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Exhibit 10.26
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of March 27, 2000
(this "Agreement"), is entered into by and between iBIZ TECHNOLOGY CORP., a
Florida corporation (the "Company"), and LITES TRADING CO. (the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Company and the Purchaser are executing and
delivering this Agreement in reliance upon the exemptions from registration
provided by Regulation D ("Regulation D") promulgated by the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act"), and/or Section 4(2) of the Securities Act;
WHEREAS, the Purchaser wishes to purchase, and the Company
wishes to issue and sell, for an aggregate purchase price of $1,600,000 upon the
terms and conditions of this Agreement, $1,600,000 aggregate principal amount
(the "Debentures") of the Company's 7% Convertible Debentures which Debentures
shall be in the form attached as Exhibit A, and warrants (the "Warrants") to
purchase 375,000 shares of the Company's Common Stock, par value $.001 per share
(the "Common Stock"); and
WHEREAS, the Debentures are convertible into shares of the
Company's Common Stock on the terms set forth therein, and the Warrants (which
shall be in substantially the form attached as Exhibit B) may be exercised for
the purchase of Common Stock, on the terms set forth therein.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE
a. PURCHASE OF DEBENTURES. Purchaser hereby agrees to purchase from the
Company, and the Company hereby agrees to issue and sell to the Purchaser, the
Debentures and the Warrants for an aggregate purchase price of $1,600,000 which
shall be payable on the date hereof in next day funds.
b. CLOSINGS. The Debentures and Warrants to be purchased by Purchaser
hereunder,
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in definitive form, and in such denominations as Purchaser or its
representative, if any, may request upon at least forty-eight hours' prior
notice to the Company, shall be delivered by or on behalf of the Company for the
account of Purchaser, against payment by the Purchaser of the aggregate purchase
price of $1,600,000 therefor by wire transfer to an account of the Company, all
at the offices of Laufer, Halberstam & Karish, 39 Broadway, 14th floor, New
York, New York 10006, New York time on the date hereof, or at such other time
and date as Purchasers or their representative, if any, and the Company may
agree upon in writing, such date being referred to herein as the "Closing Date."
2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION
The Purchaser represents and warrants to, and covenants and
agrees with, the Company as follows:
a. The Purchaser is (i) experienced in making investments of the kind
described in this Agreement and the related documents, (ii) able, by reason of
the business and financial experience of its management, to protect its own
interests in connection with the transactions described in this Agreement and
the related documents, and (iii) able to afford the entire loss of its
investment in the Debentures and Warrants.
b. All subsequent offers and sales of the Debentures and Warrants and
the Common Stock issuable upon conversion or exercise of, or in lieu of interest
payments on, the Debentures and Warrants, it shall have purchased shall be made
pursuant to an effective registration statement under the Securities Act or
pursuant to an applicable exemption from such registration.
c. The Purchaser understands that the Debentures and the Warrants are
being offered and sold to it in reliance upon exemptions from the registration
requirements of the United States federal securities laws, and that the Company
is relying upon the truth and accuracy of the Purchaser's representations and
warranties, and the Purchaser's compliance with its agreements, each as set
forth herein, in order to determine the availability of such exemptions and the
eligibility of the Purchaser to acquire the Debentures and the Warrants.
d. The Purchaser: (A) has been provided with sufficient information
with respect to the business of the Company and such documents relating to the
Company as the Purchaser has requested and Purchaser has carefully reviewed the
same including, without limitation, the Company's (i) Form SB-2 filed with the
Securities and Exchange Commission (the "Commission") on January 11, 2000, as
amended by Amendment No. 1 filed with the Commission on January 31, 2000, (ii)
Annual Report on Form 10KSB40 filed with the Commission on January 27, 2000 (the
"Annual Report"), and (iii) Registration Statement on Form S-8 filed with the
Commission on January 27, 2000, an (iv) Quarterly Report on Form
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10-QSB filed with the Commission on March 16, 2000, (B) has been provided with
such additional information with respect to the Company and its business and
financial condition as the Purchaser, or the Purchaser's agent or attorney, has
requested, and (C) has had access to management of the Company and the
opportunity to discuss the information provided by management of the Company and
any questions that the Purchaser had with respect thereto have been answered to
the full satisfaction of the Purchaser.
e. The Purchaser has the requisite corporate power and authority to
enter into this Agreement and the registration rights agreement, dated as of the
date hereof, between the Company and the Purchaser (the "Registration Rights
Agreement").
f. This Agreement and the Registration Rights Agreement and the
transactions contemplated hereby and thereby, have been duly and validly
authorized by the Purchaser; and such agreements, when executed and delivered by
each of the Purchaser and the Company will each be a valid and binding agreement
of the Purchaser, enforceable in accordance with their respective terms, except
to the extent that enforcement of each such agreement may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws now or hereafter in effect relating to creditors' rights
generally and to general principles of equity.
3. REPRESENTATIONS OF THE COMPANY
The Company represents and warrants to the Purchaser that:
a. ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida. Each of
the Company's subsidiaries, if any, is a corporation duly organized, validly
existing and in good standing under the laws of its respective jurisdiction.
Each of the Company and its subsidiaries, if any, is duly qualified as a foreign
corporation in all jurisdictions in which the failure to so qualify would have a
material adverse effect on the Company and its subsidiaries taken as a whole.
Schedule 3a lists all subsidiaries of the Company and, except as noted therein,
all of the outstanding capital stock of all such subsidiaries is owned of record
and beneficially by the Company.
b. CAPITALIZATION. On the date hereof, the authorized capital of the
Company consists of 100,000,000 shares of Common Stock, par value $.001 per
share, of which 28,943,861 shares are issued and outstanding. Schedule 3b sets
forth all of the options, warrants and convertible securities of the Company,
and any other rights to acquire securities of the Company (collectively the
"Derivative Securities") which are outstanding on the date hereof, including in
each case (i) the name and class of such Derivative Securities, (ii) the issue
date of such Derivative Securities, (iii) the number of shares of Common Stock
of the Company into which such Derivative Securities are convertible as of the
date hereof, (iv) the conversion or exercise price or prices of such Derivative
Securities as of the date hereof, (v) the expiration
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date of any conversion or exercise rights held by the owners of such Derivative
Securities and (vi) any registration rights associated with such Derivative
Securities. Schedule 3b also sets forth all registration rights associated with
the Common Stock.
c. CONCERNING THE DEBENTURES AND THE WARRANTS. The Debentures and
Warrants, and Common Stock issuable upon conversion of, or in lieu of interest
payments on, the Debentures, and upon exercise of the Warrants so issued, when
issued, shall be duly and validly issued, fully paid and non-assessable, will
not be subject to preemptive rights and will not subject the holder thereof to
personal liability by reason of being such a holder. There are currently no
preemptive rights of any stockholder of the Company, as such, to acquire the
Debentures or the Warrants, or the Common Stock issuable to the Purchaser
pursuant to the terms of the Debentures or the Warrants.
d. REPORTING COMPANY STATUS. The Company's Common Stock is registered
under Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The Company files reports with the Commission pursuant to
Section 12 and/or 15(d) of the Exchange Act. The Company has duly filed all
materials and documents required to be filed pursuant to all reporting
obligations under either Section 13(a) or 15(d) of the Exchange Act. The Common
Stock is listed and traded on the OTC Bulletin Board ("OTC"), and, except as
described in Schedule 3m, the Company is not aware of any pending or
contemplated action or proceeding of any kind to suspend the trading of the
Common Stock.
e. AUTHORIZED SHARES. The Company has available a sufficient number of
authorized and unissued shares of Common Stock as may be necessary to effect the
conversion of the Debentures and the exercise of the Warrants. The Company
understands and acknowledges the potentially dilutive effect to the Common Stock
of the issuance of shares of Common Stock upon the conversion of the Debentures
and the exercise of the Warrants. The Company further acknowledges that its
obligation to issue shares of Common Stock upon conversion of the Debentures and
upon exercise of 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 and notwithstanding the commencement of any case
under 11 U.S.C. Section 101 et seq. (the "Bankruptcy Code"). In the event the
Company becomes a debtor under the Bankruptcy Code, the Company hereby waives to
the fullest extent permitted any rights to relief it may have under 11 U.S.C.
Section 362 in respect of the conversion of the Debentures and the exercise of
the Warrants. At the direction of Purchaser, the Company agrees, without cost or
expense to the Purchaser, to take or consent to any and all action necessary to
effectuate relief under 11 U.S.C. Section 362.
f. LEGALITY. The Company has the requisite corporate power and
authority to enter into this Agreement and the Registration Rights Agreement,
and to issue and deliver the Debentures, the Warrants and the Common Stock
issuable upon conversion of, or in lieu of interest payments on the Debentures
and the exercise of the Warrants.
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g. TRANSACTION AGREEMENTS. This Agreement, the Registration Rights
Agreement, the Debentures and the Warrants (collectively, the "Primary
Documents"), and the transactions contemplated hereby and thereby, have been
duly and validly authorized by the Company; this Agreement has been duly
executed and delivered by the Company and this Agreement is, and the other
Primary Documents, when executed and delivered by the Company, will each be, a
valid and binding agreement of the Company, enforceable in accordance with their
respective terms, except to the extent that enforcement of each of the Primary
Documents may be limited by bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws now or hereafter in effect relating
to creditors' rights generally and to general principles of equity.
h. NON-CONTRAVENTION. The execution and delivery of this Agreement and
each of the other Primary Documents, and the consummation by the Company of the
transactions contemplated by this Agreement and each of the other Primary
Documents, does not and will not conflict with or result in a breach by the
Company of any of the terms or provisions of, or constitute a default under, the
Articles of Incorporation or By-laws of the Company, or any indenture, mortgage,
deed of trust or other agreement or instrument to which the Company or any of
its subsidiaries is a party or by which they or any of their properties or
assets are bound, or any existing applicable law, rule, or regulation or any
applicable decree, judgment or order of any court or United States or foreign
federal or state regulatory body, administrative agency, or any other
governmental body having jurisdiction over the Company, its subsidiaries, or any
of their properties or assets. Except as set forth on Schedule 3(h), neither the
filing of the registration statement required to be filed by the Company
pursuant to the Registration Rights Agreement nor the offering or sale of the
Debentures or the Warrants as contemplated by this Agreement gives rise to any
rights, other than those which have been waived or satisfied on or prior to the
date hereof, for or relating to the registration of any shares of the Common
Stock. Schedule 3(h)(1) hereto lists all material agreements and instruments to
which the Company or any of its subsidiaries is a party or by which any of their
properties or assets are bound.
i. APPROVALS. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, stock
exchange or market or the stockholders of the Company is required to be obtained
by the Company for the entry into or the performance of this Agreement and the
other Primary Documents.
j. SEC FILINGS. None of the reports or documents filed by the Company
with the Commission contained, at the time they were filed, any untrue statement
of a material fact or omitted to state any material fact required to be stated
therein, or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
k. STABILIZATION. Neither the Company, nor, to the knowledge of the
Company, any
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of its affiliates, has taken or may take, directly or indirectly, any action
designed to cause or result in, or which has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of the shares of Common Stock.
l. ABSENCE OF CERTAIN CHANGES. Except as disclosed in the Company's
public filings with the Commission, since October 31, 1999 there has been no
material adverse change nor any material adverse development in the business,
properties, operations, financial condition, prospects, outstanding securities
or results of operations of the Company.
m. FULL DISCLOSURE. Other than as set forth in Schedule 3m, there is no
fact known to the Company that has not been disclosed in writing to the
Purchaser (i) that could reasonably be expected to have an adverse effect upon
the condition (financial or otherwise) or the earnings, business affairs,
properties or assets of the Company or (ii) that could reasonably be expected to
materially and adversely affect the ability of the Company to perform the
obligations set forth in the Primary Documents.
n. TITLE TO PROPERTIES; LIENS AND ENCUMBRANCES. The Company has good
and marketable title to all of its material properties and assets, both real and
personal, and has good title to all its leasehold interests, in each case
subject only to mortgages, pledges, liens, security interests, conditional sale
agreements, encumbrances or charges created in the ordinary course of business.
o. PROPRIETARY RIGHTS. The Company has sufficient title and ownership
of all trademarks, service marks, trade names, internet domain names,
copyrights, trade secrets, information, proprietary rights and processes
necessary for the conduct of its business as now conducted and as proposed to be
conducted, and, to the knowledge of the Company, such business does not conflict
with or constitute an infringement on the rights of others.
p. PERMITS. The Company has all franchises, permits, licenses and any
similar authority necessary for the conduct of its business as now conducted,
the lack of which would materially and adversely affect the business or
financial condition of the Company. The Company is not in default in any respect
under any of such franchises, permits, licenses or similar authority.
q. ABSENCE OF LITIGATION. Except as disclosed in the Company's public
filings with the Commission, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board 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, in which an unfavorable
decision, ruling or finding would have a material adverse effect on the
properties, business, condition (financial or other) or results of operations of
the Company and its subsidiaries, taken as a whole, or the transactions
contemplated by the Primary Documents, or which would adversely affect the
validity or enforceability of, or the authority or ability of
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the Company to perform its obligations under, the Primary Documents.
r. NO DEFAULT. Each of the Company and its subsidiaries is not in
default in the performance or observance of any obligation, covenant or
condition contained in any indenture, mortgage, deed of trust or other
instrument or agreement to which it is a party or by which it or its property
may be bound which default could result in a material adverse effect on the
Company.
s. TRANSACTIONS WITH AFFILIATES. Except as disclosed in the Company's
public filings with the Commission, there are no agreements, understandings or
proposed transactions between the Company and any of its officers, directors or
affiliates that, had they existed on October 31, 2000, would have been required
to be disclosed in the Company's Annual Report or an amendment thereto.
t. EMPLOYMENT MATTERS. The Company is in compliance in all respects
with all presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for
which the Company would have any liability; the Company has not incurred and
does not expect to incur liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or
4971 of the Internal Revenue Code of 1986, as amended, including the regulations
and published interpretations thereunder (the "Code"); and each "pension plan"
for which the Company would have any liability that is intended to be qualified
under Section 401(a) of the Code is so qualified in all material respects and
nothing has occurred, whether by action or by failure to act, which would cause
the loss of such qualification.
u. INSURANCE. The Company maintains property and casualty, general
liability, personal injury and other similar types of insurance that is
adequate, consistent with industry standards and the Company's historical claims
experience. The Company has not received notice from, and has no knowledge of
any threat by, any insurer (that has issued any insurance policy to the Company)
that such insurer intends to deny coverage under or cancel, discontinue or not
renew any insurance policy covering the Company or any of its Subsidiaries
presently in force.
v. TAXES. All applicable tax returns required to be filed by the
Company and each of its subsidiaries have been prepared and filed in compliance
with all applicable laws, or if not yet filed have been granted extensions of
the filing dates which extensions have not expired, and all taxes, assessments,
fees and other governmental charges upon the Company, its subsidiaries, or upon
any of their respective properties, income or franchises, shown in such returns
and on assessments received by the Company or its subsidiaries to be due and
payable have been paid, or adequate reserves therefor have been set up if any of
such taxes are being contested in good faith; or if any of such tax returns have
not been filed or if any such taxes
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have not been paid or so reserved for, the failure to so file or to pay would
not in the aggregate have a material adverse effect on the business or financial
condition of the Company and its subsidiaries, taken as a whole. The Company is
disputing certain tax penalties and interest thereon as set forth on Schedule 3v
hereto.
w. FOREIGN CORRUPT PRACTICES ACT. Neither the Company nor any of its
directors, officers or other employees has (i) used any Company funds for any
unlawful contribution, endorsement, gift, entertainment or other unlawful
expense relating to any political activity; (ii) made any direct or indirect
unlawful payment of Company funds to any foreign or domestic government official
or employee; (iii) violated or is in violation of any provision of the Foreign
Corrupt Practices Act of 1977, as amended; or (iv) made any bribe, rebate,
payoff, influence payment, kickback or other similar payment to any person.
x. INTERNAL CONTROLS. The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (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
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
y. INVESTMENT COMPANY ACT. The Company is not conducting, and will not
conduct, its business in a manner which would cause it to become, an "investment
company," as defined in Section 3(a) of the Investment Company Act of 1940, as
amended.
z. BROKERAGE FEES. Other than an amount equal to $160,000 payable by
the Company as a placement fee, the Company has not incurred any liability for
any consulting fees or agent's commissions in connection with the offer and sale
of the transactions contemplated by this Agreement.
aa. PRIVATE OFFERING. Subject to the accuracy of the Purchaser's
representations and warranties set forth in Section 2 hereof, (i) the offer,
sale and issuance of the Debentures and the Warrants, (ii) the issuance of
Common Stock in lieu of interest payments on the Debentures and the Warrants and
(iii) the conversion and/or exercise of such securities into shares of Common
Stock, each as contemplated by this Agreement, are exempt from the registration
requirements of the Securities Act. The Company agrees that neither the Company
nor anyone acting on its behalf will offer any of the Debentures and the
Warrants, or any similar securities for issuance or sale, or solicit any offer
to acquire any of the same from anyone so as to render the issuance and sale of
such securities subject to the registration requirements of the Securities Act.
The Company has not offered or sold the Debentures or the Warrants by any form
of general solicitation or general advertising, as such terms are used in Rule
502(c) under the
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Securities Act.
bb. FULL DISCLOSURE. The representations and warranties of the Company
set forth in this Agreement (and the schedules thereto) do not contain any
untrue statement of a material fact or omit any material fact necessary to make
the statements contained herein, in light of the circumstances under which they
were made, not misleading.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS
a. TRANSFER RESTRICTIONS. The Purchaser acknowledges that, except as
provided in the Registration Rights Agreement, (1) none of the Debentures, the
Warrants or the Common Stock issuable upon conversion of, or in lieu of interest
payments on, the Debentures or upon exercise of the Warrants, have been, or are
being, registered under the Securities Act, and such securities may not be
transferred unless (A) subsequently registered thereunder or (B) they are
transferred pursuant to an exemption from such registration; and (2) any sale of
the Debentures, the Warrants or the Common Stock issuable upon conversion or
exchange thereof (the "Securities") made in reliance upon Rule 144 under the
Securities Act may be made only in accordance with the terms of said Rule. The
provisions of Section 4(a) and 4(b) hereof, together with the rights of the
Purchaser under this Agreement and the other Primary Documents, shall be binding
upon any subsequent transferee of the Debentures and the Warrants.
b. RESTRICTIVE LEGEND. The Purchaser acknowledges and agrees that,
until such time as the Securities shall have been registered under the
Securities Act or the Purchaser demonstrates to the reasonable satisfaction of
the Company that such registration shall no longer be required, such Securities
shall bear a restrictive legend in substantially the following form:
THESE SECURITIES (INCLUDING ANY UNDERLYING SECURITIES) HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT OR AN OPINION OF COUNSEL OR OTHER EVIDENCE REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION SHALL NO
LONGER BE REQUIRED.
c. FILINGS. The Company undertakes and agrees that it will make all
required filings in connection with the sale of the Securities to the Purchaser
as required by United States laws and regulations, or by any domestic securities
exchange or trading market, and if applicable, the filing of a notice on Form D
(at such time and in such manner as required by the Rules and
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Regulations of the Commission), and to provide copies thereof to the Purchaser
promptly after such filing or filings.
d. NASDAQ LISTING. The Company undertakes and agrees that it will file
an application with the NASDAQ market within 30 days after meeting the criteria
required by the NASD Bylaws for listing to list the Company's Common Stock
(including, but not limited to, all of the shares of Common Stock issuable upon
conversion of, or in lieu of interest payments on, the Debentures, and upon
exercise of the Warrants) on the NASDAQ Small-Cap Market. The Company further
agrees and covenants that, once the Company's Common Stock becomes listed on the
NASDAQ Small-Cap Market it will not seek to have the trading of its Common Stock
through the NASDAQ Small-Cap Market suspended or terminated, will use its best
efforts to maintain its eligibility for trading on the NASDAQ Small-Cap Market
(including, the filing of a listing application with NASDAQ to list all of the
shares of Common Stock issuable upon conversion of, or in lieu of interest
payments on, the Debentures and upon the exercise of the Warrants) and, if such
trading of its Common Stock is suspended or terminated, will use its best
efforts to requalify its Common Stock or otherwise cause such trading to resume.
e. REPORTING STATUS. So long as the Purchaser beneficially owns any of
the Securities or any Debentures and any shares of Common Stock issuable upon
conversion thereof (collectively with the Securities, the "Collective
Securities"), the Company shall timely file all reports required to be filed
with the Commission pursuant to Section 13 or 15(d) of the Exchange Act and
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.
f. STATE SECURITIES FILINGS. The Company shall from time to time
promptly take such action as the Purchaser or any of its representatives, if
applicable, may request to qualify the Collective Securities for offering and
sale under the securities laws (other than United States federal securities
laws) of the jurisdictions in the United States as shall be so identified to the
Company, and to comply with such laws so as to permit the continuance of sales
therein.
g. USE OF PROCEEDS. The Company will use all of the net proceeds from
the issuance of the Debentures and the Warrants to make investments in the
Company's subsidiaries and for working capital.
h. RESERVATION OF COMMON STOCK. The Company will at all times have
authorized and reserved for the purpose of issuance a sufficient number of
shares of Common Stock to provide for the conversion of the Debentures and the
exercise of the Warrants. The Company will use its best efforts at all times to
maintain a number of shares of Common Stock so reserved for issuance that is no
less than two (2) times the maximum number that could be issuable upon the
conversion of the Debentures and the exercise in full of the Warrants.
i. SALES OF ADDITIONAL SHARES. The Company shall not, directly or
indirectly, without
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the prior written consent of the Purchaser, offer, sell, offer to sell, contract
to sell or otherwise dispose of any shares of its capital stock or any security
or other instrument convertible into or exchangeable for shares of Common Stock,
in each case for a period commencing on the date hereof and ending on the
earlier of (i) one hundred eighty (180) days after the date on which a
registration statement relating to Common Stock issuable upon conversion of any
of the Warrants and the Debentures, is declared effective by the Securities and
Exchange Commission or (ii) the date on which Purchaser shall have converted all
of the Debentures into Common Stock (the "Lock-Up Period"), except that the
Company (i) may issue securities for the aggregate consideration of at least
$7.5 million in connection with a bona fide, firm commitment, underwritten
public offering under the Securities Act; and (ii) may issue shares of Common
Stock upon the exercise or conversion of currently outstanding options, warrants
and other convertible securities; (iii) may issue options to purchase up to
1,000,000 shares of its Common Stock to its directors, officers and employees in
connection with its existing stock option plans. In addition, the Company agrees
that it will not cause any shares of its capital stock that are issued in
connection with a transaction of the type contemplated by such clause (or upon
the conversion or exercise of other securities that are issued in connection
with such transaction) or that were issued in connection with any financing,
acquisition or other transaction that occurred prior to the date of this
agreement to be covered by a registration statement that is declared effective
by the Commission until the later to occur of (A) the expiration of the Lock-Up
Period or (B) the registration statement filed by the Company pursuant to its
obligations under the Registration Rights Agreement has been effective under the
Securities Act for a period of at least one-hundred and eighty (180) days.
j. RIGHT OF FIRST REFUSAL. Subject to Section 4(i), if during the 18
month period following the Lock-Up Period the Company shall desire to sell,
offer to sell, contract to sell or otherwise dispose of any shares of its
capital stock or any security or other instrument convertible into or
exchangeable for shares of Common Stock (collectively, the "Offered Securities")
to a prospective investor (the "Prospective Investor"), the Company shall notify
(the "Offer Notice") the Purchasers in accordance with Section 11 hereof of the
terms (the "Third Party Terms") on which the Company proposes to sell, contract
to sell or otherwise dispose of the Offered Securities to the Prospective
Investor. If, within the 5 business day period following the Purchaser's receipt
of the Offer Notice, the Purchaser desires to purchase all and not less than all
of the Offered Securities on the Third Party Terms, the Company shall be
required to sell the Offered Securities (or any portion thereof so desired by
the Purchasers) to the Purchaser and the Company shall not be permitted to sell
such Offered Securities to the Prospective Investor.
k. ADDITIONAL REGISTRATION STATEMENTS. At any time during the period
ending on the first date that follows a period of 180 consecutive days following
the effectiveness of the Registration Statement (as defined in the Registration
Rights Agreement) during which there has been no Blackout Event (as defined in
the Registration Rights Agreement) relating to such Registration Statement, the
Company agrees that, unless waived in writing by the Purchaser, it will not
cause any registration statement (other than the Registration Statement) to be
declared
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effective by the Commission.
l. STOCKHOLDER APPROVAL. The Company agrees to use its best efforts
(including obtaining any vote of its stockholders required by applicable law or
Nasdaq Bylaws) to authorize and approve the issuance of the Common Stock
issuable upon conversion of the Debentures and upon exercise of the Warrants, to
the extent that such conversion or issuance results in the issuance of 20% or
more of the Company's outstanding Common Stock; provided, however, that the
failure to obtain any such stockholder approval shall not limit any of
Purchaser's rights hereunder or pursuant to any Primary Document.
m. OWNERSHIP. At no time shall the Purchaser (including its officers,
directors and affiliates) maintain in the aggregate beneficial ownership (as
defined for purposes of Section 16 of the Securities Exchange Act of 1934, as
amended) of shares of Common Stock in excess of 4.9% of the Company's
outstanding Common Stock unless the Purchaser gives the Company at least
sixty-one days notice that it intends to increase its ownership percentage.
n. RETURN OF DEBENTURES ON CONVERSION AND WARRANTS ON EXERCISE. (i)
Upon any conversion by Purchaser of less than all of the aggregate principal
amount of Debentures then outstanding, the Company shall issue and deliver to
Purchaser within three (3) days of the Conversion Date (as defined herein), a
new certificate or certificates for, as applicable, the total principal amount
of Debentures which Purchaser has not yet elected to convert (with the number of
and denomination of such new certificate(s) designated by Purchaser).
(ii) Upon any partial exercise by Purchaser of Warrants, the
Company shall issue and deliver to Purchaser within three (3) days of the date
on which such Warrants are exercised, a new Warrant or Warrants representing the
number of adjusted shares of Common Stock covered thereby, in accordance with
the terms thereof.
o. REPLACEMENT DEBENTURES AND STOCK PURCHASE WARRANTS. (i) The
certificate(s) representing the Debentures held by Purchaser shall be
exchangeable, at the option of Purchaser, at any time and from time to time at
the office of Company, for certificates with different denominations
representing, as applicable, an equal aggregate principal amount of Debentures,
as requested by Purchaser upon surrendering the same. No service charge will be
made for such registration or transfer or exchange.
(ii) The Warrants will be exchangeable, at the option of
Purchaser, at any time and from time to time at the office of the Company, for
other Warrants of different denominations entitling the holder thereof to
purchase in the aggregate the same number of shares of Common Stock as are
purchasable under such Warrants. No service charge will be made for such
transfer or exchange.
p. DIVIDENDS OR DISTRIBUTIONS; PURCHASES OF EQUITY SECURITIES. So long
as any portion of the Warrants or the Debentures remain outstanding, the Company
agrees that it shall
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not (a) declare or pay any dividends or make any distributions to any holder or
holders of Common Stock, or (b) purchase or otherwise acquire for value,
directly or indirectly, any shares of Common Stock or equity security of the
Company.
q. NO SENIOR INDEBTEDNESS. Other than indebtedness relating to a credit
line in the aggregate principal amount not in excess of $1,000,000, until the
expiration of the Lock-up Period, the Company agrees that neither the Company
nor any direct or indirect subsidiary of the Company shall create, incur,
assume, guarantee, secure or in any manner become liable in respect of any
indebtedness, or permit any liens, claims or encumbrances to exist against the
Company or any direct or indirect subsidiary of the Company or any of their
assets, unless junior to the Debentures in all respects.
r. NO AMENDMENT OF CURRENTLY OUTSTANDING DEBENTURES. So long as any
portion of the Debentures or the Warrants remain outstanding, the Company
covenants and agrees that the Company shall not, without the consent of the
Purchaser, amend any of the terms of any currently outstanding debentures.
5. TRANSFER AGENT INSTRUCTIONS
a. The Company warrants that no instruction, other than the
instructions referred to in this Section 5 hereof prior to the registration and
sale under the Securities Act of the Common Stock issuable upon conversion of
the Debentures or upon exercise of the Warrants, will be given by the Company to
the transfer agent and that the shares of Common Stock issuable upon conversion
of, or in lieu of interest payments on, the Debentures or upon exercise of the
Warrants, shall otherwise be freely transferable on the books and records of the
Company as and to the extent provided in this Agreement, the Registration Rights
Agreement and applicable law. Nothing in this Section shall affect in any way
the Purchaser's obligations and agreement to comply with all applicable
securities laws upon resale of the Collective Securities. If the Purchaser
provides the Company with an opinion of counsel that registration of a resale by
the Purchaser of any of the Collective Securities in accordance with Section
4(a) of this Agreement is not required under the Securities Act, the Company
shall permit the transfer of the Collective Securities and, in the case of the
Common Stock, promptly instruct the Company's transfer agent to issue one or
more certificates for Common Stock without legend in such names and in such
denominations as specified by the Purchaser.
b. Purchaser shall exercise its right to convert the Debentures or to
exercise the Warrants, by faxing an executed and completed Notice of Conversion
or Form of Election to Purchase, as applicable, to the Company, and delivering
within three (3) business days thereafter, the original Notice of Conversion
(and the related original certificates representing the Debentures) or Form of
Election to Purchase (and the related original Warrants) to the Company by hand
delivery or by express courier, duly endorsed. Each date on which a Notice
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of Conversion or Form of Election to Purchase is faxed in accordance with the
provisions hereof shall be deemed a "Conversion Date." The Company will transmit
the certificates representing the Common Stock issuable upon conversion of any
Debentures or upon exercise of any Warrants (together with the certificates
representing the Debentures not so converted or the Warrants not so exercised)
to the Purchaser via express courier as soon as practicable, but in all events
no later than three (3) business days of the Conversion Date relating to
Debentures or Warrants (each such delivery date, together with the Interest
Delivery Date referred to in paragraph c below, is referred to herein as a
"Delivery Date"). For purposes of this Agreement, any conversion of the
Debentures or the exercise of the Warrants shall be deemed to have been made
immediately prior to the close of business on the Conversion Date.
c. The Company will transmit the certificates representing the Common
Stock issuable in lieu of any dividends payable on any Debentures, to the
Purchaser via express courier as soon as practicable, but in all events no later
than three (3) business days after the interest (or dividend) payment date
applicable to which such Common Stock is delivered (the "Interest Delivery
Date").
d. In lieu of delivering physical certificates representing the Common
Stock issuable upon the conversion of, or in lieu of interest payments (or
dividends) on, the Debentures, or upon the exercise of the Warrants, provided
the Company's transfer agent is participating in the Depositary Trust Company
("DTC") Fast Automated Securities Transfer program, on the written request of
the Purchaser, who shall have previously instructed the Purchaser's prime broker
to confirm such request to the Company's transfer agent, the Company shall cause
its transfer agent to electronically transmit such Common Stock to the Purchaser
by crediting the account of the Purchaser's prime broker with DTC through its
Deposit Withdrawal Agent Commission ("DWAC") system no later than the applicable
Delivery Date.
e. The Company understands that a delay in the issuance of Common Stock
beyond the applicable Delivery Date could result in an economic loss to the
Purchaser. As compensation to the Purchaser for such loss, the Company agrees to
pay to the Purchaser for late issuance of Common Stock upon conversion of, or in
lieu of interest payments (or dividend payments) on, the Debentures, or upon
exercise of the Warrants, the sum of $1,000 per day for each (i) 10,000 shares
of Common Stock purchased upon the exercise of Warrants, or (ii) 10,000 shares
of Common Stock purchased upon conversion of Debentures. The Company shall pay
any payments that are payable to the Purchaser pursuant to this Section 5 in
immediately available funds upon demand. Nothing herein shall limit the
Purchaser's right to pursue actual damages for the Company's failure to so issue
and deliver Common Stock to the Purchaser. Furthermore, in addition to any other
remedies which may be available to the Purchaser, in the event that the Company
fails for any reason to effect delivery of such Common Stock within five (5)
business days after the relevant Delivery Date, the Purchaser will be entitled
to revoke the relevant Notice of Conversion or Form of Election to Purchase by
delivering a notice to such effect to the Company, whereupon the Company and the
Purchaser shall each be restored
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to their respective positions immediately prior to delivery of such Notice of
Conversion or Form of Election to Purchase. For purposes of this Section 5,
"business day" shall mean any day in which the financial markets of New York are
officially open for the conduct of business therein.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO
ISSUE THE DEBENTURES AND WARRANTS
The Purchaser understands that the Company's obligation to
issue the Debentures and the Warrants on the Closing Date to the Purchaser
pursuant to this Agreement is conditioned upon:
a. The accuracy on the Closing Date of the representations and
warranties of the Purchaser contained in this Agreement as if made on the
Closing Date and the performance by the Purchasers on or before the Closing Date
of all covenants and agreements of the Purchasers required to be performed on or
before the Closing Date.
b. The absence or inapplicability of any and all laws, rules or
regulations prohibiting or restricting the transactions contemplated hereby, or
requiring any consent or approval which shall not have been obtained.
7. CONDITIONS TO THE PURCHASERS' OBLIGATION TO
PURCHASE THE DEBENTURES AND THE WARRANTS
The Company understands that the Purchaser's obligation to
purchase the Debentures and the Warrants on the Closing Date is conditioned
upon:
a. The accuracy on the Closing Date of the representations and
warranties of the Company contained in this Agreement as if made on the Closing
Date, and the performance by the Company on or before the Closing Date of all
covenants and agreements of the Company required to be performed on or before
the Closing Date.
b. On the Closing Date, the Purchaser shall have received an opinion of
counsel for the Company, dated the Closing Date, in substantially the form as
attached in Exhibit D.
c. The Company shall have executed and delivered to the Purchaser (i) a
signed counterpart to the Registration Rights Agreement, (ii) the Debentures and
(iii) the Warrants.
d. On the Closing Date, the Purchaser shall have received a certificate
executed by the President or the Chairman of the Company and by the Chief
Financial Officer of the Company, stating that all of the representations and
warranties of the Company set forth in this Agreement are accurate as of the
Closing Date and that the Company has performed all of its covenants and
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agreements required to be performed under this Agreement on or before the
Closing Date.
e. On the Closing Date, the Purchaser shall have received from the
Company such other certificates and documents as it or its representatives, if
applicable, shall reasonably request, and all proceedings taken by the Company
in connection with the Primary Documents contemplated by this Agreement and the
other Primary Documents and all documents and papers relating to such Primary
Documents shall be satisfactory to the Purchaser.
f. On or prior to the Closing Date, there shall not have occurred any
of the following: (i) a suspension or material limitation in the trading of
securities generally on the New York Stock Exchange, NASDAQ or the NASDAQ
Bulletin Board; (ii) a general moratorium on commercial banking activities in
New York declared by the applicable banking authorities; (iii) the outbreak or
escalation of hostilities involving the United States, or the declaration by the
United States of a national emergency or war; or (iv) a change in international,
political, financial or economic conditions, if the effect of any such event, in
the judgment of the Purchasers, makes it impracticable or inadvisable to proceed
with the purchase of the Debentures and the Warrants on the terms and in the
manner contemplated in this Agreement and in the other Primary Documents.
g. The Company shall have delivered to the Purchaser reimbursement of
the Purchaser's out-of-pocket costs and expenses incurred in connection with the
transactions contemplated by this Agreement (including fees and disbursements of
the Purchaser's legal counsel in an amount not to exceed $17,500).
8. INDEMNIFICATION
A. Indemnification of Purchaser by the Company.
The Company hereby agrees to indemnify and hold harmless the
Purchaser, its affiliates and their respective officers, directors, partners,
shareholders, employees and members (collectively, the "Buyer Indemnitees"),
from and against any and all losses, claims, damages, judgments, penalties,
liabilities and deficiencies (collectively, "Losses"), and agrees to reimburse
the Buyer Indemnitees for all out-of-pocket expenses (including the fees and
expenses of legal counsel), in each case promptly as incurred by the Buyer
Indemnitees and to the extent arising out of or in connection with:
1. any misrepresentation, omission of fact or breach of any of
the Company's representations or warranties contained in this Agreement, the
annexes, schedules or exhibits hereto or any instrument, agreement or
certificate entered into or delivered by the Company pursuant to this Agreement;
or
2. any failure by the Company to perform any of its covenants,
agreements, undertakings or obligations set forth in this Agreement, the
annexes, schedules or exhibits hereto
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or any instrument, agreement or certificate entered into or delivered by the
Company pursuant to this Agreement.
B. Indemnification of the Company by Purchaser.
Purchaser hereby agrees to indemnify and hold harmless the
Company, its affiliates and their respective officers, directors, partners and
members (collectively, the "Company Indemnitees"), from and against any and all
Losses, and agrees to reimburse the Company Indemnitees for all out-of-pocket
expenses (including the fees and expenses of legal counsel), to the extent
arising out of or in connection with any breach of any of Purchaser's
representations or warranties contained in this Agreement, the annexes,
schedules or exhibits hereto or any instrument, agreement or certificate entered
into or delivered by Purchaser pursuant to this Agreement.
C. Third Party Claims. Promptly after receipt by either
party hereto seeking indemnification pursuant to this Section 8 (an "Indemnified
Party") of written notice of any investigation, claim, proceeding or other
action in respect of which indemnification is being sought (each, a "Claim"),
the Indemnified Party promptly shall notify the party against whom
indemnification pursuant to this Section 8 is being sought (the "Indemnifying
Party") of the commencement thereof; but the omission to so notify the
Indemnifying Party shall not relieve it from any liability that it otherwise may
have to the Indemnified Party, except to the extent that the Indemnifying Party
is materially prejudiced and forfeits substantive rights and defenses by reason
of such failure. In connection with any Claim as to which both the Indemnifying
Party and the Indemnified Party are parties, the Indemnifying Party shall be
entitled to assume the defense thereof. Notwithstanding the assumption of the
defense of any Claim by the Indemnifying Party, the Indemnified Party shall have
the right to employ separate legal counsel and to participate in the defense of
such Claim, and the Indemnifying Party shall bear the reasonable fees,
out-of-pocket costs and expenses of such separate legal counsel to the
Indemnified Party if (and only if): (x) the Indemnifying Party shall have agreed
to pay such fees, out-of-pocket costs and expenses, (y) the Indemnified Party
and the Indemnifying Party reasonably shall have concluded that representation
of the Indemnified Party by the Indemnifying Party by the same legal counsel
would not be appropriate due to actual or, as reasonably determined by legal
counsel to the Indemnified Party, potentially differing interests between such
parties in the conduct of the defense of such Claim, or if there may be legal
defenses available to the Indemnified Party that are in addition to or disparate
from those available to the Indemnifying Party, or (z) the Indemnifying Party
shall have failed to employ legal counsel reasonably satisfactory to the
Indemnified Party within a reasonable period of time after notice of the
commencement of such Claim. If the Indemnified Party employs separate legal
counsel in circumstances other than as described in clauses (x), (y) or (z)
above, the fees, costs and expenses of such legal counsel shall be borne
exclusively by the Indemnified Party. Except as provided above, the Indemnifying
Party shall not, in connection with any Claim in the same jurisdiction, be
liable for the fees and expenses of more than one firm of legal counsel for
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the Indemnified Party (together with appropriate local counsel). The
Indemnifying Party shall not, without the prior written consent of the
Indemnified Party (which consent shall not unreasonably be withheld), settle or
compromise any Claim or consent to the entry of any judgment that does not
include an unconditional release of the Indemnified Party from all liabilities
with respect to such Claim or judgment.
D. Other Claims.
In the event one party hereunder should have a claim for
indemnification that does not involve a claim or demand being asserted by a
third party, the Indemnified Party promptly shall deliver notice of such claim
to the Indemnifying Party. If the Indemnified Party disputes the claim, such
dispute shall be resolved by mutual agreement of the Indemnified Party and the
Indemnifying Party or by binding arbitration conducted in accordance with the
procedures and rules of the American Arbitration Association. Judgment upon any
award rendered by any arbitrators may be entered in any court having competent
jurisdiction thereof.
9. EXPENSES
The Company covenants and agrees with the Purchaser that the
Company will pay or cause to be paid the following: (a) the fees, disbursements
and expenses of the Purchaser's counsel in connection with the issuance of the
Collective Securities payable on the Closing Date (not to exceed $17,500), (b)
all expenses in connection with registration or qualification of the Collective
Securities for offering and sale under state securities laws as provided in
Section 4(f) hereof, and (c) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section, including the fees and disbursements of the
Company's counsel, accountants and other professional advisors, if any. If the
Company fails to satisfy its obligations or to satisfy any condition set forth
in this Agreement, as a result of which the Collective Securities are not
delivered to the Purchaser on the terms and conditions set forth herein, the
Company shall reimburse the Purchaser for any out-of-pocket expenses incurred in
making preparations for the purchase, sale and delivery of the Collective
Securities not so delivered.
10. GOVERNING LAW; MISCELLANEOUS
This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York, without regard to principles
of conflict of laws. Each of the parties consents to the jurisdiction of the
federal courts whose districts encompass any part of the City of New York or the
state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement or any of the
transactions contemplated hereby, and hereby waives, to the maximum extent
permitted by law, any objection, including any objections based on forum non
conveniens, to the bringing of any such
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proceeding in such jurisdictions. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original. The headings of this
Agreement are for convenience of reference only and shall not form part of, or
affect the interpretation of this Agreement. This Agreement and each of the
Primary Documents have been entered into freely by each of the parties,
following consultation with their respective counsel, and shall be interpreted
fairly in accordance with its respective terms, without any construction in
favor of or against either party. 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 unenforceability of this
Agreement in any other jurisdiction. This Agreement shall inure to the benefit
of, and be binding upon the successors and assigns of each of the parties
hereto, including any transferees of the Warrants and the Debentures. This
Agreement may be amended only by an instrument in writing signed by the party to
be charged with enforcement. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
11. NOTICES
Any notice required or permitted hereunder shall be given in
writing (unless otherwise specified herein) and shall be effective upon personal
delivery, via facsimile (upon receipt of confirmation of error-free
transmission) or two business days following deposit of such notice with an
internationally recognized courier service, with postage prepaid and addressed
to each of the other parties thereunto entitled at the following addresses, or
at such other addresses as a party may designate by five days advance written
notice to each of the other parties hereto.
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COMPANY: IBiz Technology Corp
1919 West Lone Cactus
Phoenix, Arizona 85021
Att.: Kenneth W. Schilling, President
Tel.: 623-492-9200
Fax: 623-492-9921
WITH A COPY TO:
Gammage & Burnham
Two North Central Avenue, Suite 1800
Phoenix, AZ 85004
Att: Stephen Boatwright, Esq.
Tel.: 602-256-4439
Fax: 602-256-4475
PURCHASER: Lites Trading Co.
c/o Laufer & Halberstam
39 Broadway
NY, NY 10006
Att: Michael J. Halberstam
Tel.: 212-422-8500
Fax: 212-422-9038
WITH A COPY TO:
Laufer Halberstam & Karish
39 Broadway, 14th Floor
New York, New York 10006
Attn: Michael J. Halberstam, Esq.
Tel: (212) 422-8500
Fax: (212) 422-9038
12. SURVIVAL
The agreements, covenants representations and warranties of
the Company and the Purchaser shall survive the execution and delivery of this
Agreement and the delivery of the Securities hereunder.
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IN WITNESS WHEREOF, this Securities Purchase Agreement has
been duly executed by each of the undersigned.
Dated: March 27, 2000
iBIZ TECHNOLOGY CORP
By:
-------------------------
Kenneth Schilling
President
LITES TRADING CO.
By:
-------------------------
Name:
Title: Authorized Person
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