EXHIBIT 99.5
FORM OF SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of August
12, 1998, between AZUREL LTD., a corporation organized under the laws of the
State of Delaware (the "COMPANY"), and each of the purchasers (the "PURCHASERS")
set forth on the execution pages hereof (the "EXECUTION PAGES").
WHEREAS:
A. The Company and each Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("REGULATION D"), as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "SECURITIES ACT").
B. The Company desires to sell, and each Purchaser desires to
purchase severally and not jointly, upon the terms and conditions stated in this
Agreement, units (the "UNITS"), each Unit consisting of (i) one share of the
Company's Series A Convertible Preferred Stock, par value $.001 per share (the
"PREFERRED SHARES"), convertible into shares of the Company's common stock, par
value $.001 per share (the "COMMON STOCK"), and (ii) a warrant, in the form
attached hereto as EXHIBIT B (the "WARRANT"), to acquire 375 shares of Common
Stock. The rights, preferences and privileges of the Preferred Shares, including
the terms upon which such Preferred Shares are convertible into shares of Common
Stock, are set forth in the form of Certificate of Designations, Preferences and
Rights attached hereto as EXHIBIT A (the "CERTIFICATE OF DESIGNATION"). The
shares of Common Stock issuable upon conversion of the Preferred Shares or
otherwise pursuant to the Certificate of Designation are referred to herein as
the "CONVERSION SHARES" and the shares of Common Stock issuable upon exercise of
or otherwise pursuant to the Warrants are referred to herein as the "WARRANT
SHARES." The Preferred Shares, the Warrants, the Conversion Shares and the
Warrant Shares are collectively referred to herein as the "SECURITIES" and each
of them may individually be referred to herein as a "SECURITY."
C. 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 certain registration rights
under the Securities Act and the rules and regulations promulgated thereunder,
and applicable state securities laws.
NOW, THEREFORE, the Company and the Purchasers hereby agree as
follows:
1. PURCHASE AND SALE OF UNITS.
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(a) PURCHASE OF UNITS AND CLOSING. Subject to the satisfaction (or
waiver) of the conditions set forth in Section 6 and Section 7 below, the
Purchasers, severally but not jointly, agree to purchase, that number of the
Units set forth on such Purchaser's Execution Page. The purchase price (the
"PURCHASE PRICE") per Unit shall be equal to One Thousand Dollars ($1,000.00).
The issuance and sale of the Units shall take place, subject to the satisfaction
or waiver of the conditions precedent thereto, in two closings, the first of
which is referred to herein as the "FIRST CLOSING," the second of which is
referred to herein as the "SECOND CLOSING," and the First Closing and the Second
Closing are collectively referred to herein as the "CLOSINGS." The Second
Closing shall occur, if at all, at the sole discretion of the Purchasers at any
time during the period beginning on the six (6) month anniversary of the First
Closing Date and ending on the twenty-four (24) month anniversary of the First
Closing Date. The aggregate purchase price of the Units being acquired by each
Purchaser at each of the Closings is set forth on such Purchaser's Execution
Page. The Closings of the purchase, sale and exchange of the Units to be
acquired by the Purchasers from the Company under this Agreement shall take
place at the offices of Klehr, Harrison, Harvey, Branzburg & Ellers, LLP, 1401
Walnut Street, 8th Floor, Philadelphia, PA 19102. The date and time of the
Closings (the "CLOSING DATES") shall be (i) in the case of the First Closing on
August 12, 1998 and (ii) in the case of the Second Closing, if the Purchasers
shall elect at their option to conduct a Second Closing, as soon as practicable
after the satisfaction or waiver of the conditions precedent thereto set forth
in Section 6 and Section 7, but not earlier than February 12, 1999 and not later
than August 12, 2000, or in each case at such time and date thereafter as the
Purchasers and the Company may agree. Each Purchaser's obligation to purchase
Units hereunder is distinct and separate from each other Purchaser's obligation
to purchase Units and no Purchaser shall be required to purchase hereunder more
than the number of Units set forth on such Purchaser's Execution Page hereto
notwithstanding any failure by any other Purchaser to purchase Units hereunder
nor shall any Purchaser have any liability by reason of any such failure by any
other Purchaser.
(b) FORM OF PAYMENT. On each Closing Date, each Purchaser shall pay
the aggregate Purchase Price for the Units being purchased by such Purchaser on
the such Closing Date by wire transfer to the Company, in accordance with the
Company's written wiring instructions, against delivery of duly executed
certificates representing the Preferred Shares and duly executed Warrants being
purchased by such Purchaser and the Company shall deliver such certificates and
Warrants against delivery of such aggregate Purchase Price.
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2. PURCHASERS' REPRESENTATIONS AND WARRANTIES
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Each Purchaser severally and not jointly represents and warrants to
the Company as follows:
(a) PURCHASE FOR OWN ACCOUNT, ETC. Purchaser is purchasing the Units
for Purchaser's own account and not with a present view towards the public sale
or distribution thereof, except pursuant to sales that are exempt from the
registration requirements of the Securities Act and/or sales registered under
the Securities Act. Purchaser understands that Purchaser must bear the economic
risk of this investment indefinitely, unless the Securities are registered
pursuant to the Securities Act and any applicable state securities or blue sky
laws or an exemption from such registration is available, and that the Company
has no present intention of registering the resale of any such Securities other
than as contemplated by the Registration Rights Agreement. Notwithstanding
anything in this Section 2(a) to the contrary, by making the representations
herein, the Purchaser does not agree to hold the Securities for any minimum or
other specific term and reserves the right to dispose of the Securities at any
time in accordance with or pursuant to a registration statement or an exemption
from the registration requirements under the Securities Act.
(b) ACCREDITED INVESTOR STATUS. Purchaser is an "ACCREDITED INVESTOR"
as that term is defined in Rule 501(a) of Regulation D.
(c) RELIANCE ON EXEMPTIONS. Purchaser understands that the Units are
being offered and sold to Purchaser 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 Purchaser's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of Purchaser set forth herein in order to determine the
availability of such exemptions and the eligibility of Purchaser to acquire the
Units.
(d) INFORMATION. Purchaser and its counsel, if any, have been
furnished all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Units which have
been specifically requested by Purchaser or its counsel. Purchaser and its
counsel have been afforded the opportunity to ask questions of the Company.
Neither such inquiries nor any other investigation conducted by Purchaser or its
counsel or any of its representatives shall modify, amend or affect Purchaser's
right to rely on the Company's representations and warranties contained in
Section 3 below. Purchaser understands that Purchaser's investment in the Units
involves a high degree of risk.
(e) GOVERNMENTAL REVIEW. Purchaser 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 Units.
(f) TRANSFER OR RESALE. Purchaser understands that (i) except as
provided in the Registration Rights Agreement, the sale or resale of the
Securities have not been and are not being registered under the Securities Act
or any state securities laws, and the Securities may not be
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transferred unless (a) the resale of the Securities has been registered
thereunder; or (b) Purchaser shall have delivered to the Company an opinion of
counsel (which opinion shall be in form, substance and scope customary for
opinions of counsel in comparable transactions) to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration; or (c) the Securities are sold under Rule 144
promulgated under the Securities Act (or a successor rule) ("RULE 144"); or (d)
the Securities are sold or transferred to an affiliate of Purchaser who agrees
to sell or otherwise transfer the Securities only in accordance with the
provisions of this Section 2(f) and who is an Accredited Investor; and (ii)
neither the Company nor any other person is under any obligation to register
such Securities under the Securities Act or any state securities laws (other
than pursuant to the Registration 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. Purchaser understands that the certificates for the
Preferred Shares and the Warrants and, until such time as the Conversion Shares
and Warrant Shares have been registered under the Securities Act (including
registration pursuant to Rule 416 thereunder) as contemplated by the
Registration Rights Agreement or otherwise may be sold by Purchaser under Rule
144, the certificates for the Conversion Shares and Warrant Shares may bear a
restrictive legend in substantially the following form:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or the
securities laws of any state of the United States. The securities
represented hereby may not be offered, sold or transferred in the
absence of an effective registration statement for the securities
under applicable securities laws unless offered, sold or transferred
under an available exemption from the registration requirements of
those laws.
The legend set forth above shall be removed and the Company shall
issue a certificate without such legend to the holder of any Security upon which
it is stamped if, unless otherwise required by state securities laws, (a) the
sale of such Security is registered under the Securities Act (including
registration pursuant to Rule 416 thereunder) as contemplated by the
Registration Rights Agreement; (b) such holder provides the Company with an
opinion of counsel, in form, substance and scope customary for opinions of
counsel in comparable transactions, to the effect that a public sale or transfer
of such Security may be made without registration under the Securities Act; or
(c) such holder provides the Company with reasonable assurances that such
Security can be sold under Rule 144. Purchaser agrees to sell all Securities,
including those represented by a certificate(s) from which the legend has been
removed, pursuant to an effective registration statement, under an exemption
from the registration requirements of the Securities Act or in accordance with
Rule 144. In the event the above legend is removed from any Security and
thereafter the effectiveness of a registration statement covering such Security
is suspended or the Company determines that a supplement or amendment thereto is
required by applicable securities laws, then upon reasonable advance notice to
Purchaser the Company may require that the above legend be placed on any such
Security that cannot then be sold pursuant to an effective registration
statement or under Rule 144 and Purchaser shall cooperate in the replacement of
such legend. Such legend shall thereafter be removed when such Security may
again be sold pursuant to an effective registration statement or under Rule 144.
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(h) AUTHORIZATION; ENFORCEMENT. This Agreement and the Registration
Rights Agreement have been duly and validly authorized, executed and delivered
on behalf of Purchaser and are valid and binding agreements of Purchaser
enforceable against Purchaser in accordance with their terms.
(i) RESIDENCY. Purchaser is a resident of the jurisdiction set forth
under Purchaser's name on the Execution Page hereto executed by Purchaser.
(j) ACKNOWLEDGMENTS REGARDING PLACEMENT AGENT. Purchaser acknowledges
that The Zanett Securities Corporation is acting as placement agent (the
"PLACEMENT AGENT") for the Securities being offered hereby and will be
compensated by the Company for acting in such capacity. Purchaser further
acknowledges that the Placement Agent has acted solely as placement agent in
connection with the offering of the Securities by the Company, that the
information and data provided to Purchaser and referred to in subsection (d)
above or otherwise in connection with the transactions contemplated hereby have
not been subjected to independent verification by the Placement Agent, and that
the Placement Agent makes no representation or warranty with respect to the
accuracy or completeness of such information, data or other related disclosure
material. Purchaser further acknowledges that in making its decision to enter
into this Agreement and purchase the Securities it has relied on the Company's
representations and warranties contained in Section 3 below and on its own
examination of the Company and the terms of, and consequences of holding, the
Securities. Purchaser further acknowledges that the provisions of this Section
2(j) are for the benefit of, and may be enforced by, the Placement Agent.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
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The Company represents and warrants to each Purchaser as follows:
(a) ORGANIZATION AND QUALIFICATION. The Company and each of its
subsidiaries is a corporation duly organized and existing in good standing under
the laws of the jurisdiction in which it is incorporated, and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted. Except as set forth on Schedule 3(a), the Company and each of its
subsidiaries is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which its ownership of property or the
nature of the business conducted by it makes such qualification necessary and
where the failure so to qualify would have a Material Adverse Effect. "MATERIAL
ADVERSE EFFECT" means any material adverse effect on (i) the Securities, (ii)
the ability of the Company to perform its obligations hereunder or under the
Certificate of Designation, the Warrants or the Registration Rights Agreement or
(iii) the business, operations, properties, prospects or financial condition of
the Company and its subsidiaries, taken as a whole.
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(b) AUTHORIZATION; ENFORCEMENT. (i) The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement, the Warrants and the Registration Rights Agreement, to issue and
sell the Units in accordance with the terms hereof, to issue the Conversion
Shares upon conversion of the Preferred Shares in accordance with the terms of
the Certificate of Designation and to issue the Warrant Shares upon exercise of
the Warrants in accordance with the terms of such Warrants; (ii) the execution,
delivery and performance of this Agreement, the Warrants and the Registration
Rights Agreement by the Company and the consummation by it of the transactions
contemplated hereby and thereby (including, without limitation, the issuance of
the Preferred Shares and Warrants and the issuance and reservation for issuance
of the Conversion Shares and Warrant Shares) have been duly authorized by the
Company's Board of Directors and no further consent or authorization of the
Company, its Board of Directors, any committee of the Board of Directors or the
Company's shareholders is required, and (iii) this Agreement constitutes, and,
upon execution and delivery by the Company of the Warrants and the
Registration Rights Agreement, such agreements will constitute, valid and
binding obligations of the Company enforceable against the Company in accordance
with their terms.
(c) STOCKHOLDER AUTHORIZATION. The Company believes that neither the
execution, delivery or performance of this Agreement, the Warrants or the
Registration Rights Agreement by the Company nor the consummation by it of the
transactions contemplated hereby or thereby (including, without limitation, the
issuance of the Preferred Shares or Warrants or the issuance, reservation for
issuance or listing of the Conversion Shares or Warrant Shares) requires any
consent, approval or authorization of the Company's stockholders.
(d) CAPITALIZATION. The capitalization of the Company as of the date
hereof, including the authorized capital stock, the number of shares issued and
outstanding, the number of shares issuable and reserved for issuance pursuant to
the Company's stock option plans, the number of shares issuable and reserved for
issuance pursuant to securities (other than the Preferred Shares and Warrants)
exercisable or exchangeable for, or convertible into, any shares of capital
stock and the number of shares to be reserved for issuance upon conversion of
the Preferred Shares and exercise of the Warrants is set forth on SCHEDULE 3(D).
All of such outstanding shares of capital stock have been, or upon issuance in
accordance with the terms of any such warrants, options or preferred stock, will
be, validly issued, fully paid and non-assessable. No shares of capital stock of
the Company (including the Preferred Shares, the Conversion Shares and the
Warrant Shares) are subject to preemptive rights or any other similar rights of
the stockholders of the Company or any liens or encumbrances. Except for the
Securities and as set forth on SCHEDULE 3(D), as of the date of this Agreement,
(i) there are no outstanding options, warrants, scrip, rights to subscribe to,
calls or commitments of any character whatsoever relating to, or securities or
rights convertible into or exercisable 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 Securities Act (except the Registration Rights Agreement).
Except as set forth on SCHEDULE 3(D), (i) there are no securities or
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instruments containing antidilution or similar provisions that will be triggered
by the issuance of the Securities in accordance with the terms of this
Agreement, the Certificate of Designation or the Warrants, (ii) there are no
outstanding securities or instruments of the Company or any of its subsidiaries
which contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its
subsidiaries is or may become bound to redeem a security of the Company or any
of its subsidiaries, and (iii) the Company does not have any stock appreciation
rights or "phantom stock" plans or agreements or any similar plan or agreement.
The Company has furnished to the Purchasers true and correct copies of the
Company's Certificate of Incorporation as in effect on the date hereof
("CERTIFICATE OF INCORPORATION"), the Company's By-laws as in effect on the date
hereof (the "BY-LAWS"), and all other instruments and agreements governing
securities convertible into or exercisable or exchangeable for capital stock of
the Company. The Certificate of Designation, in the form attached hereto, will
be duly filed prior to Closing with the Secretary of State of the State of
Delaware and, upon the issuance of the Preferred Shares in accordance with the
terms hereof, each Purchaser shall be entitled to the rights set forth therein.
(e) ISSUANCE OF SHARES. The Preferred Shares are duly authorized and,
upon issuance in accordance with the terms of this Agreement, will be validly
issued, fully paid and non-assessable, and free from all taxes, liens, claims
and encumbrances and will not be subject to preemptive rights or other similar
rights of stockholders of the Company and will not impose personal liability on
the holders thereof. The Conversion Shares and Warrant Shares are duly
authorized and, in accordance with the Certificate of Designation, reserved for
issuance, and, upon conversion of the Preferred Shares and 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 and encumbrances
and will not be subject to preemptive rights or other similar rights of
stockholders of the Company and will not impose personal liability upon the
holder thereof.
(f) NO CONFLICTS. The execution, delivery and performance of this
Agreement, the Warrants and the Registration Rights Agreement by the Company,
the performance by the Company of its obligations under the Certificate of
Designation, and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the issuance and
reservation for issuance, as applicable, of the Preferred Shares, Warrants,
Conversion Shares and Warrant Shares) will not (i) result in a violation of the
Certificate of Incorporation or By-laws or (ii) conflict with, or constitute a
default (or an event which, with notice or lapse of time or both, would become a
default) under, or give to others any rights of termination, amendment
(including, without limitation, the triggering of any anti-dilution provisions),
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 rules or regulations of any
self-regulatory organizations to which either 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, with respect to clause (ii), for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations that would
not, individually or in the aggregate, have a
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Material Adverse Effect). Neither the Company nor any of its subsidiaries is in
violation of its Certificate 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, would put the
Company or any of its subsidiaries in default) under, nor has there occurred any
event giving others (with notice or lapse of time or both) 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, except for actual or possible violations, defaults or rights that would
not, individually or in the aggregate, have a Material Adverse Effect. The
businesses of the Company and its subsidiaries are not being conducted, and
shall not be conducted so long as a Purchaser owns any of the Securities, in
violation of any law, ordinance or regulation of any governmental entity, except
for possible violations the sanctions for which either singly or in the
aggregate would not have a Material Adverse Effect. Except as specifically
contemplated by this Agreement and the Registration Rights Agreement, the
Company is not required to obtain any consent, approval, 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 Warrants or the
Registration Rights Agreement or to perform its obligations under the
Certificate of Designation, in each case in accordance with the terms hereof or
thereof. Except as set forth on SCHEDULE 3(F), the Company is not in violation
of the listing requirements of the NASDAQ SmallCap Market and does not
reasonably anticipate that the Common Stock will be delisted by NASDAQ for the
foreseeable future.
(g) SEC DOCUMENTS, FINANCIAL STATEMENTS. Since December 31, 1995, the
Company has timely filed (within applicable extension periods) 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 "EXCHANGE ACT") (all of the foregoing and all exhibits
included therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to herein as the
"SEC DOCUMENTS"). The Company has delivered to the Purchasers true and complete
copies of the SEC Documents. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the Exchange Act or
the Securities Act, as the case may be, 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. None of the
statements made in any such SEC Documents is, or has been, required to be
amended or updated under applicable law (except for such statements as have been
amended or updated in subsequent filings made prior to the date hereof). 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
applicable with respect thereto. Such financial statements have been prepared in
accordance with U.S. generally accepted accounting principles ("GAAP"),
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
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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
immaterial year-end audit adjustments). Except as set forth in the financial
statements of the Company included in the SEC Documents filed prior to the date
hereof, the Company has no liabilities, contingent or otherwise, other than (i)
liabilities incurred in the ordinary course of business subsequent to the date
of such financial statements, (ii) liabilities not required by GAAP to be
disclosed on a balance sheet prepared in accordance with GAAP, and (iii)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under GAAP to be reflected in such financial
statements, which liabilities and obligations referred to in clauses (i), (ii)
and (iii), individually or in the aggregate, are not material to the financial
condition or operating results of the Company. Neither the Company nor any of
its subsidiaries or any of their officers, directors, employees or agents have
provided the Purchasers with any material, nonpublic information.
(h) ABSENCE OF CERTAIN CHANGES. Since December 31, 1997, there has
been no material adverse change and no material adverse development in the
business, properties, operations, prospects, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole, except as
disclosed in SCHEDULE 3(H) or in the SEC Documents filed prior to the date
hereof.
(i) ABSENCE OF LITIGATION. Except as set forth on SCHEDULE 3(I) and
as expressly disclosed in the SEC Documents filed prior to the date hereof,
there is no action, suit, 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,
threatened against or affecting the Company, any of its subsidiaries, or any of
their respective directors or officers in their capacities as such. There are no
facts which, if known by a potential claimant or governmental authority, could
give rise to a claim or proceeding which, if asserted or conducted with results
unfavorable to the Company or any of its subsidiaries, could reasonably be
expected to have a Material Adverse Effect.
(j) INTELLECTUAL PROPERTY. Each of the Company and its subsidiaries
owns or is licensed to use all patents, patent applications, trademarks,
trademark applications, trade names, service marks, copyrights, copyright
applications, licenses, permits, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information, systems
or procedures) and other similar rights and proprietary knowledge (collectively,
"INTANGIBLES") necessary for the conduct of its business as now being conducted
and as described in the Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1997. To the best knowledge of the Company, neither the
Company nor any subsidiary of the Company infringes or is in conflict with any
right of any other person with respect to any Intangibles which, individually or
in the aggregate, if the subject of an unfavorable decision, ruling or finding,
would have a Material Adverse Effect. Neither the Company nor any of its
subsidiaries has received written notice of any pending conflict with or
infringement upon such third party Intangibles, which alleged pending conflict
or alleged infringement, if adversely determined, would result in a Material
Adverse Effect. Except as
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disclosed in the SEC Documents filed prior to the date hereof, the termination
of the Company's ownership of, or right to use, any single Intangible would not
result in a Material Adverse Effect on the Company. Neither the Company nor any
of its subsidiaries has entered into any consent agreement, indemnification
agreement, forbearance to sue or settlement agreement with respect to the
validity of the Company's or its subsidiaries' ownership or right to use its
Intangibles and, to the best knowledge of the Company, there is no reasonable
basis for any such claim to be successful. The Intangibles are valid and
enforceable and no registration relating thereto has lapsed, expired or been
abandoned or canceled or is the subject of cancellation or other adversarial
proceedings, and all applications therefor are pending and in good standing. The
Company and its subsidiaries have complied, in all material respects, with their
respective contractual obligations relating to the protection of the Intangibles
used pursuant to licenses. To the best knowledge of the Company, no person is
infringing on or violating the Intangibles owned or used by the Company or its
subsidiaries.
(k) 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.
(l) DISCLOSURE. All information relating to or concerning the Company
set forth in this Agreement or provided to the Purchasers pursuant to Section
2(d) hereof or 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 exists with respect to the
Company or its subsidiaries or their respective businesses, properties,
prospects, operations or financial conditions, which has not been publicly
disclosed but, under applicable law, rule or regulation, would be required to be
disclosed by the Company in a registration statement filed on the date hereof by
the Company under the Securities Act with respect to the primary issuance of the
Company's securities.
(m) ACKNOWLEDGMENT REGARDING PURCHASERS' PURCHASE OF THE UNITS. The
Company acknowledges and agrees that none of the Purchasers or the Placement
Agent is acting as a financial advisor or fiduciary of the Company (or in any
similar capacity) with respect to this Agreement or the transactions
contemplated hereby, the relationship between the Company and the Purchasers and
the Placement Agent is "arms-length" and any statement made by any Purchaser or
the Placement Agent or any of their respective representatives or agents in
connection with this Agreement and the transactions contemplated hereby is not
advice or a recommendation and is merely incidental to such Purchaser's purchase
of Securities or such Placement Agent's role as a placement agent and has not
been relied upon by the Company, its officers or its directors in any way. The
Company further
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acknowledges that the Company's decision to enter into this Agreement has been
based solely on an independent evaluation by the Company and its
representatives.
(n) FORM S-3 ELIGIBILITY. The Company is currently eligible to
register the resale of its Common Stock on a registration statement on Form S-3
under the Securities Act. There exist no facts or circumstances that would
prohibit or delay the preparation and filing of a registration statement on Form
S-3 with respect to the Registrable Securities (as defined in the Registration
Rights Agreement).
(o) 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.
(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 of any security or solicited any offers to
buy any security under circumstances that would require registration of the
Securities being offered hereby under the Securities Act or cause this offering
of Securities to be integrated with any prior offering of securities of the
Company for purposes of the Securities Act or any applicable stockholder
approval provisions.
(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 by any Purchaser relating to this Agreement or the transactions
contemplated hereby, except for The Zanett Securities Corporation.
(r) ACKNOWLEDGMENT OF DILUTION. The number of Conversion Shares
issuable upon conversion of the Preferred Shares may increase in certain
circumstances, including if the trading price of the Common Stock declines. The
Company's executive officers have studied and fully understand the nature of the
Securities being sold hereunder. The Company acknowledges that its obligation to
issue Conversion Shares upon conversion of the Preferred Shares in accordance
with the Certificate of Designation is absolute and unconditional, regardless of
the dilution that such issuance may have on the ownership interests of other
stockholders. Taking the foregoing into account, the Company's Board of
Directors has determined in its good faith business judgment that the issuance
of the Preferred Shares and Warrants hereunder and the consummation of the other
transactions contemplated hereby are in the best interests of the Company and
its stockholders.
(s) TITLE. The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and merchantable title to all
personal property owned by them that 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(S) or such as do not
materially affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by the Company and
its subsidiaries. Any real property and facilities
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held under lease by the Company and its subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not materially interfere with the use made and proposed to be
made of such property and buildings by the Company and its subsidiaries.
(t) TAX STATUS. Except as set forth on SCHEDULE 3(T), the Company and
each of its subsidiaries has made or filed all foreign, federal, state and local
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. Except as set forth on SCHEDULE 3(T), there are no unpaid taxes in any
material amount 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. The Company
has not executed a waiver with respect to any statute of limitations relating to
the assessment or collection of any federal, state or local tax. Except as set
forth on SCHEDULE 3(T), none of the Company's tax returns is presently being
audited by any taxing authority.
(u) ENVIRONMENTAL LAWS. The Company and each of its subsidiaries (i)
are in compliance with any and all applicable foreign, federal, state and local
laws and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval. No contaminant, pollutant or
toxic or hazardous waste has been generated, used, treated, stored or disposed
of at, or transported to or from, or released into the air, soil, surface or
ground waters at, on or under any real property at any time owned, leased,
operated or used by the Company. The Company is not currently involved in and no
person or entity has taken any action or threatened or proposed to involve the
Company in any environmental clean-up or remediation or sought to expose the
Company to contribution or liability for such remediation.
(v) REGULATORY PERMITS. The Company and each of its subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company nor any such subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.
(w) NO OTHER AGREEMENTS. The Company has not, directly or indirectly,
made any agreements with any Purchasers relating to the terms or conditions of
the transactions contemplated by this Agreement, the Certificate of Designation,
the Registration Rights Agreement and the Warrants except as set forth in such
documents.
-12-
4. COVENANTS.
(a) BEST EFFORTS. The parties shall use their best efforts timely to
satisfy each of the conditions described in Section 6 and Section 7 of this
Agreement.
(b) FORM D: BLUE SKY LAWS. The Company shall file with the SEC a Form
D with respect to the Securities as required under Regulation D and to provide a
copy thereof to each Purchaser 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 Purchasers
pursuant to this Agreement under applicable securities or "blue sky" laws of the
states of the United States or obtain exemption therefrom, and shall provide
evidence of any such action so taken to the Purchasers on or prior to the
Closing Date.
(c) REPORTING STATUS. So long as any Purchaser beneficially owns any
of the Securities, the Company shall timely file all reports required to be
filed with the SEC pursuant to the Exchange Act, and the Company shall not
terminate its status as an issuer required to file reports under the Exchange
Act even if the Exchange Act or the rules and regulations thereunder would
permit such termination. In addition, the Company shall take all actions
necessary to continue to be eligible to register the resale of its Common Stock
on a registration statement on Form S-3 under the Securities Act.
(d) USE OF PROCEEDS. The Company shall use the proceeds from the sale
of the Preferred Shares and Warrants as set forth in SCHEDULE 4(D).
(e) EXPENSES. Except as otherwise provided herein, in the Placement
Agency Agreement and in the Registration Rights Agreement, each party hereto
shall be responsible for its own expenses incurred in connection with the
negotiation, preparation, execution, delivery and performance of this Agreement
and the other agreements to be executed in connection herewith.
(f) FINANCIAL INFORMATION. The Company shall send the following
reports to each Purchaser until such Purchaser transfers, assigns or sells all
of its Securities: (i) within 10 days after the filing with the SEC, a copy of
its Annual Report on Form 10-KSB, its Quarterly Reports on Form 10-QSB, its
proxy statements and any Current Reports on Form 8-K; (ii) within one day after
release, copies of all press releases issued by the Company or any of its
subsidiaries; and (iii) copies of any notices and other information made
available or given to shareholders of the Company generally, contemporaneously
with making available or giving thereof to such shareholders.
(g) 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
and the full exercise of the Warrants and the issuance of the Warrant Shares in
connection therewith, subject to and as otherwise required by the Certificate of
Designation and the Warrants.
-13-
(h) LISTING. The Company shall promptly 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, so long as
any Purchaser (or any of their affiliates) own any Securities, such listing of
all Conversion Shares and Warrant Shares from time to time issuable upon
conversion of the Preferred Shares and exercise of the Warrants. The Company
will use its best efforts to continue the listing and trading of its Common
Stock on the NASDAQ Small Cap Market ("NSCM"), the NASDAQ National Market
("NNM"), the New York Stock Exchange ("NYSE") or the American Stock Exchange
("AMEX") and will comply in all respects with the reporting, filing and other
obligations under the bylaws or rules of the NSCM, NNM, NYSE or AMEX as
applicable. The Company shall promptly provide to each holder of Preferred
Shares or Warrants copies of any notices it receives regarding the continued
eligibility of the Common Stock for trading on the NSCM or, if applicable, any
other securities exchange or automated quotation system on which securities of
the same class or series issued by the Company are then listed or quoted, if
any.
(i) CORPORATE EXISTENCE. So long as a Purchaser beneficially owns any
Securities, the Company shall maintain its corporate existence, and in the event
of a merger, consolidation or sale of all or substantially all of the Company's
assets, the Company shall ensure that the surviving or successor entity in such
transaction (i) assumes the Company's obligations hereunder and under the
Certificate of Designation, the Warrants (except as otherwise provided therein)
and the agreements and instruments entered into in connection herewith
regardless of whether or not the Company would have had a sufficient number of
shares of Common Stock authorized and available for issuance in order to effect
the conversion of all Preferred Shares and exercise in full of all Warrants
outstanding as of the date of such transaction and (ii) is a publicly traded
corporation whose common stock is listed for trading on the NSCM, NNM, NYSE or
AMEX. Notwithstanding the foregoing, the Company covenants and agrees that it
will not engage in any merger, consolidation or sale of all or substantially all
of its assets at any time prior to the effectiveness of the registration
statement required to be filed pursuant to the Registration Rights Agreement
without (A) providing each Purchaser with written notice of such transaction at
least 60 days prior to the consummation of such transaction, (B) obtaining the
written consent of the Purchasers holding a majority-in-interest of the then
outstanding Preferred Shares on or before the 10th day after the delivery of
such notice by the Company, and (C) publicly announcing such transaction.
(j) NO INTEGRATED OFFERINGS. The Company shall not make any offers or
sales of any security (other than pursuant to this Agreement and the
Registration Rights Agreement) under circumstances that would require
registration of the Securities being offered or sold hereunder under the
Securities Act or cause the offering of the Securities to be integrated with any
other offering of securities by the Company for purposes of any stockholder
approval provision applicable to the Company or its securities.
(k) LEGAL COMPLIANCE. The Company shall conduct its business and the
business of its subsidiaries in compliance with all laws, ordinances or
regulations of governmental entities
-14-
applicable to such businesses, except where the failure to do so would not have
a Material Adverse Effect.
(l) FILING OF FORM 8-K. On or before the fifth (5th) business day
following the Closing Date, the Company shall file a Current Report on Form 8-K
with the SEC describing the terms of the transactions contemplated by this
Agreement, the Certificate of Designation, the Registration Rights Agreement and
the Warrants in the form required by the Exchange Act.
(m) CAPITAL AND SURPLUS; SPECIAL RESERVES. The amount to be
represented in the capital account for the Series A Preferred Stock at all times
for each outstanding share of Series A Preferred Stock shall be an amount equal
to the Redemption Amount therefor.
(n) NO MANIPULATION. So long as a Purchaser beneficially owns any
Preferred Shares, neither the Purchaser nor any person acting on behalf of such
Purchaser shall take any action intended to decrease the trading price of the
Company's Common Stock during any period in which the Conversion Price (as
defined in the Certificate of Designation) is being computed for purposes of any
conversion of Preferred Shares under the Certificate of Designation.
Notwithstanding the foregoing, the provisions of this subsection (n) shall not
prohibit a sale by a Purchaser of shares of Common Stock effected on the date on
which a notice of conversion of Preferred Shares is delivered to the Company
entitling such Purchaser to receive a number of shares of Common Stock at least
equal to the number of shares so sold.
(o) NO FIVE PERCENT HOLDERS. As more fully provided in the
Certificate of Designation and subject to the terms and limitations provided in
the Certificate of Designation, a holder of the Preferred Shares shall not be
entitled to receive shares of Common Stock upon conversion where receipt of such
Common Stock would result in such holder of Preferred Shares beneficially owning
more than 4.99% of the Company's outstanding Common Stock.
(p) ADDITIONAL EQUITY CAPITAL; RIGHT OF FIRST OFFER. The Company
agrees from the date of this Agreement until the earlier of (i) five (5) years
from the date of this Agreement or (ii) such time as the Purchasers no longer
own any Preferred Shares or Common Stock (the "LOCK-UP PERIOD"), the Company
will not, without the prior written consent of Purchasers (or their designated
agents) holding at least a majority-in-interest of the then outstanding
Preferred Shares, which consent shall not be unreasonably withheld, contract
with any party to obtain additional equity financing (including any debt
financing with an equity component) (as defined below) ("FUTURE OFFERINGS"). For
purposes of determining the majority-in-interest under this subsection (p), the
holders of outstanding Conversion Shares shall be deemed to hold the number of
Preferred Shares that were converted to such Conversion Shares. In addition, the
Company will not conduct any Future Offering during the Lock-Up Period, unless
it shall have first delivered to each Purchaser at least ten (10) business days
prior to the closing of such Future Offering, written notice describing the
proposed Future Offering, including the terms and conditions thereof, and
providing each Purchaser and its affiliates, an option during the ten (10)
business day period following delivery of such notice to purchase up to the
Applicable Portion (as defined below) of the securities being offered in the
-15-
Future Offering on the same terms as contemplated by such Future Offering (the
limitations referred to in this and the immediately preceding sentence are
collectively referred to as the "Capital Raising Limitations"). The Capital
Raising Limitations shall not apply to any transaction involving issuances of
securities as consideration in a merger, consolidation or acquisition of assets,
or in connection with any strategic partnership or joint venture (the primary
purpose of which is not to raise equity capital), or as consideration for the
acquisition of a business, product or license by the Company. The Capital
Raising Limitations also shall not apply to (i) the issuance of securities
pursuant to an underwritten public offering, (ii) 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 (iii) the grant of
additional options or warrants, or the issuance of additional securities, under
any Company stock option, bonus plan or restricted stock plan for the benefit of
the Company's employees, consultants or directors pursuant to plans approved by
a majority of the Board of Directors who are not officers of the Company or a
majority of the Board's compensation committee, if any. The "APPLICABLE PORTION"
shall mean a fraction, the numerator of which is the number of Units purchased
by such Purchaser hereunder and the denominator of which is the total number of
Units purchased by all of the Purchasers hereunder.
(q) STOCKHOLDER APPROVAL. The Company shall hold an annual or special
meeting of its stockholders as soon as practicable, but in no event later than
one hundred and twenty (120) days after the date hereof and use its best effort
to obtain at such meeting such approvals of the Company's stockholders as may be
required to issue all of the shares of Common Stock issuable upon full
conversion of, or as dividends on or otherwise with respect to, the Preferred
Shares (issuable at the First Closing and the Second Closing, if any, hereunder)
and the full exercise of, or otherwise with respect to, the Warrants (issuable
at the First Closing and the Second Closing, if any, hereunder) without
violating NASD Rules 4310(c)(25)(H) or 4460(i) (or any successor rules thereto
which may then be in effect) (the "STOCKHOLDER APPROVAL"). The Company shall
comply with the filing and disclosure requirements of Section 14 promulgated
under the Exchange Act in connection with the solicitation, acquisition and
disclosure of such Stockholder Approval. The Company represents and warrants
that Gerard Semhon, the Company's Chief Executive Officer, has agreed to vote
all of the shares of Common Stock which he beneficially owns in favor of the
Stockholder Approval proposal.
5. TRANSFER AGENT INSTRUCTIONS.
(a) The Company shall instruct its transfer agent to issue
certificates, registered in the name of each Purchaser or its nominee, for the
Conversion Shares and the Warrant Shares in such amounts as specified from time
to time by such Purchaser to the Company upon conversion of the Preferred Shares
or exercise of the Warrants, as applicable.
(b) The Company warrants that no instruction other than such
instructions referred to in this Section 5, and stop transfer instructions to
give effect to Section 2(f) hereof in the case of the transfer of the Conversion
Shares or Warrant Shares prior to registration of the Conversion Shares and
Warrant Shares under the Securities Act or without an exemption therefrom, will
be given by
-16-
the Company to its transfer agent and that the Securities shall otherwise be
freely transferable on the books and 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 each Purchaser's obligations and agreement
set forth in Section 2(g) hereof to resell the Securities pursuant to an
effective registration statement or under an exemption from the registration
requirements of applicable securities law.
(c) If a Purchaser provides the Company and the transfer agent with
an opinion of counsel, which opinion of counsel shall be in form, substance and
scope customary for opinions of counsel in comparable transactions, to the
effect that the Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from registration, or a Purchaser provides the Company
with reasonable assurances that such Securities may be sold under Rule 144, the
Company shall permit the transfer and, in the case of the Conversion Shares and
Warrant Shares, promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by such
Purchaser.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
-----------------------------------------------
The obligation of the Company hereunder to issue and sell the Units
to a Purchaser at the Closing is subject to the satisfaction, at or before the
Closing, of each of the following conditions, provided that such conditions are
for the Company's sole benefit and may be waived by the Company at any time in
its sole discretion by providing prior written notice to each Purchaser. The
obligation of the Company to issue and sell the Units to any Purchaser hereunder
is distinct and separate from its obligation to issue and sell Units to any
other Purchaser hereunder and any failure by one or more Purchasers to fulfill
the conditions set forth herein or to consummate the purchase of Units hereunder
will not relieve the Company of its obligations with respect to any other
Purchaser.
(a) The applicable Purchaser shall have executed this Agreement and
the Registration Rights Agreement, and delivered executed copies to the Company.
(b) The applicable Purchaser shall have delivered the Purchase Price
for the Units in accordance with Section 1(b) above.
(c) The representations and warranties of the applicable Purchaser
shall be true and correct as of the date when made and as of the date and time
of such closing as though made at that time (except for representations and
warranties that relate to a different date, which shall be true and correct as
of such date), and the applicable Purchaser 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 Purchaser at or prior to the Closing Date.
(d) No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority
-17-
of competent jurisdiction or any self-regulatory organization having authority
over the matters contemplated hereby that prohibits the consummation of any of
the transactions contemplated by this Agreement.
(e) In the case of the First Closing, this Agreement shall have been
executed by Purchasers that are obligated to purchase an aggregate of at least
1,500 Units and such Purchasers shall have delivered the Purchase Price therefor
in accordance with Section 1(b) hereof. In the case of the Second Closing, the
Purchasers shall have elected, in their sole discretion, to purchase an
additional 3,000 Units and such Purchasers shall have delivered the Purchase
Price therefor in accordance with Section 1(b) hereof.
7. CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE.
------------------------------------------------------
The obligation of each Purchaser hereunder to purchase the Units to
be purchased by it at the Closing is subject to the satisfaction, at or before
the Closing Date, of each of the following conditions, provided that such
conditions are for such Purchaser's sole benefit and may be waived by such
Purchaser at any time in such Purchaser's sole discretion:
(a) The Company shall have executed this Agreement and the
Registration Rights Agreement, and delivered executed copies to such Purchaser.
(b) The Certificate of Designation shall have been accepted for
filing with the Secretary of State of the State of Delaware and a copy thereof
certified by the Secretary of State of the State of Delaware shall have been
delivered to such Purchaser.
(c) The Company shall have delivered to such Purchaser duly executed
certificates and Warrant agreements (each in such denominations as such
Purchaser shall request) representing the Preferred Shares and Warrants being so
purchased by such Purchaser in accordance with Section 1(b) above.
(d) The Common Stock shall be authorized for quotation and listed on
the NSCM and trading in the Common Stock (or the NSCM generally) shall not have
been suspended by the SEC or the NSCM and a listing application for the
inclusion of the Conversion Shares and Warrant Shares on the NSCM shall have
been filed.
(e) The representations and warranties of the Company shall be true
and correct as of the date when made and as of the Closing Date as though made
at that time (except for representations and warranties that relate to a
different date, which shall be true and correct as of such date) and the Company
shall have performed, satisfied and complied 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. Such Purchaser shall have
received a certificate, executed by the Chief Executive Officer of the Company,
dated as of the Closing Date to the foregoing effect and as to such other
matters as such Purchaser may reasonably request.
-18-
(f) No litigation, statute, rule, regulation, executive order,
decree, ruling, injunction, action or proceeding shall have been enacted,
entered, promulgated or endorsed by any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby that questions the validity of, or challenges or
prohibits the consummation of, any of the transactions contemplated by this
Agreement.
(g) Such Purchaser 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 Purchaser and in substantially the form of EXHIBIT D
attached hereto.
(h) The Company shall have delivered evidence reasonably satisfactory
to the Purchasers that the Company's transfer agent has agreed to act in
accordance with irrevocable instructions in the form attached hereto as EXHIBIT
E.
(i) There shall have been no material adverse changes and no material
adverse developments in the business, properties, operations, prospects,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, since the date hereof, and no information, of
which the Purchasers are not currently aware, shall come to the attention of the
Purchasers that is materially adverse to the Company.
(j) The aggregate number of Units being purchased hereunder by all
Purchasers at the First Closing shall be 1,500 Units.
(k) The Board of Directors of the Company shall have adopted
resolutions consistent with Section 3(b)(ii) above and in a form reasonably
acceptable to such Purchaser.
(l) The Company shall have delivered to such Purchaser a certificate
evidencing the incorporation and good standing of the Company and each of its
subsidiaries in such corporation's state of incorporation issued by the
Secretary of State of such state of incorporation as of a date within ten days
of the Closing Date.
(m) The Company shall have delivered to such Purchaser a certified
copy of the Articles of Incorporation as certified by the Secretary of State of
the State of Delaware within ten days of the Closing Date.
(n) The Company shall have delivered to such Purchaser a secretary's
certificate, dated as of the Closing Date, as to (i) the resolutions described
in Section 7(k), (ii) the Certificate of Incorporation and (iii) the Bylaws,
each as in effect at the Closing.
(o) In the case of the Second Closing, the Purchasers shall have
elected, in their sole discretion, to conduct such Second Closing.
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8. GOVERNING LAW; MISCELLANEOUS.
-----------------------------
(a) GOVERNING LAW; JURISDICTION. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware without
regard to principles of choice of law or conflicts of laws that would defer to
the substantive law of another jurisdiction. The Company irrevocably consents to
the jurisdiction of the United States federal courts and the state courts
located in the State of Delaware, in any suit or proceeding based on or arising
under this Agreement and irrevocably agrees that any and all claims arising out
of this Agreement or related to the transactions contemplated by this Agreement
shall be determined exclusively in such courts. The Company irrevocably waives
the defense of an inconvenient forum to the maintenance of such suit or
proceeding. The Company further agrees that service of process mailed by first
class mail shall be deemed in every respect effective service of process in any
such suit or proceeding. Nothing herein shall affect the right of any Purchaser
to serve process in any other manner permitted by law. The Company agrees that a
final non-appealable judgment in any such suit or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on such judgment or in any
other lawful manner.
(b) COUNTERPARTS. 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 party 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 Purchasers, the
Company, their affiliates and persons acting on their behalf with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor any Purchaser makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived other than by an instrument in writing signed by
the party to be charged with enforcement and no provision of this Agreement may
be amended other than by an instrument in writing signed by the Company and each
Purchaser.
(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 or by confirmed
facsimile, and shall be effective upon receipt or refusal
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of receipt, if delivered personally or by courier or confirmed facsimile, in
each case addressed to a party. The addresses for such communications shall be:
If to the Company:
Azurel Ltd.
509 Madison Avenue
New York, New York 10022
Facsimile: (212) 317-0713
Attn: Chief Financial Officer
With a copy to:
Gersten, Savage, Kaplowitz & Fredericks, LLP
101 East 52nd Street
New York, New York 10022
Facsimile: (212) 980-5192
Attn: Jay M. Kaplowitz
If to any Purchaser, to such address set forth under such Purchaser's
name on the Execution Page hereto executed by such Purchaser.
Each party shall provide notice to the other parties 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. Except as
provided herein or therein, the Company shall not assign this Agreement, the
Registration Rights Agreement or the Warrants or any rights or obligations
hereunder or thereunder.
(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, except for the provisions of Section 2(j) and Section 3(m)
which are for the benefit of, and may be enforced by, the Placement Agent.
(i) SURVIVAL. The representations, warranties, agreements and
covenants of the Company set forth in Sections 3, 4, 5 and 8 hereof shall
survive the Closing notwithstanding any investigation conducted by or on behalf
of any Purchasers. None of the representations and warranties made by the
Company herein shall act as a waiver of any rights or remedies a Purchaser may
have under applicable federal or state securities laws. The Company shall
indemnify and hold harmless each Purchaser and each of such Purchaser's
officers, directors, employees, partners, members, agents and affiliates for all
losses or damages arising as a result of or related to any breach or alleged
breach by the Company of any of its representations or covenants set forth
herein, including advancement of reasonable expenses as they are incurred.
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(j) PUBLICITY. The Company and each Purchaser shall have the right to
review before issuance any press releases, SEC or NASDAQ filings, or any other
public statements with respect to the transactions contemplated hereby;
PROVIDED, HOWEVER, that the Company shall be entitled, without the prior review
of the Purchasers, to make any press release or SEC or NASDAQ filings with
respect to such transactions as is required by applicable law and regulations
(although the Purchasers shall be consulted by the Company in connection with
any such press release and filing prior to its release and shall be provided
with a copy thereof).
(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) TERMINATION. In the event that the Closing shall not have
occurred on or before August 19, 1998, unless the parties agree otherwise, this
Agreement shall terminate at midnight, New York City time on such date.
Notwithstanding any termination of this Agreement, any party not in breach of
this Agreement shall preserve all rights and remedies it may have against
another party hereto for a breach of this Agreement prior to or relating to the
termination hereof.
(m) JOINT PARTICIPATION IN DRAFTING. Each party to this Agreement has
participated in the negotiation and drafting of this Agreement, the Certificate
of Designation, the Warrants and the Registration Rights Agreement. As such, the
language used herein and therein shall be deemed to be the language chosen by
the parties hereto to express their mutual intent, and no rule of strict
construction will be applied against any party to this Agreement.
(n) EQUITABLE RELIEF. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to a Purchaser by
vitiating the intent and purpose of the transactions contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations hereunder (including, but not limited to, its obligations pursuant
to Section 5 hereof) will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Agreement (including,
but not limited to, its obligations pursuant to Section 5 hereof), that a
Purchaser shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate issuance and transfer
of the Securities, without the necessity of showing economic loss and without
any bond or other security being required.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned Purchaser and the Company have
caused this Agreement to be duly executed as of the date first above written.
AZUREL LTD.
By: ________________________________
Name: ________________________________
Title:________________________________
PURCHASER:
ZANETT LOMBARDIER, LTD.
By:
Name: ________________________________
Title: ________________________________
RESIDENCE: Cayman Islands
ADDRESS:
c/o Bank Julius Baer Trust Co.
Kirk House, P. O. Box 1100
Grand Cayman, Cayman Islands
British West Indies
Telecopy: (345) 949-0993
Attention: Peter Goulden
with copies of all notices to:
The Zanett Securities Corporation
Tower 49, 31st Floor
12 East 49th Street
New York, New York 10017
Telecopy: (212) 343-2121
Attention: Claudio Guazzoni
SUBSCRIPTION AMOUNT
First Closing Second Closing
(Optional)
Number of Units 1,000 2,000
Purchase Price ($1,000 per Unit): $1,000,000 $2,000,000
IN WITNESS WHEREOF, the undersigned Purchaser and the Company have
caused this Agreement to be duly executed as of the date first above written.
AZUREL LTD.
By: __________________________
Name: __________________________
Title:__________________________
PURCHASER:
GOLDMAN SACHS PERFORMANCE PARTNERS, L.P.
BY: COMMODITIES CORPORATION LLC, ITS GENERAL PARTNER
By: ________________________________
Name:
Title:
RESIDENCE: Delaware
ADDRESS: c/o Commodities Corporation LLC
701 Mount Lucas Road
CN 850
Princeton, NJ 08540
SUBSCRIPTION AMOUNT
First Closing Second Closing
(Optional)
Number of Units 276 552
Purchase Price ($1,000 per Unit): $276,000 $552,000
IN WITNESS WHEREOF, the undersigned Purchaser and the Company have
caused this Agreement to be duly executed as of the date first above written.
AZUREL LTD.
By: __________________________
Name: __________________________
Title:__________________________
PURCHASER:
GOLDMAN SACHS PERFORMANCE PARTNERS (OFFSHORE), L.P.
BY: COMMODITIES CORPORATION LLC, ITS GENERAL PARTNER
By:
Name: __________________________
Title:__________________________
RESIDENCE: Cayman Islands
ADDRESS: P.O. Box 309
South Church Street
George Town, Grand Cayman
Cayman Islands
with copies of all notices to:
c/o Commodities Corporation LLC
701 Mount Lucas Road
CN 850
Princeton, NJ 08540
SUBSCRIPTION AMOUNT
First Closing Second Closing
(Optional)
Number of Units 224 448
Purchase Price ($1,000 per Unit): $224,000 $448,000