FORM OF
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated
as of June 8, 2000, by and among Majestic Companies, Limited, a
Nevada corporation, with headquarters located at 8880 Rio San
Diego Drive, San Diego California (the "Company"), and the
investors listed on Schedule I attached hereto (individually, a
"Buyer" or collectively "Buyers").
WITNESSETH:
WHEREAS, the Company and the Buyers are executing and
delivering this Agreement in reliance upon an exemption from
securities registration pursuant to Section 4(2) and/or
Regulation D ("Regulation D") as promulgated by the U.S.
Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "1933 Act");
WHEREAS, the parties desire that, upon the terms and subject
to the conditions contained herein, the Company shall issue and
sell to the Investor, as provided herein, and the Investor shall
purchase Five Hundred Twenty Thousand ($520,000) Dollars of
convertible debentures (the "Convertible Debentures"), which
shall be convertible into shares of the Company's Common Stock,
(the "Common Stock") (as converted, the "Conversion Shares"), for
a total purchase price of Five Hundred Twenty Thousand ($520,000)
Dollars (the "Purchase Price") in the respective amounts set
forth opposite each Investors name on Schedule I ( the
"Subscription Amount"); and
WHEREAS, contemporaneously with the execution and delivery
of this Agreement, the parties hereto are executing and
delivering a Registration Rights Agreement substantially in the
form attached hereto as Exhibit A (the "Registration Rights
Agreement") pursuant to which the Company has agreed to provide
certain registration rights under the 1933 Act and the rules and
regulations promulgated there under, and applicable state
securities laws; and
WHEREAS, the Convertible Debentures are being offered
through May Davis Group, Inc. (the "Placement Agent"), as the
Company's exclusive placement agent for the offering; and
WHEREAS, the aggregate proceeds of the sale of the
Convertible Debentures contemplated hereby shall be held in
escrow pursuant to the terms of an escrow agreement substantially
in the form of the Escrow Agreement attached hereto as Exhibit B.
NOW, THEREFORE, in consideration of the mutual covenants and
other agreements contained in this Agreement the Company and the
Buyers hereby agree as follows:
1. PURCHASE AND SALE OF CONVERTIBLE DEBENTURES.
(a) Purchase of Convertible Debentures. Subject to the
satisfaction (or waiver) of the terms and conditions of this
Agreement, each Investor agrees, severally and not jointly, to
purchase at Closing (as defined herein below) and the Company
agrees to sell and issue to each Investor, severally and not
jointly, at Closing, Convertible Debentures in amounts
corresponding with the Subscription Amount set forth opposite
each Investor's name on Schedule I hereto. Upon execution hereof
by an Investor, the Investor shall wire transfer the Subscription
Amount set forth opposite his name on Schedule I in same-day
funds or a check payable to "First Union National Bank, as Escrow
Agent for Majestic Companies, Ltd. / The May Davis Group, Inc.",
which Subscription Amount shall be held in escrow pursuant to the
terms of the Escrow Agreement (as hereinafter defined) and
disbursed in accordance therewith. Notwithstanding the
foregoing, an Investor may withdraw his Subscription Amount and
terminate this Agreement as to such Investor at any time after
the execution hereof and prior to Closing (as hereinafter
defined).
(b) Closing Date. The closing of the purchase and sale of
the Convertible Debentures (the "Closing") shall take place at
10:00 a.m. Eastern Standard Time on the fifth business day
("Closing Date") following the date hereof, subject to
notification of satisfaction (or waiver) of the conditions to the
Closing set forth in Sections 6 and 7 below (or such later date
as is mutually agreed to by the Company and the Buyers). The
Closing shall occur on the Closing Date at the offices of Butler
Gonzalez, LLP, 1000 Stuyvesant Avenue, Suite 6, Union, NJ 07083.
(c) Escrow Arrangements; Form of Payment. Upon execution
hereof by Buyer and pending Closing, the aggregate proceeds of
the sale of the Convertible Debentures to Investors pursuant
hereto shall be deposited in a non-interest bearing escrow
account with First Union National Bank, as escrow agent ("Escrow
Agent"), pursuant to the terms of an escrow agreement between the
Company, the Placement Agent and the Escrow Agent in the form
attached hereto as Exhibit B. Subject to the satisfaction of the
terms and conditions of this Agreement, on the Closing Date, (i)
the Escrow Agent shall deliver to the Company in accordance with
the terms of the Escrow Agreement such aggregate gross proceeds
for the Convertible Debentures to be issued and sold to such
Investor at the Closing, by wire transfer of immediately
available funds in accordance with the Company's written wire
instructions, and (ii) the Company shall deliver to each
Investor, Convertible Debentures which such Buyer is purchasing
in amounts indicated opposite such Buyer's name on Schedule I,
duly executed on behalf of the Company.
2. BUYER'S REPRESENTATIONS AND WARRANTEES.
Each Buyer represents and warrants, severally and not
jointly, that:
(a) Investment Purpose. Each Investor is acquiring the
Convertible Debentures and, upon conversion of Convertible
Debentures, the Investor will acquire the Conversion Shares then
issuable, for its own account for investment only and not with a
view towards, or for resale in connection with, the public sale
or distribution thereof, except pursuant to sales registered or
exempted under the 1933 Act; provided, however, that by making
the representations herein, such Investor reserves the right to
dispose of Conversion Shares at any time in accordance with or
pursuant to a registration statement or an available exemption
under the 1933 Act.
(b) Accredited Investor Status. Each Investor is an
"accredited investor" as that term is defined in Rule 501(a)(3)
of Regulation D.
(c) Reliance on Exemptions. Each Investor understands that
the Convertible Debentures and the Conversion Shares are being
offered and sold to it in reliance on specific exemptions from
the registration requirements of United States Federal and state
securities laws and that the Company is relying in part upon the
truth and accuracy of, and such Investor's compliance with, the
representations, warranties, agreements, acknowledgments and
understandings of such Investor set forth herein in order to
determine the availability of such exemptions and the eligibility
of such Investor to acquire such securities.
(d) Information. Such Investor and its advisors (and his
or, its counsel), if any, have been furnished with all materials
relating to the business, finances and operations of the Company
and information he deemed material to making an informed
investment decision regarding his purchase of the Convertible
Debentures and the Conversion Shares, which have been requested
by such Investor. Such Investor and its advisors, if any, have
been afforded the opportunity to ask questions of the Company and
its management. Neither such inquiries nor any other due
diligence investigations conducted by such Investor or its
advisors, if any, or its representatives shall modify, amend or
affect such Investor's right to rely on the Company's
representations and warranties contained in Section 3 below.
Such Investor understands that its investment in the Convertible
Debentures and the Conversion Shares involves a high degree of
risk. Investors is in a position regarding the Company, which,
based upon employment, family relationship or economic bargaining
power, enabled and enables Investor to obtain information from
the Company in order to evaluate the merits and risks of this
investment. Such Investor has sought such accounting, legal and
tax advice, as it has considered necessary to make an informed
investment decision with respect to its acquisition of the
Convertible Debentures and the Conversion Shares.
(e) No Governmental Review. Such Investor understands that
no United States Federal or state agency or any other government
or governmental agency has passed on or made any recommendation
or endorsement of the Convertible Debentures or the Conversion
Shares, or the fairness or suitability of the investment in the
Convertible Debentures or the Conversion Shares, nor have such
authorities passed upon or endorsed the merits of the offering of
the Convertible Debentures or the Conversion Shares.
(f) Transfer or Resale. Such Investor understands that
except as provided in the Registration Rights Agreement: (i) the
Convertible Debentures and the Conversion Shares have not been
and are not being registered under the 1933 Act or any state
securities laws, and may not be offered for sale, sold, assigned
or transferred unless (A) subsequently registered there under, or
(B) such Investor shall have delivered to the Company an opinion
of counsel, in a generally acceptable form, to the effect that
such securities to be sold, assigned or transferred may be sold,
assigned or transferred pursuant to an exemption from such
registration requirements; (ii) any sale of such securities made
in reliance on Rule 144 under the 1933 Act (or a successor rule
thereto) ("Rule 144") may be made only in accordance with the
terms of Rule 144 and further, if Rule 144 is not applicable, any
resale of such securities under circumstances in which the seller
(or the person through whom the sale is made) may be deemed to be
an underwriter (as that term is defined in the 1933 Act) may
require compliance with some other exemption under the 1933 Act
or the rules and regulations of the SEC there under; and (iii)
neither the Company nor any other person is under any obligation
to register such securities under the 1933 Act or any state
securities laws or to comply with the terms and conditions of any
exemption there under. The Company reserves the right to place
stop transfer instructions against the shares and certificates
for the Conversion Shares and Warrant Shares.
(g) Legends. Such Investor understands that the
certificates or other instruments representing the stock
certificates representing the Conversion Shares shall bear a
restrictive legend in substantially the following form (and a
stop transfer order may be placed against transfer of such stock
certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN
ACQUIRED SOLELY FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TOWARD RESALE AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN
A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.
The legend set forth above shall be removed and the Company shall
issue a certificate without such legend to the holder of the
Conversion Shares upon which it is stamped, if, unless otherwise
required by state securities laws, (i) in connection with a sale
transaction, provided the Conversion Shares are registered under
the 1933 Act or (ii) in connection with a sale transaction, such
holder provides the Company with an opinion of counsel, in form
acceptable to the Company and its counsel, to the effect that a
public sale, assignment or transfer of the Conversion Shares may
be made without registration under the 1933 Act.
(h) Authorization, Enforcement. This Agreement has been
duly and validly authorized, executed and delivered on behalf of
such Investor and is a valid and binding agreement of such
Investor enforceable in accordance with its terms, except as such
enforceability may be limited by general principles of equity and
to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting
generally, the enforcement of applicable creditors' rights and
remedies.
(i) Receipt of Documents. Such Investor and his or its
counsel has received and read in their entirety: (i) this
Agreement and each representation, warranty and covenant set
forth herein, the Registration Rights Agreement, and the Escrow
Agreement; (ii) all due diligence and other information necessary
to verify the accuracy and completeness of such representations,
warranties and covenants; (iii) the Company's Form 10-KSB for the
year ended 1999 ; (iv) the Company's Forms 10-QSB for the periods
ended March 31, 2000; and (v) answers to all questions the
Investor submitted to the Company regarding an investment in the
Company; and the Investor has relied on the information contained
therein and has not been furnished any other documents,
literature, memorandum or prospectus.
(j) Due Formation of Corporate and Other Investors. If the
Investor is a corporation, trust, partnership or other entity
that is not an individual person, it has been formed and validly
exists and has not been organized for the specific purpose of
purchasing the Convertible Debentures and is not prohibited from
doing so.
(k) Due Authorization of Fiduciary Investors. If the
Investor is purchasing the in a fiduciary capacity for another
person or entity, including without limitation a corporation,
partnership, trust or any other entity, the Investor has been
duly authorized and empowered to execute this Agreement and such
other person fulfills all the requirements for purchase of the
Convertible Debentures and agrees to be bound by the obligations,
representations, warranties, and covenants contained herein.
Upon request of the Company, the Investor will provide true,
complete and current copies of all relevant documents creating
the Investor, authorizing its investment in the Company and/or
evidencing the satisfaction of the foregoing.
(l) Further Representations by Foreign Investors. If
Investor is not a U.S. Person (as defined), such Investor hereby
represents that such Investor is satisfied as to full observance
of the laws of such Investor's jurisdiction in connection with
any invitation to subscribe for the securities or any use of this
Agreement, including: (i) the legal requirements of such
Investor's jurisdiction for the purchase of the securities, (ii)
any foreign exchange restrictions applicable to such purchase,
(iii) any governmental or other consents that may need to be
obtained, and (iv) the income tax and other tax consequences, if
any, which may be relevant to the purchase, holding, redemption,
sale, or transfer of the securities. Such Buyer's subscription
and payment for, and such Investor's continued beneficial
ownership of, the securities will not violate any applicable
securities or other laws of such Buyer's jurisdiction. The term
"U.S. Person" as used herein shall mean any person who is a
citizen or resident of the United States or Canada, or any state,
territory or possession thereof, including but not limited to any
estate of any such person, or any corporation, partnership, trust
or other entity created or existing under the laws thereof, or
any entity controlled or owned by any of the foregoing.
(m) Soft Floor. If the Closing Bid Price of the Company's
Common Stock is eleven ($0.11) or lower the Company may request
that the Investor refrain, one time, from any additional
conversions for a period of five (5) business days.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Investor
that:
(a) Organization and Qualification. The Company and its
subsidiaries are corporations duly organized and validly existing
in good standing under the laws of the jurisdiction in which they
are incorporated, and have the requisite corporate power to own
their properties and to carry on their business as now being
conducted. Each of the Company and its subsidiaries is duly
qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which the nature of the
business conducted by it makes such qualification necessary,
except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the
Company and its subsidiaries taken as a whole.
(b) Authorization, Enforcement, Compliance with Other
Instruments. (i) The Company has the requisite corporate power
and authority to enter into and perform this Agreement, the
Registration Rights Agreement and any related agreements, and to
issue the Convertible Debentures and the Conversion Shares, the
Warrants (as defined herein below), or shares of Common Stock
issuable upon exercise of the Warrants (the "Warrant Shares") in
accordance with the terms hereof and thereof, (ii) the execution
and delivery of this Agreement, the Registration Rights Agreement
and any related agreements by the Company and the consummation by
it of the transactions contemplated hereby and thereby, including
without limitation the issuance of the Convertible Debentures,
the Conversion Shares and the Warrants and the reservation for
issuance and the issuance of the Conversion Shares and the
Warrant Shares issuable upon conversion or exercise thereof, have
been duly authorized by the Company's Board of Directors and no
further consent or authorization is required by the Company, its
Board of Directors or its stockholders, (iii) this Agreement and
the Registration Rights Agreement and any related agreements have
been duly executed and delivered by the Company, (iv) this
Agreement, the Registration Rights Agreement and any related
agreements constitute the valid and binding obligations of the
Company enforceable against the Company in accordance with their
terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating
to, or affecting generally, the enforcement of creditors' rights
and remedies.
(c) Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of 50,000,000 shares of
Common Stock, of which as of June [ ], 2000, 35,989,070 shares
were issued and outstanding, and 0 shares of preferred stock, no
par value, of which as of June [ ], 2000, 0 shares were issued
and outstanding. All of such outstanding shares have been
validly issued and are fully paid and nonassessable. Except as
disclosed in Schedule 3(c), no shares of Common Stock are subject
to preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by the Company. Except as
disclosed in Schedule 3(c), as of the date of this Agreement, (i)
there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares
of capital stock of the Company or any of its subsidiaries, or
contracts, commitments, understandings or arrangements by which
the Company or any of its subsidiaries is or may become bound to
issue additional shares of capital stock of the Company or any of
its subsidiaries or options, warrants, scrip, rights to subscribe
to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into, any shares of capital
stock of the Company or any of its subsidiaries, (ii) there are
no outstanding debt securities and (iii) there are no agreements
or arrangements under which the Company or any of its
subsidiaries is obligated to register the sale of any of their
securities under the 1933 Act (except pursuant to the
Registration Rights Agreements). There are no securities or
instruments containing anti-dilution or similar provisions that
will be triggered by the issuance of the Convertible Debentures,
the Conversion Shares, the Warrants, or the Warrant Shares as
described in this Agreement. The Company has furnished to the
Investor true and correct copies of the Company's Certificate of
Incorporation, as amended and as in effect on the date hereof
(the "Certificate of Incorporation"), and the Company's By-laws,
as in effect on the date hereof (the "By-laws"), and the terms of
all securities convertible into or exercisable for Common Stock
and the material rights of the holders thereof in respect
thereto.
(d) Issuance of Securities. The Convertible Debentures are
duly authorized and, upon issuance in accordance with the terms
hereof, shall be duly issued, fully paid and nonassessable, are
free from all taxes, liens and charges with respect to the issue
thereof. The Conversion Shares issuable upon conversion of the
Convertible Debentures have been duly authorized and reserved for
issuance. Upon conversion or exercise in accordance with the
Convertible Debentures or the terms of the Warrants and receipt
of payment therefore (in the case of the Warrant Shares), the
Conversion Shares and the Warrant Shares will be duly issued,
fully paid and nonassessable.
(e) No Conflicts. Except as disclosed in Schedule 3(e),
the execution, delivery and performance of this Agreement by the
Company and the consummation by the Company of the transactions
contemplated hereby will not (i) result in a violation of the
Certificate of Incorporation, any certificate of designations of
any outstanding series of preferred stock of the Company or By-
laws or (ii) conflict with or constitute a default (or an event
which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its
subsidiaries is a party, or result in a violation of any law,
rule, regulation, order, judgment or decree (including federal
and state securities laws and regulations and the rules and
regulations of The Nasdaq Stock Market Inc.'s OTC Bulletin Board
on which the Common Stock is quoted) applicable to the Company or
any of its subsidiaries or by which any property or asset of the
Company or any of its subsidiaries is bound or affected. Except
as disclosed in Schedule 3(e), neither the Company nor its
subsidiaries is in violation of any term of or in default under
its Certificate of Incorporation or By-laws or their
organizational charter or by-laws, respectively, or any material
contract, agreement, mortgage, indebtedness, indenture,
instrument, judgment, decree or order or any statute, rule or
regulation applicable to the Company or its subsidiaries. The
business of the Company and its subsidiaries is not being
conducted, and shall not be conducted in violation of any
material law, ordinance, regulation of any governmental entity.
Except as specifically contemplated by this Agreement and as
required under the 1933 Act and any applicable state securities
laws, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration
with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under or
contemplated by this Agreement or the Registration Rights
Agreement in accordance with the terms hereof or thereof. Except
as disclosed in Schedule 3(e), all consents, authorizations,
orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained
or effected on or prior to the date hereof. The Company and its
subsidiaries are unaware of any facts or circumstance, which
might give rise to any of the foregoing.
(f) SEC Documents: Financial Statements. Since January 12,
2000, the Company has filed all reports, schedules, forms,
statements and other documents required to be filed by it with
the SEC under of the Securities Exchange Act of 1934, as amended
(the "1934 Act") (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements
and schedules thereto and documents incorporated by reference
therein, being hereinafter referred to as the "SEC Documents").
The Company has delivered to the Buyers or their representatives,
or made available through the SEC's website at
http://www.sec.gov., true and complete copies of the SEC
Documents. As of their respective dates, the financial
statements of the Company disclosed in the SEC Documents (the
"Financial Statements") complied as to form in all material
respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto.
Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto, or
(ii) in the case of un-audited interim statements, to the extent
they may exclude footnotes or may be condensed or summary
statements) and fairly present in all material respects the
financial position of the Company as of the dates thereof and the
results of its operations and cash flows for the periods then
ended (subject, in the case of un-audited statements, to normal
year-end audit adjustments). No other information provided by or
on behalf of the Company to the Investor which is not included in
the SEC Documents, including, without limitation, information
referred to in Section 2(d) and (i) of this Agreement, contains
any untrue statement of a material fact or omits to state any
material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading.
(g) Absence of Certain Changes. Except as disclosed in
Schedule 3(g), there has been no material adverse change and no
material adverse development in the business, properties,
operations, financial condition, results of operations or
prospects of the Company or its subsidiaries. The Company has
not taken any steps, and does not currently expect to take any
steps, to seek protection pursuant to any bankruptcy law nor does
the Company or its subsidiaries have any knowledge or reason to
believe that its creditors intend to initiate involuntary
bankruptcy proceedings.
(h) Absence of Litigation. Except as disclosed on Schedule
3(h), there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its subsidiaries, threatened
against or affecting the Company, the Common Stock or any of the
Company's subsidiaries, wherein an unfavorable decision, ruling
or finding would (i) have a material adverse effect on the
transactions contemplated hereby (ii) adversely affect the
validity or enforceability of, or the authority or ability of the
Company to perform its obligations under, this Agreement or any
of the documents contemplated herein, or (iii) except as
expressly disclosed in the SEC Documents, have a material adverse
effect on the business, operations, properties, financial
condition or results of operation of the Company and its
subsidiaries taken as a whole.
(i) Acknowledgment Regarding Investor's Purchase of the
Convertible Debentures. The Company acknowledges and agrees that
the Investor is acting solely in the capacity of an arm's length
purchaser with respect to this Agreement and the transactions
contemplated hereby. The Company further acknowledges that the
Investor is not acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to this
Agreement and the transactions contemplated hereby and any advice
given by the Investor or any of their respective representatives
or agents in connection with this Agreement and the transactions
contemplated hereby is merely incidental to such Investor's
purchase of the Convertible Debentures or the Conversion Shares.
The Company further represents to the Investor that the
Company's decision to enter into this Agreement has been based
solely on the independent evaluation by the Company and its
representatives.
(j) No Undisclosed Events, Liabilities, Developments or
Circumstances. No event, liability, development or circumstance
has occurred or exists, or is contemplated to occur, with respect
to the Company or its subsidiaries or their respective
businesses, properties, prospects, operations or financial
condition, which could be material but which has not been
publicly announced or disclosed in writing to the Investor.
(k) No General Solicitation. Neither the Company, nor any
of its affiliates, nor any person acting on its or their behalf,
has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D under the 1933
Act) in connection with the offer or sale of the Convertible
Debentures, the Conversion Shares, the Warrants, or the Warrant
Shares.
(1) No Integrated Offering. Neither the Company, nor any
of its affiliates, nor any person acting on its or their behalf
has, directly or indirectly, made any offers or sales of any
security or solicited any offers to buy any security, under
circumstances that would require registration of the Convertible
Debentures, the Conversion Shares, the Warrants, or the Warrant
Shares under the 1933 Act or cause this offering of the
Convertible Debentures, the Conversion Shares, the Warrants, or
the Warrant Shares to be integrated with prior offerings by the
Company for purposes of the 1933 Act.
(m) Employee Relations. Neither the Company nor any of its
subsidiaries is involved in any labor dispute nor, to the
knowledge of the Company or any of its subsidiaries, is any such
dispute threatened. None of the Company's or its subsidiaries'
employees is a member of a union and the Company and its
subsidiaries believe that their relations with their employees
are good.
(n) Intellectual Property Rights. The Company and its
subsidiaries own or possess adequate rights or licenses to use
all trademarks, trade names, service marks, service mark
registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations,
trade secrets and rights necessary to conduct their respective
businesses as now conducted. Except as set forth on Schedule
3(n), none of the Company's trademarks, trade names, service
marks, service mark registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, government
authorizations, trade secrets, or other intellectual property
rights have expired or terminated, or are expected to expire or
terminate in the near future. The Company and its subsidiaries
do not have any knowledge of any infringement by the Company or
its subsidiaries of trademark, trade name rights, patents, patent
rights, copyrights, inventions, licenses, service names, service
marks, service mark registrations, trade secret or other similar
rights of others, or of any such development of similar or
identical trade secrets or technical information by others and,
except as set forth on Schedule 3(n), to the knowledge of the
Company, there is no claim, action or proceeding being made or
brought against, or to the Company's knowledge, being threatened
against, the Company or its subsidiaries regarding trademark,
trade name, patents, patent rights, invention, copyright,
license, service names, service marks, service mark
registrations, trade secret or other infringement; and the
Company and its subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing. The
Company and its subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of all
of their intellectual properties.
(o) Environmental Laws. The Company and its subsidiaries
are (i) in compliance with any and all applicable foreign,
federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all
permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective
businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval.
(p) Title. The Company and its subsidiaries have good and
marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them which is
material to the business of the Company and its subsidiaries, in
each case free and clear of all liens, encumbrances and defects
except such as are described in Schedule 3(p), are disclosed in
the SEC Documents or such as do not materially affect the value
of such property and do not interfere with the use made and
proposed to be made of such property by the Company and its
subsidiaries. Any real property and facilities held under lease
by the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to
be made of such property and buildings by the Company and its
subsidiaries.
(q) Insurance. The Company and each of its subsidiaries
are insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as management
of the Company believes to be prudent and customary in the
businesses in which the Company and its subsidiaries are engaged.
Neither the Company nor any such subsidiary has been refused any
insurance coverage sought or applied for and neither the Company
nor any such subsidiary has any reason to believe that it will
not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost
that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations
of the Company and its subsidiaries, taken as a whole.
(r) Regulatory Permits. The Company and its subsidiaries
possess all certificates, authorizations and permits issued by
the appropriate federal, state or foreign regulatory authorities
necessary to conduct their respective businesses, and neither the
Company nor any such subsidiary has received any notice of
proceedings relating to the revocation or modification of any
such certificate, authorization or permit.
(s) Internal Accounting Controls. The Company and each of
its subsidiaries maintain a system of internal accounting
controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general
or specific authorizations, (ii) transactions are recorded as
necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain asset accountability, (iii) access to assets is
permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences.
(t) No Materially Adverse Contracts, etc. Except as set
forth in the SEC Documents, neither the Company nor any of its
subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation
which in the judgment of the Company's officers has or is
expected in the future to have a material adverse effect on the
business, properties, operations, financial condition, results of
operations or prospects of the Company or its subsidiaries.
Neither the Company nor any of its subsidiaries is a party to any
contract or agreement which in the judgment of the Company's
officers has or is expected to have a material adverse effect on
the business, properties, operations, financial condition,
results of operations or prospects of the Company or its
subsidiaries.
(u) Tax Status. The Company and each of its subsidiaries
has made or filed all federal and state income and all other tax
returns, reports and declarations required by any jurisdiction to
which it is subject (unless and only to the extent that the
Company and each of its subsidiaries has set aside on its books
provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental
assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations,
except those being contested in good faith and has set aside on
its books provision reasonably adequate for the payment of all
taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid
taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company
know of no basis for any such claim.
(v) Certain Transactions. Except as set forth on Schedule
3(v) and in the SEC Documents and except for arm's length
transactions pursuant to which the Company makes payments in the
ordinary course of business upon terms no less favorable than the
Company could obtain from third parties and other than the grant
of stock options disclosed on Schedule 3(c), none of the
officers, directors, or employees of the Company is presently a
party to any transaction with the Company (other than for
services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to
or from any officer, director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or
other entity in which any officer, director, or any such employee
has a substantial interest or is an officer, director, trustee or
partner.
(w) Dilutive Effect. The Company understands and
acknowledges that the number of Conversion Shares issuable upon
conversion of the Convertible Debentures will increase in certain
circumstances and that the number of Warrant Shares issuable upon
exercise of the Warrants will increase in certain circumstances.
The Company further acknowledges that its obligation to issue
Conversion Shares upon conversion of the Convertible Debentures
in accordance with this Agreement is absolute and unconditional
regardless of the dilutive effect that such issuance may have on
the ownership interests of other stockholders of the Company.
(x) Fees and Rights of First Refusal. The Company is not
obligated to offer the securities offered hereunder on a right of
first refusal basis or otherwise to any third parties including,
but not limited to, current or former shareholders of the
Company, underwriters, brokers, agents or other third parties.
(y) Right of Redemption. The Company shall have the
right of redemption with five (5) days advance notice to the
Investor, for any or all of the outstanding convertible. The
redemption price shall be 120 % of the face value plus accrued
interest.
4. COVENANTS.
(a) Best Efforts. Each party shall use its best efforts
timely to satisfy each of the conditions to be satisfied by it as
provided in Sections 6 and 7 of this Agreement.
(b) Form D. The Company agrees to file a Form D with
respect to the Conversion Shares as required under Regulation D
and to provide a copy thereof to each Investor promptly after
such filing. The Company shall, on or before the Closing Date,
take such action as the Company shall reasonably determine is
necessary to qualify the Conversion Shares for, or obtain
exemption the Conversion Shares for, sale to the Investors at the
Closing pursuant to this Agreement under applicable securities or
"Blue Sky" laws of the states of the United States, and shall
provide evidence of any such action so taken to the Investors on
or prior to the Closing Date.
(c) Reporting Status. Until the earlier of (i) the date as
of which the Investors (as that term is defined in the
Registration Rights Agreement) may sell all of the Conversion
Shares and the Warrant Shares without restriction pursuant to
Rule 144(k) promulgated under the 1933 Act (or successor
thereto), or (ii) the date on which (A) the Investors shall have
sold all the Conversion Shares and (B) none of the Convertible
Debentures or the Warrants are outstanding (the "Registration
Period"), the Company shall file all reports required to be filed
with the SEC pursuant to the 1934 Act, and the Company shall not
terminate its status as an issuer required to file reports under
the 1934 Act even if the 1934 Act or the rules and regulations
there under would otherwise permit such termination.
(d) Use of Proceeds. The Company will use the proceeds
from the sale of the Convertible Debentures for substantially the
same purposes and in substantially the same amounts as indicated
in Schedule 4(d).
(e) Financial Information. The Company agrees to send the
following to each Investor during the Registration Period: (i)
within five (5) days after the filing thereof with the SEC, a
copy of its Annual Reports on Form 10-KSB, its Quarterly Reports
on Form 10-QSB, any Current Reports on Form 8-K and any
registration statements or amendments filed pursuant to the 1933
Act; (ii) within one (1) day after release thereof, copies of all
press releases issued by the Company or any of its subsidiaries;
and (iii) copies of the same notices and other information given
to the stockholders of the Company generally, contemporaneously
with the giving thereof to the stockholders.
(f) Reservation of Shares. The Company shall take all
action reasonably necessary to at all times have authorized, and
reserved for the purpose of issuance, 6,000,000 shares of Common
Stock as shall be necessary to effect the issuance of the
Conversion Shares and the Warrant Shares. If at any time the
Company does not have available 6,000,000 shares of Common Stock
as shall from time to time be sufficient to effect the conversion
of all of the Conversion Shares and the exercise of the Warrant
Shares the Company shall call and hold a special meeting within
thirty (30) days of such occurrence, for the sole purpose of
increasing the number of shares authorized. The Company's
management shall recommend to the shareholders to vote in favor
of increasing the number of shares of common stock authorized.
Management shall also vote all of its shares in favor of
increasing the number of common shares authorized.
(g) Listings or Quotation. The Company shall promptly
secure the listing or quotation of the Conversion Shares upon
each national securities exchange, automated quotation system or
over-the-counter bulletin board or other market, if any, upon
which shares of Common Stock are then listed or quoted (subject
to official notice of issuance) and shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing
of all Conversion Shares from time to time issuable under the
terms of this Agreement. The Company shall maintain the Common
Stock's authorization for quotation in the over-the counter
market. The Company shall promptly provide to each Buyer copies
of any notices it receives regarding the continued eligibility of
the Common Stock for trading in the over-the-counter market.
(h) Expenses. Each of the Company and the Investors shall
pay all costs and expenses incurred by such party in connection
with the negotiation, investigation, preparation, execution and
delivery of this Agreement and the Registration Rights Agreement.
The costs and expenses of the Placement Agent and its counsel
shall be paid for by the Company at Closing in accordance with
the terms of the Placement Agency Agreement between the Company
and the Placement Agent, dated June [ ], 2000.
(i) Corporate Existence. So long as any of the Convertible
Debentures or Conversion Shares remain outstanding, the Company
shall not directly or indirectly consummate any merger,
reorganization, restructuring, consolidation, sale of all or
substantially all of the Company's assets or any similar
transaction or related transactions (each such transaction, a
"Sale of the Company") unless, prior to the consummation of a
Sale of the Company, the Company makes appropriate provision (in
form and substance reasonably satisfactory to the holders of a
majority of the Convertible Debentures then outstanding or
Conversion Shares then outstanding) to insure that, upon the
consummation of such Sale of the Company, each of the holders of
the Convertible Debentures and/or Conversion Shares will
thereafter have the right to acquire and receive such shares of
stock, securities or assets as may be issued or payable with
respect to or in exchange for the number of shares of Common
Stock immediately theretofore acquirable and receivable upon the
conversion of such holder's Convertible Debentures had such Sale
of the Company not taken place. In any such case, the Company
will make appropriate provision (in form and substance reasonably
satisfactory to the holders of a majority of the Convertible
Debentures or Conversion Shares then outstanding) with respect to
such holders' rights and interests to insure that the provisions
of this Section 4(i) will thereafter be applicable to the
Convertible Debentures.
(j) Transactions With Affiliates. So long as any
Convertible Debentures and/or Conversion Shares are outstanding,
the Company shall not, and shall cause each of its subsidiaries
not to, enter into, amend, modify or supplement, or permit any
subsidiary to enter into, amend, modify or supplement any
agreement, transaction, commitment, or arrangement with any of
its or any subsidiary's officers, directors, person who were
officers or directors at any time during the previous two years,
stockholders who beneficially own 5% or more of the Common Stock,
or affiliates or with any individual related by blood, marriage,
or adoption to any such individual or with any entity in which
any such entity or individual owns a 5% or more beneficial
interest (each a "Related Party"), except for (a) customary
employment arrangements and benefit programs on reasonable terms,
(b) any agreement, transaction, commitment, or arrangement on an
arms-length basis on terms no less favorable than terms which
would have been obtainable from a person other than such Related
Party, (c) any agreement transaction, commitment, or arrangement
which is approved by a majority of the disinterested directors of
the Company, for purposes hereof, any director who is also an
officer of the Company or any subsidiary of the Company shall not
be disinterested director with respect to any such agreement,
transaction, commitment, or arrangement. "Affiliate" for
purposes hereof means, with respect to any person or entity,
another person or entity that, directly or indirectly, (i) has a
5% or more equity interest in that person or entity, (ii) has 5%
or more common ownership with that person or entity, (iii)
controls that person or entity, or (iv) shares common control
with that person or entity. "Control" or "controls" for purposes
hereof means that a person or entity has the power, direct or
indirect, to conduct or govern the policies of another person or
entity.
(k) Warrant Issuances. Subject to the satisfaction of the
terms and condition of this Agreement, the Placement Agent will
receive on the Closing Date warrants ("Convertible Warrants") to
purchase 84,000 shares of Common Stock (the "Convertible Warrant
Shares") at an exercise price equal to 110% of the Closing Bid
Price (as reported by Bloomberg) on the day immediately preceding
the Closing Date. The Warrants shall be exercisable for a period
of five (5) years from the date of issuance and shall be
substantially in the form of the form of Warrant hereto as
Exhibit C.
(l) Transfer Agent. The Company covenants and agrees that,
in the event that the Company's agency relationship with the
transfer agent should be terminated for any reason prior to a
date which is two (2) years after the Closing Date, the Company
shall immediately appoint a new transfer agent and shall require
that the transfer agent execute and agree to be bound by the
terms of the Irrevocable Instructions to Transfer Agent.
(m) Limitations on Short Sales. The Buyer and its
Affiliates shall not engage in short sales of the Company's
Common Stock.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions in the form
attached hereto as Exhibit D to its transfer agent to issue
certificates, registered in the name of the Investor or its
respective nominee(s), for the Conversion Shares and the Warrant
Shares in such amounts as specified from time to time by the
Buyer to the Company upon conversion of the Convertible
Debentures or the exercise of the Warrants and payment therefore
(the "Irrevocable Transfer Agent Instructions"). Prior to
registration of the Conversion Shares and the Warrant Shares
under the 1933 Act, all such certificates shall bear the
restrictive legend specified in Section 2(g) of this Agreement.
The Company warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this
Section 5, and stop transfer instructions to give effect to
Section 2(f) hereof (in the case of the Conversion Shares or the
Warrant Shares, prior to registration of such shares under the
1933 Act) will be given by the Company to its transfer agent and
that the Conversion Shares or the Warrant Shares shall otherwise
be freely transferable on the books and records of the Company as
and to the extent provided in this Agreement and the Registration
Rights Agreement. Nothing in this Section 5 shall affect in any
way the Investor's obligations and agreement to comply with all
applicable securities laws upon resale of Conversion Shares or
the Warrant Shares. If the Investor or Warrant holder provides
the Company with an opinion of counsel, reasonably satisfactory
in form, and substance to the Company, that registration of a
resale by the Investor of any of the Conversion Shares, or the
Warrant Shares is not required under the 1933 Act, the Company
shall permit the transfer, and, in the case of the Conversion
Shares or the Warrant Shares, promptly instruct its transfer
agent to issue one or more certificates in such name and in such
denominations as specified by the Investor. The Company
acknowledges that a breach by it of its obligations hereunder
will cause irreparable harm to the Investor by vitiating the
intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for
a breach of its obligations under this Section 5 will be
inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Section 5, that
the Investor shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach and
requiring immediate issuance and transfer, without the necessity
of showing economic loss and without any bond or other security
being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell
the Convertible Debentures to the Investors at the Closing is
subject to the satisfaction, at or before the Closing Date, of
each of the following conditions, provided that these conditions
are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion:
(a) Each Investor shall have executed this Agreement and
the Registration Rights Agreement and delivered the same to the
Company.
(b) The Investors shall have delivered to the Escrow Agent
the Purchase Price for Convertible Debentures in respective
amounts as set forth next to each Investors name as outlined on
Schedule and the Escrow Agent shall have delivered such funds to
the Company by wire transfer of immediately available U.S. funds
pursuant to the wire instructions provided by the Company.
(d) The representations and warranties of the Investor
shall be true and correct in all material respects as of the date
when made and as of the Closing Date as though made at that time
(except for representations and warranties that speak as of a
specific date), and the Investor shall have performed, satisfied
and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Investor at or prior
to the Closing Date.
7. CONDITIONS TO THE INVESTOR'S OBLIGATION TO PURCHASE.
The obligation of the Investor hereunder to purchase the
Convertible Debenture at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for the
Investor's sole benefit and may be waived by the Investor at any
time in its sole discretion:
(a) The Company shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to the
Investor.
(b) The Common Stock shall be authorized for quotation on
The Nasdaq Stock Market, Inc.'s OTC Bulletin Board, trading in
the Common Stock shall not have been suspended for any reason and
all of the Conversion Shares issuable upon conversion of the
Convertible Debentures shall be approved for listing or quotation
on The Nasdaq Stock Market, Inc.'s OTC Bulletin Board.
(c) The representations and warranties of the Company shall
be true and correct in all material respects (except to the
extent that any of such representations and warranties is already
qualified as to materiality in Section 3 above, in which case,
such representations and warranties shall be true and correct
without further qualification) as of the date when made and as of
the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date)
and the Company shall have performed, satisfied and complied in
all material respects with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date.
The Investor shall have received a certificate, executed by the
Chief Executive Officer of the Company, dated as of the Closing
Date, to the foregoing effect and as to such other matters as may
be reasonably requested by the Buyer including, without
limitation an update as of the Closing Date regarding the
representation contained in Section 3(c) above.
(d) The Investor shall have received the opinion of the
Company's counsel dated as of the Closing Date, in form, scope
and substance reasonably satisfactory to the Investor and in
substantially the form of Exhibit E attached hereto.
(e) The Company shall have executed and delivered to the
Investor the Convertible Debentures in the respective amounts set
forth opposite each Investors name on Schedule I.
(f) The Board of Directors of the Company shall have
adopted the resolutions in substantially the form of Exhibit F
attached hereto.
(g) As of the Closing Date, the Company shall have reserved
out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the Debentures and
permitting the exercise of the Warrants, 6,000,000 shares of
Common Stock to effect the conversion of all of the Conversion
Shares and the exercise of all the Warrants then outstanding.
(h) The Irrevocable Transfer Agent Instructions, in form
and substance satisfactory to the Investor, shall have been
delivered to and acknowledged in writing by the Company's
transfer agent.
8. INDEMNIFICATION.
In consideration of the Investor's execution and delivery of
this Agreement and acquiring the Convertible Debentures and the
Conversion Shares hereunder, and in addition to all of the
Company's other obligations under this Agreement, the Company
shall defend, protect, indemnify and hold harmless the Investor
and each other holder of the Convertible Debentures and the
Conversion Shares, and all of their officers, directors,
employees and agents (including, without limitation, those
retained in connection with the transactions contemplated by this
Agreement) (collectively, the "Indemnitees") from and against any
and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee
is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and
disbursements (the "Indemnified Liabilities"), incurred by the
Indemnitees or any of them as a result of, or arising out of, or
relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in this Agreement,
the Convertible Debentures or the Registration Rights Agreement
or any other certificate, instrument or document contemplated
hereby or thereby, (b) any breach of any covenant, agreement or
obligation of the Company contained in this Agreement, the
Certificate of Designations, or the Registration Rights Agreement
or any other certificate, instrument or document contemplated
hereby or thereby, or (c) any cause of action, suit or claim
brought or made against such Indemnitee and arising out of or
resulting from the execution, delivery, performance or
enforcement of this Agreement or any other instrument, document
or agreement executed pursuant hereto by any of the Indemnities,
any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the
Convertible Debentures or the status of the Investor or holder of
the Convertible Debentures, the Conversion Shares, as an
investor in the Company. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason,
the Company shall make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities, which is
permissible under applicable law.
9. GOVERNING LAW: MISCELLANEOUS.
(a) Governing Law. This Agreement shall be deemed to be
made, governed by, interpreted under and construed in all
respects in accordance with the commercial rules of JAMS. This
chosen jurisdiction is irrespective of the country or place of
domicile or residence of either party. In the event of
controversy arising out of the interpretation, construction,
performance or breach of this agreement, the parties hereby
consent to adjudication under the commercial rules of JAMS. Said
venue of the arbitration shall be in New York County, New York.
Judgment on the award rendered by the arbitrator may be entered
in U.S. District Court sitting in the Southern District of the
State of New York or the state courts of the State of New York
sitting in Manhattan. The Laws of the State of New York shall
govern all disputes regarding this matter.
(b) Counterparts. This Agreement may be executed in two or
more identical counterparts, all of which shall be considered one
and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the
other party. In the event any signature page is delivered by
facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages
to be physically delivered to the other party within five (5)
days of the execution and delivery hereof
(c) Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement.
(d) Severability. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity
or unenforceability shall not affect the validity or
enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision
of this Agreement in any other jurisdiction.
(e) Entire Agreement, Amendments. This Agreement
supersedes all other prior oral or written agreements between the
Investor, the Company, their affiliates and persons acting on
their behalf with respect to the matters discussed herein, and
this Agreement and the instruments referenced herein contain the
entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor any Investor makes any
representation, warranty, covenant or undertaking with respect to
such matters. No provision of this Agreement may be waived or
amended other than by an instrument in writing signed by the
party to be charged with enforcement.
(f) Notices. Any notices, consents, waivers, or other
communications required or permitted to be given under the terms
of this Agreement must be in writing and will be deemed to have
been delivered (i) upon receipt, when delivered personally; (ii)
upon receipt, when sent by facsimile, provided a copy is mailed
by U.S. certified mail, return receipt requested; (iii) three (3)
days after being sent by U.S. certified mail, return receipt
requested, or (iv) one (1) day after deposit with a nationally
recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
If to the Company, to:
Majestic Companies, Ltd.
8880 Rio San Diego Drive - 8th Floor
San Diego, CA 92108
Attention: Francis Zubrowski, President
Telephone: (619) 209-6077
Facsimile: (619) 209-6078
With a copy to:
Law Offices of Marc. R. Tow
3900 Birch Street, Suite 113
Newport Beach, CA. 92660
Attention: James DeOlden, Esq.
Telephone: (949) 975-0544
Facsimile: (949) 975-0547
If to the Transfer Agent, to:
Chase Mellon Shareholder Services
400 South Hope Street - 4th Floor
Los Angeles, CA 90071
Attention: Ray Torres
Telephone: (213) 553-9724
Facsimile: (213) 553-9735
If to the Investor, to its address and facsimile number on
Schedule I, with copies to the Investor's counsel as set forth on
Schedule I. Each party shall provide five (5) days' prior
written notice to the other party of any change in address or
facsimile number.
(g) Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their
respective successors and assigns. Neither the Company nor any
Investor shall assign this Agreement or any rights or obligations
hereunder without the prior written consent of the other party
hereto.
(h) No Third Party Beneficiaries. This Agreement is
intended for the benefit of the parties hereto and their
respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any
other person.
(i) Survival. Unless this Agreement is terminated under
Section 9(l), the representations and warranties of the Company
and the Investors contained in Sections 2 and 3, the agreements
and covenants set forth in Sections 4, 5 and 9, and the
indemnification provisions set forth in Section 8, shall survive
the Closing. The Investor shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
(j) Publicity. The Company and the Investors shall have
the right to approve, before issuance any press release or any
other public statement with respect to the transactions
contemplated hereby made by any party; provided, however, that
the Company shall be entitled, without the prior approval of the
Investors, to issue any press release or other public disclosure
with respect to such transactions required under applicable
securities or other laws or regulations (the Investors shall be
consulted by the Company in connection with any such press
release or other public disclosure prior to its release and
Investors shall be provided with a copy thereof upon release
thereof).
(k) Further Assurances. Each party shall do and perform,
or cause to be done and performed, all such further acts and
things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.
(1) Termination. In the event that the Closing shall not
have occurred with respect to the Investors on or before five (5)
business days from the date hereof due to the Company's or the
Investor's failure to satisfy the conditions set forth in
Sections 6 and 7 above (and the non-breaching party's failure to
waive such unsatisfied condition(s)), the nonbreaching party
shall have the option to terminate this Agreement with respect to
such breaching party at the close of business on such date
without liability of any party to any other party; provided,
however, that if this Agreement is terminated pursuant to this
Section 9(l), the Company shall remain obligated to reimburse the
Investor for the expenses described in Section 4(h) above.
(m) Finder. The Company acknowledges that it has engaged
The May Davis Group, Inc. as a placement agent in connection with
the sale of the Convertible Debentures. The Company shall be
responsible for the payment of any placement agent fees (which
includes cash and warrants to purchase Common Stock) relating to
or arising out of the transactions contemplated hereby and from
the proceeds thereof.
(n) No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties
to express their mutual intent, and no rules of strict
construction will be applied against any party.
IN WITNESS WHEREOF, the Buyers and the Company have caused
this Securities Purchase Agreement to be duly executed as of the
date first written above.
MAJESTIC COMPANIES, LTD
By: /s/ Francis Zubrowski
Name: Francis Zubrowski
Title: President and Chief Executive Officer
[INSERT NAME OF BUYER]
By:
