Exhibit 4.34
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of June 11,
2001, by and among ATSI Communications, Inc., a Delaware corporation, with
headquarters located at 6000 Northwest Parkway, Suite 110, San Antonio, Texas
78249 (the "Company"), and each of the purchasers set forth on the signature
pages hereto (each a "Buyer" and, collectively, "Buyers").
WHEREAS:
A. The Company and the Buyers are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by Rule 506
under 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 "1933 Act");
B. The Company has authorized a new series of preferred stock designated as
15% Series G Cumulative Convertible Preferred Stock ("Series G Preferred
Stock"), having the rights, preferences and privileges set forth in the
Certificate of Designations, Rights and Preferences attached hereto as Exhibit A
(the "Certificate of Designation");
C. The Series G Preferred Stock is convertible into shares of common stock,
par value $0.001 per share, of the Company ("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 warrants, in
the form attached hereto as Exhibit B, to purchase an aggregate of a number of
shares of Common Stock equal to one-half of the number of shares of Common Stock
issuable upon conversion of all of the Closing Preferred Shares (the "Closing
Warrants" or the "Warrants");
E. The Buyers desire to purchase and the Company desires to issue and sell,
upon the terms and conditions set forth in this Agreement, (i) an aggregate of
up to 8,000 shares of Series G Preferred Stock (such shares, together with any
Series G Preferred Stock issued in replacement thereof or as a dividend thereon
or otherwise with respect thereto in accordance with the terms thereof, being
hereinafter collectively referred to as the "Closing Preferred Shares"), and
(ii) Closing Warrants to purchase an aggregate of a number of shares of Common
Stock equal to one-half of the number of shares of Common Stock issuable upon
conversion of all of the Closing Preferred Shares; and
F. Each Buyer wishes to purchase, upon the terms and conditions stated in
this Agreement, the number of Closing Preferred Shares and number of Closing
Warrants as is set forth immediately below its name on the signature pages
hereto.
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.
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a. Purchase of Preferred Shares and Warrants. On the Closing Date, the
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Company shall issue and sell to each Buyer and each Buyer severally agrees to
purchase from the Company such number of Closing Preferred Shares and number of
Closing Warrants as is set forth immediately below such Buyer's name on the
signature pages hereto. The issuance, sale and purchase of the Closing Preferred
Shares and Closing Warrants shall take place at one or more closings (each a
"Closing"), the first of which is hereinafter referred to as the "First
Closing". At the First Closing, the Company shall issue an aggregate of (i)
6,500 Closing Preferred Shares and (ii) Closing Warrants to purchase 738,636
shares of Common Stock, for an aggregate purchase price of $650,000 (the "First
Closing Purchase Price"). At each subsequent Closing, the Company shall issue
such number of additional Closing Preferred Shares and Closing Warrants as the
Company and Buyers purchasing Closing Preferred Shares and Closing Warrants
shall agree; provided, however that in no event shall the Company issue greater
than an aggregate
of (i) 8,000 Closing Preferred Shares and (ii) Closing Warrants to purchase an
aggregate of a number of shares of Common Stock equal to one-half of the number
of shares of Common Stock issuable upon conversion of all of the Closing
Preferred Shares for an aggregate purchase price (including the purchase price
at the First Closing) of $800,000 (the "Purchase Price"). The purchase price at
any Closing is hereinafter referred to as the "Purchase Price." Any issuance and
sale subsequent to the First Closing shall be upon the same terms and conditions
as those set forth in this Agreement and any Buyers at a subsequent Closing
shall become parties to this Agreement and shall have the rights and obligations
of the Buyers at the First Closing, as provided in a supplemental investment
agreement (which shall not require the joinder of the Buyers at the First
Closing) ("Supplemental Investment Agreement") between the Company and each of
the Buyers at a subsequent Closing. Subject to the satisfaction (or waiver) of
the conditions thereto set forth in Section 6 and Section 7 below, (i) at the
First Closing, the Company shall issue and sell to each Buyer and each Buyer
shall purchase from the Company the number of Closing Preferred Shares and
Closing Warrants which such Buyer is purchasing hereunder and set forth below
such Buyer's name on the signature page hereto and (ii) at each subsequent
Closing, the Company shall issue and sell to each Buyer and each Buyer shall
purchase from the Company the number of Closing Preferred Shares and Closing
Warrants as such Buyer and the Company may agree.
b. Form of Payment. On each Closing Date (as defined below), each Buyer
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shall pay the purchase price for the Closing Preferred Shares and the Closing
Warrants to be issued and sold to it at each respective Closing. The Purchase
Price at any Closing shall be paid by wire transfer of immediately available
funds to the Company, in accordance with the Company's written instructions,
against delivery of duly executed certificates representing such number of
Closing Preferred Shares and Closing Warrants which such Buyer is purchasing at
such Closing. At each Closing, the Company shall deliver such certificates and
Closing Warrants duly executed on behalf of the Company, to such Buyer, against
delivery of such applicable Purchase Price.
c. Closing Date. Subject to the satisfaction (or waiver) of the
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conditions thereto set forth in Section 6 and Section 7 below, the date and time
of the issuance and sale of the Closing Preferred Shares and the Closing
Warrants pursuant to this Agreement (the "Closing Date") shall be (i) in the
case of the First Closing, 10:00 a.m. Central Daylight Savings Time on June 11,
2001, and (iii) in the case of any subsequent Closing, as soon as practicable
(but no later than 10:00 a.m., San Antonio, Texas Time on the Second (2nd)
Trading Day (as defined in the Certificate of Designation)) following the
satisfaction (or waiver) of the conditions to Closing set forth in Sections 6
and 7 below (but in no event later than the Second (2nd)Trading Day following
the satisfaction of the last condition set forth in Section 7(b)) or, in each
case, such other mutually agreed upon time. Notwithstanding anything to the
contrary contained herein, no subsequent Closing shall occur after June 30,
2001. Each Closing shall occur on the applicable Closing Date at the offices of
Cox & Smith Incorporated, 112 E. Pecan, Suite 1800, San Antonio, Texas 78205, or
at such other location as may be agreed to by the parties.
2. BUYERS' REPRESENTATIONS AND WARRANTIES. Each Buyer severally (and not
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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
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the Preferred Shares, the shares of Common Stock issuable upon conversion of or
otherwise pursuant to the Preferred Shares (including, without limitation, any
additional shares of Common Stock as are issuable pursuant to the terms of the
Certificate of Designation (such shares of Common Stock being collectively
referred to herein as the "Conversion Shares"), the Warrants and the shares of
Common Stock issuable upon exercise of or otherwise pursuant to the Warrants
(the "Warrant Shares" and, collectively with the Preferred Shares, the Warrants
and Conversion Shares, the "Securities") for its own account and not with a
present view towards the public sale or distribution thereof, except pursuant to
sales registered or exempted from registration under the 1933 Act.
b. Accredited Investor Status. The Buyer is an "accredited investor"
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as that term is defined in Rule 501(a) of Regulation D (an "Accredited
Investor").
c. Reliance on Exemptions. The Buyer understands that the Securities
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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.
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d. Information. The Buyer and its advisors, if any, have been furnished
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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
receive answers concerning the business, finances and operations of the Company
and the terms and conditions of the transactions contemplated by this Agreement.
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 understands that its investment in the Securities
involves a significant degree of risk.
e. Governmental Review. The Buyer understands that no United States federal
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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 Re-sale. The Buyer understands that (i) the sale or re-sale
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of the Securities has not been and is not being registered under the 1933 Act or
any applicable state securities laws, and the Securities may not be transferred
unless (a) the Securities are sold pursuant to an effective registration
statement under the 1933 Act, (b) the Buyer 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, (c) the Securities are sold or transferred
to an "affiliate" (as defined in Rule 144 promulgated under the 1933 Act (or a
successor rule) ("Rule 144")) of the Buyer who agrees to sell or otherwise
transfer the Securities only in accordance with this Section 2(f) and who is an
Accredited Investor or (d) the Securities are sold pursuant to Rule 144; (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 re-sale 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. 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 Preferred Shares and the
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Warrants and, until such time as the Conversion Shares and Warrant Shares have
been registered under the 1933 Act or otherwise may be sold pursuant to Rule 144
without any restriction as to the number of securities as of a particular date
that can then be immediately sold, 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 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 customary for opinions of counsel in comparable transactions, 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 Security upon which it is
stamped, if, unless otherwise required by applicable state securities laws, (a)
such Security is registered for sale under an effective registration statement
filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 without
any restriction as to the number of securities as of a particular date that can
then be immediately sold, or (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 1933 Act and such
sale or transfer is effected or (c) such holder provides the Company with
reasonable assurances that such Security can be sold pursuant to Rule 144.
Without limiting the generality of the foregoing, 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.
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h. Authorization; Enforcement. This Agreement has been duly and validly
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authorized. This Agreement has been duly executed and delivered on behalf of the
Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer
enforceable in accordance with its terms.
i. Residency. The Buyer is a resident of the jurisdiction set forth
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immediately below such Buyer's name on the signature pages hereto.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
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The Company represents and warrants to each Buyer that:
a. Organization and Qualification. The Company and each of its Subsidiaries
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(as defined below), if any, is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction in which it is
incorporated, 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
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all of the Subsidiaries of the Company and the jurisdiction in which each is
incorporated. 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 or use of property or 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 (i) the
Securities, (ii) the business, operations, assets, financial condition or
prospects of the Company and its Subsidiaries, if any, taken as a whole, (iii)
the transactions contemplated hereby or by the agreements or instruments to be
entered into in connection herewith or (iv) the authority or the ability of the
Company to perform its obligation under this Agreement, the Certificate of
Designation or the Warrants. "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.
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(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 perform this 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 and the Warrants by the Company, the filing of the Certificate of
Designation and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the issuance of the Preferred
Shares and the Warrants and the issuance and reservation for issuance of the
Conversion Shares issuable upon conversion of or otherwise pursuant to the
Preferred Shares and the Warrant Shares issuable upon exercise of or otherwise
pursuant to the Warrants) have been duly authorized by the Company's Board of
Directors and no further consent or authorization of the Company, its Board of
Directors, or its stockholders is required, (iii) this Agreement has been duly
executed and delivered by the Company, and (iv) this Agreement constitutes, and
upon execution and delivery by the Company of the Warrants and upon execution
and filing of the Certificate of Designation, each of such agreements and
instruments will constitute, a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the rights of
creditors generally and by general equitable principles (regardless of whether
such enforceability is considered in a proceeding at law or in equity).
c. Capitalization. As of the date hereof, the authorized capital stock of
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the Company consists of (i) 200,000,000 shares of Common Stock of which
76,668,376 shares are issued and outstanding, 11,261,414 shares are reserved for
issuance pursuant to the Company's stock option plans and 21,367,938 shares are
reserved for issuance pursuant to securities (other than the Preferred Shares
and the Closing Warrants) exercisable for, or convertible into or exchangeable
for shares of Common Stock; and (ii) 10,000,000 shares of preferred stock,
50,000 of which are designated as Series A Cumulative Convertible Preferred
Stock of which 4,255 are issued and outstanding, 2,000 of which are designated
as Series B Cumulative Convertible Preferred Stock of which no shares are issued
and outstanding, 500 of which are designated as Series C Cumulative Convertible
Preferred Stock of which no shares are issued and outstanding, 3,000 of which
are designated as Series D Cumulative Convertible Preferred Stock of which 1,642
shares are issued and outstanding, 15,000 of which are designated as Series E
Cumulative Convertible
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Preferred Stock of which 4,410 are issued and outstanding, and 40,000 of which
are designated as Series F Cumulative Convertible Preferred Stock of which 9,210
are issued and outstanding. All of such outstanding shares of capital stock are,
or upon issuance will be, duly authorized, validly issued, fully paid and
nonassessable. Except as disclosed in Schedule 3(c), no shares of capital stock
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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),
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as of the effective 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
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, (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 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, the Warrants, the
Conversion Shares or the Warrant Shares. 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 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 are publicly available.
d. Issuance of Shares. The Preferred Shares are duly authorized and, upon
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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 with respect to the issue thereof and shall 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. The Conversion
Shares and the Warrant Shares are duly authorized and reserved for issuance,
and, when issued upon conversion of or otherwise pursuant to the Preferred
Shares and upon exercise of or otherwise pursuant to 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.
e. Acknowledgment of Dilution. The Company understands and acknowledges the
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potentially dilutive effect to the Common Stock upon the issuance of the
Conversion Shares upon conversion of or otherwise pursuant to the Preferred
Shares and upon issuance of the Warrant Shares upon exercise of or otherwise
pursuant to the Warrants. The Company's directors and executive officers have
studied and fully understand the nature of the Securities being sold hereunder.
The Company further acknowledges that its obligation to issue the Conversion
Shares and the Warrant Shares upon conversion of the Preferred Shares or
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. Taking the foregoing into account, the Company's
Board of Directors has determined, in its good faith business judgment, that the
issuance of the Securities hereunder and under the Certificate of Designation
and the Warrants and the consummation of the transactions contemplated hereby
and thereby are in the best interest of the Company and its stockholders.
f. Series of Preferred Stock. The terms, designations, powers, preferences
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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 Shares) are as stated in the
Certificate of Incorporation, filed on or prior to the date hereof, and the
By-laws. The terms, designations, powers, preferences and relative,
participating and optional or special rights, and the qualifications,
limitations and restrictions of the Preferred Shares are as stated in the
Certificate of Designation.
g. No Conflicts. The execution, delivery and performance of this Agreement
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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, as applicable, of the Preferred Shares, the Conversion Shares and the
Warrant Shares) will not (i) conflict with or result in a violation of any
provision of the Certificate 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
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or both could become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material agreement,
indenture, patent, patent license or instrument to which the Company or any of
its Subsidiaries is a party, or (iii) result in a violation of any applicable
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, defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect). Except as disclosed in Schedule 3(g), neither the Company nor
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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 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 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 applicable law, ordinance or regulation of any governmental entity. Except
as specifically contemplated by this Agreement and as required under the 1933
Act and any applicable state securities laws, the Company is not required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court, governmental agency, regulatory agency, self
regulatory organization or stock market or any third party in order for it to
execute, deliver or perform any of its obligations under this Agreement or the
Warrants in accordance with the terms hereof or thereof or to issue and sell the
Preferred Shares and the Warrants in accordance with the terms hereof and to
issue the Conversion Shares upon conversion of or otherwise pursuant to the
Preferred Shares and the Warrant Shares upon exercise of or otherwise pursuant
to the Warrants. Except as disclosed in Schedule 3(g), all consents,
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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.
h. SEC Documents; Financial Statements. Except as disclosed in Schedule
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3(h), since July 31, 1997, the Company has timely filed all reports, schedules,
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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 to such documents) incorporated by reference
therein, being hereinafter referred to as the "SEC 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. 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 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 with
respect thereto. Such financial statements have been prepared in accordance with
United States 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, the Company
has no liabilities, contingent or otherwise, other than (i) liabilities incurred
in the ordinary course of business subsequent to July 31, 2000 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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i. Absence of Certain Changes. Since July 31, 2000 there has been no
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material adverse change and no material adverse development in the assets,
liabilities, business, properties, operations, financial condition, results of
operations or prospects of the Company or any of its Subsidiaries.
j. Absence of Litigation. Except as set forth in Schedule 3(j), there is no
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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,
threatened against or affecting the Company or any of its Subsidiaries, or their
officers or directors in their capacity as such, that could have a Material
Adverse Effect. Schedule 3(j) contains a complete list and summary description
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of any pending or threatened proceeding against or affecting the Company or any
of its Subsidiaries, without regard to whether it would have a Material Adverse
Effect. The Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.
k. Patents, Copyrights, etc.
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(i) The Company and each of its Subsidiaries owns or possesses the
requisite licenses or rights to use all patents, patent applications, patent
rights, inventions, know-how, trade secrets, trademarks, trademark applications,
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(k) hereof, to the Company's knowledge, as
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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(k)
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hereof, to the Company's knowledge, as presently contemplated to be operated in
the future); to the Company's knowledge, the Company's or its Subsidiaries'
current and intended products, services and processes do not infringe on any
Intellectual Property or other rights held by any person; and the Company has no
knowledge of any facts or circumstances which might give rise to any of the
foregoing. The Company and each of its Subsidiaries have taken commercially
reasonable security measures to protect the secrecy, confidentiality and value
of their Intellectual Property.
l. No Materially Adverse Contracts, Etc. Neither the Company nor any of its
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Subsidiaries is subject to any charter, corporate or other legal restriction, or
any judgment, decree, order, rule or regulation which in the reasonable judgment
of the Company's officers has or is expected in the future 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 reasonable judgment of the Company's
officers has or is expected to have a Material Adverse Effect.
m. Tax Status. Except as set forth on Schedule 3(m), the Company and each
---------- -------------
of its Subsidiaries has made or filed all federal, state and foreign 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 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 the statute of
limitations relating to the assessment or collection of any foreign, federal,
state or local tax. Except as set forth on Schedule 3(m), none of the Company's
-------------
tax returns is presently being audited by any taxing authority.
n. Certain Transactions. Except as set forth on Schedule 3(n) 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 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,
7
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.
o. 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 does not contain any untrue statement of a
material fact or omit 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.
p. 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 that
any statement made by any Buyer 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 the Buyers'
purchase of the Securities and has not been relied upon by the Company, its
officers or directors in any way. 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.
q. 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 under the 1933 Act of the
issuance of the Securities to the Buyers. The issuance of the Securities to the
Buyers will not be integrated with any other issuance of the Company's
securities (past, current or future) for purposes of any stockholder approval
provisions applicable to the Company or its securities.
r. 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 as
set forth in Schedule 3(r).
-------------
s. 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 (collectively, the "Company Permits") except for
those Company Permits which the failure of the Company to have in its possession
would not have a Material Adverse Effect, 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 July 31, 2000 neither the Company nor any of its Subsidiaries has
received any written notification with respect to possible conflicts, defaults
or violations of applicable laws, except for written notices relating to
possible conflicts, defaults or violations, which conflicts, defaults or
violations would not have a Material Adverse Effect.
t. Environmental Matters.
---------------------
(i) Except as set forth in Schedule 3(t), 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 written 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,
8
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) To the knowledge of the Company, other than those that are or were
stored, used or disposed of in compliance with applicable law, no Hazardous
Materials are contained on or about any real property currently owned, leased or
used by the Company or any of 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.
(iii) Except as set forth in Schedule 3(t), to the knowledge of the
-------------
Company, 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.
u. Title to Property. The Company and its Subsidiaries have good and
-----------------
marketable title in fee simple to all real property and good and marketable
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(u) 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.
v. 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.
w. Internal Accounting Controls. The Company and each of its Subsidiaries
----------------------------
maintain a system of internal accounting controls sufficient, in the reasonable
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.
x. 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.
y. No Investment Company. The Company is not, and upon the issuance and
---------------------
sale of the Securities as contemplated by this Agreement and the Certificate of
Designation will not be an "investment company" required to be registered under
the Investment Company Act of 1940, as amended (an "Investment Company"). To the
knowledge of the Company, the Company is not "controlled" (as such term is
defined in Rule 405 promulgated under the 1933 Act) by an Investment Company.
9
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. The Company shall, on or
before the Closing Date with respect to the First Closing, take such action as
the Company shall reasonably determine is necessary to qualify the Securities
for sale to the Buyers at the Closing 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 with
respect to the First Closing.
c. Reporting Status; Press Release. The Company's Common Stock is
-------------------------------
registered under Section 12(b) 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 shall issue a press release
describing the material terms of the transactions contemplated hereby as soon as
practicable following the Closing Date with respect to the First Closing.
d. Use of Proceeds. The Company shall use the proceeds from the sale of the
---------------
Preferred Shares and the Warrants in the manner set forth in Schedule 4(d)
-------------
attached hereto and made a part hereof and shall not, 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 currently
existing direct or indirect Subsidiaries).
e. Financial Information. 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; and (ii) 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.
f. 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 with the Preferred
Shares (based on the Conversion Price in effect from time to time (each as
defined in the Certificate of Designation)) and as otherwise required by the
Certificate of Designation and the full exercise of the Warrants and issuance of
the Warrant Shares in connection therewith (based on the Exercise Price (as
defined in the Warrants) 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 or otherwise pursuant to the Preferred Shares and
upon exercise of or otherwise pursuant to the Warrants without the consent of
each Buyer. If at any time the number of shares of Common Stock authorized and
reserved for issuance is below the number of Conversion Shares issued and
issuable upon conversion of or otherwise pursuant to the Preferred Shares (based
on the Conversion Price in effect from time to time) and the aggregate number of
the Warrant Shares issued and issuable upon exercise of or otherwise pursuant to
the Warrants (based on the Exercise Price of the Warrants in effect from time to
time), 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 stockholders to authorize additional
shares to meet the Company's obligations under this Section 4(f), in the case of
an insufficient number of authorized shares, and using its best efforts to
obtain stockholder approval of an increase in such authorized number of shares.
g. Listing. The Company shall promptly secure the listing of the Conversion
-------
Shares and the 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, so long as any Buyer owns
any of the Securities, shall maintain, so long as any other shares of Common
Stock shall be so listed, such listing of all Conversion Shares and Warrant
Shares from time to time issuable upon conversion of or otherwise pursuant to
the Preferred Shares or exercise of or otherwise pursuant to the Warrants. The
Company will obtain and, so long as any Buyer owns any of the Securities, use
its reasonable efforts to maintain the listing and trading of its Common Stock
on the American Stock Exchange, Inc. ("AMEX"), the Nasdaq National Market
("Nasdaq"), the Nasdaq SmallCap
10
Market ("Nasdaq SmallCap") or the New York Stock Exchange ("NYSE") 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.
h. Corporate Existence. So long as a Buyer beneficially owns any Preferred
-------------------
Shares or Warrants, the Company shall maintain its corporate existence and shall
not merge, consolidate or 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 (i) the successor or acquiring entity and, if
an entity different from the successor or acquiring entity, the entity whose
securities into which the Preferred Shares shall become convertible pursuant to
the Certificate of Designation, in such transaction assumes the Company's
obligations hereunder and under the agreements and instruments entered into in
connection herewith (including the Certificate of Designation and the Warrants)
and (ii) the entity whose securities into which the Preferred Shares shall
become convertible pursuant to the Certificate of Designation is a publicly
traded corporation whose Common Stock is listed for trading on Nasdaq, Nasdaq
SmallCap, NYSE or AMEX.
i. No Integration. The Company shall not make any offers or sales of any
--------------
security (other than the Securities) under circumstances that would require
registration of the Securities being offered or sold hereunder under the 1933
Act or cause the offering of Securities to be integrated with any other offering
of securities by the Company for the purpose of any stockholder approval
provision applicable to the Company or its securities.
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 conversion of the Preferred Shares or
exercise of the Warrants in accordance with the terms thereof (the "Irrevocable
Transfer Agent Instructions"). Prior to registration of the Conversion Shares
and the Warrant Shares under the 1933 Act or the date on which the Conversion
Shares or Warrant Shares may be sold pursuant to Rule 144 without any
restriction as to the number of securities as of a particular date that can then
be immediately sold, all such certificates shall bear the restrictive legend
specified in Section 2(g) of this Agreement. The Company covenants and agrees
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 and Warrant Shares,
prior to registration of the Conversion Shares and Warrant Shares under the 1933
Act or the date on which the Conversion Shares or Warrant Shares may be sold
pursuant to Rule 144 without any restriction as to the number of securities as
of a particular date that can then be immediately sold), will be given by 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. 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 re-sale of
the Securities. If a Buyer provides the Company with (i) an opinion of counsel,
in form, substance and scope customary for opinions in comparable transactions,
to the effect that a public sale or transfer of such Securities may be made
without registration under the 1933 Act and such sale or transfer is effected or
(ii) the Buyer provides reasonable assurances that the Securities can be sold
pursuant to 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, free from any restrictive legend, in such
name and in such denominations as specified by such Buyer.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
----------------------------------------------
The obligation of the Company hereunder to issue and sell the Preferred
Shares and Warrants to a Buyer at each of the First Closing and any subsequent
Closing is subject to the satisfaction, at or before the Closing Date in respect
of such applicable Closing, 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 or a
Supplemental Investment Agreement, as the case may be, and delivered the same to
the Company.
11
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 accepted for filing with
the Secretary of State of the State of Delaware.
d. The representations and warranties of the applicable Buyer shall be true
and correct as of the date when made and as of the Closing Date as though made
at that time 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.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
-------------------------------------------------
The obligation of each Buyer hereunder to purchase the Preferred Shares and
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. With respect to the First Closing and any subsequent Closing:
(i) The Company shall have executed this Agreement or a Supplemental
Investment Agreement, as the case may be, and delivered the same to the Buyer.
(ii) 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 purchased at such Closing in accordance with
Section 1(b) above.
(iii) 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 such Secretary of State shall have been delivered to such Buyer.
(iv) 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.
(v) 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
applicable Closing Date as though made at such time (except for representations
and warranties that speak as of a specific date, which representations and
warranties shall be true and correct as of such 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 applicable Closing Date. The
Buyers shall have received a certificate or certificates, executed by the chief
executive officer of the Company, dated as of the applicable 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 Certificate of Incorporation, By-laws and Board of Directors'
resolutions relating to the transactions contemplated hereby.
(vi) 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.
8. GOVERNING LAW; MISCELLANEOUS.
----------------------------
12
a. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed in the State of Delaware (without regard to principles of
conflict of laws). All parties irrevocably consent to the exclusive jurisdiction
of the United States federal courts and the state courts located in Texas with
respect to any suit or proceeding based on or arising under this Agreement, the
agreements entered into in connection herewith or the transactions contemplated
hereby or thereby and irrevocably agree that all claims in respect of such suit
or proceeding may be determined in such courts. All parties irrevocably waive
the defense of an inconvenient forum to the maintenance of such suit or
proceeding. All parties further agree that service of process upon a party
mailed by first class mail shall be deemed in every respect effective service of
process upon the party in any such suit or proceeding. Nothing herein shall
affect either party's right to serve process in any other manner permitted by
law. All parties agree 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; Signatures by Facsimile. This Agreement may be executed in
-------------------------------------
one 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 party 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 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 be effective five days
after being placed in the mail, if mailed by regular United States 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:
ATSI Communications, Inc.
6000 NW Parkway, Suite 110
San Antonio, Texas 78249
Attention: Chief Financial Officer
Facsimile: (210) 558-6090
With copy to:
Cox & Smith Incorporated
112 E. Pecan, Suite 1800
San Antonio, Texas 78205
Attention: Steven R. Jacobs
Facsimile: (210) 226-8395
13
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.
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. 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.
j. 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.
k. Remedies. The Company acknowledges that a breach by it of its
--------
obligations hereunder will cause irreparable harm to each Buyer 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
under this Agreement will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Agreement, that each
Buyer shall be entitled, in addition to all other available remedies in law or
in equity, to an injunction or injunctions to prevent or cure any breaches of
the provisions of this Agreement and to enforce specifically the terms and
provisions of this Agreement, without the necessity of showing economic loss and
without any bond or other security being required.
IN WITNESS WHEREOF, the undersigned Buyers and the Company have caused this
Agreement to be duly executed as of the date first above written.
ATSI COMMUNICATIONS, INC.
By: /s/ H. Douglas Saathoff
-----------------------
H. Douglas Saathoff,
Chief Financial Officer,
Senior Executive Vice President
and Treasurer
BUYER:
-----
By:_________________________________________
Printed Name:_______________________________
Address:____________________________________
No. of Closing Preferred Shares:____________
No. of Closing Warrants:____________________
14