PURCHASE AGREEMENT
PURCHASE AGREEMENT dated as of May 30, 2000 by and among FRISBY
TECHNOLOGIES, INC. ("Frisby" or the "Company"), a Delaware corporation (the
"Company"), and the purchaser parties listed on Schedule 1 hereto (the
"Buyers").
RECITALS
Buyers desire to purchase from the Company, and the Company desires to
issue and sell to Buyers, the Units.
NOW, THEREFORE, the parties hereto agree as follows:
I. DEFINITIONS
1.1. Definitions. In addition to the terms defined elsewhere herein, the
following terms, as used herein, have the following meanings when used herein
with initial capital letters:
"Affiliate" means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with such Person.
For the purposes of this definition, "control," when used with respect to any
Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Agreement" means this Agreement, as the same may be amended from time to
time.
"Ancillary Agreements" means the Warrant Agreement, the Stockholders
Agreement and the Registration Rights Agreement.
"Balance Sheet" means the audited balance sheet of the Company as of
December 31, 1999 and the related statements of operations and cash flows for
the period ended December 31, 1999.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized by law to close.
"Closing Date" means May 30, 2000.
"Common Stock" means the Common Stock, par value $0.001 per share, of the
Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Employment Agreement" means the Amended Employment Agreement dated
December 8, 1997 entered into between the Company and Gregory Frisby.
"Environmental Laws" means any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, decrees, codes, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and governmental restrictions, relating to
human health, the environment or emissions, discharges or releases of Hazardous
Substances into the environment, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Substances or the clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Exchange Act of 1934, as amended.
"Financial Statements" means, collectively, the Balance Sheet and the
Interim Balance Sheet.
"Hazardous Substances" means any toxic, radioactive, caustic or otherwise
hazardous substance, including petroleum, its derivatives, by-products and other
hydrocarbons, or any substance having any constituent elements displaying any of
the foregoing characteristics, regulated under Environmental Laws.
"Interim Balance Sheet" means the unaudited balance sheet of the Company
for the three month period ended March 31, 2000 and the related statement of
income for the three month period ended March 31, 2000.
"Interim Balance Sheet Date" means March 31, 2000.
"Lien" means, with respect to any property or asset, any mortgage, lien,
pledge, charge, security interest, encumbrance or other adverse claim of any
kind in respect of such property or asset. For the purposes of this Agreement, a
Person will be deemed to own subject to a Lien any property or asset which it
has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such property or asset.
"Material Adverse Effect" means a material adverse effect on the assets,
liabilities, properties, business, financial condition, results of operations or
prospects of the Company, taken as a whole.
"Person" means an individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Pre-Closing Tax Period" means any Tax period (or portion thereof) ending
on or before the close of business on the Closing Date.
"Registration Rights Agreement" means the Registration Rights Agreement
dated the Closing Date by and between the Company and the Buyers, substantially
in the form of Exhibit C.
"Securities Act" means the Securities Act of 1933, as amended.
"Stockholders' Agreement" means the Second Amended and Restated
Stockholders' Agreement dated the Closing Date by and between MUSI, the Company,
Greg Frisby and Jeff Frisby substantially in the form of Exhibit A.
"Tax" means (i) any net income, alternative or add-on minimum tax, gross
income, gross receipts, sales, use, ad valorem, value added, transfer,
franchise, profits, license, withholding on amounts paid to or by the Company,
payroll, employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest, penalty, addition to tax or additional amount imposed by any
governmental authority (domestic or foreign) responsible for the imposition of
any such tax (a "Taxing Authority"), (ii) any liability of the Company for the
payment of any amounts of the type described in (i) as a result of being a party
to any agreement or arrangement whereby liability of the Company for payment of
such amounts was determined or taken into account with reference to the
liability of any other Persons, and (iii) any liability of the Company with
respect to the payment of any amounts of the type described in (i) or (ii) as a
result of any express or implied obligation to indemnify any other Person.
"Units" means one share of Common Stock and one Warrant.
"Warrant" means the warrants issued pursuant to the Warrant Agreement.
"Warrant Agreement" the form of warrant agreement attached hereto as
Exhibit B between the Company and certain investors who purchase Units.
II. PURCHASE AND SALE; CLOSING
2.1. Authorization of Common Stock. The Company has authorized the issuance
and sale of up to 800,000 shares of its Common Stock (the "Common Stock") to be
issued under this Agreement and has reserved for issuance 800,000 shares of
Common Stock issuable upon exercise of the Warrants pursuant to the Warrant
Agreement.
2.2. Purchase and Sale. (a) On the terms and subject to the conditions of
this Agreement, at the Closing, the Company will issue and sell to the Buyers,
and each of the Buyers will severally purchase from the Company such number of
Units specified opposite such Buyer's name on Schedule A hereto. Each Unit shall
consist of one share of Common Stock and one Warrant.
(b) The purchase price for the Units (the "Purchase Price") will be Five
Dollars ($5.00) per Unit. Such Purchase Price shall be payable as provided in
Section 2.3.
2.3. Closing. The purchase and sale of the Units shall take place at the
offices of Jones, Day, Reavis & Pogue at 599 Lexington Avenue, New York, NY
10022 at 10:00 a.m. on May 30, 2000 or at such other time and place as the
parties shall mutually agree (the "Closing"). The Closing shall take place
concurrently with the execution and delivery of this Agreement or at such other
time as the parties shall mutually agree. At the Closing, the Buyers shall
purchase 800,000 Units and the Company shall deliver to each of the Buyers
purchasing Units, (i) certificates registered in each such Buyer's name,
representing such number of shares of Common Stock and (ii) warrant certificates
registered in each such Buyer's name representing Warrants to be acquired by
each Buyer as set forth opposite such Buyer's name on Schedule A against payment
of the Purchase Price thereof in lawful money of the United States of America by
wire transfer.
2.4. Proceedings. Except as otherwise specifically provided for in this
Agreement, all proceedings that will be taken and all documents that will be
executed and delivered by the parties hereto on the Closing will be deemed to
have been taken and executed simultaneously, and no proceeding will be deemed
taken nor any document executed and delivered until all have been taken,
executed and delivered.
III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company acknowledges that Buyers were induced to enter into, and
entered into, this Agreement relying upon the representations, warranties and
covenants of the Company set forth in this Agreement. Accordingly, the Company
represents and warrants to each Buyer that:
3.1. Corporate Existence and Power. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware. The Company has all requisite corporate powers required to carry on
its business as now conducted. The Company is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where such
qualification is necessary except for those jurisdictions where the failure to
be so qualified or in good standing would not, individually or in the aggregate,
have a Material Adverse Effect.
3.2. Authorization; Etc. The execution, delivery and performance by the
Company of this Agreement and each of the Ancillary Agreements to which it is a
party and the issuance, sale and delivery of the Units are within the Company's
corporate powers and have been duly authorized by all necessary corporate action
on the part of the Company. The Company has all requisite legal and corporate
power to issue and sell the Common Stock and the Warrants, to issue the Common
Stock upon exercise of the Warrants and to carry out and perform its obligations
under the terms of this Agreement and each of the Ancillary Agreements. This
Agreement and the Ancillary Agreements to which the Company is a party have been
duly executed and delivered by the Company and constitute valid and binding
agreements of the Company, enforceable against the Company in accordance with
their respective terms.
3.3. Non-Contravention. Except as disclosed on Schedule 3.3, the execution,
delivery and performance by the Company of this Agreement and each Ancillary
Agreement to which the Company is a party will not (a) violate the certificate
of incorporation or bylaws of the Company, (b) require any action by or in
respect of, or filing with, any United States governmental body, agency, or
official, including, without limitation, The NASDAQ Market, Inc., (c) violate
any applicable law, rule, regulation, judgment, injunction, order or decree, (d)
require any consent or other action by any Person, constitute a default under,
or give rise to any right of termination, cancellation or acceleration of any
right or obligation of the Company or to a loss of any benefit to which the
Company is entitled under any agreement binding upon the Company or any license,
franchise, permit or other similar authorization held by the Company, or (e)
result in the creation or imposition of any Lien on any asset or securities of
the Company.
3.4. Capitalization; No Subsidiaries. (a) The entire authorized and issued
capital stock of the Company is as of the date hereof and will be at the
Closing, as set forth on Schedule 3.4(a) attached hereto. Schedule 3.4(a)
includes a list of the principal record holders of the Company's securities and
the number or amount of such securities each owns. Except as set forth in
Schedule 3.4(a), the Company holds no shares of its capital stock in its
treasury. The Company has duly authorized the issuance of 800,000 shares of
Common Stock for issuance to the Buyers pursuant to this Agreement. When issued
in accordance with the terms of this Agreement, the Common Stock will be validly
issued and outstanding, fully paid and nonassessable. The Common Stock, $0.001
par value of the Company issuable upon exercise of the Warrants purchased under
this Agreement has been duly and validly reserved for issuance and, upon
issuance, will be duly and validly issued, fully paid, and nonassessable and
will be free of restrictions on transfer other than restrictions on transfer
under this Agreement and under applicable state and federal securities laws.
(b) Except as set forth in Schedule 3.4(b), there are no outstanding
options, warrants or other rights to purchase or acquire from the Company, or
exchangeable for or convertible into, any shares of Common Stock. The Company
has reserved (i) a total of 750,000 shares of its Common Stock (the "Reserved
Employee Shares") for purchase upon exercise of options granted or to be granted
in the future to directors, employees and consultants under the Company's 1998
Option Plan (the "Option Plan") between the Company and certain employees and
consultants of the Company as identified in Schedule 3.4(a), of which 531,050
option shares have been granted and are outstanding as of the date hereof and
(ii) a total of 200,000 shares of its Common Stock for purchase by the Company's
employees pursuant to the Company's 2000 Employee Stock Purchase Plan of which
no shares have been granted and are outstanding as of the date hereof. There are
no preemptive rights with respect to the issuance or sale by the Company of the
Units that have not been properly waived. Except as provided in the Ancillary
Agreements and agreements executed and delivered pursuant to the Option Plan or
as imposed by applicable securities laws, upon the Closing there will be no
restrictions on the transfer or voting of any shares of the Company's Common
Stock other than restrictions on transfer necessary to preserve the exemptions
pursuant to which such securities were issued without registration under
applicable securities laws.
(c) Except as set forth on Schedule 3.4(c), the Company has no subsidiaries
and does not own of record or beneficially (i) any shares of capital stock or
voting securities or any other equity interest in any other Person or (ii) any
participating or other interest in any partnership, joint venture or other
non-corporate business enterprise.
(d) Upon issuance of all Units to be issued to Buyers as contemplated by
this Agreement, such Units, assuming the issuance of all Common Stock upon the
exercise of all Warrants will represent 18.29% of the total outstanding capital
stock of the Company on a fully diluted basis. For the purposes hereof,
"outstanding capital stock of the Company on a fully diluted basis" means (a)
all issued and outstanding shares of Common Stock of the Company, (b) all shares
of Common Stock issuable upon exercise of any outstanding options, warrants or
other rights to acquire capital stock of the Company and (c) all shares of
Common Stock reserved for issuance under any equity incentive plans adopted by
the Company, including, without limitation, the Option Plan.
3.5. Financial Statements; Books and Records. (a) Copies of the Financial
Statements have been heretofore delivered to Buyers. Except as set forth on
Schedule 3.5, such Financial Statements together with the notes thereto as well
as financial statements in SEC Documents (as defined below) fairly present the
financial position of the Company as of the dates thereof and its results of
operations and changes in financial position for the periods then ended in
conformity with generally accepted accounting principles ("GAAP") applied on a
consistent basis for year-end financial information and in conformity with the
instructions to Form 10-KSB and Regulations S-X.
(b) All accounts, books, ledgers and official and other records material to
the business of the Company have been fully, properly and accurately kept and
compiled, and there are no material inaccuracies or discrepancies contained or
reflected therein. The Company's books of account have been kept in conformity
with GAAP.
3.6. No Undisclosed Liabilities. There are no material liabilities of the
Company of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, and there is no existing condition,
situation or set of circumstances which could reasonably be expected to result
in such a material liability, other than:
(a) liabilities provided for in the Financial Statements or disclosed in
the notes thereto;
(b) liabilities disclosed on Schedule 3.6;
(c) liabilities incurred in the ordinary course of business consistent with
past practices after the Interim Balance Sheet Date; and
(d) liabilities reasonably incurred in connection with the transactions
contemplated by this Agreement.
3.7. Accounts Receivable and Inventory. (a) All accounts receivable
reflected in the Financial Statements (net of reserves set forth therein) and
all accounts receivable which have arisen since the Interim Balance Sheet Date
(net of additional reserves established since then, none of which are material)
are valid and enforceable claims, and the goods sold and delivered which gave
rise to such accounts receivable were sold and delivered in accordance with the
applicable purchase orders, agreements and specifications. Such accounts
receivable are, to the knowledge of the Company, subject to no defenses, offsets
or recovery and are fully collectible in the ordinary course of business without
resort to legal proceedings except to the extent of the amount of the reserve
for doubtful accounts reflected on the Financial Statements.
(b) Except as set forth on Schedule 3.7(a), all inventories reflected on
the Financial Statements (net of reserves set forth thereon) and all inventories
which have been acquired since the Interim Balance Sheet Date (net of reserves
established since such date, none of which is material) are carried in
accordance with GAAP consistently applied at lower of cost or market, are in
good condition and are not obsolete (as determined in accordance with industry
standards).
3.8. Accounts Payable. Schedule 3.8 sets forth a true and correct "aged"
list of all accounts payable of the Company as of March 31, 2000.
3.9. Properties. (a) The Company does not own any real property. The
Company has good title to all of its property and assets (whether tangible or
intangible), including without limitation, those properties and assets reflected
on the Financial Statements, free and clear of all Liens, except for (i) Liens
identified on the Financial Statements, (ii) Liens for taxes not yet due, (iii)
Liens which do not materially detract from the value or materially interfere
with any present or intended use of such property or assets, or (iv) mechanics',
workmen's, repairmen's or other similar Liens arising or incurred in the
ordinary course of business.
(b) Except as set forth on Schedule 3.9, the assets owned or leased by the
Company, or which it otherwise has the right to use, constitute all of the
assets held for use or used in connection with the business of the Company and
are sufficient for the conduct of the Company's business as currently conducted.
3.10. Intellectual Property. (a) Schedule 3.10(a) identifies all
Intellectual Property Rights and all licenses, sublicenses and other written
agreements to which the Company is a party and pursuant to which any Person is
authorized to use such Intellectual Property Rights, including the identity of
all parties thereto other than such agreements entered into by the Company with
its customers, licensees and suppliers in the ordinary course of business. As
used herein, the term "Intellectual Property Rights" means any trademark,
service mark, trade name, invention, license, patent, trade secret, copyright,
know-how (including any registrations or applications for registration of any of
the foregoing), in each case which is owned, licensed, used or held for use in
connection with the conduct of the business of the Company as now conducted. The
Company has the valid right to use the Intellectual Property Rights in the
conduct of its business and such Intellectual Property Rights are sufficient for
the conduct and development of the Company's business as currently conducted and
as presently contemplated by the Company to be conducted in the future.
(b) Except as set forth in Schedule 3.10(b):
(i) The Company has not been sued or charged with or been a defendant in
any claim, suit, action or proceeding relating to its business that is either
pending or, to the knowledge of the Company, threatened, that involves a claim
of infringement by the Company or any of its Affiliates of any trademark,
service mark, trade name, invention, patent, trade secret, copyright, know-how
or any other similar type of proprietary intellectual property right of any
other Person and the Company has no knowledge of any basis for any such claim of
infringement, including with respect to the future development of the Company's
business as presently contemplated, by any other Person of any Intellectual
Property Rights;
(ii) To the knowledge of the Company, there is no unauthorized use,
infringement or misappropriation or any continuing infringement of any of the
Intellectual Property Rights by any other Person, including any employee, former
employee, supplier, licensee, customer or Affiliate of the Company.
(iii) The Company is not in violation of any license, sub-license or other
agreement in respect of which the Company is a party and pursuant to which it is
authorized to use any Intellectual Property Rights or any other trademarks,
service marks, trade names, inventions, patents, trade secrets, copyrights,
know-how or any other similar type of proprietary intellectual property rights
of any other Person.
(iv) No Intellectual Property Right is subject to any outstanding order,
judgment, decree, stipulation or agreement restricting the use thereof by the
Company or restricting the licensing thereof by the Company to any Person;
(v) The Company has not entered into any agreement to indemnify any other
Person against any charge of infringement of any trademark, service mark, trade
name, invention, patent, trade secret, copyright, know-how or any other similar
type of proprietary intellectual property right; and
(vi) There are no trade secrets, unpatented inventions or other
confidential know-how of the Company, the value of which to the Company is
contingent upon maintenance of the confidentiality thereof, that are not subject
to confidentiality agreements between the Company and its employees, consultants
and suppliers.
3.11. Contracts. (a) Except as disclosed in Schedule 3.11(a), the Company
is not a party to or bound by:
(i) any lease or sublease of real property or;
(ii) any agreement for the purchase of materials, supplies, goods,
services, equipment or other assets that provides for payments by the Company in
any one year of $50,000 or more other than agreements entered into by the
Company in the ordinary course of business;
(iii) any agreement providing for the sale by the Company of goods,
services, equipment or other assets that provides for payments to the Company of
$50,000 or more other than agreements entered into by the Company in the
ordinary course of business;
(iv) any partnership, joint venture or other similar agreement or
arrangement;
(v) any agreement relating to the acquisition or disposition of any
business (whether by merger, sale of stock, sale of assets or otherwise);
(vi) any agreement relating to indebtedness for borrowed money or the
deferred purchase price of property (other than trade payables arising in the
ordinary course of business) (in either case, whether incurred, assumed,
guaranteed or secured by any asset);
(vii) any indenture, note, bond, guaranty, surety, or other obligation for,
or relating to, the borrowing or lending of money;
(viii) any license agreement or other agreement with respect to any
Intellectual Property Rights;
(ix) any agency, dealer, distributorship, sales representative, marketing
or other similar agreement;
(x) any agreement that limits the freedom of the Company to compete in any
line of business or with any Person or in any area or which would so limit the
freedom of the Company after the Closing Date; or
(xi) any other agreement, commitment or arrangement not made in the
ordinary course of business that is material to the Company.
(b) Each agreement, contract or commitment disclosed or required to be
disclosed in any Schedule to this Agreement is a valid and binding agreement of
the Company and is in full force and effect, and, except as set forth on
Schedule 3.11(b), the Company:
(i) has performed all obligations required to be performed by it under such
agreements, contracts or commitments;
(ii) is current in all payments obligations under such agreements,
contracts or commitments; and
(iii) the Company is not nor, to the knowledge of the Company, is any other
party thereto in default or breach in any respect under the terms of any such
agreement, contract or commitment.
(c) Each lease of real property to which the Company is a party is valid,
binding and enforceable in accordance with its respective terms and the Company
is a tenant or possessor in good standing thereunder and, except as set forth on
Schedule 3.11(c), all rents due under such leases for which any applicable grace
period has expired have been paid. The Company is not nor, to the knowledge of
the Company, is any other party thereto in default or breach in any respect
under the terms of any such lease.
3.12. Customers; Licensees and Suppliers. (a) Schedule 3.12(a) lists the
name of all customers, including licensees, of the Company that purchased or
ordered goods or services from the Company accounting for aggregate revenues of
$100,000 or more since January 1, 1999 and the approximate amount for which each
customer was invoiced during such period (each such customer or licensee, a
"Significant Customer"). The Company has not received any notice and otherwise
has no knowledge that any Significant Customer of the Company has ceased, or
will cease, to purchase or use the goods or services of the Company, or will
substantially reduce the purchase of such goods or services.
(b) Schedule 3.12(b) lists the name of all suppliers from which the Company
ordered or purchased raw materials, supplies or other goods with an aggregate
purchase price of $100,000 or more since January 1, 1999 and the approximate
amount for which each supplier invoiced the Company during such period (each
such supplier, a "Significant Supplier"). The Company has not received any
notice and otherwise has no knowledge that any Significant Supplier will not
sell raw materials, supplies or other goods to the Company at any time after the
Closing Date on terms and conditions similar to those imposed on current sales
to the Company, subject to general and customary price increases.
3.13. Absence of Certain Changes. Except as disclosed on Schedule 3.13,
since the Interim Balance Sheet Date, the business of the Company has been
conducted in the ordinary course consistent with past practice and there has not
been:
(a) any event, occurrence or development or state of circumstances or facts
which, individually or in the aggregate has had or could reasonably be expected
to have a Material Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any securities issued by the Company, or any
repurchase, redemption or other acquisition by the Company of any outstanding
securities issued by the Company;
(c) any amendment of any term of any outstanding security issued by the
Company;
(d) any incurrence, assumption or guarantee by the Company of any
indebtedness for borrowed money;
(e) any creation or assumption by the Company of any Lien on any material
asset;
(f) any making by the Company of any loan, advance or capital contributions
to or investment in any Person;
(g) any damage, destruction or other casualty loss (whether or not covered
by insurance) affecting the business or assets of the Company which,
individually or in the aggregate, has had or would reasonably be expected to
have a Material Adverse Effect;
(h) any write off, write up or write down of any material assets of the
Company;
(i) except for this Agreement and for transactions or commitments entered
into in the ordinary course of business consistent with past practice, any
transaction or commitment made, or any contract or agreement entered into, by
the Company relating to its assets or business (including the acquisition or
disposition of any assets) or any relinquishment by the Company of any contract
or other right, in either case where the amount involved exceeds $100,000;
(j) any change in any method of accounting or accounting practice by the
Company;
(k) any forward purchase commitments outside of the ordinary course of
business, or at prices higher than then current market prices;
(l) any change in compensation, bonuses or other benefits payable to any
director, officer or employee of the Company; or
(m) any change in the terms of the Company's severance or retirement plans
or policies thereof.
3.14. Tax Matters. Except as set forth in the Financial Statements
(including the notes thereto) or on Schedule 3.14, (a) all Tax returns,
statements, reports and forms (including estimated tax or information returns
and reports) required to be filed with any Taxing Authority with respect to any
Pre-Closing Tax Period by or on behalf of the Company (collectively, the
"Returns") have, to the extent required to be filed on or before the date
hereof, been or will be filed when due in accordance with all applicable laws;
(b) as of the time of filing, the Returns correctly reflected (and, as to any
Returns not filed as of the date hereof, will correctly reflect) in all material
respects the facts regarding the income, business, assets, operations,
activities and status of the Company and any other information required to be
shown therein; (c) all Taxes shown as due and payable on the Returns that have
been filed have been timely paid, or withheld and remitted to the appropriate
Taxing Authority; (d) the charges, accruals and reserves for Taxes for any
Pre-Closing Tax Period (including any Pre-Closing Tax Period for which no Return
has yet been filed) reflected on the books of the Company (excluding any
provision for deferred income taxes) are adequate to cover such Taxes; (e) the
Company is not delinquent in the payment of any Tax; (f) the Company has not
granted any extension or waiver of the statute of limitations period applicable
to any Return, which period (after giving effect to such extension or waiver)
has not yet expired; (g) there is no claim, audit, action, suit, proceeding, or
investigation now pending or, to the knowledge of the Company, threatened
against or with respect to the Company in respect of any Tax (other than normal
audits conducted by state or local Tax Authorities in the ordinary course of
business); (h) neither the Company nor any other Person on behalf of the Company
has entered into any agreement or consent pursuant to Section 341(f) of the
Code; (i) there are no Liens for Taxes upon the assets of the Company except
Liens for current Taxes not yet due; (j) the Company will not be required to
include any adjustment in taxable income for any post-Closing Tax Period under
Section 481(c) of the Code (or any similar provision of the Tax laws of any
jurisdiction) as a result of a change in method of accounting for a Pre-Closing
Tax Period or pursuant to the provisions of any agreement entered into with any
Taxing Authority with regard to the Tax liability of the Company for any
Pre-Closing Tax Period; and (k) the Company has never been a member of an
affiliated, consolidated, combined or unitary group or participated in any other
arrangement whereby any income, revenues, receipts, gain or loss of the Company
was determined or taken into account for Tax purposes with reference to or in
conjunction with any income, revenues, receipts, gain, loss, asset or liability
of any other Person.
3.15. Affiliate Transactions. (a) Schedule 3.15(a) contains a complete list
of all liabilities or obligations as of the Interim Balance Sheet Date between
any stockholder of the Company, any of their respective Affiliates or any
Relative of any of the foregoing, on the one hand, and the Company, on the other
hand. Other than as set forth on Schedule 3.15(a), since the Interim Balance
Sheet Date the Company has not paid any amount (including without limitation for
services rendered or to be rendered) or incurred any actual or contingent
liability or obligation to any of its stockholders, any of their respective
Affiliates or any Relative of any of the foregoing, or entered into any other
transaction between the Company, on the one hand, and any such Person, on the
other hand. For purposes of this Section 3.15, "Relative" means, with respect to
any Person, (i) any living spouse or lineal descendent of such Person and any
spouse of such lineal descendent and (ii) any living ascendant of such Person
and any living spouse or lineal descendants of such ascendant and any spouse of
such lineal descendants.
(b) Schedule 3.15(b) lists any agreement between the Company and (i) any
Person directly or indirectly owning, controlling or holding with power to vote,
1% or more of the outstanding voting securities of the Company or (ii) any
director or officer of the Company or with any "associate" of any such director
or officer.
3.16. Insurance Coverage. Schedule 3.16 contains a complete list of all
insurance policies and fidelity bonds covering the assets, business, operations,
employees, officers and directors of the Company. Except as set forth in
Schedule 3.16, (i) there is no claim by the Company pending under any of such
policies or bonds as to which coverage has been questioned, denied or disputed
by the underwriters of such policies or bond (ii) all premiums due and payable
under all such policies and bonds have been paid and the Company has complied
with the terms and conditions of all such policies and bonds; (iii) such
policies of insurance and bonds (or other policies and bonds providing
substantially similar insurance coverage) are in full force and effect; (iv)
such policies of insurance and bonds are of the type and in amounts deemed by
the management of the Company to be sufficient; and (v) the Company does not
know of any threatened termination of, or premium increase with respect to, any
of such policies or bonds.
3.17. Litigation. Except as set forth in Schedule 3.17, there is no action,
suit, investigation or proceeding pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its properties before any
court or arbitrator or any governmental body, agency or official.
3.18. Compliance with Laws; End-Use Products. (a) Except as disclosed on
Schedule 3.18(a), the Company, in the conduct of its business, is in compliance
in all material respects with all laws, rules, regulations, judgments,
injunctions, orders or decrees applicable thereto.
(b) Except as set forth on Schedule 3.18(b), each governmental or
regulatory license, authorization, permit, consent and approval held by the
Company is valid and in full force and effect and will not be terminated or
impaired (or become terminated or impaired) as a result of the transactions
contemplated hereby. The Company is not in default under, and, to the knowledge
of the Company, no condition exists that with notice or lapse of time or both
would constitute a default under, any license, franchise, permit, or similar
authorization held by the Company.
(c) Except as set forth on Schedule 3.18(c), there are no statements,
citations or decisions issued by any governmental authority that any product
manufactured, marketed or distributed by the Company or any of its licensees (an
"End-Use Product"), is, in whole or in part, defective or fails to meet any
standard promulgated by any such governmental authority nor has any such
governmental authority or other Person threatened, in writing, or, to the
knowledge of the Company, otherwise threatened, to issue any such statement,
citation or decision. Except as set forth on Schedule 3.18(c), (i) to the
knowledge of the Company, there have been no threatened or actual government
recalls by any governmental authority with respect to any End-Use Product and
(ii) based on the results of all third-party and in-house tests conducted by the
Company since January 1, 1999, as set forth on Schedule 3.18(c), to the
knowledge of the Company, there is no reasonable basis for the Company or any
licensee to recall any End-Use Product or a duty to warn customers of a defect
or insufficiency in any End-Use Product.
3.19. Environmental Matters. (a) Except as disclosed on Schedule 3.19,
(i) the Company has no knowledge of nor has it received any written notice
from any Person alleging that the assets or properties now or previously owned,
leased or operated by the Company do not comply with, or that the Company is in
violation of or has violated, in connection with its use of any such assets or
properties or the conduct of its business, any Environmental Laws;
(ii) the Company has no knowledge of nor has it received any written notice
from any Person alleging that there is any liability on the part of the Company
arising out of or related to, directly or indirectly, any Environmental Laws;
(iii) to the knowledge of the Company, no polychlorinated biphenyls,
radioactive material, urea formaldehyde, lead, asbestos, asbestos-containing
materials or underground storage tank (active or abandoned) is present at any
property now owned, leased or operated by the Company; or
(iv) to the knowledge of the Company, no Hazardous Substance has been
transported, stored, used, manufactured, generated, distributed, released,
discharged or disposed of by the Company in violation of any applicable
Environmental Laws.
(b) There has been no environmental investigation, study, audit, test,
review or other analysis conducted by or on behalf of the Company (or by a third
party of which the Company has knowledge) in relation to the business of the
Company or any property or facility currently or, to the knowledge of the
Company, previously owned or leased by the Company.
3.20. Employee Matters. (a) Schedule 3.20(a) sets forth the name, annual
salary and other compensation of all directors, officers, and other employees of
the Company. All of the Company's employees are "at will" employees and the
Company is not party to any employment agreement (written or oral) with any
employee.
(b) Schedule 3.20(b) lists all employee benefit plans (as defined in
Section 3(3) of ERISA), and all other material plans or arrangements (other than
contracts with individual employees or directors), written or oral, with respect
to which the Company has any obligation or liability which are maintained,
contributed to or sponsored by the Company for purposes of providing benefits
with respect to the benefit of any current or former employee, officer or
director of the Company (collectively, the "Plans"). The Company has made
available to Buyers a true and complete copy of each Plan (including without
limitation all amendments thereto) and a true and complete copy of each material
document (including without limitation all amendments thereto) prepared in
connection with each such Plans including without limitation (i) a copy of each
trust or other funding arrangement, (ii) each summary plan description and
summary of material modifications, and (iii) the most recently filed Internal
Revenue Service ("IRS") Form 5500 for each Plan, if any. Except as set forth on
Schedule 3.20(b), the Company has no express or implied commitment, whether
legally enforceable or not, to create, incur liability with respect to or cause
to exist any employee benefit plan or to modify any Plan, other than as required
by law.
(c) Absence of Certain Types of Plans. Except as set forth on Schedule
3.20(b), none of the Plans is a plan that is or has ever been subject to Title
IV of ERISA, Section 302 of ERISA or Section 412 of the Code (a "Defined Benefit
Plan"). None of the Plans is (i) a "multiemployer plan" as defined in Section
3(37) of ERISA, (ii) a plan or arrangement described under Section 4(b) (5) or
401(a) (l) of ERISA, or (iii) a plan maintained in connection with a trust
described in Section 501(c)(g) of the Code. Except as set forth on Schedule
3.20(c), (i) none of the Plans provides for the payment of separation,
severance, termination or similar-type benefits to any Person and (ii) none of
the Plans provides for or promises retiree medical or life insurance benefits to
any current or former employee, officer or director of the Company.
(d) Compliance with Applicable Law. Except as set forth on Schedule
3.20(d), each Plan is in compliance in all material respects with, and has
always been operated in all material respects in accordance with, its terms and
the requirements of all applicable law. No legal action, suit or claim is
pending or, to the knowledge of the Company, threatened with respect to any Plan
(other than claims for benefits in the ordinary course) and, to the knowledge of
the Company, no fact or event exists that could give rise to any such action,
suit or claim.
(e) Qualification of Certain Plans. Each Plan or trust which is intended to
be qualified or exempt from taxation under Section 401(a), 401(k) or 501(a) of
the Code has received a favorable determination letter from the IRS that it is
so qualified or exempt, and, to the knowledge of the Company, no fact or event
has occurred since the date of such determination letter to adversely affect the
qualified or exempt status of any Plan or trust in such a manner as to give rise
to a material liability incurred by the Company.
(f) Absence of Certain Liabilities and Events. There has been no non-exempt
prohibited transaction (within the meaning of Section 406 of ERISA or Section
4975 of the Code) with respect to any Plan which could give rise to a material
liability incurred by the Company. The Company has not incurred any material
liability for any excise tax arising under Section 4971, 4972, 4975, 4980 or
4980B of the Code and no fact or event exists which could give rise to such
material liability. The Company has not incurred any liability relating to Title
IV of ERISA (other than for the payment of premiums to the Pension Benefit
Guaranty Corporation), and no fact or event exists which could give rise to such
liability.
(g) Plan Contributions and Funding. Contributions, premiums or payments
required to be made with respect to any Plan have been made on or before their
due dates. All such contributions have been fully deducted for income tax
purposes and no such deduction has been challenged or disallowed by any
government entity, and to the knowledge of the Company, no fact or event exists
which could give rise to any such challenge or disallowance.
(h) Plan Modifications. Except as set forth on Schedule 3.20(h) or as
required by applicable law, as of the date hereof, there has been no amendment
to, written interpretation of or announcement (whether or not written) by the
Company relating to, or change in employee participation or coverage under, any
Plan that would increase materially the expense of maintaining such Plan above
the level of the expense incurred in respect thereto for the most recent fiscal
year ended prior to the date hereof.
(i) Entitlements. Except as set forth on Schedule 3.20(i), no employee or
former employee of the Company or any Affiliate of the Company will become
entitled to any bonus, retirement, severance, job security or similar benefit or
enhanced benefit (including acceleration of vesting or exercise of an incentive
award) solely as a result of the transactions contemplated hereby.
3.21. Offering of Shares. The issuance, sale and delivery of the Units to
Buyers as contemplated herein and in the Warrant Agreement may be accomplished
without registration of the Units under the Securities Act or any state
securities law. Neither the Company nor any person authorized or employed by the
Company as agent, broker, dealer or otherwise in connection with the offering or
sale of the Units or any similar security of the Company has offered the Units
or any such security for sale to, or solicited any offers to buy the Units or
any similar security of the Company from, or otherwise approached or negotiated
with respect thereto, any Persons other than accredited investors. Neither the
Company nor any person acting on its behalf has taken or will take any action
which might subject the offering, issuance or sale of the Units to the
registration provisions of the Securities Act or any state securities law.
3.22. Finders' Fees. Except as set forth on Schedule 3.22, there is no
investment banker, broker, finder or other intermediary which has been retained
by or is authorized to act on behalf of the Company who might be entitled to any
fee or commission in connection with the transactions contemplated by this
Agreement.
3.23. Full Disclosure. The representations and warranties of the Company
contained in this Agreement do not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements contained herein, in the light of the circumstances in which they are
being made, not misleading.
3.24. SEC Filings. (a) The Company has delivered to the Buyers (i) its
annual report on Form 10-KSB for the fiscal year ended December 31, 1999 and
(ii) its quarterly reports on Form 10-Q for its fiscal quarters ended March 31,
June 30 and September 30, 1999 (collectively the "SEC Reports").
(b) As of its filing date, each SEC Report filed pursuant to the Exchange
Act (i) did not contain any untrue statement of material fact or omit to state
any material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading and (ii)
complied as to form in all material respects with the requirements of the
Exchange Act.
(c) The Company is eligible to use Securities Act Form S-3 for the filing
of a registration statement under the Securities Act.
IV. REPRESENTATIONS AND WARRANTIES OF BUYERS
Each Buyer, severally and not jointly, represents and warrants to the
Company that, as to itself only:
4.1. Authorization. Such Buyer has full power and authority to execute,
deliver and perform this Agreement and the Ancillary Agreements to which it is a
party and to acquire the Units to be acquired pursuant to this Agreement. This
Agreement and the Ancillary Agreements to which Buyer is a party have been duly
executed and delivered by such Buyer and constitute valid and legally binding
obligations of such Buyer, enforceable against such Buyer in accordance with
their respective terms, subject to applicable bankruptcy, insolvency,
reorganization and moratorium laws and other laws of general application
affecting enforcement of creditors' rights generally.
4.2. Non-Contravention. The execution, delivery and performance by Buyer of
this Agreement and each of the Ancillary Agreements to which it is a party do
not and will not (a) contravene or conflict with the constituent documents of
Buyer, (b) require any action by or in respect of, or filing with, any
governmental body, agency or official or (c) violate any applicable law, rule,
regulation, judgment, injunction, order or decree binding upon Buyer.
4.3. Purchase for Investment. (a) Buyer is purchasing the Units for
investment for its own account and not with a view to, or for sale in connection
with, any distribution of the Units except in compliance with applicable
securities laws.
(b) Buyer understands that the Units have not been registered under the
Securities Act, or any state securities or blue sky laws and are "restricted
securities" under the federal securities laws.
(c) Buyer has the requisite knowledge and experience in financial and
business matters to be capable of evaluating the merits and risks of its
purchase of the Units and of protecting Buyer's interests in connection
therewith. Buyer is able to bear the economic risk of the purchase of the Units
pursuant to the terms of this Agreement.
(d) Buyer is not a Person that would, nor has Buyer taken any action which
would, cause the issuance of the Units hereunder to be ineligible for the
exemption from the registration requirements of the Securities Act pursuant to
Section 4(2) thereof. Buyer is an "accredited investor" as defined in Rule
501(a) of Regulation D promulgated under the Securities Act.
(e) Buyer understands that the share certificates and warrant certificates
evidencing the Units may bear substantially the following legends:
(i) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE
144 OR RULE 144A OF SUCH ACT."
(ii) Any legend required by the Registration Rights Agreement or the laws
of any other applicable jurisdiction.
4.4. Finders' Fees. There is no investment banker, broker, finder or other
intermediary which has been retained by or is authorized to act on behalf of
Buyer who might be entitled to any fee or commission from the Company upon
consummation of the transactions contemplated by this Agreement or the
Stockholders' Agreement.
V. COVENANTS
5.1. Access. (a) Prior to the Closing, the Company will give Buyers and
their representatives, employees, counsel and accountants reasonable access to
the properties, books, records and contracts of the Company and will furnish to
Buyers and their representatives, employees, counsel and accountants such
additional information with respect to the Company as Buyers reasonably request.
The Company will cause its managerial and supervisory employees, independent
accountants and other representatives, agents and advisors to be available upon
reasonable notice to answer questions of Buyers and their representatives
concerning the business and affairs of the Company; provided, however, that the
foregoing shall not be construed to constitute, and the Company expressly
disclaims making any, representations with respect to the financial projections
previously furnished to Buyers.
5.2. Third Party Consents; Governmental Approvals. With respect to any
consent (a "Consent") which is required to be obtained by the Company from a
third party and identified on any Schedule, the Company will use commercially
reasonable efforts, and Buyers will cooperate with the Company, to obtain such
Consent and to resolve any impediments to the purchase and sale of the Units.
5.3. Notices of Actions and Proceedings. (a) The Company will promptly
notify Buyers of any claims, actions, proceedings, or investigations commenced
or, to its knowledge, threatened, involving or affecting the Company, which
could have a Material Adverse Effect or which could adversely affect the
consummation of the transactions contemplated by this Agreement.
(b) The Company will promptly give notice to Buyers of: (i) any notice or
other communication from any third party alleging that the consent of such third
party is or may be required in connection with the transactions contemplated by
this Agreement; (ii) any notice or other communication from any governmental
authority in connection with the transactions contemplated by this Agreement;
(iii) the occurrence or nonoccurrence of any event which would cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate; (iv) any failure of the Company to comply with or satisfy in any
material respect when required any covenant, condition or agreement to be
complied with or satisfied by it hereunder; or (v) the discovery of any
information indicating that a representation or warranty contained in this
agreement is untrue or incorrect in a material respect; provided, however, that
the delivery of any notice pursuant to this Section 5.3 will not prejudice
Buyers' right to any remedies to which they may be entitled hereunder.
5.4. Best Efforts. Each of the parties will use their respective best
efforts to take all actions necessary to render accurate as of the Closing their
respective representations and warranties contained herein, to refrain from
taking any action which would render any such representation or warranty
inaccurate, and to perform or cause to be performed each covenant or condition
to be performed or satisfied by them.
5.5. Further Assurances. From time to time, as and when requested by any
party hereto, the other parties will execute and deliver, or cause to be
executed and delivered, all such documents and instruments and will take, or
cause to be taken, all such further or other actions, as the requesting party
may reasonably deem necessary or desirable to consummate the transactions
contemplated by this Agreement.
5.6. Certain Tax Matters. All transfer, documentary, sales, use, stamp,
registration, value added and other U.S. taxes and fees (including any penalties
and interest) imposed on the Company in connection with the sale of the Units to
Buyers under this Agreement and the Warrant Agreement will be borne and paid by
the Company when due, and the Company will, at its own expense, file all
necessary Tax returns and other documentation with respect to all such Taxes and
fees.
5.7. Use of Proceeds. The Company shall apply the aggregate Purchase Price
to reduce, satisfy and discharge those obligations of the Company listed on
Schedule 5.7 and to fund those working capital needs of the Company more
particularly described on Schedule 5.7.
5.8. Registration of Units. The Company shall register all Units held by
MUSI whether previously held or acquired pursuant to the Purchase Agreement
under the Securities Act in accordance with the terms and conditions set forth
in the Registration Rights Agreement.
5.9. Additional Investors. The Company may issue and sell to such other
persons as the Company's Board of Directors authorizes ("Additional Investors"),
at one or more closings (each, a "Subsequent Closing") on a date determined by
the Company up to 700,000 Units for an aggregate purchase price of $3,500,000 in
accordance with the subscription documents in the form attached hereto as
Exhibit D; provided, however, that no such Subsequent Closing shall take place
later than June 30, 2000 without the written consent of MUSI. At each such
Subsequent Closing, each Additional Investor shall become a party to the
Registration Rights Agreement by executing a joinder agreement thereto, and
shall enter into a Warrant Agreement with the Company.
VI. CONDITIONS TO CLOSING
6.1. Conditions to Obligations of Buyers at Closing. The obligation of
Buyers to consummate the Closing are subject to the satisfaction on or before
the Closing of each of the following conditions:
6.1.1. Representations, Warranties and Covenants of the Company. (a) The
representations and warranties of the Company made in this Agreement shall be
true and correct as of the date hereof and as of the Closing, as though made as
of the Closing; (b) the Company shall have performed and complied in all
material respects with all terms, agreements and covenants contained in this
Agreement required to be performed or complied with by it on or before the
Closing Date; and (c) the Company shall have delivered to Buyers a certificate
dated the Closing Date confirming the foregoing.
6.1.2. Secretary's Certificate. The Company shall have delivered to Buyers
a certificate from its Secretary certifying (a) as to the due adoption of
resolutions adopted by its Board of Directors authorizing the execution of this
Agreement and the taking of any and all actions deemed necessary or advisable to
consummate the transactions contemplated herein and (b) that the resolutions of
the Company's Board of Directors adopted at a special meeting of the Board of
Directors on May 10, 2000 and attached hereto as Exhibit E are true and correct
and in full force and effect on the Closing Date and have not been amended,
modified or rescinded.
6.1.3. No Injunction, Etc. No provision of any applicable law or regulation
and no judgment, injunction, order or decree shall be in effect which prohibits
the consummation of the Closing.
6.1.4. Required Filings; Consents. All actions by the Company in the United
States by or in respect of or filings with any United States governmental body,
agency, official or authority required to permit the consummation of the Closing
shall have been taken, made or obtained. The Company shall have obtained all
Consents referred to in Section 5.2 and made them available for review by
Buyers.
6.1.5. Opinion of Counsel. Buyers shall have received an opinion of Ruskin,
Moscou, Evans & Faltischek, P.C., counsel to the Company, dated the Closing
Date, substantially in the form of Schedule 6.1.5.
6.1.6. Ancillary Agreements. Each of the Ancillary Agreements, all in form
and substance reasonably satisfactory to MUSI, shall have been executed and
delivered by the Company and the other persons party thereto (other than MUSI).
6.1.7. Agency Agreement. The letter agreement dated May 1, 2000 amending
the Agency Agreement dated December 15, 1999 between Janney Montgomery Scott and
the Company will not have been terminated, amended or modified without MUSI's
prior written consent.
6.1.8. Common Stock and Warrants. Each Buyer shall have received (i) a
certificate evidencing the Common Stock being purchased at the Closing, duly
completed and executed and (ii) a certificate evidencing the Warrants being
issued pursuant to the Warrant Agreement, duly completed and executed.
6.1.9. Letter Amendment to Employment Agreement. The Company and Gregory
Frisby shall have entered into a letter agreement amending the Employment
Agreement which shall be satisfactory to MUSI, which letter agreement shall not
have been amended, modified or terminated.
6.1.10. NASDAQ Consent. The Company shall have made any filings with or
obtained any consents necessary under the NASDAQ SmallCap Market listing
requirements in connection with the purchase and sale of the Units.
6.2. Conditions to Obligations of the Company. The obligations of the
Company to consummate the Closing are subject to the satisfaction on or before
the Closing of each of the following conditions:
6.2.1. Representations, Warranties and Covenants of Buyers. (a) The
representations and warranties of Buyers made in this Agreement shall be true
and correct as of the date hereof and as of the Closing, as though made as of
the Closing and (b) Buyers shall have performed and complied in all material
respects with all terms, agreements and covenants contained in this Agreement
required to be performed or complied with by Buyers on or before the Closing
Date.
6.2.2. No Injunction, etc. No provision of any applicable law or regulation
and no judgment, injunction, order or decree shall be in effect which will
prohibit the consummation of the Closing.
6.2.3. Required Filings. All actions by Buyers by or in respect of or
filings with any governmental body, agency, official or authority required to
permit the consummation of the Closing shall have been taken, made or obtained.
6.2.4. Ancillary Agreement. Each of the Ancillary Agreements to which a
Buyer is a party, in form and substance reasonably satisfactory to the Company,
shall have been executed and delivered by such Buyer.
VII. MISCELLANEOUS
7.1. Survival. The representations and warranties of the parties contained
in this Agreement or in any certificate or other writing delivered pursuant
hereto or in connection herewith will survive the Closing until expiration of
the statute of limitations applicable to the matters covered thereby (giving
effect to any waiver, mitigation or extension thereof). All covenants and
agreements of the parties contained in this Agreement will survive the Closing
indefinitely.
7.2. Notices. All notices and other communications required or permitted
hereunder will be in writing and, unless otherwise provided in this Agreement,
will be deemed to have been duly given when delivered in person or by a
nationally recognized overnight courier service or when dispatched during
sender's normal business hours by electronic facsimile transfer (confirmed in
writing by mail simultaneously dispatched) to the appropriate party at the
address specified on Schedule 1 hereto or to any changed address of which the
parties are notified in accordance with this Section. All such notices, requests
and other communications will be deemed received on the date of receipt by the
recipient thereof if received prior to 5 p.m. in the place of receipt and such
day is a business day in the place of receipt. Otherwise, any such notice,
request or communication will be deemed not to have been received until the next
succeeding business day in the place of receipt.
7.3. Amendments and Waivers. (a) Any provision of this Agreement may be
amended or waived if, but only if, such amendment or waiver is in writing and is
signed, in the case of an amendment, by each party to this Agreement, or in the
case of a waiver, by the party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder will operate as a waiver thereof nor will any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided will be cumulative and not exclusive of any rights or remedies provided
by law.
7.4. Expenses. (a) Except as provided in this Section 7.4, the parties will
pay all of their own expenses incurred in connection with the transactions
contemplated by this Agreement.
(b) The Company will reimburse to MUSI, in respect of the fees and expenses
(included, but not limited to, attorney fees and expenses incurred by MUSI in
connection with this Agreement and the Ancillary Agreements) up to an amount not
to exceed $60,000.
7.5. Successors and Assigns. The provisions of this Agreement will be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that no party may assign, delegate or
otherwise transfer any of its rights or obligations under this Agreement without
the consent of the other parties hereto.
7.6. No Third Party Beneficiaries. This Agreement is for the sole benefit
of the parties hereto and their permitted assigns and nothing herein expressed
or implied will give or be construed to give to any person or entity, other than
the parties hereto and such permitted assigns, any legal or equitable rights
hereunder.
7.7. Governing Law. This Agreement will be governed by, and construed in
accordance with, the law of the State of New York, without regard to the
conflict of laws rules of such State.
7.8. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
7.9. Counterparts. This Agreement may be signed in any number of
counterparts, each of which will be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
7.10. Headings. The headings in this Agreement are for convenience of
reference only and will not control or affect the meaning or construction of any
provisions hereof.
7.11. Entire Agreement. This Agreement and the Ancillary Agreements
constitute the entire agreement between the parties with respect to the subject
matter of this Agreement. This Agreement and the Ancillary Agreements supersede
all prior agreements and understandings, both oral and written, among the
parties with respect to the subject matter of this Agreement and the Ancillary
Agreements.
7.12. Severability. If any provision of this Agreement or the application
of any such provision to any person or circumstance is held invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
hereof.
7.13. Certain Interpretive Matters. (a) Unless the context otherwise
requires, (i) all references to Sections, Articles or Schedules are to be
Sections, Articles or Schedules of or to this Agreement, (ii) each of the
Schedules will apply only to the corresponding Section or subsection of this
Agreement, (iii) each term defined in this Agreement has the meaning assigned to
it, (iv) each accounting term not otherwise defined in this Agreement has the
meaning assigned to it in accordance with GAAP, and (v) words in the singular
include the plural and vice versa. All references to $ or dollar amounts will be
to lawful currency of the United States.
(b) No provision of this Agreement will be interpreted in favor of, or
against, any of the parties hereto by reason of the extent to which any such
party or its counsel participated in the drafting thereof or by reason of the
extent to which any such provision is inconsistent with any prior draft hereof
or thereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
FRISBY TECHNOLOGIES, INC.
By:/s/ Gregory S. Frisby
-------------------------
Name: Gregory S. Frisby
Title: Chairman and CEO
MUSI INVESTMENTS S.A.
By:/s/ Luca Bassani Antivari
-------------------------
Name: Dott. Luca Bassani Antivari
Title: President
/s/ Jean S. Moore
-----------------
Jean S. Moore
ALLFIRST COMPANY
CUSTODIAN FOR HOGAN & HARTSON
PARTNERS RETIREMENT PLAN FOR THE
BENEFIT OF JEAN S. MOORE
By:/s/ Leslie S. Christensen
-------------------------
Name: Leslie S. Christensen
Title: Senior Vice President
SCHOELLER TEXTIL AG
By:/s/ F. Albers
------------------------
Name: F. Albers
Title: Chairman of the Board
By:/s/ H.J. Hubner
------------------------
Name: H.J. Hubner
Title: Chief Executive Officer
[Signature Page to Purchase Agreement]
<PAGE>
Schedule A
----------
Aggregate
Buyer Number of Units Purchase Price
----- --------------- --------------
MUSI 550,000 $2,750,000
Ms. Jean S. Moore 20,000 $ 100,000
Allfirst Company Custodian for Hogan &
Hartson Partners Retirement Plan for
the Benefit of Jean S. Moore 180,000 $ 900,000
Schoeller Textil AG 50,000 $ 250,000
<PAGE>
Exhibit A
Second Amended and Restated Stockholders' Agreement
<PAGE>
Exhibit B
Warrant Agreement
<PAGE>
Exhibit C
Registration Rights Agreement
<PAGE>
Schedule 1
----------
Notices
-------
Buyers:
MUSI INVESTMENTS S.A.
231 Val des Bons Malades
L-2121 Luxembourg-Kirchberg
Attention: Dott. Luca Bassani Antivari
Fax: 377-93-10-0850
with a copy to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Attention: Robert K. Smits, Esq.
Fax: (212) 755-7306
Ms. Jean S. Moore
Hogan & Hartson LLP
Columbia Square
555 Thirteenth Street, NW
Washington, DC 20004-1109
Fax: (202) 637-5910
Allfirst Company Custodian for
Hogan & Hartson Partners Retirement Plan
for the Benefit of Jean S. Moore
Suite 1000 North
601 Thirteenth St., NW
Washington, DC 20005
Attention: Leslie Christiansen
Fax: 202-434-7049
Schoeller Textile AG
Bahnhofstrasse 17
9475 Sevelen, Switzerland
Attention: Chief Executive Officer
Fax: 081-785-20-10
Company:
Frisby Technologies, Inc.
3195 Centre Park Boulevard
Winston-Salem, North Carolina 27107
Attention: Gregory S. Frisby
Fax: (336) 784-4664
with a copy to:
Ruskin, Moscou, Evans & Faltischek, P.C.
170 Old Country Road
Mineola, New York 111501-4366
Attention: Norman M. Friedland
Fax: (516) 663-6601
