
designated as Series C Convertible Preferred Stock and of which no other shares
are issued and outstanding. All of such outstanding shares of capital stock
are, or upon issuance against receipt of consideration therefor will be, duly
authorized, validly issued, fully paid and nonassessable. No shares of capital
stock of the Company are subject to preemptive rights or any other similar
rights of the stockholders of the Company or any liens or encumbrances imposed
through the actions or failure to act of the Company. Except as disclosed in
SCHEDULE 3(c) and except for the transactions contemplated hereby, as of the
date of this Agreement, (i) there are no outstanding options, warrants, scrip,
rights to subscribe for, puts, calls, rights of first refusal, agreements,
understandings, claims or other commitments or rights of any character
whatsoever relating to, or securities or rights convertible into, exercisable
for, or exchangeable for any shares of capital stock of the Company or any of
its Subsidiaries, or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital
stock of the Company or any of its Subsidiaries, and (ii) there are no
agreements or arrangements under which the Company or any of its Subsidiaries
is obligated to register the sale of any of its or their securities under
the 1933 Act (except the Registration Rights Agreement) and (iii) there are no
anti-dilution or price adjustment provisions contained in any security issued
by the Company (or in any agreement providing rights to security holders) that
will be triggered by the issuance of the Preferred Shares, Conversion Shares,
Warrants or Warrant Shares. The Company has furnished to the Buyer true and
correct copies of the Company's Amended and Restated Articles of Incorporation,
as amended, as in effect on the date hereof ("ARTICLES OF INCORPORATION"), the
Company's By-laws, as amended, as in effect on the date hereof (the"BY-LAWS"),
and the terms of all securities convertible into or exercisable for Common
Stock of the Company and the material rights of the holders thereof in
respect thereto. The Company shall provide the Buyer with a written update of
this representation signed by the Company's Chief Executive or Treasurer on
behalf of the Company as of the Closing Date.
d. Issuance of Shares. The Preferred Shares, Conversion Shares and
Warrant Shares are duly authorized and, upon issuance in accordance with the
terms of this Agreement (including the issuance of the Conversion Shares upon
conversion of the Preferred Shares in accordance with the Certificate of
Designation and the issuance of the Warrant Shares upon exercise of the Warrants
in accordance with the terms thereof) will be validly issued, fully paid and
non-assessable, and free from all taxes, liens, claims, encumbrances, and
charges with respect to the issue thereof and shall not be subject to preemptive
rights or other similar rights of stockholders of the Company. The term
Conversion Shares includes the shares of Common Stock issuable upon conversion
of the Preferred Shares, including without limitation, such additional shares,
if any, as are issuable as a result of the events described in Section 2(c) of
the Registration Rights Agreement. The Company understands and acknowledges the
potentially dilutive effect to the Common Stock of the issuance of the
Conversion Shares and Warrant Shares upon conversion or exercise of the
Preferred Shares or Warrants. The Company further acknowledges that its
obligation to issue
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Conversion Shares upon conversion of the Preferred Shares and Warrant
Shares upon exercise of the Warrants in accordance with this Agreement,
the Certificate of Designation and the Warrants is absolute and
unconditional regardless of the dilutive effect that such issuance may
have on the ownership interests of other stockholders of the Company.
e. Series of Preferred Stock. The terms, designations, powers,
preferences and relative, participating, and optional or special rights, and the
qualifications, limitations, and restrictions of each series of preferred stock
of the Company (other than the Preferred Stock) are as stated in the Articles of
Incorporation, the Bylaws, and the Certificates of Designation with respect to
each such series of preferred stock of the Company, filed on or prior to the
date hereof. The terms, designations, powers, preferences and relative,
participating, and optional or special rights, and the qualifications,
limitations, and restrictions of the Preferred Stock are as stated in the
Articles of Incorporation, the Bylaws, and Certificates of Designation with
respect to the Preferred Stock, attached hereto as Exhibit A.
f. No Conflicts. The execution, delivery and performance of this
Agreement, the Registration Rights Agreement and the Warrants by the Company and
the consummation by the Company of the transactions contemplated hereby and
thereby (including, without limitation, the filing of the Certificate of
Designation and the issuance and reservation for issuance of the Preferred
Shares, Warrants, Conversion Shares and Warrant Shares) will not (i) conflict
with or result in a violation of any provision of the Articles of Incorporation
or By-laws or (ii) violate or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which with notice or lapse of
time or both could become a default) under, or give to others any rights of
termination, amendment, (including without limitation, the triggering of any
anti-dilution provision), acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its Subsidiaries is a
party, or result in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations and
regulations of any self-regulatory organizations to which the Company or its
securities are subject) applicable to the Company or any of its Subsidiaries or
by which any property or asset of the Company or any of its Subsidiaries is
bound or affected (except for such conflicts, breaches, defaults, terminations,
amendments, accelerations, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect). Neither the
Company nor any of its Subsidiaries is in violation of its Articles of
Incorporation, By-laws or other organizational documents and neither the Company
nor any of its Subsidiaries is in default (and no event has occurred which with
notice or lapse of time or both could put the Company or any of its Subsidiaries
in default) under, and neither the Company nor any of its Subsidiaries has taken
any action or failed to take any action that (and no event has occurred which,
without notice or lapse of time or both) would give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its Subsidiaries is a
party or by which any property or assets of the Company or any of its
Subsidiaries is bound or affected, except for possible defaults as would not,
individually or in the aggregate, have a Material Adverse Effect. The businesses
of the Company and its Subsidiaries, if any, are not being conducted, and shall
not be conducted so long as a Buyer owns any of the Securities, in violation of
any law, ordinance or regulation of any governmental entity, the failure to
comply with which would, individually or in the aggregate, have a Material
Adverse Effect. Except as specifically contemplated by this Agreement and as
required under the 1933 Act
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and any applicable state securities laws or any listing agreement with
any securities exchange or automated quotation system, the Company is
not required to obtain any consent, authorization or order of, or make
any filing or registration with, any court or governmental agency or
any regulatory or self regulatory agency in order for it to execute,
deliver or perform any of its obligations under this Agreement, the
Registration Rights Agreement or the Warrants or to perform its
obligations under the Certificate of Designation in each case in
accordance with the terms hereof or thereof. Except as discussed in
SCHEDULE 3(f), all consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the
preceding sentence have been obtained or effected on or prior to the
date hereof. The Company and its Subsidiaries are unaware of any facts
or circumstances which might give rise to any of the foregoing. The
Company is not in violation of the listing requirements of the Nasdaq
SmallCap Market ("NASDAQ SMALLCAP") and does not reasonably anticipate
that the Common Stock will be delisted by the Nasdaq SmallCap in the
foreseeable future. The Company and its Subsidiaries are unaware of any
facts or circumstances which might give rise to any of the foregoing.
g. SEC Documents, Financial Statements. Since January 1, 1995, the
Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 ACT")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents (other than
exhibits) incorporated by reference therein, being hereinafter referred to
herein as the "SEC DOCUMENTS"). The Company has delivered to each Buyer true and
complete copies of the SEC Documents, except for such exhibits and incorporated
documents. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with U.S. generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements) and fairly present in all
material respects the consolidated financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments). Except as
set forth in the financial statements of the Company included in the SEC
Documents or as set forth on SCHEDULE 3(g), the Company has no liabilities,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to June 30, 1997 and (ii) obligations under
contracts and commitments incurred in the ordinary course of business and not
required under generally accepted accounting principles to be reflected in such
financial statements, which, individually or in the aggregate, are not material
to the financial condition or operating results of the Company.
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h. Absence of Certain Changes. Since June 30, 1997, there has been
no material adverse change and no material adverse development in the assets,
liabilities, business, properties, operations, financial condition, or results
of operations of the Company or any of its Subsidiaries.
i. Absence of Litigation. There is no action, suit, claim,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its Subsidiaries, or, to the knowledge of the
Company, threatened against or affecting the Company or any of its Subsidiaries
that could, individually or in the aggregate, have a Material Adverse Effect.
SCHEDULE 3(i) contains a complete list and summary description of any pending
or, to the knowledge of the Company, threatened proceeding against or affecting
the Company or any of its Subsidiaries, without regard to whether it would have
a Material Adverse Effect.
j. Patents, Copyrights, etc. The Company and each of its
Subsidiaries owns or possesses the requisite licenses or rights to use all
patents, patent rights, inventions, know-how, trade secrets, trademarks, service
marks, service names, trade names and copyrights ("INTELLECTUAL PROPERTY")
necessary to enable it to conduct its business as now operated (and, except as
set forth in SCHEDULE 3(j) hereof, to the best of the Company's knowledge, as
presently contemplated to be operated in the future); there is no claim or
action by any person pertaining to, or proceeding pending, or to the Company's
knowledge threatened which challenges the right of the Company or of a
Subsidiary with respect to any Intellectual Property necessary to enable it to
conduct its business as now operated (and, except as set forth in SCHEDULE 3(j)
hereof, to the best of the Company's knowledge, as presently contemplated to be
operated in the future); to the best of the Company's knowledge, the Company's
or its Subsidiaries' products, services and processes do not infringe on any
Intellectual Property or other rights held by any person; and the Company is
unaware of any facts or circumstances which might give rise to any of the
foregoing. The Company and each of its Subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of their
Intellectual Property.
k. No Materially Adverse Contracts, Etc. Neither the Company nor
any of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's officers has or is expected in the future,
individually or in the aggregate, to have a Material Adverse Effect. Neither the
Company nor any of its Subsidiaries is a party to any contract or agreement
which in the judgment of the Company's officers has or is expected to have a
Material Adverse Effect.
l. Tax Status. Except as set forth on SCHEDULE 3(l), the Company
and each of its Subsidiaries has made or filed all federal and state income and
all other tax returns, reports and declarations required by any jurisdiction to
which it is subject (unless and only to the extent that the Company and each of
its Subsidiaries has set aside on its books provisions reasonably adequate for
the payment of all unpaid and unreported taxes) and has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and has set aside on its books provisions
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount
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claimed to be due by the taxing authority of any jurisdiction, and the officers
of the Company know of no basis for any such claim.
m. Certain Transactions. Except as set forth on SCHEDULE 3(m) and
except for arm's length transactions pursuant to which the Company or any of its
Subsidiaries makes payments in the ordinary course of business upon terms no
less favorable than the Company or any of its Subsidiaries could obtain from
third parties and other than the grant of stock options disclosed on SCHEDULE
3(c), none of the officers, directors, or employees of the Company is presently
a party to any material transaction with the Company or any of its Subsidiaries
(other than for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any corporation, partnership,
trust or other entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner.
n. Disclosure. All information relating to or concerning the
Company or any of its Subsidiaries set forth in this Agreement and provided to
the Buyers pursuant to Section 2(d) hereof and otherwise in connection with the
transactions contemplated hereby is true and correct in all material respects
and the Company has not omitted to state any material fact necessary in order to
make the statements made herein or therein, in light of the circumstances under
which they were made, not misleading. No event or circumstance has occurred or
information exists with respect to the Company or any of its Subsidiaries or its
or their business, properties, operations or financial conditions, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or disclosed
(assuming for this purpose that the Company's reports filed under the 1934 Act
are being incorporated into an effective registration statement filed by the
Company under the 1933 Act).
o. Acknowledgment Regarding Buyers' Purchase of Securities. The
Company acknowledges and agrees that the Buyers are acting solely in the
capacity of arm's length purchasers with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that no Buyer
is acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereby and any advice given by any Buyer or any of their respective
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is merely incidental to the Buyers' purchase of the
Securities. The Company further represents to each Buyer that the Company's
decision to enter into this Agreement has been based solely on the independent
evaluation of the Company and its representatives.
p. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales in any security or solicited any offers to
buy any security under circumstances that would require registration under the
1933 Act of the issuance of the Securities to the Buyers on the Closing Date.
Except as set forth on SCHEDULE 3(c) or as disclosed in the SEC Documents, the
Company has not issued any of its securities in a private placement in 1997.
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q. No Brokers. The Company has taken no action which would give
rise to any claim by any person for brokerage commissions, finder's fees or
similar payments relating to this Agreement or the transactions contemplated
hereby, except for dealings with Clarco, whose commissions and fees will be paid
for by the Company.
r. Permits; Compliance. The Company and each of its Subsidiaries
is in possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and orders
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted except those the failure of which to possess would
not, individually or in the aggregate, have a Material Adverse Effect
(collectively, the "COMPANY PERMITS"), and there is no action pending or, to the
knowledge of the Company, threatened regarding suspension or cancellation of any
of the Company Permits. Neither the Company nor any of its Subsidiaries is in
conflict with, or in default or violation of, any of the Company Permits, except
for any such conflicts, defaults or violations which, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
Since June 30, 1997, neither the Company nor any of its Subsidiaries has
received any notification with respect to possible conflicts, defaults or
violations of applicable laws, except for notices relating to possible
conflicts, defaults or violations, which conflicts, defaults or violations would
not have a Material Adverse Effect.
s. Environmental Matters.
(i) Except as set forth in SCHEDULE 3(s), and except with
regard to such violations that would not individually or in the aggregate have a
Material Adverse Effect, there are, to the Company's knowledge, with respect to
the Company or any of its Subsidiaries or any predecessor of the Company, no
past or present violations of Environmental Laws (as defined below), releases of
any material into the environment, actions, activities, circumstances,
conditions, events, incidents, or contractual obligations which may give rise to
any common law environmental liability or any liability under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 or similar
federal, state, local or foreign laws and neither the Company nor any of its
Subsidiaries has received any notice with respect to any of the foregoing, nor
is any action pending or, to the Company's knowledge, threatened in connection
with any of the foregoing. The term "ENVIRONMENTAL LAWS" means all federal,
state, local or foreign laws relating to pollution or protection of human health
or the environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants contaminants, or toxic or hazardous substances or wastes
(collectively, "HAZARDOUS MATERIALS") into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
(ii) Other than those that are or were stored, used or
disposed of in compliance with applicable law, to the Company's knowledge, no
Hazardous Materials are contained on or about any real property currently owned,
leased or used by the Company or any of
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its Subsidiaries, and no Hazardous Materials were released on or about any real
property previously owned, leased or used by the Company or any of its
Subsidiaries during the period the property was owned, leased or used by the
Company or any of its Subsidiaries, except in the normal course of the Company's
or any of its Subsidiaries' business and materially in compliance with law.
(iii) Except as set forth in SCHEDULE 3(s), to the Company's
knowledge, there are no underground storage tanks on or under any real property
owned, leased or used by the Company or any of its Subsidiaries that are not in
compliance with applicable law.
t. Title to Property. The Company and its Subsidiaries have good
and marketable title in fee simple to all real property and good title to all
personal property owned by them which is material to the business of the Company
and its Subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as are described in SCHEDULE 3(t) or such as would not have
a Material Adverse Effect. Any real property and facilities held under lease by
the Company and its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as would not have a Material Adverse
Effect.
u. Insurance. The Company and each of its Subsidiaries are insured
by insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business at a cost that would not have a Material
Adverse Effect.
v. Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient, in
the judgment of the Company's board of directors, to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
w. Employment Matters. The Company and its Subsidiaries are in
compliance with all federal, state, local and foreign laws and regulations
respecting employment and employment practices, terms and conditions of
employment and wages and hours except where failure to be in compliance would
not have a Material Adverse Effect. There are no pending investigations
involving the Company or any of its Subsidiaries by the U.S. Department of Labor
or any other governmental agency responsible for the enforcement of such
federal, state, local or foreign laws and regulations. There is no unfair labor
practice charge or complaint against the Company or any of its Subsidiaries
pending before the National Labor Relations Board or any strike, picketing,
boycott, dispute, slowdown or stoppage pending or threatened against or
involving the Company or any of its Subsidiaries. Except as set forth in
SCHEDULE 3(w), no representation question
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exists respecting the employees of the Company or any of its Subsidiaries, and
no collective bargaining agreement or modification thereof is currently being
negotiated by the Company or any of its subsidiaries. No grievance or
arbitration proceeding is pending under any expired or existing collective
bargaining agreements of the Company or any of its Subsidiaries. No material
labor dispute with the employees of the Company or any of its Subsidiaries
exists or, to the knowledge of the Company, is imminent.
x. ERISA Matters. The Company has no employee benefit plans subject
to the Employee Retirement Income Security Act of 1974, as amended.
y. Investment Company Status. The Company is not and upon
consummation of the sale of the Securities will not be an "investment company,"
a company controlled by an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company" as such terms
are defined in the Investment Company Act of 1940, as amended.
z. Foreign Corrupt Practices. Neither, the Company nor any of its
Subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any Subsidiary has, in the course of his actions
for, or on behalf of, the Company used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977;
or made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee.
aa. No General Solicitation. Neither the Company nor any
distributor participating on the Company's behalf in the transactions
contemplated hereby (if any) nor any person acting for the Company, or any such
distributor, has conducted any "general solicitation," as such term is defined
in Regulation D, with respect to any of the Securities being offered hereby.
4. COVENANTS.
a. Best Efforts. The parties shall use their best efforts to
satisfy timely each of the conditions described in Section 6 and 7 of this
Agreement.
b. Form D; Blue Sky Laws. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof to each Buyer promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Securities for sale to the Buyers pursuant
to this Agreement under applicable securities or "blue sky" laws of the states
of the United States (or to obtain an exemption from such qualification), and
shall provide evidence of any such action so taken to each Buyer on or prior to
the Closing Date.
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c. Reporting Status; Eligibility to Use Form S-3. The Company's
Common Stock is registered under Section 12(g) of the 1934 Act. So long as any
Buyer beneficially owns any of the Securities, the Company shall timely file all
reports required to be filed with the SEC pursuant to the 1934 Act, and the
Company shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
would permit such termination. The Company currently meets, and will take all
necessary action to continue to meet, the "registrant eligibility" requirements
set forth in the general instructions to Form S-3.
d. Use of Proceeds. The Company shall use the proceeds from the
sale of the Preferred Shares and Warrants in the manner set forth in SCHEDULE
4(d) attached hereto and made a part hereof and shall not otherwise, directly or
indirectly, use such proceeds for any loan to or investment in any other
corporation, partnership, enterprise or other person (except in connection with
its direct or indirect Subsidiaries).
e. Additional Equity Capital. Subject to the exceptions described
below, the Company will not, without the prior written consent of two-thirds
(2/3) in interest of the Buyers, negotiate or contract with any party to obtain
additional equity financing (including debt financing with an equity component)
that (i) involves (A) the issuance of Common Stock at a discount to the market
price of the Common Stock on the date of issuance or (B) the issuance of
convertible securities that are convertible (x) into an indeterminate number of
shares of Common Stock or (y) into shares of Common Stock at a discount to the
market price of the Common Stock on either the date of issuance or the date of
conversion, and (ii) provides for the registration under the 1933 Act of public
resales of the Common Stock referred to in clause (i) above, until the later of
(x) nine (9) months after the Closing Date or (y) six (6) months following the
effective date of the Registration Statement (as defined in the Registration
Rights Agreement). The foregoing limitations shall not apply to any transaction
involving (i) issuances of securities in a firm commitment underwritten public
offering (excluding a continuous offering pursuant to Rule 415 under the 1933
Act) or (ii) issuances of securities as consideration for a merger,
consolidation or sale of assets, or in connection with any strategic partnership
or joint venture (the primary purpose of which is not to raise equity capital),
or in connection with the disposition or acquisition of a business, product or
license by the Company. The Capital Raising Limitations also shall not apply to
the issuance of securities upon exercise or conversion of the Company's options,
warrants or other convertible securities outstanding as of the date hereof or to
the grant of additional options or warrants, or the issuance of additional
securities, under any Company stock option or restricted stock plan approved by
a majority of the Company's disinterested directors.
f. Expenses. The Company shall reimburse Rose Glen Capital
Management, L.P. ("RGC") for all expenses incurred by it in connection with the
negotiation, preparation, execution and delivery of this Agreement and the other
agreements to be executed in connection herewith, including, without limitation,
attorneys' and consultants' fees and expenses. The Company's obligation to
reimburse RGC's expenses under this Section 4(f) shall be limited to Thirty
Thousand Dollars ($30,000).
g. Financial Information. The Company agrees to file all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the
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reporting requirements of the 1934 Act. The financial statements of the Company
will be prepared in accordance with generally accepted accounting principles,
consistently applied, and will fairly present in all material respects the
consolidated financial position of the Company and its consolidated subsidiaries
and results of their operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). The Company agrees to send the following reports to each Buyer
until such Buyer transfers, assigns, or sells all of the Securities: (i) within
ten (10) days after the filing with the SEC, a copy of its Annual Report on Form
10-K, its Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K;
(ii) promptly after release, copies of all press releases issued by the Company
or any of its Subsidiaries; and (iii) contemporaneously with the making
available or giving to the stockholders of the Company, copies of any notices or
other information the Company makes available or gives to such stockholders.
h. Reservation of Shares. The Company shall at all times have
authorized, and reserved for the purpose of issuance, a sufficient number of
shares of Common Stock to provide for the full conversion of the outstanding
Preferred Shares and issuance of the Conversion Shares in connection therewith
(based on the Conversion Price of the Preferred Shares in effect from time to
time) and the full exercise of the Warrants and the issuance of the Warrant
Shares in connection therewith (based upon the Exercise Price of the Warrants in
effect from time to time). The Company shall not reduce the number of shares of
Common Stock reserved for issuance upon conversion of the Preferred Shares or
exercise of the Warrants without the consent of each Buyer, which consent will
not be unreasonably withheld. The Company shall use its best efforts at all
times to maintain the number of shares of Common Stock so reserved for issuance
at no less than two (2) times the number that is then actually issuable upon
full conversion of the Preferred Shares and full exercise of the Warrants (based
on the Conversion Price of the Preferred Shares or Exercise Price of the
Warrants in effect from time to time). If at any time the number of shares of
Common Stock authorized and reserved for issuance is below the number of
Conversion Shares and Warrant Shares issued and issuable upon conversion of the
Preferred Shares and exercise of the Warrants (based on the Conversion Price of
the Preferred Shares and Exercise Price of the Warrants then in effect), the
Company will promptly take all corporate action necessary to authorize and
reserve a sufficient number of shares, including, without limitation, calling a
special meeting of shareholders to authorize additional shares to meet the
Company's obligations under this Section 4(h), in the case of an insufficient
number of authorized shares, and using its best efforts to obtain shareholder
approval of an increase in such authorized number of shares.
i. Listing. The Company shall timely secure the listing of the
Conversion Shares and Warrant Shares upon each national securities exchange or
automated quotation system, if any, upon which shares of Common Stock are then
listed (subject to official notice of issuance) and shall maintain such listing
of all Conversion Shares and Warrant Shares from time to time issuable upon
conversion or exercise of the Preferred Shares and the Warrants. The Company
will obtain and maintain the listing and trading of its Common Stock on the
Nasdaq SmallCap, the Nasdaq National Market System ("NASDAQ NMS"), the New York
Stock Exchange ("NYSE"), or the American Stock Exchange ("AMEX") and will comply
in all respects with the Company's reporting, filing and other obligations under
the bylaws or rules of the National Association of Securities Dealers ("NASD")
and such exchanges, as applicable. The Company shall promptly provide to each
Buyer copies of any notices it receives regarding the continued eligibility of
the
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Common Stock for listing on Nasdaq SmallCap, Nasdaq NMS or other principal
exchange or quotation system on which the Common Stock is listed or traded. The
Company will use its best efforts to obtain the listing of its Common Stock, and
the Conversion Shares and Warrant Shares, on the Nasdaq NMS as soon as
practicable following the Closing Date.
j. Corporate Existence. So long as a Buyer beneficially owns any
Preferred Shares or Warrants, the Company shall maintain its corporate existence
in good standing under the laws of the jurisdiction in which it is incorporated
and shall not sell all or substantially all of the Company's assets, except in
the event of a merger or consolidation or sale of all or substantially all of
the Company's assets, where the surviving or successor entity in such
transaction (i) assumes the Company's obligations hereunder and under the
agreements and instruments entered into in connection herewith and (ii) is a
publicly traded corporation whose Common Stock is listed for trading on Nasdaq
NMS, Nasdaq SmallCap, NYSE or AMEX.
k. Compliance with Law. The Company will conduct its business in
compliance with all applicable laws, rules and regulations of the jurisdictions
in which it is conducting business, including, without limitation, all
applicable local, state and federal environmental laws and regulations the
failure to comply with which would have a Material Adverse Effect.
l. Insurance. The Company shall maintain liability, casualty and
other insurance (subject to customary deductions and retentions) with
responsible insurance companies against such risk of the types and in the
amounts customarily maintained by companies of comparable size to the Company.
m. No Integration. The Company will not conduct any future offering
that will be integrated with the issuance of the Securities solely for purposes
of Rule 4460(i) of the Nasdaq Stock Market.
n. No Qualified Opinion. The Company did not receive a qualified
opinion from its auditors with respect to its most recent fiscal year end and
does not anticipate or know of any basis upon which its auditors might issue a
qualified opinion in respect of its current fiscal year.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its transfer agent
to issue certificates, registered in the name of each Buyer or its nominee, for
the Conversion Shares and Warrant Shares in such amounts as specified from time
to time by each Buyer to the Company upon proper conversion or exercise of the
Preferred Shares and the Warrants (the "Irrevocable Transfer Agent
Instructions"). All such certificates shall bear the restrictive legend as and
when specified in Section 2(g) of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 5, and stop transfer instructions to give effect to Section 2(f)
hereof (in the case of the Conversion Shares or Warrant Shares, prior to
registration of the Conversion Shares or Warrant Shares under the 1933 Act),
will be given by the Company to its transfer agent and that the Securities shall
otherwise be freely transferable on the books and
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records of the Company as and to the extent provided in this Agreement and the
Registration Rights Agreement. Nothing in this Section shall affect in any way
the Buyer's obligations and agreement set forth in Section 2(g) hereof to comply
with all applicable prospectus delivery requirements, if any, upon resale of the
Securities. If a Buyer provides the Company with an opinion of counsel,
reasonably satisfactory to the Company in form, substance and scope, that
registration of a resale by such Buyer of any of the Securities is not required
under the 1933 Act, the Company shall permit the transfer, and, in the case of
the Conversion Shares or Warrant Shares, promptly instruct its transfer agent to
issue one or more certificates in such name and in such denominations as
specified by such Buyer. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Buyers, by vitiating
the intent and purpose of the transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Section 5 will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section, that the
Buyers shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate transfer, without the
necessity of showing economic loss and without any bond or other security being
required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Preferred
Shares and the Warrants to a Buyer at the Closing is subject to the
satisfaction, at or before the Closing Date of each of the following conditions
thereto, provided that these conditions are for the Company's sole benefit and
may be waived by the Company at any time in its sole discretion:
a. The applicable Buyer shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to the Company.
b. The applicable Buyer shall have delivered the Purchase Price in
accordance with Section 1(b) above.
c. The Certificate of Designation shall have been filed with the
Secretary of State of the State of Colorado.
d. The representations and warranties of the applicable Buyer shall
be true and correct in all material respects as of the date when made and as of
the Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and the applicable Buyer shall
have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the applicable Buyer at or prior to the Closing
Date.
e. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
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7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the Preferred Shares
and the Warrants at the Closing is subject to the satisfaction, at or before the
Closing Date of each of the following conditions, provided that these conditions
are for such Buyer's sole benefit and may be waived by such Buyer at any time in
its sole discretion:
a. The Company shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to the Buyer.
b. The Certificate of Designation shall have been filed with the
Secretary of State of the State of Colorado, and a file-stamped copy thereof
certified by such Secretary of State shall have been delivered to such Buyer.
c. The Company shall have delivered to such Buyer duly executed
certificates (in such denominations as the Buyer shall request) representing the
Preferred Shares and the Warrants being so purchased in accordance with Section
1(b) above.
d. The representations and warranties of the Company shall be true
and correct in all material respects as of the date when made and as of the
Closing Date as though made at such time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date. The Buyer shall
have received a certificate or certificates, executed by the Chief Executive
Officer or the Treasurer of the Company, dated as of the Closing Date, to the
foregoing effect and as to such other matters as may be reasonably requested by
such Buyer including, but not limited to certificates with respect to the
Company's Articles of Incorporation, By-laws, Board of Directors' resolutions
relating to the transactions contemplated hereby and the incumbency and
signatures of each of the officers of the Company who shall execute on behalf of
the Company any document delivered on the Closing Date.
e. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
f. Trading in the Common Stock on Nasdaq SmallCap shall not have
been suspended by the SEC or Nasdaq.
g. The Buyer shall have received an opinion of the Company's
counsel, dated as of the Closing Date, in form, scope and substance reasonably
satisfactory to the Buyer and in substantially the same form as EXHIBIT "D"
attached hereto.
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h. The Buyer shall have received an officer's certificate described
in Section 3(c) above, dated as of the Closing Date.
i. The Buyer shall have received executed lock-up agreements from
certain of the Company's executive officers whereby such persons agree not to
sell any shares of Common Stock for a period commencing on the Closing Date and
ending on April 30, 1998.
j. The Irrevocable Transfer Agent Instructions, in form and
substance satisfactory to a majority-in-interest of the Buyers, shall have been
delivered to and acknowledged in writing by the Company's Transfer Agent.
8. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law; Jurisdiction. This Agreement shall be governed by
and interpreted in accordance with the laws of the Commonwealth of Pennsylvania
without regard to the principles of conflict of laws. The parties hereto hereby
submit to the exclusive jurisdiction of the United States Federal and state
courts located in Philadelphia, Pennsylvania with respect to any dispute arising
under this Agreement, the agreements entered into in connection herewith or the
transactions contemplated hereby or thereby.
b. Counterparts; Signatures by Facsimile. This Agreement may be
executed in two or more counterparts, all of which 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. This Agreement, once executed by
a party, may be delivered to the other parties hereto by facsimile transmission
of a copy of this Agreement bearing the signature of the parties so delivering
this Agreement.
c. Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor the Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.
f. Notices. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile and shall
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be effective five days after being placed in the mail, if mailed by regular U.S.
mail, or upon receipt, if delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile, in each case addressed
to a party. The addresses for such communications shall be:
If to the Company:
EPL Technologies, Inc.
2 International Plaza, Suite 245
Philadelphia, PA 19113-1507
Attn: Secretary
Fax: 610-521-5985
With copy to:
Ballard Spahr Andrews & Ingersoll
Attn: Raymond D. Agran, Esq.
1735 Market Street, 51st Floor
Philadelphia, PA 19103-7599
Facsimile: 215-864-8999
If to a Buyer: To the address set forth immediately below such Buyer's
name on the signature pages hereto.
Each party shall provide notice to the other party of any change in
address.
g. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and assigns.
Neither the Company nor any Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, any Buyer may assign its rights hereunder to any
person that purchases Securities in a private transaction from a Buyer or to any
of its "affiliates," as that term is defined under the 1934 Act, without the
consent of the Company.
h. 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.
i. Survival. The representations and warranties of the Company and
the agreements and covenants set forth in Sections 3, 4, 5 and 8 shall survive
the closing hereunder notwithstanding any due diligence investigation conducted
by or on behalf of the Buyers. The Company agrees to indemnify and hold harmless
each of the Buyers and all their officers, directors, employees, partners,
members, affiliates, and agents for loss or damage arising as a result of or
related to any breach or alleged breach by the Company of any of its
representations, warranties and covenants set forth in Sections 3 and 4 hereof
or any of its covenants and obligations under this Agreement or the Registration
Rights Agreement, including advancement of expenses as they are incurred.
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j. Publicity. The Company and each of the Buyers shall have the
right to review a reasonable period of time before issuance of any press
releases, or relevant portions of any SEC, Nasdaq or NASD filings, or any other
public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior
approval of each of the Buyers, to make any press release or SEC, Nasdaq or NASD
filings with respect to such transactions as is required by applicable law and
regulations (although each of the Buyers shall be consulted by the Company in
connection with any such press release prior to its release and shall be
provided with a copy thereof and be given an opportunity to comment thereon).
k. Further Assurances. Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
m. Equitable Relief. The Company recognizes that in the event that
it fails to perform, observe, or discharge any or all of its obligations under
this Agreement, any remedy at law may prove to be inadequate relief to the
Buyers. The Company therefore agrees that the Buyers shall be entitled to
temporary and permanent injunctive relief in any such case without the necessity
of proving actual damages.
IN WITNESS WHEREOF, the undersigned Buyers and the Company have caused
this Agreement to be duly executed as of the date first above written.
EPL Technologies, Inc.
By:_________________________________
Timothy B. Owen
Secretary and Treasurer
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RGC International Investors, LDC
By: Rose Glen Capital Management, L.P.,
Investment Manager
By: RGC General Partner Corp.
By:_________________________________
Name: Wayne D. Bloch
Its: Managing Director
RESIDENCE: Cayman Islands
ADDRESS:
c/o Rose Glen Capital Management, L.P.
3 Bala Plaza East, Suite 200
251 St. Asaphs Road
Bala Cynwyd, PA 19004
Fax: (610) 617-0570
Telephone: (610) 617-5900
AGGREGATE SUBSCRIPTION AMOUNT:
Number of Shares of Series D Convertible Preferred Stock: 7,000
Number of Warrants: 225,807
Aggregate Purchase Price: $7,000,000
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Capital Ventures International
By: Heights Capital Management, Inc.,
its authorized agent
By: ____________________________
Name:
Title:
RESIDENCE: Cayman Islands
c/o Heights Capital Management
425 California Street, Suite 1100
San Francisco, CA 94104
Facsimile: (415) 403-6525
Telephone: (415) 403-6500
AGGREGATE SUBSCRIPTION AMOUNT:
Number of Shares of Series D Convertible Preferred Stock: 2,500
Number of Warrants: 80,646
Aggregate Purchase Price: $2,500,000
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Halifax Fund, L.P.
By: Palladin Group, L.P., as attorney-in-fact
By: Palladin Capital Management LC, its general partner
By:_____________________________
Andrew Kaplan
Managing Director
RESIDENCE: Cayman Islands
c/o Andrew Kaplan
Palladin Group
40 W. 57th Street, 19th Floor
New York, New York 10019
Facsimile: (212) 698-0599
Telephone: (212) 698-0515
AGGREGATE SUBSCRIPTION AMOUNT:
Number of Shares of Series D Convertible Preferred Stock: 3,000
Number of Warrants: 96,775
Aggregate Purchase Price: $3,000,000
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