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EXHIBIT 4.05
REDEMPTION AND EXCHANGE AGREEMENT
REDEMPTION AND EXCHANGE AGREEMENT (this "AGREEMENT"), dated as of
January 12, 2001, by and between SmartSources.com, Inc., a Colorado corporation,
with headquarters located at 2030 Marine Drive, Suite 100, North Vancouver,
British Columbia, V7P 1V7 (the "COMPANY"), and RGC International, LDC, a Cayman
Islands limited duration company (the "BUYER").
WHEREAS:
A. The Buyer, pursuant to the Securities Purchase Agreement, dated
February 24, 2000, by and between the Company and the Buyer (the "SECURITIES
PURCHASE AGREEMENT"), (i) purchased (a) convertible debenture of the Company in
the aggregate principal amount of Five Million Dollars ($5,000,000) (the
"DEBENTURE"), convertible into shares of common stock, no par value, of the
Company (the "COMMON STOCK"), and (b) warrants to purchase Three Hundred Thirty
Thousand (330,000) shares of Common Stock (the "WARRANTS") and (ii) entered into
a certain Registration Rights Agreement, dated February 24, 2000, with the
Company (the "REGISTRATION RIGHTS AGREEMENT") (the Securities Purchase
Agreement, the Registration Rights Agreement, the Debenture and the Warrants are
collectively referred to herein as the "INVESTMENT DOCUMENTS");
B. The Company has authorized the redemption of a portion of the
Debenture for $1,300,000 (the "CASH AMOUNT") and the exchange of the remainder
of the Debenture and the Warrants for a Promissory Note in the principal amount
of $2,860,000, in the form attached hereto as EXHIBIT "A" (the "NOTE");
C. The Buyer wishes to have a portion of the Debenture redeemed for
the Cash Amount and to exchange the remaining amount of the Debenture and the
Warrants for the Note;
D. The Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 under Regulation D ("REGULATION D") as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 ACT");
E. All capitalized terms used but not defined in this Agreement
shall have the meanings ascribed to them in the Securities Purchase Agreement;
and
NOW THEREFORE, the Company and the Buyer hereby agrees as follows:
1. PURCHASE AND SALE OF DEBENTURES AND WARRANTS.
a. PARTIAL REDEMPTION. At the Closing (as defined below), the
Company shall redeem $1,300,000 principal amount of the Debenture and wire the
Cash Amount in immediately
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available funds to the Buyer pursuant to the wiring instructions provided to the
Company by the Buyer.
b. EXCHANGE OF DEBENTURE. At the Closing (as defined below),
the Company shall exchange the remaining amount of the Debenture and the
Warrants for the Note.
c. CANCELLATION AND TERMINATION; RELEASE. By and upon the
signing of this Agreement, the Securities Purchase Agreement, Sections 2, 3, 4,
8 and 9 of the Registration Rights Agreement, the Debenture, the Warrants and
the irrevocable authorization and direction dated February 24, 2000 to the
Transfer Agent ("IRREVOCABLE AUTHORIZATION"), shall be terminated and cancelled
and shall be of no further force or effect, and neither of the parties shall
have any further rights or obligations whatsoever under any of such agreements
and instruments. At the Closing, Buyer hereby agrees to cancel, as of the
Closing Date, the Debenture and the Warrants. The parties agree (a) that the
furnishing of a copy of this Agreement to the Transfer Agent shall constitute
notice to the Transfer Agent of the termination of the Irrevocable
Authorization, and (b) to promptly sign and deliver to the Transfer Agent such
further documents of termination and direction as may be required by the
Transfer Agent to effect the same. Except as to the obligations of the Company
under the Note and the rights and obligations of the parties arising under this
Agreement and Sections 1, 5, 6, 7, 10 and 11 of the Registration Rights
Agreement (only to the extent that securities have been registered and re-sold
pursuant to the Registration Rights Agreement prior to the date of this
Agreement), each of the parties hereto hereby forever releases, surrenders,
waives and abandons any and all claims, rights, obligations, rights of action
whether in contract or tort, of any and every type whatsoever, known or unknown,
past, present or future (expressly assuming all risk thereof and associated
therewith) against the other party, its officers, directors, employees,
shareholders, affiliates or other agents or persons acting on its behalf (the
"RELEASED PARTIES").
d. MANDATORY REDEMPTION NOTICE WITHDRAWAL. The Mandatory
Redemption Notice dated November 10, 2000, which was delivered by the Buyer to
the Company pursuant to the Debenture, is hereby withdrawn as of the Closing
Date (as defined below).
e. CLOSING DATE. Subject to the satisfaction (or waiver) of
the conditions thereto set forth in Section 5 and Section 6 below, the
consummation of the transactions contemplated by this Agreement (the "CLOSING
DATE") shall be 12:00 noon Eastern Standard Time on January 12, 2001 or such
other mutually agreed upon time. The closing of the transactions contemplated by
this Agreement (the "CLOSING") shall occur on the Closing Date at the offices of
Akerman, Senterfitt & Edison, P.A. at SunTrust International Center, One S.E.
Third Avenue, 28th Floor, Miami, Florida 33131, or at such other location as may
be agreed to by the parties.
2. BUYER'S REPRESENTATIONS AND WARRANTIES. The Buyer represents and
warrants to the Company solely as to such Buyer that:
a. INVESTMENT PURPOSE. As of the date hereof, the Buyer is
purchasing the Note for its own account and not with a present view towards the
public sale or distribution thereof, except pursuant to sales registered or
exempted from registration under the 1933 Act; provided, however, that by making
the representations herein, the Buyer does not agree to hold the Note for
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any minimum or other specific term and reserves the right to dispose of the Note
at any time in accordance with or pursuant to an exemption under the 1933 Act.
b. TRANSFER OR RE-SALE. The Buyer understands that (i) the
sale or re-sale of the Note has not been and is not being registered under the
1933 Act or any applicable state securities laws, and the Note may not be
transferred unless (a) the Buyer shall have delivered to the Company an opinion
of counsel (which opinion shall be in form, substance and scope customary for
opinions of counsel in comparable transactions) to the effect that the Note to
be sold or transferred may be sold or transferred pursuant to an exemption from
the registration requirements of the 1933 Act; or (b) the Note is sold or
transferred to an "affiliate" (as defined in Rule 144 promulgated under the 1933
Act (or a successor rule) ("RULE 144")) of the Buyer who agrees to sell or
otherwise transfer the Note only in accordance with this Section 2(b) and who is
an Accredited Investor under the 1933 Act; or (c) the Note is sold pursuant to
Rule 144(k); and (ii) neither the Company nor any other person is under any
obligation to register the Note under the 1933 Act or any state securities laws
or to comply with the terms and conditions of any exemption thereunder.
Notwithstanding the foregoing or anything else contained herein to the contrary,
the Note may be pledged as collateral in connection with a bona fide margin
account or other lending arrangement.
c. LEGENDS. The Buyer understands that the Note may bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the certificates for such Note):
"The securities represented by this Note have not
been registered under the Securities Act of 1933,
as amended. The securities may not be sold,
transferred or assigned in the absence of an
effective registration statement for the
securities under said Act, or an opinion of
counsel, in form, substance and scope customary
for opinions of counsel in comparable
transactions, that registration is not required
under said Act or unless sold pursuant to Rule 144
under said Act."
The legend set forth above shall be removed and the Company shall
issue the Note without such legend to the holder of the Note upon which it is
stamped, if, unless otherwise required by applicable state securities laws, (a)
the Note may be sold pursuant to Rule 144 without any restriction as to the
number of securities as of a particular date that can immediately be sold, or
(b) such holder provides the Company with an opinion of counsel, in form,
substance and scope customary for opinions of counsel in comparable
transactions, to the effect that a re-sale or transfer of the Note may be made
without registration under the 1933 Act and such re-sale or transfer is
effected.
d. AUTHORIZATION; ENFORCEMENT. This Agreement has been duly and
validly authorized. This Agreement has been duly executed and delivered on
behalf of the Buyer, and this Agreement constitutes the valid and binding
agreement of the Buyer enforceable in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency or similar
laws affecting creditors rights generally or general principles of equity.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Buyer that:
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a. ORGANIZATION AND QUALIFICATION. The Company and each of its
Subsidiaries (as defined below), if any, is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated, with full power and authority (corporate and other) to
own, lease, use and operate its properties and to carry on its business as and
where now owned, leased, used, operated and conducted. The Company and each of
its Subsidiaries is duly qualified as a foreign corporation to do business and
is in good standing in every jurisdiction in which its ownership or use of
property or the nature of the business conducted by it makes such qualification
necessary except where the failure to be so qualified or in good standing would
not have a Material Adverse Effect. "MATERIAL ADVERSE EFFECT" means any material
adverse effect on (i) the Note, (ii) the business, operations, assets, financial
condition, results of operations, properties or prospects of the Company and its
Subsidiaries, if any, taken as a whole, (iii) the transactions contemplated
hereby or by the agreements or the guarantees to be entered into in connection
herewith by the Company or its Subsidiaries or (iv) the authority or the ability
of the Company to perform its obligation under this Agreement or the Note.
"SUBSIDIARIES" means any corporation or other organization, whether incorporated
or unincorporated, in which the Company owns, directly or indirectly, any equity
or other ownership interest.
b. AUTHORIZATION; ENFORCEMENT. (i) The Company has all
requisite corporate power and authority to enter into and perform this Agreement
and the Note and to consummate the transactions contemplated hereby and thereby
and to issue and deliver the Note, in accordance with the terms hereof and
thereof, (ii) the execution and delivery of this Agreement and the Note by the
Company and the consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by the Company's Board of Directors and no
further consent or authorization of the Company, its Board of Directors, or its
stockholders is required, (iii) this Agreement and the Note have been duly
executed and delivered by the Company, and (iv) this Agreement constitutes, and
upon execution and delivery by the Company of the Note, such instrument will
constitute, a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency or similar laws affecting
creditors rights generally or general principles of equity.
c. CAPITALIZATION. As of the date hereof, the authorized
capital stock of the Company consists of (i) 50,000,000 shares of Common Stock,
of which 12,055,300 shares are issued and outstanding, 1,385,000 shares are
reserved for issuance pursuant to the Company's stock option plans, and
1,675,000 shares are reserved for issuance pursuant to securities exercisable
for, or convertible into or exchangeable for shares of Common Stock; and (ii) no
shares of preferred stock. All of such outstanding shares of capital stock are,
or upon issuance will be, duly authorized, validly issued, fully paid and
nonassessable. No shares of capital stock of the Company are subject to
preemptive rights or any other similar rights of the stockholders of the Company
or any liens or encumbrances imposed through the actions or failure to act of
the Company. Except as disclosed in SCHEDULE 3(c), as of the effective date of
this Agreement, (i) there are no outstanding options, warrants, scrip, rights to
subscribe for, puts, calls, rights of first refusal, agreements, understandings,
claims or other commitments or rights of any character whatsoever relating to,
or securities or rights convertible into or exchangeable for any shares of
capital stock of the Company or any of its Subsidiaries, or arrangements by
which the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries and
(ii) there are no agreements or arrangements under which the Company or any of
its Subsidiaries is obligated to register the sale of any of its or their
securities under the 1933 Act. The Company has
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furnished to the Buyer true and correct copies of the Company's Certificate of
Incorporation as in effect on the date hereof ("CERTIFICATE OF INCORPORATION"),
the Company's By-laws, as in effect on the date hereof (the "BY-LAWS"), and the
terms of all securities convertible into or exercisable for Common Stock of the
Company and the material rights of the holders thereof in respect thereto. The
Company shall provide the Buyer with a written update of this representation
signed by the Company's Chief Executive or Chief Financial Officer on behalf of
the Company as of the Closing Date.
d. NO CONFLICTS. The execution, delivery and performance of
this Agreement and the Note by the Company and the consummation by the Company
of the transactions contemplated hereby and thereby will not (i) conflict with
or result in a violation of any provision of the Certificate of Incorporation or
By-laws or (ii) except as set forth on SCHEDULE 3(d), violate or conflict with,
or result in a breach of any provision of, or constitute a default (or an event
which with notice or lapse of time or both could become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture, patent, patent license or instrument
to which the Company or any of its Subsidiaries is a party (assuming exclusively
for the purposes of this representation and warranty that the actions
contemplated by Section 1(c) of this Agreement have been consummated), or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and regulations of
any self-regulatory organizations to which the Company or its securities are
subject) applicable to the Company or any of its Subsidiaries or by which any
property or asset of the Company or any of its Subsidiaries is bound or affected
(except for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect). Neither the Company nor any of its Subsidiaries
is in violation of its Certificate of Incorporation, By-laws or other
organizational documents and neither the Company nor any of its Subsidiaries is
in default (and no event has occurred which with notice or lapse of time or both
could put the Company or any of its Subsidiaries in default) under, and neither
the Company nor any of its Subsidiaries has taken any action or failed to take
any action that would give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its Subsidiaries is a party or by which any property or
assets of the Company or any of its Subsidiaries is bound or affected (assuming
exclusively for the purposes of this representation and warranty that the
actions contemplated by Section 1(c) of this Agreement have been consummated),
except for possible defaults as would not, individually or in the aggregate,
have a Material Adverse Effect. The businesses of the Company and its
Subsidiaries, if any, are not being conducted, and shall not be conducted so
long as a Buyer holds the Note, in violation of any law, ordinance or regulation
of any governmental entity the violation of which could have a Material Adverse
Effect. Except as specifically contemplated by this Agreement, the Company is
not required to obtain any consent, authorization or order of, or make any
filing or registration with, any court, governmental agency, regulatory agency,
self regulatory organization or stock market or any third party in order for it
to execute, deliver or perform any of its obligations under this Agreement or
the Note in accordance with the terms hereof or thereof. Except as disclosed in
SCHEDULE 3(d), 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.
e. DISCLOSURE. All information relating to or concerning the
Company or any of its Subsidiaries set forth in this Agreement and provided to
the Buyer in connection with the
<PAGE> 6
transactions contemplated hereby is true and correct in all material respects
and the Company has not omitted to state any material fact necessary in order to
make the statements made herein or therein, in light of the circumstances under
which they were made, not misleading. No event or circumstance has occurred or
exists with respect to the Company or any of its Subsidiaries or its or their
business, properties, operations or financial conditions, which has not been
publicly announced or disclosed but under applicable law, rule or regulation,
requires public disclosure or announcement by the Company (assuming for this
purpose that the Company's reports filed under the 1934 Act are being
incorporated into an effective registration statement filed by the Company under
the 1933 Act).
f. SOLVENCY. The Company (both before and after giving effect
to the transactions contemplated by this Agreement) is solvent and currently the
Company has no information that would lead it to reasonably conclude that the
Company would not have the ability to, nor does it intend to take any action
that would impair its ability to, pay its debts from time to time incurred in
connection therewith as such debts mature (assuming exclusively for the purposes
of this representation and warranty that the actions contemplated by Section
1(c) of this Agreement have been consummated). Upon the closing of the
transactions contemplated by this Agreement, the Company does not anticipate
receiving a qualified opinion from its auditors with respect to its most recent
fiscal year end.
g. ABSENCE OF CERTAIN CHANGES. Except as disclosed on Schedule
3(g) or disclosed in the SEC Documents filed since June 30, 2000, since June 30,
2000, there has been no changes or developments in the Company or its business,
that would, or would reasonably be expected to, have a Material Adverse Effect.
4. COVENANTS.
a. BEST EFFORTS. The parties shall use their best efforts to
satisfy timely each of the conditions described in Section 5 and 6 of this
Agreement.
b. EXPENSES. Each of the parties to this Agreement shall bear
their own expenses in connection with this Agreement and the transactions
contemplated hereby.
5. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The obligation of
the Company hereunder to deliver the Cash Amount and the Note at the Closing is
subject to the satisfaction, at or before the Closing Date, of each of the
following conditions thereto, provided that these conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion:
a. The Buyer shall have executed this Agreement and delivered
the same to the Company.
b. The Buyer shall have delivered the Warrants and Debenture
to the Company.
c. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority
<PAGE> 7
over the matters contemplated hereby which prohibits the consummation of any of
the transactions contemplated by this Agreement.
6. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE. The obligations
of the Buyer at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these
conditions are for such Buyer's sole benefit and may be waived by such Buyer at
any time in its sole discretion:
a. The Company shall have executed this Agreement and the Note,
and delivered the same to the Buyer.
b. The Company shall have delivered the Cash Amount.
c. The representations and warranties of the Company shall be
true and correct in all material respects as of the date when made and as of the
Closing Date as though made at such time (except for representations and
warranties that speak as of a specific date, which representations and
warranties shall be true and correct as of such date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date. Except as set
forth on SCHEDULE 6(b), the representations and warranties of the Company set
forth in Sections 3(g)-SEC Documents; Financial Statements; 3(i)-Absence of
Litigation, 3(j) - Patents, Copyrights, etc., and 3(m)-Certain Transactions of
the Securities Purchase Agreement shall be true and correct in all material
respects as though made at Closing. The Buyer shall have received a certificate
or certificates, 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 such Buyer including, but not limited to
certificates with respect to the Company's Certificate of Incorporation, By-laws
and Board of Directors' resolutions relating to the transactions contemplated
hereby.
d. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
e. The Buyer shall have received opinion of the Company's
counsel, dated as of the Closing Date, in form, scope and substance reasonably
satisfactory to the Buyer and in substantially the same form as EXHIBIT "B"
attached hereto.
f. The Buyer shall have received an officer's certificate
described in Section 3(c) above, dated as of the Closing Date.
g. Nifco Investments Ltd., SmartSources.com Technologies Inc.
and Intelli Trade Inc. shall each have executed and delivered a Subsidiary
Guarantee in the form attached hereto as EXHIBIT "C" (collectively, the
"GUARANTEES").
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7. GOVERNING LAW; MISCELLANEOUS.
a. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
agreements made and to be performed in the State of Delaware (without regard to
principles of conflict of laws). Both parties irrevocably consent to the
exclusive jurisdiction of the United States federal courts and the state courts
located in Delaware with respect to any suit or proceeding based on or arising
under this Agreement, the agreements entered into in connection herewith or the
transactions contemplated hereby or thereby and irrevocably agree that all
claims in respect of such suit or proceeding may be determined in such courts.
Both parties irrevocably waive the defense of an inconvenient forum to the
maintenance of such suit or proceeding. Both parties further agree that service
of process upon a party mailed by first class mail shall be deemed in every
respect effective service of process upon the party in any such suit or
proceeding. Nothing herein shall affect either party's right to serve process in
any other manner permitted by law. Both parties agree that a final
non-appealable judgment in any such suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on such judgment or in any other
lawful manner.
b. COUNTERPARTS; SIGNATURES BY FACSIMILE. This Agreement may be
executed in one or more counterparts, all of which shall be considered one and
the same agreement and shall become effective when counterparts have been signed
by each party and delivered to the other party. This Agreement, once executed by
a party, may be delivered to the other party hereto by facsimile transmission of
a copy of this Agreement bearing the signature of the party so delivering this
Agreement.
c. HEADINGS. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. SEVERABILITY. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
e. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the Note
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor the Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by an instrument in writing signed
by the party to be charged with enforcement.
f. NOTICES. Any notices required or permitted to be given
under the terms of this Agreement shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile and shall be effective
five days after being placed in the mail, if mailed by regular United States
mail, or upon receipt, if delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile, in each case addressed
to a party. The addresses for such communications shall be:
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If to the Company:
SmartSources.com, Inc.
2030 Marine Drive
Suite 100
North Vancouver, B.C. V7P 1V7
Attention: Chief Executive Officer
Facsimile: (604) 986-0869
With copy to:
Kirkpatrick & Lockhart LLP
3100 Bank One Center
1717 Main Street
Dallas, Texas 75201-4681
Attention: Norman R. Miller
Facsimile: (214) 939-4949
If to a Buyer:
Rose Glen Capital Management, L.P.
3 Bala Plaza East, Suite 501
251 St. Asaphs Road
Bala Cynwyd, PA 19004
Attention: Steven B. Katznelson
Facsimile: (610) 617-0570
With copy to:
Akerman, Senterfitt & Edison, P.A.
SunTrust International Center
One S.E. Third Avenue, 28th Floor
Miami, Florida 33131-1704
Attention: Bradley D. Houser
Facsimile: (305) 374-5095
Each party shall provide notice to the other party of any change in
address.
g. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns;
provided that any assignment of the Note shall be in a minimal denomination of
$1,000,000 in aggregate principal amount . The Company shall not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the Buyer; provided, however, that the Agreement may be assigned by
the Company without the prior written consent of the Buyer in the event of a
merger or consolidation of the Company or the sale of all or substantially all
of its assets (each a "CHANGE OF CONTROL"), where (i) the successor or acquiring
entity and, if such entity is owned or controlled by another
<PAGE> 10
entity or entities, the entity or entities owning or controlling the successor
or acquiring entity, in such transaction assumes the Company's obligations
hereunder and under the agreements and instruments entered into in connection
herewith (including the Note) and (ii) the successor or acquiring entity has
combined financial strength after the Change of Control, which is greater than
or equal to the Company's financial condition prior to the Change of Control and
the Company's ability to satisfy its obligations under this Agreement is not
impaired, as certified without qualification to the Buyer by an independent
public accounting firm or independent investment banking firm, in either case,
reasonably acceptable to the Buyer.
h. THIRD PARTY BENEFICIARIES. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. SURVIVAL. The representations and warranties of the Company
and the Buyer and the agreements and covenants set forth in Sections 1(c), 2, 3,
4 and 7 shall survive the closing hereunder notwithstanding any due diligence
investigation conducted by or on behalf of the Buyer or the Company. The Company
agrees to indemnify and hold harmless the Buyer and all their officers,
directors, employees and agents from any and all costs, expenses, losses,
liabilities and damages whatsoever that may be incurred as the result of any
claims, rights, obligations or rights of action against the Buyer and all their
officers, directors, employees and agents related to any breach or alleged
breach by the Company of any of its representations, warranties, agreements and
covenants set forth in Sections 1(c), 3, 4 and 7 hereof or in any other of its
covenants and obligations under this Agreement.
j. PUBLICITY. The Company shall not issue any press releases or
any other public statements with respect to the transactions contemplated hereby
(including any disclosure in any documents filed with the SEC), unless expressly
reasonably agreed to in writing by the Buyer or unless and until such disclosure
is, in the reasonable opinion of counsel to the Company, required by law or
applicable regulation, and then only to the extent of such requirement. In
addition, the Company agrees that it will not disclose, and will not include in
any public statement or other announcement (including any disclosure in any
document filed with the SEC), the name of the Buyer, unless expressly reasonably
agreed to in writing by the Buyer or unless and until such disclosure is, in the
reasonable opinion of counsel to the Company, required by law or applicable
regulation, and then only to the extent of such requirement; provided, however,
that, if either the Note, the Guarantees or this Agreement are filed as an
exhibit to any filing made by the Company with the SEC, the disclosure of the
Buyer's name in such exhibit shall not be a breach of this Section 7(j).
k. FURTHER ASSURANCES. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. 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.
<PAGE> 11
m. REMEDIES. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Buyer, by vitiating
the intent and purpose of the transactions contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Agreement will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Agreement, that the
Buyer shall be entitled, in addition to all other available remedies in law or
in equity, to an injunction or injunctions to prevent or cure any breaches of
the provisions of this Agreement and to enforce specifically the terms and
provisions of this Agreement, without the necessity of showing economic loss and
without any bond or other security being required.
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<PAGE> 12
IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused
this Agreement to be duly executed as of the date first above written.
SMARTSOURCES.COM, INC.
By:
--------------------------------------------
Nathan Nifco
Chief Executive Officer
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P.,
Investment Manager
By: RGC General Partner Corp.,
as General Partner
By:
--------------------------------------------
Steven B. Katznelson
Managing Director
