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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: August 23, 1999
LAHAINA ACQUISITIONS, INC.
(Exact name of registrant as specified in its charter)
Colorado 0-27480 84-1325695
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
5895 Windward Parkway, Suite 200, Alpharetta, Georgia 30005
(Address of Principal Executive Offices)
(770) 754-6140
(Registrant's telephone number, including area code)
2900 Atlantic Avenue, Fernandina Beach, Florida 32034
(Former name or former address, if changed since last report)
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
The Annual Report on Form 10-K filed by Lahaina Acquisitions, Inc.
("Lahaina" or the "Company") on December 28, 1998 for the fiscal year ended
September 30, 1998, Part I, Item 1 "Business, History, Organization and Change
of Control" and the Current Report on Form 8-K filed by the Company on December
28, 1998 set forth the history, organization and previous changes of control at
the Company.
CHANGE IN CONTROL
On August 23, 1999, LAHA No. 1, Inc., ("LAHA 1"), a wholly-owned subsidiary of
the Company, merged with and into The Accent Group, Inc. ("Accent"), an
Atlanta-based real estate mortgage financing entity with real estate holdings in
Georgia, Tennessee and Florida. In consideration of the surrender of each
certificate evidencing shares of Accent Common Stock, Lahaina issued 13,251,000
shares of the Company's Common Stock to the Accent shareholders. The 13,251,000
shares of Common Stock issued in connection with the merger are not registered
under the Securities Act.
Upon the consummation of the merger, 4,301,000 of the 13,251,000 shares of
Common Stock were issued and delivered to the owners of those shares. The
remaining 8,950,000 shares of Common Stock were issued subject to certain
conditions of release and may not be released by the Company until such
conditions are met. The Board of Directors of the Company, elected on August 23,
1999, determined by unanimous written consent on such date that the conditions
of release relating to an additional 5,200,000 shares of Common Stock had been
satisfied and that such shares have been released.
The Company redeemed 1,910,000 shares of Series A Preferred Stock held by
Mongoose Investments, LLC ("Mongoose") for 415,000 shares of Common Stock.
The Company also borrowed $500,000 under a Convertible Note to raise money to
pay its payables as of the date of the closing.
The Agreement and Plan of Merger, the related Amendments to the Agreement and
Plan of Merger, the Escrow Agreement, the Convertible Note, the Securities
Purchase Agreement related to the Convertible Note and the related Registration
Rights Agreement, Stock Pledge Agreement, Escrow Agreement and Warrant are
attached as Exhibits to this Form 8-K. Consulting Agreements between the Company
and each of Gerald F. Sullivan and Gator Glory, LLC, a Settlement and Release
Agreement and a Purchase and Sale Agreement entered into in connection with the
merger are incorporated by reference to the Company's Quarterly Report on Form
10-Q filed on August 23, 1999.
As a result of the above transactions, a change in the control of the Company
has occurred in that Scott Demerau individually and through Eutopean
Enterprises, LLC of which Demerau is a controlling member, and through his wife,
owns 5,997,000 shares of the 16,217,343 shares of Common Stock currently
outstanding, or approximately 37% of such shares. Family members or entities
controlled by family members of Scott Demerau own an additional 2,250,000 shares
of Common Stock, or approximately 14% of the issued and outstanding shares of
the Company. The conversion of the $500,000 Convertible Note, the
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exercise of a related Warrant for 50,000 shares and the conversion and exercise
of instruments issued in connection with the December 7, 1998 change in control
are estimated to result in an additional 1,700,000 to 2,100,000 shares of Common
Stock being issued.
Thus, after conversion of all convertible securities, it is likely that the
Company will remain in the control of the Demeraus for the foreseeable future.
EFFECTS OF CHANGE IN CONTROL
CHANGE IN BOARD OF DIRECTORS
The previous directors of the Company resigned, but, before resigning,
elected L. Scott Demerau, Betty Sullivan, Sherry Sagemiller and Bart
Siegal as Directors of the Company. The Directors will be paid $500 per
meeting held telephonically and $1,000 per meeting held in person.
The Company is interviewing other persons for membership on the Board
of Directors and will elect a fifth Director mutually agreeable to L.
Scott Demerau and Richard P. Smyth within 60 days of the Closing of the
Merger Agreement.
The Company indemnifies the past and present Directors to the maximum
extent permitted by Colorado law.
CHANGE IN MANAGEMENT
The Company has new management. The staff will initially consist of
approximately 25 people, including the President and CEO, L. Scott
Demerau; the Executive Vice President - Finance and Treasurer, Colman
Hoffman; the Executive Vice President - Administration and Secretary,
Betty Sullivan; the Assistant Secretary, Sherry Sagemiller; a support
staff, accounting staff, marketing staff and real estate and
development staff. Auditing services will be provided by outside
services. Other staff will be added on an as-needed basis, though it is
anticipated that the staff will not increase in the near term.
CHANGE IN FINANCIAL AND BUSINESS POSITION
As a result of the change in control, there has been a change in the
financial position of the Company. Prior to August 23, 1999, the
Company had operations and assets primarily located on Amelia Island,
Florida. The Company now has significant assets located in Atlanta,
Georgia, Tennessee and Florida, primarily in the form of commercial
real estate, residential development and multi-family holdings of
Accent. The Company also operates a significant mortgage brokerage
operation.
BRIDGE FUNDING
In order to raise cash to be used for payment of payables incurred
prior to the merger and related transaction costs, the Company borrowed
$500,000 from GCA Strategic
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Investment Fund Limited ("GCA") in the form of a $500,000 Convertible
Note. The cost associated with the transaction was the issuance of a
Warrant to purchase 50,000 shares of Common Stock to GCA.
The Convertible Note bears interest of 9% per annum and matures on
August 18, 2001, if not sooner converted or redeemed. Interest is
payable quarterly in cash or, at the option of the Company, in Common
Stock on the last days of March, June, September and December, and on
the August 18, 2001 maturity date, on a Conversion Date (as defined in
the Convertible Note), which is the date on which all or a portion of
the Convertible Note is converted into Common Stock, and on the date
the principal amount of the Convertible Note shall become automatically
due and payable.
Subject to the Company's redemption rights, the holder of the
Convertible Note shall have the right, at its option, at any time from
and after the date of issuance of the Convertible Note, convert the
principal amount of the Convertible Note, or any portion of such
principal amount, into that number of fully paid and non-assessable
shares of Common Stock (as such shares shall then be constituted)
determined as follows:
The number of shares of Common Stock to be issued upon each conversion
of the Convertible Note shall be determined by dividing the Conversion
Amount (as defined below) by the Conversion Price in effect on the date
(the "Conversion Date") a Notice of Conversion is delivered. The term
"Conversion Amount" means, with respect to the conversion of the
Convertible Note, the sum of (1) the principal amount of the
Convertible Note to be converted in such conversion, plus (2) accrued
and unpaid interest, if any, on such principal amount at the interest
rates provided in the Convertible Note to the Conversion Date, plus (3)
Default Interest, if any on the interest referred to in the immediately
preceding clause (2), plus (4) at the holder's option, any amounts owed
to the holder under Section 4.3 of the Convertible Note or Sections
10.1 or 10.4 of the Securities Purchase Agreement. The Conversion Price
is $3.50.
At a Conversion Price of $3.50 and if 500,000 shares of the Convertible
Note was converted, approximately 142,000 shares of Common Stock would
be issued to the holder of the Convertible Note.
FUTURE FUNDING PLANS
The Company intends to continue to evaluate other acquisitions, both in
the area of real estate and in other business areas, as a method of
increasing its size of operation and value.
The Company anticipates the need for further funding as it grows its
operations, in order to purchase additional real estate properties or
operating companies and to make the payments which may be required as a
result of other funding activities, including fees,
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interest or dividends. It expects to accomplish such funding through a
combination of debt and equity, from both private and public sources.
As a result of these activities, the Company expects that additional
shares of Common Stock and Preferred Stock in the Company will be
issued at future dates, and that these activities will likely have a
dilutive effect on the Company and its shareholders. Management
believes that debt funding from conventional sources such as banks and
real estate lending sources, combined with the issuance of preferred
convertible equities, or the use of Common Stock as a form of payment,
will be sufficient to fund its operations during this growth period.
Success in the implementation of the current business plan is
contingent of the availability of such funding sources.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
As described in Item 1, on August 23, 1999, LAHA 1 merged with and into
Accent. The Company issued 13,251,000 shares of Common Stock in exchange for the
surrender of 1,325,100 shares of Accent Common Stock. As previously indicated,
the Agreement and Plan of Merger is filed as an exhibit to this Form 8-K.
The assets of Accent consist of several parcels of lakefront property
and property near interstate exits which Accent either owns or has the option to
purchase. Accent has minimal operating capital.
The President of Accent is L. Scott Demerau, who is now the President
and CEO of the Company. See: Item 1: Changes of Control. Prior to the change of
control, there was no relationship between the Company and Accent or Demerau.
The Company intends to continue operating the developed portion of the
Accent property and intends to initiate and complete the development of the
Accent property when appropriate financing can be obtained.
The Accent property is estimated to have a value of approximately $18.8
million. This value is calculated by management and is not supported by an
appraisal.
ITEM 5. OTHER EVENTS
CHANGE IN COMPANY HEADQUARTERS LOCATION
As of the date of this filing the Company has relocated its Corporate Offices to
5895 Windward Parkway, Suite 200, Alpharetta, Georgia 30005. Its phone number is
(770) 754-6140.
INTENTION TO FILE FORM S-1
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In conjunction with the issuance of the Convertible Note and the Warrant, the
Company intends to file a post-effective amendment to its registration statement
no. 333-74607 on Form S-1 with the Securities and Exchange Commission within the
next 30 days. The post-effective amendment to the Form S-1 will further detail
the Company's business strategy and will cover the registration of 2,100,000
shares of the Common Stock, amended to include shares issuable upon conversion
of the Convertible Note and the exercise of the Warrant. The number of shares
was determined based on the current requirements for registration contained in
the Convertible Note and Warrant.
Item 7. Financial Statements and Exhibits
(b) Pro Forma Financial Information. (to be filed by amendment)
(c) Exhibits. (See following page.)
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EXHIBITS
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Exhibit Number
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2.1 Agreement and Plan of Merger by and among Lahaina Acquisitions, Inc., LAHA No. 1,
Inc., Mongoose Investments, LLC, The Accent Group, Inc. and Accent Mortgage
Services, dated as of July 21, 1999.
2.2 Amendments to the Agreement and Plan of Merger by and among Lahaina Acquisitions,
Inc., LAHA No. 1, Inc., Mongoose Investments, LLC, The Accent Group, Inc. and
Accent Mortgage Services, dated as of August 19, 1999.
10.1 Securities Purchase Agreement by and between Lahaina Acquisitions, Inc. and GCA
Strategic Investment Fund Limited, dated as of August 19, 1999.
10.2 9% Convertible Note of Lahaina Acquisitions, Inc. payable to GCA Strategic Investment
Fund Limited in the principal amount of $500,000.
10.3 Registration Rights Agreement by and between Lahaina Acquisitions, Inc. and GCA
Strategic Investment Fund Limited, dated as of August 19, 1999.
10.4 Common Stock Purchase Warrant in the amount of 50,000 shares to be
issued by Lahaina Acquisitions, Inc. and purchased by LKB Financial, LLC.
10.5 Stock Pledge Agreement by and between Mongoose Investments, LLC and GCA Strategic
Investment Fund Limited, dated as of August 18, 1999.
10.6 Escrow Agreement by and among Lahaina Acquisitions, Inc., GCA Strategic Investment
Fund Limited and Kim T. Stevens, Esq., dated as of August 19, 1999.
10.7 Consulting Agreement by and between Gerald F. Sullivan and Lahaina
Acquisitions, Inc., dated as of June 1, 1999 (1).
10.8 Consulting Agreement by and between Gator Glory, LLC and Lahaina Acquisitions, Inc.,
dated as of June 1, 1999 (1).
10.9 Settlement and Release Agreement by and between Lahaina Acquisitions, Inc. and Sherry
Klein, dated as of June 30, 1999 (1).
10.10 Purchase and Sale Agreement by and between Lahaina Acquisitions, Inc. and Mongoose
Investments, LLC, dated as of June 30, 1999 (1).
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10.11 Escrow Agreement by and among Lahaina Acquisitions, Inc., LAHA No. 1, Inc.,
Mongoose Investments, LLC, The Accent Group, Inc., Accent Mortgage Services, Inc.
and Altman, Kritzer & Levick, P.C., dated as of August 16, 1999.
99.1 Form of Press Release dated July 22, 1999.
99.2 Form of Press Release dated August 4, 1999.
99.3 Form of Press Release dated August 5, 1999.
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(1) Incorporated by reference to the Company's Quarterly Report on Form
10-Q, filed on August 23, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
LAHAINA ACQUISITIONS, INC.
Date: August 30, 1999 By: /s/ L. Scott Demerau
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L. Scott Demerau
Chief Executive Officer and President
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EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
by and among
LAHAINA ACQUISITIONS, INC. a Colorado corporation,
LAHA NO. 1, INC., a Georgia corporation,
THE ACCENT GROUP, INC., a Georgia corporation,
ACCENT MORTGAGE SERVICES, INC., a Georgia corporation and
MONGOOSE INVESTMENTS, LLC, Georgia limited liability company
Dated as of July 21, 1999
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS..............................................................................................6
ARTICLE II
THE MERGER..............................................................................................10
SECTION 2.1 The Merger.................................................................................10
SECTION 2.2 Effective Time.............................................................................10
SECTION 2.3 Effects of the Merger......................................................................10
SECTION 2.4 Articles of Incorporation and Bylaws.......................................................10
SECTION 2.5 Directors..................................................................................11
SECTION 2.6 Officers...................................................................................11
SECTION 2.7 Conversion of Securities...................................................................11
ARTICLE III
CLOSING.................................................................................................13
SECTION 3.1 Location; Date.............................................................................13
SECTION 3.2 Deliveries.................................................................................13
ARTICLE IV
DISSENTING SHAREHOLDERS; EXCHANGE OF
CERTIFICATES REPRESENTING SHARES........................................................................14
SECTION 4.1 Exchange of Certificates Representing Shares...............................................14
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACCENT ...............................................................15
SECTION 5.1 Organization...............................................................................15
SECTION 5.2 Capitalization.............................................................................16
SECTION 5.3 Authority Relative to this Agreement.......................................................16
SECTION 5.4 Absence of Undisclosed Liabilities.........................................................17
SECTION 5.5 No Default.................................................................................17
SECTION 5.6 Real Property..............................................................................17
SECTION 5.7 Compliance with Applicable Law.............................................................18
SECTION 5.8 Brokers....................................................................................18
SECTION 5.9 Corporate Opportunity and Successor Liability. ...........................................18
SECTION 5.10 Governmental Authorization.................................................................19
SECTION 5.11 Disclosure.................................................................................19
SECTION 5.12 Absence of Certain Changes.................................................................19
SECTION 5.13 Litigation.................................................................................20
SECTION 5.14 Environmental Matters......................................................................20
SECTION 5.15 Material Contracts.........................................................................21
SECTION 5.16 Pro Forma Consolidated Financial Statements................................................21
SECTION 5.17 Licenses...................................................................................22
SECTION 5.18 Survival of Prior Representations and Warranties...........................................22
SECTION 5.19 Accent Stock Option Plan...................................................................22
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF LAHAINA AND LAHA 1....................................................22
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SECTION 6.1 Organization...............................................................................23
SECTION 6.2 Capitalization.............................................................................23
SECTION 6.3 Authority Relative to this Agreement.......................................................25
SECTION 6.4 Absence of Undisclosed Liabilities.........................................................25
SECTION 6.5 No Default.................................................................................26
SECTION 6.6 Real Property..............................................................................26
SECTION 6.7 Compliance with Applicable Law.............................................................27
SECTION 6.8 Brokers....................................................................................27
SECTION 6.9 Corporate Opportunity and Successor Liability..............................................27
SECTION 6.10 Governmental Authorization................................................................27
SECTION 6.11 Disclosure................................................................................27
SECTION 6.12 SEC Filings...............................................................................28
SECTION 6.13 Financial Statements......................................................................28
SECTION 6.14 Disclosure................................................................................29
SECTION 6.15 Absence of Certain Changes................................................................30
SECTION 6.16 Litigation................................................................................31
SECTION 6.17 Environmental Matters.....................................................................31
SECTION 6.18 Material Contracts........................................................................32
SECTION 6.19 Survival of Prior Representations and Warranties...........................................33
ARTICLE VII
COVENANTS OF ACCENT AND ACCENT MORTGAGE ................................................................33
SECTION 7.1 Conduct of Business of Accent..............................................................33
SECTION 7.2 Shareholder and Board Approval.............................................................33
SECTION 7.3 Fulfillment of the Closing Conditions......................................................34
SECTION 7.4 Payment of Loans...........................................................................34
ARTICLE VIII
COVENANTS OF LAHAINA....................................................................................35
SECTION 8.1 Conduct of Business of Lahaina.............................................................35
SECTION 8.2 Board Approval.............................................................................35
SECTION 8.3 Fulfillment of the Closing Conditions......................................................35
SECTION 8.4 Redemption of Lahaina Preferred Stock.......................................................36
ARTICLE IX
COVENANTS OF THE PARTIES................................................................................36
SECTION 9.1 Filings; Other Action......................................................................36
SECTION 9.2 Public Announcements.......................................................................37
SECTION 9.3 Stock Subscription Agreements, Letters of Investment and Accredited
Investor Questionnaires........................................................................37
ARTICLE X
CONDITIONS TO CONSUMMATION OF THE MERGER................................................................37
SECTION 10.1 Conditions to Each Party's Obligation to Effect the Merger................................37
SECTION 10.2 Conditions to Accent's Obligations to Effect the Merger...................................38
SECTION 10.3 Conditions to Obligations of Lahaina and LAHA 1 to Effect the Merger .....................40
ARTICLE XI
TERMINATION; AMENDMENT; WAIVER..........................................................................43
SECTION 11.1 Termination by Mutual Consent.............................................................43
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SECTION 11.2 Termination by Either Lahaina or Accent...................................................43
SECTION 11.3 Termination by Accent.....................................................................43
SECTION 11.4 Termination by Lahaina....................................................................44
SECTION 11.5 Effect of Termination.....................................................................44
SECTION 11.6 Fees and Expenses.........................................................................44
SECTION 11.7 Extension; Waiver.........................................................................44
ARTICLE XII
MISCELLANEOUS...........................................................................................45
SECTION 12.1 Survival of Representations and Warranties.................................................45
SECTION 12.2 Entire Agreement; Assignment..............................................................45
SECTION 12.3 Amendment.................................................................................46
SECTION 12.4 Validity..................................................................................46
SECTION 12.5 Notices...................................................................................46
SECTION 12.6 Governing Law.............................................................................47
SECTION 12.7 Descriptive Headings......................................................................47
SECTION 12.8 Parties in Interest.......................................................................47
SECTION 12.9 Counterparts..............................................................................48
EXHIBITS
A - Stock Pledge Agreements
B - Property Contribution Agreement
C - Accent Shareholders Agreement, as amended
D - Consulting Agreement
E - Accent Consolidation Documents
F - Form of Opinion Letter by Paul, Hastings, Janofsky & Walker LLP
G - Form of Opinion Letter by Holland & Hart, LLP
H - Settlement Agreement and Release between KRES and Lahaina
I - Purchase and Sale Agreement between Mongoose and Lahaina
J - Form of Opinion Letter by Altman, Kritzer & Levick, P.C.
K - Form of Consent by GCA
L - Third Party Property Valuations
M - The Accent Group Business Executive Summary
SCHEDULES
Schedule 2.4 Articles of Incorporation and Bylaws - Accent
Schedule 2.7 Conversion of Securities - Accent
Schedule 4.1 Exchange of Certificates Representing Shares - Accent
Schedule 5.2 Capitalization - Accent
Schedule 5.4 Absence of Undisclosed Liabilities - Accent
Schedule 5.6 Real Property - Accent
Schedule 5.8 Brokers - Accent
Schedule 5.12 Absence of Certain Changes - Accent
Schedule 5.13 Litigation - Accent
Schedule 5.14 Environmental Matters - Accent
Schedule 5.15 Material Contracts - Accent
Schedule 5.16 Pro forma Consolidated Financial Statements - Accent
Schedule 6.2 Capitalization - Lahaina
Schedule 6.4 Absence of Undisclosed Liabilities - Lahaina
Schedule 6.6 Real Property - Lahaina
Schedule 6.15 Absence of Certain Changes - Lahaina
Schedule 6.17 Environmental Matters - Lahaina
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Schedule 6.18 Material Contracts - Lahaina
Schedule 7.4 Payment of Loans
Schedule 10.1 Payables - Lahaina
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "AGREEMENT"), dated as of July
21, 1999, is by and among LAHAINA ACQUISITIONS, INC., a Colorado corporation
("LAHAINA"), LAHA NO. 1, INC., a Georgia corporation and wholly owned subsidiary
of Lahaina ("LAHA 1"), THE ACCENT GROUP, INC., a Georgia corporation ("ACCENT"),
ACCENT MORTGAGE SERVICES, INC., a Georgia corporation ("ACCENT MORTGAGE") and
MONGOOSE INVESTMENTS, LLC, a Georgia limited liability company ("MONGOOSE").
Mongoose is a party to this Agreement solely for the purpose of making
the representations, warranties and covenants set forth in Sections 7.4, 8.4 and
10.2 hereof.
R E C I T A L S:
This Agreement sets forth the terms and conditions under which LAHA 1
will merge with and into Accent (the "MERGER"). In connection therewith, Accent
will be the Surviving Company of the Merger (the "SURVIVING COMPANY") and shall
become a wholly-owned subsidiary of Lahaina. The Shareholders shall receive
shares of common stock, no par value per share, of Lahaina (the "LAHAINA COMMON
STOCK") in connection with the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Lahaina, LAHA 1, Accent, Accent Mortgage and Mongoose (collectively, the
"PARTIES") hereby agree as follows:
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ARTICLE I
DEFINITIONS
Capitalized terms shall have the meanings provided below or as
parenthetically in this Agreement:
"AGREEMENT" means this Agreement and Plan of Merger.
"ASSUMED DEBT" has the meaning set forth in Section 10.3 hereof.
"ACCENT" has the meaning set forth in the preamble of the Agreement.
"ACCENT BOARD" means the Board of Directors of Accent.
"ACCENT CERTIFICATE" has the meaning set forth in Section 4.1 hereof.
"ACCENT COMMON STOCK" means the common stock, no par value per share,
of Accent.
"ACCENT FINANCIAL STATEMENTS" has the meaning set forth in Section 5.16
hereof.
"ACCENT MATERIAL ADVERSE EFFECT" has the meaning set forth in Section
5.1 hereof.
"ACCENT MATERIAL CONTRACT" means any contract, agreement or
understanding, written or oral, with a value in excess of $10,000, to which
Accent is a party.
"ACCENT REAL PROPERTY" has the meaning set forth in Section 5.6 hereof.
"ARTICLES OF MERGER" means the Articles of Merger filed with the
Secretary of State of Georgia by the Surviving Company pursuant to this
Agreement.
"BALANCE SHEET" means the consolidated balance sheet of Lahaina as of
September 30, 1998 set forth in Lahaina's 10-K filed for the fiscal year ending
September 30,1998.
"BENEFICIAL OWNERS" means those Persons set forth on Schedules
5.2(b)(i) and 5.2(b)(ii) hereto.
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"CLOSING" has the meaning set forth in Section 3.1 hereof.
"CONDITIONS OF RELEASE" has the meaning set forth on Schedule 4.1
hereto. The Conditions of Release are distinct for each Contribution. Conditions
of Release apply only to the Contribution appearing on the same row as such
Conditions of Release on Schedule 4.1 hereto.
"DEMERAU" means L. Scott Demerau.
"DESTINY" means Destiny Holdings, LLC.
"EFFECTIVE TIME" has the meaning set forth in Section 2.2 hereof.
"ENVIRONMENTAL LAWS" means any and all federal, state, local and
foreign laws, judicial decisions, regulations, rules, judgments, orders decrees,
injunctions, permits, licenses, agreements and governmental restrictions or any
agreement or contract with any governmental authority or other third party,
relating to human health, the environment or employee safety, or to pollutants,
contaminants, wastes or chemicals or any toxic, radioactive, ignitable,
corrosive or reactive or otherwise hazardous substances, wastes or materials.
"ENVIRONMENTAL REPORTS" has the meaning set forth in Section 10.3
hereof.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"GBCC" means the Georgia Business Corporation Code.
"GCA" has the meaning set forth in Section 10.2(g) hereof.
"INTERNATIONAL" means International Boulevard Property, L.P., a Georgia
limited partnership.
"LAHA 1" has the meaning set forth in the preamble of the Agreement.
"LAHA 1 COMMON STOCK" has the meaning set forth in Section 2.7 hereto.
"LAHAINA" has the meaning set forth in the preamble of the Agreement.
"LAHAINA BOARD" means the Board of Directors of Lahaina.
"LAHAINA COMMON STOCK" has the meaning set forth in the Recitals to
this Agreement.
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"LAHAINA DISCLOSURE DOCUMENTS" has the meaning set forth in Section
6.14 hereof.
"LAHAINA MATERIAL ADVERSE EFFECT" has the meaning set forth in Section
6.1 hereof.
"LAHAINA MATERIAL CONTRACT" means any contract, agreement or
understanding, written or oral, with a value in excess of $10,000, to which
Lahaina or any Subsidiary of Lahaina is a party.
"LAHAINA PREFERRED STOCK" means the series A preferred stock, no par
value per share, of Lahaina.
"LAHAINA PROXY STATEMENT" has the meaning set forth in Section 6.14
hereof.
"LAHAINA REAL PROPERTY" has the meaning set forth in Section 6.6
hereof.
"LENDER" has the meaning set forth in Section 10.3 hereof.
"LICENSE" has the meaning set forth in Section 5.17 hereof.
"MERGER" means the merger of LAHA 1 with and into Accent pursuant to
the terms and conditions of the Agreement.
"MERGER SHARES" has the meaning set forth in Section 2.7 hereof.
"NOEL" means Noel Associates, Ltd., an Anguilla international business
organization.
"NOEL/DESTINY CONTRIBUTION" has the meaning set forth in Section 10.3
hereof.
"PARTIES" has the meaning set forth in the Recitals to this Agreement.
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency or political
subdivision thereof).
"PLEDGOR" has the meaning set forth in Section 10.1 hereof.
"REDEMPTION CONSIDERATION" has the meaning set forth in Section 8.4
hereof.
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"RETAINED SHARES" has the meaning set forth in Section 4.1 hereof. The
Retained Shares apply only as noted on Schedule 4.1 hereto.
"SEC" means the United States Securities and Exchange Commission.
"SEC REPORT" means any filing made with the SEC.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHAREHOLDERS" means L. Scott Demerau, Julia E. Demerau, Eutopean
Enterprises, LLC., Diana B. Hutsell, Kingdom Generals, LLC, Noel Associates,
Ltd., Destiny Holdings, LLC, Accent Holdings, Inc., Bach Consulting, Inc.,
International Boulevard Property, L.P., Accent Associates, LLC, Sherry
Sagemiller, John Andersen, Fidelity National Bank as Trustee of the David M.
Linfert Self-Directed IRA, Jack Margheson, William McBraer and Wes Stucki.
"SHAREHOLDERS AGREEMENT" means that certain agreement entered into
between Accent and the Shareholders and dated as of July 9, 1999.
"SMYTH" means Richard P. Smyth.
"STOCK PLEDGE AGREEMENT" means those six certain stock pledge
agreements entered into among Accent and (a) Scott and Julia Demerau, (b) Noel
and Destiny, (c) Diana B. Hutsell, (d) Accent Holdings, Inc. (e) International,
and (f) Sherry Sagemiller and John Anderson, respectively, and dated as of July
9, 1999, as attached as Exhibit A hereto.
"SUBSIDIARY" means any corporation, partnership, limited liability
company, association or other entity of which securities or other ownership
interests representing 50% or more of the ordinary voting power are, at the time
as of which any determination is being made, owned or controlled by Accent,
Lahaina or LAHA 1, as applicable.
"SURVIVING COMPANY" means the surviving company of the Merger.
"TERMINATION DATE" has the meaning set forth in Section 12.1 hereof.
"TITLE COMPANY" has the meaning set forth in Section 10.3 hereof.
"TITLE POLICY" has the meaning set forth in Section 10.3 hereof.
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ARTICLE II
THE MERGER
SECTION 2.1 The Merger. At the Effective Time and upon the terms and
subject to the satisfaction or waiver of the conditions of this Agreement, LAHA
1 shall be merged with and into Accent pursuant to Section 14-2-1101 of the
GBCC. Following the Merger, the separate corporate existence of LAHA 1 shall
cease. Accent shall continue as the Surviving Company and shall succeed to and
assume all the rights and obligations of LAHA 1.
SECTION 2.2 Effective Time. As soon as practicable after the
satisfaction or, if permissible, waiver of the conditions set forth in Article X
hereof, the Parties shall execute Articles of Merger and the Surviving Company
shall cause such documents to be filed with the Secretary of State of the State
of Georgia, and shall take all such other and further actions as may be required
by law to make the Merger effective. The Merger shall become effective at such
time as the Articles of Merger referenced above are duly filed with and accepted
by the Secretary of State of the State of Georgia (the "EFFECTIVE TIME").
SECTION 2.3 Effects of the Merger. The Merger shall have the effects
set forth in the GBCC. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the properties, rights, privileges,
powers and franchises of Accent and LAHA 1 shall vest in the Surviving Company
and all debts, liabilities and duties of Accent and LAHA 1 shall become the
debts, liabilities and duties of the Surviving Company.
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SECTION 2.4 Articles of Incorporation and Bylaws.
(a) The Articles of Incorporation of Accent (attached hereto as
Schedule 2.4(a)) in effect at the Effective Time shall be the Articles of
Incorporation of the Surviving Company until amended in accordance with
applicable law.
(b) The Bylaws of Accent (attached hereto as Schedule 2.4(b)) in effect
at the Effective Time shall be the Bylaws of the Surviving Company until amended
in accordance with applicable law.
SECTION 2.5 Directors. As a result of the Merger, a change in the
directors of Lahaina shall occur. Immediately following the Merger, the
directors of Lahaina shall number five, four of whom shall be Demerau, Sherry
Sagemiller, Bart Siegel and Betty Sullivan. The remaining director shall be an
independent director and shall be appointed by mutual consent of Demerau and
Smyth. Each director shall hold office from the Effective Time in accordance
with the Articles of Incorporation and Bylaws of the Surviving Company and until
his or her successor is duly elected and qualified. At such time as the number
of directors of Lahaina is increased the newly appointed or elected director
shall be an independent director.
SECTION 2.6 Officers. The officers of Accent immediately prior to the
Effective Time shall be the initial officers of the Surviving Company, each to
hold office from the Effective Time in accordance with the Articles of
Incorporation and Bylaws of the Surviving Company, and until his or her
successor is duly appointed and qualified. A chief financial officer with
extensive experience working with a public company and filing SEC Reports and
who is mutually acceptable to Demerau and Smyth shall be recruited.
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SECTION 2.7 Conversion of Securities. At the Effective Time, by virtue
of the Merger and without any action on the part of the Parties or the holder of
any of the following securities:
(a) Each share of Accent Common Stock issued and outstanding
immediately prior to the Effective Time (other than treasury shares to be
canceled as provided in this Section), by virtue of the Merger and without any
action on the part of the holders thereof, shall be canceled and extinguished
and converted into the right to receive the number of shares of Lahaina Common
Stock opposite each Shareholder's name as set forth on Schedule 2.7(a) hereto,
the sum of which shall total the right to hold 13,251,000 shares of Lahaina
Common Stock (the "MERGER SHARES"). Any shares of Accent Common Stock held in
the treasury of Accent immediately prior to the Effective Time shall be
canceled;
(b) Each share of common stock, par value $0.01 per share, of LAHA 1
(the "LAHA 1 COMMON STOCK"), issued and outstanding immediately prior to the
Effective Time, by virtue of the Merger and without any action on the part of
the holder thereof, shall be converted into and become one fully paid
nonassessable share of the common stock of the Surviving Company; and
(c) The Certificates evidencing the Merger Shares shall contain the
following legend:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED ("THE SECURITIES ACT"), OR WITH ANY
SECURITIES REGULATORY AUTHORITY OF ANY STATE. SUCH SECURITIES MAY NOT
BE SOLD, TRANSFERRED, EXCHANGED, ENCUMBERED, HYPOTHECATED, PLEDGED NOR
MAY ANY OTHER ACTION BE TAKEN TO DISPOSE OF, PLACE ANY LIEN UPON, OR
OTHERWISE VEST OR PROVIDE ANY THIRD PARTY WITH ANY INTEREST
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WHATSOEVER IN OR TO ANY OF THE SHARES REPRESENTED BY THIS CERTIFICATE
(A "DISPOSITION") UNLESS AND UNTIL SUCH TIME AS THE HOLDER OF THIS
CERTIFICATE MEETS THE REQUIREMENTS OF RULE 144 OR AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND THE HOLDER IS FURNISHED WITH
AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO LAHAINA THAT THE
PROPOSED DISPOSITION CAN BE EFFECTUATED IN ACCORDANCE WITH SUCH
EXEMPTION.
ARTICLE III
CLOSING
SECTION 3.1 Location; Date. The closing (the "CLOSING") of the Merger
shall be held at the offices of Paul, Hastings, Janofsky & Walker LLP in
Atlanta, Georgia as promptly as practicable hereafter (and in any event within
ten business days) after satisfaction or waiver of the conditions to the
consummation of the Merger set forth in Article X hereof, unless the Parties
agree in writing to another date or place.
SECTION 3.2 Deliveries. At the Closing,
(a) Lahaina shall make the Merger Shares available for delivery to the
Shareholders in accordance with the procedures set forth in Section 4.1 hereto,
with such Merger Shares registered in the name of each Shareholder.
(b) The Surviving Company shall deliver to the Secretary of State of
the State of Georgia duly executed and verified copies of the Articles of Merger
as required by the GBCC;
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(c) The Parties shall deliver to each other the respective agreements,
legal opinions and other documents and instruments specified with respect to
them in Article X hereof and such other items as may be reasonably requested;
and
(d) The Parties shall take all such other and further actions as may be
required by the GBCC to make the Merger effective upon the terms and subject to
the conditions set forth in this Agreement.
ARTICLE IV
DISSENTING SHAREHOLDERS; EXCHANGE OF
CERTIFICATES REPRESENTING SHARES
SECTION 4.1 Exchange of Certificates Representing Shares.
(a) As soon as practicable after the Effective Time and upon the
surrender of each certificate representing Accent Common Stock (each an "ACCENT
CERTIFICATE"), properly endorsed, Lahaina shall promptly issue the Shareholders
certificates evidencing each Shareholder's initial allocation of the Merger
Shares as set forth on Schedule 4.1(a) hereto and each surrendered Accent
Certificate shall forthwith be canceled. Certain of the Merger Shares allocated
to the Shareholders pursuant to Schedule 4.1(b) shall be held by Lahaina pending
satisfaction of certain Conditions of Release as set forth on Schedule 4.1(b)
(the "Retained Shares").
As and when the Conditions of Release are fully satisfied for a
particular Shareholder, the Lahaina Board shall cause Lahaina to release to such
Shareholder the Retained Shares.
Until surrendered and exchanged in accordance with this Section 4.1,
each Accent Certificate shall represent solely the right to receive the Merger
Shares. In the event the Conditions of Release are not fully satisfied within
the timeframe defined in Section 4.1, or as otherwise modified by the Lahaina
Board, the Shareholders shall cease to have any rights with
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respect to the Retained Shares. The Retained Shares shall be canceled and, from
and after the Effective Time, the holders of the Accent Certificates shall cease
to have any rights with respect to the Accent Common Stock except as otherwise
provided herein or by law.
(b) Lahaina shall pay any transfer or similar taxes required by reason
of the exchange of Accent Common Stock for shares of Lahaina Common Stock.
(c) At and after the Effective Time, there shall be no transfers on the
transfer books of Accent of any Accent Common Stock, and the ledgers of Accent
shall be closed, except as to Lahaina. If, after the Effective Time,
certificates formerly representing Accent Common Stock are presented to the
Surviving Company for transfer, they shall be canceled and exchanged by Lahaina
for the Merger Shares, as provided in this Article IV.
(d) In the event any Accent Certificate shall have been lost, stolen or
destroyed, upon the making and delivery of an affidavit of that fact by the
person claiming such Accent Certificate to have been lost, stolen or destroyed
and, if required by Lahaina, the posting by such person of a bond in such
reasonable amount as Lahaina may direct as indemnity against any claim that
would be made against the Surviving Company, LAHA 1 or Lahaina with respect to
such Accent Certificate, Lahaina will issue in exchange for such lost, stolen or
destroyed Accent Certificate the applicable Merger Shares. None of Lahaina, the
Surviving Company, or any other person shall be liable to any former Accent
shareholder for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACCENT
Accent represents and warrants to Lahaina and LAHA 1 as follows:
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SECTION 5.1 Organization. Accent is a corporation duly organized,
validly existing and in good standing under the laws of the State of Georgia,
and has the corporate power to carry on its business as it is now being
conducted or presently proposed to be conducted. Accent is duly qualified as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary, including those
states in which Accent conducts its mortgage-related business, except where the
failure to be so qualified would not individually or in the aggregate have a
material adverse effect on the business, assets, liabilities, or existing or
prospective business, results of operations, or financial condition of Accent
and its Subsidiaries, taken as a whole (an "ACCENT MATERIAL ADVERSE EFFECT,"
which term contemplates materiality being determined given the current cash,
cash flow and competitive position of Accent and its continuing as a going
concern and which term shall be broadly applicable for the purposes of this
Agreement).
Accent has delivered to Lahaina correct and complete copies of the
Articles of Incorporation, Bylaws and Resolutions of the Accent Board.
SECTION 5.2 Capitalization.
The authorized capital stock of Accent consist of 100,000,000 shares of
Accent Common Stock. As of the date of this Agreement, 1,325,100 shares of
Accent Common Stock are issued and outstanding, all of which are held by the
Shareholders. All of the issued and outstanding shares of Accent Common Stock
are validly issued, fully paid and nonassessable and free of preemptive rights.
Except as set forth on Schedule 5.2 or as otherwise disclosed in this Agreement,
including the Exhibits and Schedules hereto, as of the date of this Agreement,
there are no options, warrants, subscriptions, calls, rights, convertible
interests or other agreements or commitments with respect to shares of Accent
Common Stock obligating Accent to issue, transfer, sell, redeem, or repurchase
or otherwise acquire any of its shares.
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SECTION 5.3 Authority Relative to this Agreement. Accent has the power
to enter into this Agreement and to carry out its obligations hereunder. The
execution, delivery and performance of this Agreement by Accent, the Merger and
the consummation by Accent of the transactions contemplated hereby have been
duly authorized by the Accent Board and the Shareholders. The Accent Board (by
consent action or at meetings duly called and held) has unanimously determined
that the transactions contemplated hereby are fair to and in the best interests
of Accent. No other corporate proceedings on the part of Accent are necessary to
authorize this Agreement or the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by an authorized officer of
Accent and constitutes a valid and binding agreement of Accent, enforceable
against Accent in accordance with its terms.
SECTION 5.4 Absence of Undisclosed Liabilities. Except as disclosed on
Schedule 5.4 hereto or as otherwise disclosed in this Agreement, including the
Exhibits and Schedules hereto, Accent does not have any liabilities or
obligations with a total value greater than $10,000 (whether absolute, accrued,
contingent or otherwise) of a nature that would be required by GAAP or by
cash-basis accounting to be disclosed in a balance sheet (or reflected in the
notes thereto), except liabilities incurred or accrued in the ordinary course of
business since their respective dates of formation.
SECTION 5.5 No Default. Accent is not in violation or breach of, or
default under, nor has any event occurred which would result in any acceleration
under (and no event has occurred which with notice or the lapse of time or both
would constitute a violation or breach of, or a default under, or result in any
acceleration under), any term, condition or provision of (i) its Articles of
Incorporation or its Bylaws, (ii) any note, bond, mortgage, deed of trust,
security interest, indenture, license, agreement, plan, contract, lease,
commitment or other
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instrument or obligation to which Accent is a party or by which Accent or any of
its respective properties or assets may be bound or affected, (iii) any order,
writ, injunction, decree, statute, rule or regulation applicable to Accent or
any of its respective properties or assets, or (iv) any License.
SECTION 5.6 Real Property. Except as set forth on Schedule 5.6, Accent
has (a) good and marketable title, free from liens, to all real property in
which it has an ownership interest, as set forth together with the legal
description of each such property on Schedule 5.6(a), and (b) a valid option to
purchase the real property set forth together with the legal description of each
such property on Schedule 5.6(b) hereto (collectively, the "ACCENT REAL
PROPERTY"). Accent believes the approximate fair market value of each property,
net of debt, described on Schedule 5.6(a) and 5.6(b) to be not less than the
value set forth for such property on Schedule 5.6(c). All parties acknowledge,
however, that Accent does not guarantee the value of such property, that actual
values could differ from those estimated, and that such differences could be
material. Additionally, all parties acknowledge that there is and can be no
assurance that the properties described on Schedule 5.6(b) hereto will in fact
be acquired by Accent or Lahaina or acquired on the terms and conditions
proposed. By the Effective Time, Accent will have delivered to Lahaina correct
and complete copies of the conveyance documents relating to the Accent Real
Property. Further, attached as Exhibit L to this Agreement is a third party
valuation of each significant parcel of Real Property.
SECTION 5.7 Compliance with Applicable Law. Accent is in substantial
compliance with all material applicable laws.
SECTION 5.8 Brokers. Except as set forth on Schedule 5.8, no
consultant, broker, finder or investment banker is entitled to any brokerage,
finder's fee or other fee or
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commission payable by or claimed to be owed by Accent in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Accent.
SECTION 5.9 Corporate Opportunity and Successor Liability. No
Shareholder, director or officer of Accent has or will have any claim against
Accent, the Surviving Company or any of their successors for the wrongful taking
of a corporate opportunity in connection with this Agreement.
SECTION 5.10 Governmental Authorization. No notification report need be
filed, and no governmental consent to the transactions contemplated by this
agreement need be sought, including under the HSR Act.
SECTION 5.11 Disclosure. There is no fact known to Accent that has not
been set forth in this Agreement that has specific application to Accent (other
than general economic or industry specific conditions) and that results in (or,
as far as Accent can reasonably foresee, materially threatens,) an Accent
Material Adverse Effect.
SECTION 5.12 Absence of Certain Changes. Except as set forth in
Schedule 5.12 hereto or as otherwise disclosed in this Agreement, including the
Schedules and Exhibits, since its date of incorporation, Accent has conducted
its business in the ordinary course of business in connection with its formation
and initial operations and there has not been:
(a) Any event, occurrence, development or state of circumstances or
facts which has had or could reasonably be expected to have an Accent Material
Adverse Effect;
(b) Any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of Accent, or any
repurchase, redemption or other
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acquisition by Accent of any outstanding shares of capital stock or other
securities of, or other ownership interests in, Accent or its Subsidiaries;
(c) Any amendment of any material term of any outstanding security of
Accent; or
(d) Any (i) grant of any severance or termination pay to any director,
officer or employee of Accent, (ii) increase in benefits payable
under any existing severance or termination pay policies or
employment agreements of Accent, (iii) entering into of any
employment, deferred compensation or other similar agreement (or
any amendment to any such existing agreement) with any director,
officer or employee of Accent, or (iv) increase in compensation,
bonus or other benefits payable to directors, officers or employees
of Accent other than any such increases payable to employees other
than directors or officers in the ordinary course of business.
SECTION 5.13 Litigation. Except as set forth on Schedule 5.13 hereto,
or as otherwise disclosed in this Agreement, including the Exhibits and
Schedules hereto, there is no material action, suit, investigation or proceeding
pending, or to the best knowledge of Accent, any threatened, or any
circumstances which are likely to give rise to any such proceedings, against or
affecting Accent or any of its respective properties or any of its officers or
directors in their capacity as officers or directors of Accent (or any basis
therefor) before any court or arbitrator or before or by any governmental body,
agency or official as of the date hereof.
SECTION 5.14 Environmental Matters. To Accent's knowledge:
(a) Except as set forth on Schedule 5.14(a) hereto:
(i) no notice, notification, demand, request for information,
citation, summons or order has been received, no complaint has been filed, no
penalty has been assessed, and no investigation, action, claim, suit,
proceeding or review (or any basis therefor) is pending or, to the knowledge of
Accent, is threatened by any governmental entity or other Person with respect to
any matter relating to Accent and relating to any Environmental Law;
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(ii) Accent is and has been in compliance with all Environmental
Laws and have obtained and are in compliance with all permits, licenses,
franchises, certificates, approvals and other similar authorizations of
governmental authorities relating to or required by Environmental Laws and
affecting the business of Accent; and
(iii) there are no liabilities of or relating to Accent of any kind
whatsoever, whether contingent or fixed, actual or potential, known or unknown,
arising under or relating to any Environmental Law that have had or could
reasonably be expected to have an Accent Material Adverse Effect and there are
no facts, conditions, situations or set of circumstances that would reasonably
be expected to result in or be the basis for any such liability.
(b) Except as set forth on Schedule 5.14(b) hereto, there has been no
environmental investigation, study, audit, test, review or other analysis
conducted of which Accent has knowledge in relation to the current or prior
business of Accent or any property or facility now or previously owned or leased
by Accent.
(c) Accent does not own, lease or operate, and never has owned, leased
or operated, any real property, and does not conduct and never has conducted any
operations, in New York.
SECTION 5.15 Material Contracts.
(a) Accent has disclosed in writing to Lahaina all Accent Material
Contracts including those listed on Schedule 5.15 attached hereto. Accent is not
in breach of or default under any such Accent Material Contract, except for such
breaches and defaults which would not reasonably be expected to have,
individually or in the aggregate, an Accent Material Adverse Effect.
(b) Except for certain non-competition covenants between Demerau and
Malibu Worldwide Entertainment, Inc. relating to the operation of certain
entertainment centers, Accent is not a party to or bound by any non-competition
agreement or any other agreement or
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obligation which purports to limit in any material respect the manner in which,
or the localities in which, Accent is entitled to conduct any part of its
business.
SECTION 5.16 Pro Forma Consolidated Financial Statements.
(a) To Accent's knowledge, the unaudited pro forma consolidated
financial statements of Accent at and as of June 30, 1999 attached as Schedule
5.16 hereto presents fairly and in all material respects, in conformity with
generally accepted accounting principles applied on a consistent basis (except
as may be indicated in the notes thereto), the financial position of Accent as
of the date of such statements.
(b) The pro forma consolidated financial statements have been prepared
for purposes of this Agreement only and are based on certain assumptions and
estimates, some or all of which may not materialize or may not materialize at
the times stated. Actual results may vary from those estimated, and such
variances could be material.
SECTION 5.17 Licenses. Accent holds any and all licenses required by
any governmental or regulatory agency in any jurisdiction in order for Accent
and its Subsidiaries to conduct their respective businesses as currently
conducted (the "LICENSES"). All Licenses are current and valid and Accent and
its Subsidiaries are in full compliance therewith.
SECTION 5.18 Survival of Prior Representations and Warranties. All
representations and warranties made to Accent in that certain Property
Contribution Agreement dated July 9, 1999, a copy of which is attached hereto as
Exhibit B, shall survive for a period of three years from July 9, 1999 and shall
inure to the benefit of Lahaina.
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SECTION 5.19 Accent Stock Option Plan. Lahaina shall not have any
responsibility for or liability arising from the 1999 Accent Stock Option Plan,
attached as part of Exhibit E hereto.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF LAHAINA AND LAHA 1
Lahaina and LAHA 1, jointly and severally, represent and warrant to
Accent as follows:
SECTION 6.1 Organization. Lahaina is a corporation duly organized,
validly existing and in good standing under the laws of the State of Colorado
and has the corporate power to carry on its business as it is now being
conducted or presently proposed to be conducted. Lahaina is duly qualified as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities make such qualification necessary, except where the
failure to be so qualified would not individually or in the aggregate have a
material adverse effect on the business, assets, liabilities, results of
operations or financial condition of Lahaina and its Subsidiaries, taken as a
whole (a "LAHAINA MATERIAL ADVERSE EFFECT," which term contemplates materiality
being determined given the current cash, cash flow and competitive position of
Lahaina and its Subsidiaries and their continuing as a going concern and which
term shall be broadly applicable for the purposes of this Agreement).
LAHA 1 is a corporation duly organized, validly existing and in good
standing under the laws of the State of Georgia. LAHA 1 has not engaged in any
business since the date of its incorporation, other than in connection with this
Agreement.
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Both Lahaina and LAHA 1 have delivered to Accent correct and complete
copies of their respective Articles of Incorporation, Bylaws and Resolutions of
the Board.
SECTION 6.2 Capitalization.
(a) The authorized capital stock of Lahaina consists of 800,000,000
shares of Lahaina Common Stock and 10,000,000 shares of Lahaina Preferred Stock.
As of the date of this Agreement, 2,433,833 shares of Lahaina Common Stock,
including shares issued in connection with the redemption of 1,910,000 shares of
Lahaina Preferred Stock, are issued and outstanding. All of the issued and
outstanding Lahaina Common Stock and Lahaina Preferred Stock has been validly
issued, fully paid and nonassessable and free of preemptive rights. As of the
date of this Agreement, various warrants obligating Lahaina to issue a total of
275,000 shares of Common Stock, the terms of which are set forth on Schedule
6.2(a)(i) hereto and a convertible note in the principal amount of $775,000
convertible into approximately 885,714 shares of Lahaina Common Stock plus
additional shares of Lahaina Common Stock due as a result of accrued interest or
other related fees, are outstanding, Except for those set forth above, there are
no shares of capital stock of Lahaina issued or outstanding or any options,
warrants, subscriptions, calls, rights, convertible securities or other
agreements or commitments obligating Lahaina to issue, transfer, sell, redeem,
repurchase or otherwise acquire any shares of its capital stock or securities,
including but not limited to the shares of Lahaina Common Stock registered
pursuant to Lahaina's registration statement on Form S-1 (Registration No.
333-74607). The capitalization of Lahaina as of the Closing is as set forth on
Schedule 6.2(a)(ii) hereto.
(b) Schedule 6.2(b)(i) sets forth those Persons which, after the
Merger, will beneficially own or control five percent or more of the Lahaina
Common Stock, including any options, warrants, subscriptions, calls, rights,
convertible securities or other agreements or commitments obligating Lahaina to
issue, transfer, sell, redeem, repurchase or otherwise
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acquire any shares of its capital stock or securities, regardless of such
Person's relationship, to Lahaina.
(c) Schedule 6.2(b)(ii) sets forth those Persons who hold a beneficial
ownership interest in any Person which, after the Merger, will beneficially own
or control five percent or more of the Lahaina Common Stock, including any
options, warrants, subscriptions, calls, rights, convertible securities or other
agreements or commitments obligating Lahaina to issue, transfer, sell, redeem,
repurchase or otherwise acquire any shares of its capital stock or securities,
regardless of such Person's relationship, other than as a shareholder, to
Lahaina.
For the purposes of Schedules 6.2(b)(i) and 6.2(b)(ii), a Person is
deemed to be the beneficial owner, or have control, of the Lahaina Common Stock
if he, she or it is capable of exercising either investment power (the power to
dispose or to direct the disposition of the securities) or voting power (the
power to vote or to direct the voting of the securities) over the Lahaina Common
Stock. Thus, two or more Persons may be deemed to be the beneficial owners
of the same shares of Lahaina Common Stock and may even comprise a "group" that
is deemed to be a Person required to report its beneficial ownership.
SECTION 6.3 Authority Relative to this Agreement. Each of Lahaina and
LAHA 1 has the power to enter into this Agreement and to carry out its
obligations hereunder. The execution, delivery and performance of this Agreement
by Lahaina and LAHA 1, the Merger and the consummation by Lahaina and LAHA 1 of
the transactions contemplated hereby, including, but not limited to, the
Consulting Agreement attached as Exhibit D hereto, have been duly authorized by
the Board of Directors of each of Lahaina and LAHA 1 and by Lahaina as the sole
shareholder of LAHA 1. The Board of Directors of each of Lahaina and LAHA 1 (at
meetings duly called and held) has unanimously determined that the transactions
contemplated hereby are fair to and in the best interests of Lahaina and LAHA 1,
respectively. No other corporate proceedings on the part of Lahaina or LAHA 1
are necessary to authorize
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this Agreement or the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by an authorized officer of each of
Lahaina and LAHA 1 and constitutes a valid and binding agreement of each of
Lahaina and LAHA 1, enforceable against Lahaina and LAHA 1 in accordance with
its terms.
SECTION 6.4 Absence of Undisclosed Liabilities. Except as set forth on
Schedule 6.4, neither Lahaina nor LAHA 1, nor any Subsidiary of either Lahaina
or LAHA 1, has any liabilities or obligations with a total value greater than
$10,000 (whether absolute, accrued, contingent or otherwise) of a nature that
would be required by GAAP or by cash-basis accounting to be disclosed in a
balance sheet (or reflected in the notes thereto), except liabilities incurred
or accrued in the ordinary course of business since March 31, 1999 or otherwise
disclosed in its filings with the SEC, or as otherwise disclosed to Accent in
writing.
SECTION 6.5 No Default. Neither Lahaina nor LAHA 1 is in violation or
breach of, or default under, nor has any event occurred which would result in
any acceleration under (and no event has occurred which with notice or the lapse
of time or both would constitute a violation or breach of, or a default under,
or result in any acceleration under), any term, condition or provision of (i)
its Articles of Incorporation or its Bylaws, (ii) any note, bond, mortgage, deed
of trust, security interest, indenture, license, agreement, plan, contract,
lease, commitment or other instrument or obligation to which either Lahaina or
LAHA 1 is a party or by which Lahaina or LAHA 1 or any of Lahaina's or LAHA 1's
respective properties or assets may be bound or affected, (iii) any order, writ,
injunction, decree, statute, rule or regulation applicable to Lahaina or LAHA 1
or any of its respective properties or assets, or (iv) any license.
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SECTION 6.6 Real Property. Except as set forth on Schedule 6.6, each of
Lahaina and LAHA 1 has (a) good and marketable title, free from liens, to all
real property in which it has an ownership interest, as set forth together with
the legal description of each such property on Schedule 6.6(a), and (b) a valid
option to purchase the real property set forth together with the legal
description of each such property on Schedule 6.6(b) hereto (collectively, the
"LAHAINA REAL PROPERTY"). Lahaina and LAHA 1 believe the approximate fair market
value of each property, net of debt, described on Schedule 6.6(a) and 6.6(b) to
be not less than the value set forth for such property on Schedule 6.6(c). All
parties acknowledge, however, that Lahaina does not guarantee the value of such
property, that actual values could differ from those estimated, and that such
differences could be material. Additionally, all parties acknowledge that there
is and can be no assurance that the properties described on Schedule 6.6(b) will
in fact be acquired by Lahaina or acquired on the terms and conditions proposed.
By the Effective Time, Lahaina and LAHA 1 will have delivered to Accent correct
and complete copies of the conveyance documents relating to the Lahaina Real
Property.
SECTION 6.7 Compliance with Applicable Law. Lahaina and LAHA 1 are in
substantial compliance with all material applicable laws.
SECTION 6.8 Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's fee or other fee or commission payable by Lahaina or
LAHA 1 in connection with the transactions contemplated by this Agreement based
upon arrangements made by or on behalf of Lahaina.
SECTION 6.9 Corporate Opportunity and Successor Liability. No
shareholder, director or officer of Lahaina or LAHA 1 has or will have any claim
against either Lahaina or
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LAHA 1 or any of their successors for the wrongful taking of a corporate
opportunity in connection with this Agreement.
SECTION 6.10 Governmental Authorization. No notification report need be
filed, and no governmental consent to the transactions contemplated by this
agreement need be sought, including under the HSR Act.
SECTION 6.11 Disclosure. There is no fact known to either Lahaina or
LAHA 1 that has not been set forth in this Agreement that has specific
application to either Lahaina or LAHA 1 (other than general economic or industry
specific conditions) and that materially adversely affects (or, as far as either
Lahaina or LAHA 1 can reasonably foresee, materially threatens,) the assets,
business, prospects, financial condition, or results of operations of Lahaina or
LAHA 1 (on a consolidated basis).
SECTION 6.12 SEC Filings.
(a) Lahaina has delivered, or the following were available, to Accent:
(i) its Registration Statement on Form S-1 (Registration No.
333-74607) as declared effective by the SEC;
(ii) its annual reports on Form 10-K for its fiscal years ended
September 30, 1998 and 1997;
(iii) information statements relating to meetings of, or
actions without meeting taken by, the shareholders of Lahaina held since
December 31, 1998, to the extent that such information statements exist; and
(iv) all of its other reports, statements, schedules and
registration statements filed with the SEC since December 31, 1998.
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(b) As of its filing date, each such report or statement filed pursuant
to the Exchange Act complied as to form in all material respects with the
requirements of the Exchange Act and did not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
(c) Each such registration statement, as amended or supplemented, if
applicable, filed pursuant to the Securities Act as of the date such statement
or amendment became effective, complied as to form in all material respects with
the requirements of the Securities Act and did not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading.
SECTION 6.13 Financial Statements.
(a) To Lahaina's knowledge, the audited consolidated financial
statements and unaudited consolidated interim financial statements of Lahaina
included in its annual reports of Form 10-K referred to in Section 6.12 hereof
and in each of Lahaina's 10-Qs present fairly in all material respects, in
conformity with generally accepted accounting principles applied on a consistent
basis (except as may be indicated in the notes thereto), the consolidated
financial position of Lahaina and its consolidated subsidiaries as of the dates
thereof and their consolidated results of operations and cash flows for the
periods then ended (subject to normal year-end adjustments in the case of any
unaudited interim financial statements).
(b) To Lahaina's knowledge, the unaudited, consolidated financial
statements of the Company at and as of March 31, 1999 filed in the most recent
Lahaina 10-Q present fairly in all material respects, in conformity with
generally accepted accounting principles applied on a consistent basis (except
as may be indicated in the notes thereto), the consolidated financial position
of Lahaina and its consolidated Subsidiaries as of such date and their
consolidated
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results of operations and cash flows for the three-month period then ended
(subject to normal year-end adjustments).
(c) The preparation of financial statements in conformity with
generally accepted accounting principles requires the management of Lahaina to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the period. Lahaina acknowledges that actual
results could differ from those estimates, resulting in a material misstatement
of the financial position of Lahaina.
SECTION 6.14 Disclosure.
(a) Each document required to be filed by Lahaina with the SEC in
connection with the transactions contemplated by this Agreement (the "LAHAINA
DISCLOSURE DOCUMENTS"), including, without limitation, the Schedule 13E-3, the
Schedule 14D-9, the proxy or information statement of Lahaina (the "LAHAINA
PROXY STATEMENT"), if any, to be filed with the SEC in connection with the
Merger, and any amendments or supplements thereto will, when filed, comply as to
form in all material respects with the applicable requirements of the Exchange
Act, and will not, at the time of the filing thereof, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading.
(b) The documents, certificates, and other writings furnished or to be
furnished by or on behalf of Lahaina or LAHA 1 pursuant to the provisions of
this Agreement, taken together in the aggregate, do not and will not contain any
untrue statement of a material fact, or omit to state any of material fact
necessary to make the statements made, in the light of the circumstances under
which they are made, not misleading.
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SECTION 6.15 Absence of Certain Changes. Except set forth on Schedule
6.15 hereto, since March 31, 1999 or, if not incorporated on March 31, 1999, the
date of incorporation, Lahaina, LAHA 1 and their respective Subsidiaries have
conducted their business in the ordinary course of business consistent with past
practice and there has not been:
(a) Any event, occurrence or development or state of circumstances or
facts which has had or could reasonably be expected to have a Lahaina Material
Adverse Effect;
(b) Any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of Lahaina or LAHA 1,
or any repurchase, redemption or other acquisition by Lahaina, LAHA 1 or their
Subsidiaries of any outstanding shares of capital stock or other securities of,
or other ownership interests in, Lahaina, LAHA 1 or their Subsidiaries;
(c) Any amendment of any material term of any outstanding security of
Lahaina, LAHA 1 or their Subsidiaries; or
(d) Any (i) grant of any severance or termination pay to any director,
officer or employee of Lahaina, LAHA 1 or their Subsidiaries, (ii) increase in
benefits payable under any existing severance or termination pay policies or
employment agreements of Lahaina, LAHA 1 or their Subsidiaries, (iii) entering
into of any employment, deferred compensation or other similar agreement (or any
amendment to any such existing agreement) with any director, officer or employee
of Lahaina, LAHA 1 or their Subsidiaries, or (iv) increase in compensation,
bonus or other benefits payable to directors, officers or employees of Lahaina,
LAHA 1 or their Subsidiaries other than any such increases payable to employees
other than directors or officers in the ordinary course of business.
SECTION 6.16 Litigation. Except as set forth in the most recent Lahaina
10-K, there is no material action, suit, investigation or proceeding pending, or
to the best knowledge of Lahaina, or LAHA 1 any threatened, or any circumstances
which are likely to give rise to any
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such proceedings, against or affecting Lahaina, LAHA 1 or any Subsidiary of
either or any of their respective properties or any of their respective officers
or directors in their capacity as officers or directors of Lahaina, LAHA 1 or
any Subsidiary of either (or any basis therefor) before any court or arbitrator
or before or by any governmental body, agency or official as of the date hereof.
SECTION 6.17 Environmental Matters. To Lahaina's or LAHA 1's knowledge:
(a) Except as set forth on Schedule 6.17(a) hereto:
(i) no notice, notification, demand, request for
information, citation, summons or order has been received, no complaint has been
filed, no penalty has been assessed, and no investigation, action, claim, suit,
proceeding or review (or any basis therefor) is pending or, to the knowledge of
Lahaina or LAHA 1, is threatened by any governmental entity or other Person with
respect to any matter relating to Lahaina, LAHA 1 or any Subsidiary of either
and relating to any Environmental Law;
(ii) Lahaina, LAHA 1 and their Subsidiaries are and have
been in compliance with all Environmental Laws and have obtained and are in
compliance with all permits, licenses, franchises, certificates, approvals and
other similar authorizations of governmental authorities relating to or required
by Environmental Laws and affecting the business of Lahaina, LAHA 1 and their
Subsidiaries; and
(iii) there are no liabilities of or relating to Lahaina,
LAHA 1 or any Subsidiary of either, of any kind whatsoever, whether contingent
or fixed, actual or potential, known or unknown, arising under or relating to
any Environmental Law that have had or could reasonably be expected to have a
Lahaina Material Adverse Effect and there are no facts, conditions, situations
or set of circumstances that would reasonably be expected to result in or be the
basis for any such liability.
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(b) Except as set forth on Schedule 6.17(b) hereto, there has been no
environmental investigation, study, audit, test, review or other analysis
conducted of which Lahaina has knowledge in relation to the current or prior
business of Lahaina, LAHA 1 or any Subsidiary of either, or any property or
facility now or previously owned or leased by Lahaina, LAHA 1 or any Subsidiary
of either.
(c) Neither Lahaina, LAHA 1 nor any Subsidiary of either owns, leases
or operates, or has owned, leased or operated, any real property, or conducts or
has conducted any operations, in New York.
SECTION 6.18 Material Contracts.
(a) Lahaina and LAHA 1 have disclosed in writing to Accent all Lahaina
Material Contracts, including those listed on Schedule 6.18 attached hereto.
Neither Lahaina, LAHA 1 nor any Subsidiary of either, or, to the knowledge of
Lahaina or LAHA 1, any other party is in breach of or default under any such
Lahaina Material Contract, except for such breaches and defaults which would not
reasonably be expected to have, individually or in the aggregate, a Lahaina
Material Adverse Effect.
(b) Neither Lahaina, LAHA 1 nor any Subsidiary of either is a party to
or bound by any non-competition agreement or any other agreement or obligation
which purports to limit in any material respect the manner in which, or the
localities in which, Lahaina, LAHA 1 or any Subsidiary of either is entitled to
conduct any part of its business.
SECTION 6.19 Survival of Prior Representations and Warranties. All
representations and warranties made by Lahaina in that certain Stock Purchase
Agreement by and between Lahaina and Mongoose dated December 7, 1998 or pursuant
thereto shall survive for a period of one year from December 7, 1998.
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ARTICLE VII
COVENANTS OF ACCENT AND ACCENT MORTGAGE
SECTION 7.1 Conduct of Business of Accent. Except as expressly
contemplated by this Agreement, during the period from the date hereof to the
Effective Time, each of Accent and Accent Mortgage shall conduct its respective
operations only according to its ordinary course of business, and each of Accent
and Accent Mortgage shall use its reasonable best efforts to (i) preserve intact
its business organization, (ii) maintain in effect all federal, state and local
Licenses, approvals and authorizations that are required for Accent to carry on
its business, (iii) keep available the services of its officers and employees,
and (iv) maintain its existing relationships with its lenders, suppliers and
others having business relationships with it.
SECTION 7.2 Shareholder and Board Approval. Accent shall take all
action necessary in accordance with applicable law and its Articles of
Incorporation and Bylaws, to consider and vote its approval of this Agreement,
the Merger and the transactions contemplated hereby. The parties acknowledge
that the Merger is subject to the approval of the Accent Board.
SECTION 7.3 Fulfillment of the Closing Conditions. At and prior to the
Closing, Accent shall use its reasonable best efforts to fulfill the conditions
specified in Article X hereof to the extent that the fulfillment of such
conditions is then in its control. In connection with the foregoing, Accent
shall (a) refrain from any actions that would cause any of its representations
and warranties to be inaccurate in any material respect as of the Closing, (b)
execute and deliver the agreements and other documents referenced in Sections
10.1 and
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10.3 hereof, (c) comply in all material respects with all applicable
laws in connection with its execution, delivery and performance of this
Agreement and the Merger, (d) use commercially reasonable efforts to obtain in a
timely manner all necessary waivers, consents and approvals required for the
consummation of the Merger, and (e) use its reasonable best efforts to take, or
cause to be taken, all other actions and to do, or cause to be done, all of the
things reasonably necessary, proper or advisable to consummate and make
effective as promptly as practicable the Merger. Accent shall give Lahaina
prompt written notice of any event or development that occurs or fails to occur
(and that is known to Accent) that gives Accent reason to believe the conditions
set forth in Sections 10.1 and 10.3 hereof will not be satisfied prior to the
Effective Date.
SECTION 7.4 Payment of Loans. Lahaina shall promptly pay and perform,
according to their terms, the loans of which Smyth is the guarantor (the
"Loans," as set forth on Schedule 7.4(a) hereto). Lahaina shall make no cash
dividends or distributions from Lahaina or any of its Subsidiaries, nor shall
Lahaina prepay or make any significant payments on any other loans of any sort,
other than as due in the ordinary course of business, until the Loans are paid.
Lahaina further covenants and agrees to use its best efforts to refinance the
Loans by September 30, 1999 and to release Smyth as guarantor at such time as
the Loans are refinanced. Mongoose shall assume the liabilities associated with
certain notes payable of Lahaina as described on Schedule 7.4(b) hereto.
ARTICLE VIII
COVENANTS OF LAHAINA AND MONGOOSE
SECTION 8.1 Conduct of Business of Lahaina. Except as expressly
contemplated by this Agreement, during the period from the date hereof to the
Effective Time, Lahaina shall
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conduct its operations according to its ordinary course of business consistent
with past practice, and shall use its reasonable best efforts to preserve intact
its business organization and to carry on its business in the manner in which it
was conducting its business in the period immediately prior to the date of this
Agreement. To the extent Lahaina contemplates any event outside the ordinary
course of business, including, but not limited to, amendment of any
organizational or governing documents, the issuance of stock, warrants, or
similar instruments evidencing the right to receive Lahaina Common Stock, and
the employment of any employee, during the period from the date hereof to the
Effective Time, which event is estimated to have a total value greater than
$10,000, Lahaina shall provide Accent with notice of such event. Lahaina shall
only pursue such event with the consent of Accent which shall not be
unreasonably withheld.
SECTION 8.2 Board Approval. Lahaina shall take all action necessary in
accordance with applicable law and its Articles of Incorporation and Bylaws, to
consider and vote its approval of this Agreement, the Merger and the
transactions contemplated hereby. The parties acknowledge that the Merger is
subject to the approval of the Lahaina Board.
SECTION 8.3 Fulfillment of the Closing Conditions. At and prior to the
Closing, Lahaina shall use its reasonable best efforts to fulfill the conditions
specified in Article X hereof to the extent that the fulfillment of such
conditions is then in its control. In connection with the foregoing, Lahaina
shall refrain from any actions that would cause any of its representations and
warranties to be inaccurate in any material respect as of the Closing, execute
and deliver the Agreements and other documents referenced in Sections 10.1 and
10.2 hereof, (c) comply in all material respects with all applicable laws in
connection with its execution, delivery and performance of this Agreement and
the Merger, (d) use commercially reasonable efforts to obtain in a timely manner
all necessary waivers, consents and approvals
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required for the consummation of the Merger, (e) use its reasonable best efforts
to take, or cause to be taken, all other actions and to do, or cause to be done,
all of the things reasonably necessary, proper or advisable to consummate and
make effective as promptly as practicable the Merger and (f) make all filings
with the SEC or any other governmental authority required as a result of the
Merger. Lahaina shall give Accent prompt written notice of any event or
development that occurs or fails to occur (and that is known to Lahaina) that
gives Lahaina reason to believe the conditions set forth in Sections 10.1 and
10.2 hereof will not be satisfied prior to the Effective Date.
SECTION 8.4 Redemption of Lahaina Preferred Stock. Lahaina agrees to
redeem, and Mongoose agrees to submit for redemption, the Lahaina Preferred
Stock held by Mongoose for shares of Lahaina Common Stock at a rate of $5.00 per
share, plus any dividends accrued from the date of this Agreement until the date
of redemption (approximately 405,357 shares of Lahaina Common Stock) (the
"Redemption Consideration"). Lahaina shall pay Mongoose the Redemption
Consideration not later than three days after the Closing. Mongoose agrees not
to exercise any provisions of the Lahaina Preferred Stock for a period of four
days from the Closing.
ARTICLE IX
COVENANTS OF THE PARTIES
SECTION 9.1 Filings; Other Action. Subject to the terms and conditions
herein provided, as promptly as practicable, the Parties shall, using all
reasonable efforts, take, or cause to be taken, all other action and do, or
cause to be done, all other things necessary or appropriate to consummate the
transactions contemplated by this Agreement.
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SECTION 9.2 Public Announcements. (a) Lahaina and LAHA 1 and (b) Accent
shall consult with each other before issuing any press release or otherwise
making any public statements with respect to the transactions contemplated by
this Agreement, including without limitation the Merger, and shall not issue any
such press release or make any such public statement prior to such consultation,
except as may be required by applicable law or by obligations pursuant to any
listing agreement with any securities exchange.
SECTION 9.3 Stock Subscription Agreements, Letters of Investment and
Accredited Investor Questionnaires. Lahaina shall not release any of the Merger
Shares until each Shareholder has delivered to Lahaina a stock subscription
agreement with Accent, a letter of investment with Accent and an investment
questionnaire by which such Shareholder shows that he, she or it qualifies for
an exemption from registration under the Securities Act.
ARTICLE X
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 10.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each Party to effect the Merger shall be
subject to the satisfaction or waiver at or prior to the Effective Time of the
following conditions:
(a) The directors and officers of Lahaina shall resign and new
directors and officers shall be elected. The new directors and officers of
Lahaina shall be as set forth in Sections 2.5 and 2.6 hereof.
(b) Accent and each of Smyth and Sullivan shall enter into a consulting
agreement substantially in the form attached as Exhibit D hereto.
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(c) Certain payables of Lahaina accrued as of the Closing shall be paid
at the Closing, including but not limited to all fees incurred by Paul,
Hastings, Janofsky & Walker LLP in the course of its representation of Lahaina,
as set forth on Schedule 10.1 hereto.
(d) Accent shall enter into a Shareholders' Agreement with the
Shareholders under which the Shareholders agree to vote their stock in favor of
any proposed Merger or Reorganization, including any and all related activities
and undertakings reasonably required in connection therewith.
(e) Accent shall enter into a Stock Pledge Agreement with each of Scott
and Julia Demerau, Diana Hutsell, Noel, Destiny, Accent Holdings, Inc.,
International, Sherry Sagemiller, Jon Andersen and/or any other Persons who have
an interest in the Allocated Shares, and whose interest is subject to
cancellation pursuant to Section 4.1 hereof, (for purposes of this section only,
the "PLEDGORS") under which the Pledgors agree to forfeit their rights under the
pledged stock in the event a default in the performance of any obligation or any
amount due or owing from the Pledgor under one or more subject documents,
including, but not limited to, under the Shareholders' Agreement.
(f) The Parties shall furnish the other with a Secretary's certificate
certifying to the due adoption of the resolutions relating to the Merger and the
actions contemplated by this Agreement, which resolutions shall be attached to
the appropriate Secretary's certificate.
SECTION 10.2 Conditions to Accent's Obligations to Effect the Merger.
The obligations of Accent to effect the Merger shall be subject to satisfaction
or waiver at or prior to the Closing of the following additional conditions:
(a) Each of Lahaina and LAHA 1 shall have performed in all material
respects its obligations under the Agreement required to be performed by it at
or prior to the Closing; the representations and warranties of Lahaina and LAHA
1 contained in this Agreement which are qualified with respect to materiality
shall be true and correct in all respects, and such
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representations and warranties that are not so qualified shall be true and
correct in all material respects in each case of the date of this Agreement and
at and as of the Closing as if made at and as of such time, except as
contemplated by this Agreement; and Accent shall have received a certificate of
the Chairman of the Board or the Treasurer of Lahaina as to the satisfaction of
this condition.
(b) Mongoose shall assume the responsibility for certain notes payable
as listed on Exhibit E hereto.
(c) Accent shall receive an opinion from Paul, Hastings, Janofsky &
Walker LLP, counsel for Lahaina, dated the Closing, in substantially the form
set forth as Exhibit F. As to any matter in such opinion which involves matters
of fact or matters relating to laws other than federal securities law or the
laws of the State of Georgia, such counsel may rely on the certificates of
officers and directors of Lahaina and LAHA 1 and of public officials and
opinions of local counsel, reasonably acceptable to Accent.
(d) Accent shall receive an opinion from Holland & Hart LLP, Colorado
counsel for Lahaina, dated the Closing, in substantially the form set forth as
Exhibit G.
(e) Prior to the Closing, Lahaina shall have entered into a settlement
and release agreement with Sherry Klein ("KLEIN") substantially in the form
attached as Exhibit H hereto, pursuant to which Lahaina agrees to make a
one-time payment of $30,000 to Klein and allows Klein to retain the 20,000
shares of Lahaina Common Stock which were issued in connection with Lahaina's
engagement of Klein. In exchange for the above, Klein agrees to terminate the
Purchase and Sale Agreement by and among Lahaina, Klein and Klein Real Estate
Services, dated as of March 1, 1999, and any and all agreements related thereto,
contemplated thereof or in connection therewith, and release and discharge any
claims or demands against Lahaina in connection therewith.
(f) Prior to the Closing, Lahaina shall have entered into a purchase
and sale agreement with Mongoose substantially in the form attached as Exhibit I
hereto. Under such
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agreement, Mongoose agrees to transfer 60,000 shares of Lahaina Common Stock to
Lahaina in return for the transfer all of the issued and outstanding stock of JP
Concepts, Inc., including, without limitation, substantially all of the assets
of JP Concepts, Inc. Mongoose additionally agrees to assume the JP Concepts'
facility lease with Beachside.
(g) Prior to the Closing, Lahaina shall have entered into an agreement
with GCA Strategic Investment Fund, Ltd. ("GCA"), attached as Exhibit L hereto,
pursuant to which GCA grants its consent to the Merger as required by that
certain Securities Purchase Agreement between Lahaina and GCA dated December 7,
1998.
SECTION 10.3 Conditions to Obligations of Lahaina and LAHA 1 to Effect
the Merger. The obligations of Lahaina and LAHA 1 to effect the Merger shall be
subject to the satisfaction or waiver at or prior to the Closing of the
following additional conditions:
(a) Accent shall have performed in all material respects its
obligations under this Agreement required to be performed by it at or prior to
the Closing; the representations and warranties of Accent contained in this
Agreement which are qualified with respect to materiality shall be true and
correct in all respects, and such representations and warranties that are not so
qualified shall be true and correct in all material respects, in each case as of
the date of this Agreement and at and as of the Closing as if made at and as of
such time. Lahaina and LAHA 1 shall have received a Certificate of the Chairman
of the Board, the President or the Treasurer of Accent as to the satisfaction of
this condition.
(b) Lahaina shall have received an opinion from Altman, Kritzer &
Levick, P.C., counsel to Accent, dated the Closing, in substantially the form
set forth as Exhibit J. As to any matter in such opinion which involves matters
of fact or matters relating to laws other than federal securities or Georgia
corporate law, such counsel may rely upon the certificates of officers and
directors of Accent and of public officials and opinions of local counsel,
reasonably acceptable to Lahaina.
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(c) From the date of the Agreement through the Closing, there shall not
have occurred any change in the financial condition, business, operations or
prospects of Accent that would have or would be reasonably likely to have an
Accent Material Adverse Effect.
(d) Prior to the Closing, Accent shall have delivered to Lahaina an
original policy of title insurance (the "TITLE POLICY"), as mutually agreed to
by the Parties, issued by a national title insurance company reasonably
acceptable to Lahaina (the "TITLE COMPANY"), insuring good and marketable fee
simple title in and to the Real Property (including all necessary and
appropriate easement rights necessary for the development of the Real Property)
in favor of Accent, subject only to the exceptions approved by Lahaina. The
Title Policy shall include all endorsements available at no extra charge
therefor. Upon the Closing, Accent shall have the Title Company issue an
endorsement to the Title Policy changing the effective date thereof to the date
of the Closing, without the addition or modification of any exceptions thereto.
(e) Prior to the Closing, Accent shall deliver to Lahaina a current
ALTA survey, certified to Accent, for each tract or parcel of the Real Property.
(f) Prior to the Closing, Accent shall deliver to Lahaina evidence,
satisfactory to Lahaina in its sole discretion, that Accent possesses all
permits, approvals, or authorizations from all governmental agencies or entities
having jurisdiction over the Real Property as may be necessary for the
development of the Real Property as contemplated by the parties hereto. This
requirement shall include, without limitation, the delivery of any necessary
permits, approvals, or authorizations from (i) the U.S. Army Corps of Engineers
with respect to properties located near any lake or waterway or properties
located in or near jurisdictional wetlands and (ii) from any local governmental
entity allowing the subdivision of any portion of the Real Property. All such
permits, approvals, and authorizations shall be transferrable by Accent to any
entity merging therewith as contemplated by this Agreement.
(g) Prior to the Closing, Accent shall deliver to Lahaina a Phase I
Environmental Report (compliant with ASTM standards) regarding each tract or
parcel of the Real Property (the
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"ENVIRONMENTAL REPORTS"). The Environmental Reports shall be certified to Accent
and Lahaina. If so recommended by the Environmental Reports, Accent shall
arrange for additional services with respect to any portion of the Real
Property, including the performance of invasive testing. Accent shall provide
the results of any such additional work to Lahaina prior to the Closing.
(h) Prior to the Closing, Accent shall deliver an estoppel certificate
from each of the Lenders as set forth on Schedule 10.3 (the "LENDERS") stating
that (i) the corresponding borrower, as set forth on Schedule 10.3, (the
"BORROWER") is not in default under any indebtedness encumbering any property or
assets contributed to the capital of Accent by such Borrower or otherwise
purchased by Accent from such Borrower (the "ASSUMED DEBT"); (ii) the debt
instrument contains no mechanism or provision by which the principal amount of
the Assumed Debt can be increased without the approval of the Lahaina Board; and
(iii) no additional fees are currently or at a later date will be due in
connection with the Assumed Debt.
(i) Prior to the Closing, Accent will deliver a signed consent from the
Lender by which the Lender consents and agrees to Accent's assumption of the
Assumed Debt.
(j) Prior to the Closing, Accent will deliver a description of all cash
needs and material obligations incurred as of the Closing or which Accent
reasonably expects to incur within 90 days of the Closing.
(k) Prior to the Closing, Accent will deliver to Lahaina The Accent
Group Executive Business Summary, attached as Exhibit M hereto.
43
<PAGE> 45
ARTICLE XI
TERMINATION; AMENDMENT; WAIVER
SECTION 11.1 Termination by Mutual Consent. This Agreement may be
terminated at any time prior to the Effective Time, whether before or after
approval by the Shareholders, by mutual written consent of the Parties.
SECTION 11.2 Termination by Either Lahaina or Accent. This Agreement
may be terminated and the Merger may be abandoned by action of the Lahaina Board
or the Accent Board if (i) the Merger shall not have been consummated on or
before August 16, 1999, or (ii) a United States federal or state court of
competent jurisdiction or United States federal or state governmental,
regulatory or administrative agency or commission shall have issued an order,
decree or ruling or taken any other action permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement and such
order, decree, ruling or other action shall have become final and
non-appealable; provided, however, that the party seeking to terminate this
Agreement pursuant to this clause (ii) shall have used all reasonable efforts to
remove such injunction, order or decree.
SECTION 11.3 Termination by Accent. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, upon
the recommendation of the Accent Board, which must be approved by the favorable
vote of the holders of a majority of the Accent Common Stock, if (i) there has
been a breach by Lahaina of any representation or warranty contained in this
Agreement which would have or would be reasonably likely to have a Lahaina
Material Adverse Effect; or (ii) there has been a material breach of any of the
covenants or agreements set forth in this Agreement on the part of
44
<PAGE> 46
Lahaina, which breach is not curable or, if curable, is not cured within 30 days
after written notice of such breach is given by Accent to the breaching Party.
SECTION 11.4 Termination by Lahaina. This Agreement may be terminated
with respect to the Merger and may be abandoned at any time prior to the
Effective Time by action of the Lahaina Board, if (i) there has been a breach by
Accent of any representation or warranty contained in this Agreement which would
have or would be reasonably likely to have an Accent Material Adverse Effect; or
(ii) there has been a material breach of any of the covenants or agreements set
forth in this Agreement on the part of Accent, which breach is not curable or,
if curable, is not cured within 30 days after written notice of such breach is
given by Lahaina to the breaching Party.
SECTION 11.5 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to any of Sections 11.1, 11.2, 11.3 or
11.4 hereof, this Agreement shall forthwith become void and have no effect,
without any liability on the part of any party hereto or its affiliates,
directors, officers or shareholders, other than the provisions of this Section
11.5 and 11.6 hereof. Nothing contained in this Section 11.5 shall relieve any
party from liability for any willful breach of this Agreement.
SECTION 11.6 Fees and Expenses. All costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the Party incurring such expenses.
SECTION 11.7 Extension; Waiver. At any time prior to the Effective
Time, either Accent, on the one hand, or Lahaina or LAHA 1, on the other hand,
(each a "SIDE", as used in the rest of this Section) may extend the time for the
performance of any of the obligations or
45
<PAGE> 47
other acts of the other side. Should there by any inaccuracy in the
representations and warranties of any Party contained herein or in any document,
certificate or writing delivered pursuant hereto, or should any Party hereto
fail to comply with any of the agreements or conditions contained herein, then
such inaccuracy in the representations and warranties or failure to comply with
such agreement or condition may be waived by all other Parties hereto. Any
agreement to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed by the Parties required hereunder on behalf of such
side. The failure of any Party hereto to assert any of its rights hereunder
shall not constitute a waiver of such rights.
ARTICLE XII
MISCELLANEOUS
SECTION 12.1 Survival of Representations and Warranties. The
representations and warranties made herein shall survive until December 31, 2000
(the "TERMINATION DATE"). A claim for breach of representation or for breach of
warranty must be brought within 90 days of the date claimant becomes or
reasonably should have become aware of the breach underlying the claim or within
90 days of December 31, 2000, whichever is earlier.
SECTION 12.2 Entire Agreement; Assignment. This Agreement, the exhibits
and schedules attached hereto, and the documents and instruments referred to
herein and therein, constitute the entire agreement between the Parties with
respect to the subject matter hereof and supersede all other prior agreements
and understandings, both written and oral, among the Parties with respect to the
subject matter hereof and shall not be assigned by operation of law or
otherwise.
46
<PAGE> 48
SECTION 12.3 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of all of the parties.
SECTION 12.4 Validity. If any provision of this Agreement, or the
application thereof to any person or circumstance is held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to other persons or circumstances, shall not be affected thereby, and
to such end, the provisions of this Agreement are agreed to be severable. To the
extent legally permissible, any invalid or unenforceable provision of this
Agreement shall be replaced by a valid provision which will implement the
commercial purpose of the invalid or unenforceable provision.
SECTION 12.5 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if it is (i) sent by
registered or certified mail, return receipt requested, postage prepaid, and
addressed to the intended recipient, (ii) sent to the intended recipient by
prepaid overnight courier delivery; or (iii) delivered by hand to the intended
recipient with evidence of receipt at delivery, in each case to the address as
set forth below:
if to Lahaina or LAHA 1:
Lahaina Acquisitions, Inc.
2900 Atlantic Avenue
Fernandina Beach, FL 32024
Attn: Richard P. Smyth
if to Mongoose:
Mongoose Investments, LLC
7276 Sanctuary Lane
Fernandina Beach, FL 32029
Attn: Richard P. Smyth
47
<PAGE> 49
with a copy to:
Paul, Hastings, Janofsky & Walker LLP
600 Peachtree Street, N.E., Suite 2400
Atlanta, Georgia 30308-2222
Attn: Wayne Shortridge, Esq. or Michael T. Voytek, Esq.
if to Accent or Accent Mortgage:
L. Scott Demerau
5895 Windward Parkway, Suite 220
Alpharetta, Georgia 30005
with a copy to:
Altman, Kritzer & Levick, P.C.
6400 Powers Ferry Road, N.W., Suite 224
Atlanta, Georgia 30339
Steven A. Cunningham, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above.
SECTION 12.6 Governing Law. The laws of the State of Georgia (without
reference to conflicts of law principles) shall govern all issues concerning
this Agreement and the Merger, including, without limitation, the validity of
this Agreement, the construction of its terms and the interpretation and
enforcement of the rights and duties of the Parties.
SECTION 12.7 Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
SECTION 12.8 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and its successors and
permitted assigns, and nothing
48
<PAGE> 50
in this Agreement, express or implied, is intended to or shall confer upon any
other person any rights, benefits or remedies of any nature whatsoever under or
by reason of this Agreement.
SECTION 12.9 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, all of which
shall constitute one and the same agreement.
[NEXT PAGES ARE SIGNATURE PAGES]
49
<PAGE> 51
IN WITNESS WHEREOF, each of the parties has caused this Agreement and
Plan of Merger to be executed on its behalf by its duly authorized
representatives hereunto duly authorized, all as of the day and year first above
written.
LAHAINA:
LAHAINA ACQUISITIONS, INC., a Colorado corporation
By:
---------------------------------------------
Name:
Title:
LAHA 1:
LAHA NO. 1, INC., a Georgia corporation
By:
---------------------------------------------
Name:
Title:
ACCENT
THE ACCENT GROUP, INC., a Georgia corporation
By:
---------------------------------------------
Name:
Title:
ACCENT MORTGAGE
ACCENT MORTGAGE SERVICES, INC., a Georgia
corporation
By:
---------------------------------------------
Name:
Title:
(Signatures continued on following page)
50
<PAGE> 52
MONGOOSE, signing for the purposes
of Sections 7.4, 8.4 and 10.2 only.
MONGOOSE INVESTMENTS, LLC, a Georgia limited
liability company
By:
-------------------------------------------
Name: Richard P. Smyth
Title: Managing Member
51
<PAGE> 1
EXHIBIT 2.2
AMENDMENTS TO AGREEMENT
AND PLAN OF MERGER
Pursuant to Section 12.3 of the Agreement and Plan of Merger dated July
21, 1999 (the "Merger Agreement") by and among LAHAINA ACQUISITIONS, INC., a
Colorado corporation ("Lahaina"), LAHA NO. 1, INC., a Georgia corporation ("LAHA
1"), THE ACCENT GROUP, INC., a Georgia corporation ("Accent"), MONGOOSE
INVESTMENTS, LLC, a Georgia limited liability company ("Mongoose") and ACCENT
MORTGAGE SERVICES, INC., a Georgia corporation ("AMSI"), is hereby amended and
restated in the following respects:
1. ARTICLE I - DEFINITIONS - The definitions for "Beneficial Owners"
and "Shareholders Agreement" are hereby deleted in their entirety and the
definitions set forth below are hereby inserted in their place:
"BENEFICIAL OWNERS" means those Persons set forth on Schedule
6.2(b)(i) and 6.2(b)(ii) hereto.
"SHAREHOLDERS AGREEMENT" means that certain agreement entered into
between Accent and the Shareholders dated as of July 9, 1999 and the
First Amendment to such Agreement, attached as Exhibit C hereto.
2. ARTICLE II - The second and third sentences of Section 2.5 of the
Merger Agreement are hereby deleted in their entirety and amended and restated
to provide as follows:
"Following the Merger, the directors of Lahaina shall number five,
four of whom shall be Demerau, Sherry Sagemiller, Bart Siegel and Betty
Sullivan. The remaining director shall be an independent director and
shall be appointed within 60 days of the Closing by mutual consent of
Demerau and Smyth."
3. ARTICLE IV - Paragraph 2 of Section 4.1(a) of the Merger Agreement
is hereby deleted in its entirety and amended and restated to provide as
follows:
"As and when Conditions of Release are fully satisfied for a
particular Shareholder (or the Lahaina Board waives and modifies said
Conditions of Release and, in the case of modifications, deems said
Conditions of Release, as modified, satisfied; provided, however, that
any such waiver or modification be in
-1-
<PAGE> 2
accordance with commercially reasonable practices and deemed by the
Lahaina Board to be in the best interests of Lahaina and/or Accent, as
may be applicable), the Lahaina Board shall cause Lahaina to release to
such Shareholder the Retained Shares."
4. ARTICLE V -
(a) Section 5.6 of the Merger Agreement is hereby deleted in
its entirety and amended and restated to provide as follows:
"Except as set forth on Schedule 5.6, Accent has (a) good and
marketable title free from liens, to all real property in which it has
an ownership interest, as set forth together with the legal description
of each such property on Schedule 5.6(a), and (b) a valid option to
purchase or is in discussions concerning a proposed joint venture (of
which Accent or Lahaina, as the case may be, would own not less than
50%) to invest in and develop the real property set forth, together
with the legal description of each such property, on Schedule 5.6(b)
hereto (collectively, the "Accent Real Property"). The properties known
as the "Exit 17 Properties" have been acquired by Accent's proposed
joint venture partner and said joint venture partner has indicated a
willingness to have Accent become a 50-50 joint venture partner with it
and participate in the investment into and development of said
properties.
Accent believes the approximate fair market value of each
property, net of debt, described on Schedule 5.6(a) and 5.6(b) to be
not less than the value set forth for such property on Schedule 5.6(c).
All parties acknowledge that Accent does not guarantee the value of any
property, that actual values could differ from those estimated, and
that such differences could be material. Additionally, all parties
acknowledge that there is and can be no assurance that the properties
described on Schedule 5.6(b) hereto or any interest therein (by way of
joint venture or otherwise) will in fact be acquired by Accent or
Lahaina or acquired on the terms and conditions proposed. By the
Effective Time, Accent will have delivered to Lahaina correct and
complete copies of the conveyance documents relating to the Accent Real
Property. Exhibit L to this Agreement set forth the valuation of each
parcel of Real Property."
(b) Section 5.19 of the Merger Agreement is hereby deleted in
its entirety and amended and restated to provide as follows:
-2-
<PAGE> 3
"Accent Consolidation Documents. Those certain agreements and
documents attached as Exhibit E hereto are the true, correct and
complete documents relating to the formation and capitalization of
Accent (the "Accent Consolidation Documents").
"The 1999 Accent Stock Option Plan, attached as part of
Exhibit E hereto, is being reviewed by the auditors of Accent, and will
be modified, as needed, based upon the recommendations of the auditors
of Lahaina, so as to avoid any material adverse effect as Lahaina's
future earnings."
5. ARTICLE X
(a) Section 10.2(a) of the Merger Agreement is hereby deleted
in its entirety and amended and restated to provide as follows:
"Each of Lahaina and LAHA 1 shall have performed in all
material respects its obligations under this Agreement required to be
performed by it at or prior to the Closing; the representations and
warranties of Lahaina and LAHA 1 contained in this Agreement which are
qualified with respect to materiality shall be true and correct in all
material respects, and such representations and warranties that are not
so qualified shall be true and correct in all respects, in each case as
of the date of this Agreement and at and as of the Closing as if made
at and as of such time, except as contemplated by this Agreement.
Accent shall have received a certificate of the Chairman of the Board
or the Treasurer of Lahaina as to the satisfaction of this condition."
(b) Section 10.2(b) of the Merger Agreement is hereby deleted
in its entirety and amended and restated to provide as follows:
"Mongoose shall assume the responsibility for certain notes
payable as listed on Schedule 7.4 attached hereto."
(c) Section 10.3(a) of the Merger Agreement is hereby deleted
in its entirety and amended and restated to provide as follows:
"Accent shall have performed in all material respects its
obligations under this Agreement required to be performed by it at or
prior to the Closing; the representations and warranties of Accent
contained in this Agreement which are qualified with respect to
materiality shall be true and correct in all material
-3-
<PAGE> 4
respects, and such representations and warranties that are not so
qualified shall be true and correct in all respects, in each case as of
the date of this Agreement and at and as of the Closing as if made at
and as of such time, except as contemplated by this Agreement. Lahaina
and LAHA 1 shall have received a certificate of the Chairman of the
Board, the President or the Treasurer of Accent as to the satisfaction
of this condition."
6. SCHEDULES
(a) Schedule 4.1 shall be deleted in its entirety and replaced
with Schedule 4.1 as attached hereto.
(b) Schedule 5.16 shall be deleted in its entirety and
replaced with Schedule 5.16 as attached hereto.
(c) Schedule 6.2 shall be deleted in its entirety and replaced
with Schedule 6.2 as attached hereto.
(d) Schedule 6.15 shall be deleted in its entirety and
replaced with Schedule 6.15 as attached hereto.
(e) Schedule 10.1 is attached hereto.
7. Exhibit L shall be deleted in its entirety and replaced with
Exhibit L as attached hereto.
8. OTHER PROVISIONS -- All other provisions of the Merger
Agreement shall remain unchanged and in full force and effect as therein stated.
-4-
<PAGE> 5
IN WITNESS WHEREOF, each of the parties has caused these Amendments to
the Merger Agreement to be executed on its behalf by its duly authorized
representatives hereunto duly authorized, all as of August __, 1999.
LAHAINA:
LAHAINA ACQUISITIONS, INC., a Colorado
corporation
By:
----------------------------------------
Name:
Title:
LAHA 1:
LAHA NO. 1, INC., a Georgia corporation
By:
----------------------------------------
Name:
Title:
(Signatures continued on following page)
-5-
<PAGE> 6
ACCENT
THE ACCENT GROUP, INC., a Georgia
corporation
By:
----------------------------------------
Name:
Title:
ACCENT MORTGAGE
ACCENT MORTGAGE SERVICES, INC., a
Georgia corporation
By:
----------------------------------------
Name:
Title:
MONGOOSE, signing for the purposes of
Sections 7.4, 8.4 and 10.2 of the Merger
Agreement only.
MONGOOSE INVESTMENTS, LLC, a Georgia
limited liability company
By:
----------------------------------------
Name:
Title:
-6-
<PAGE> 7
SCHEDULE 4.1
TO THE AGREEMENT AND PLAN OF MERGER
SCHEDULE OF PROPERTIES, SERVICES & BUSINESS ASSETS
EXCHANGE OF CERTIFICATES REPRESENTING SHARES
(a) Initial Allocation
<TABLE>
<CAPTION>
NAME TOTAL SHARES RETAINED SHARES FREE SHARES
---- ------------ --------------- -----------
<S> <C> <C> <C>
L. Scott Demerau 2,559,500 2,000,000 (1,400,000 Swiss 559,500
Air/Bethel; 600,000 Putt Putt)
Julia Demerau 2,537,500 2,000,000 (1,400,000 Swiss Air; 537,500
600,000 Putt Putt)
Eutopean Enterprises, Inc. 1,200,000 1,000,000 (All Swiss Air/Bethel) 200,000
Accent Associates, LLC 1,400,000 800,000 600,000
Diana B. Hutsell 100,000 100,000 0
Kingdom Generals, LLC 850,000 600,000 250,000
Noel Associates, Ltd. 618,000 300,000 318,000
Destiny Holdings, LLC 600,000 300,000 300,000
Accent Holdings, Inc. 700,000 300,000 400,000
Bach Consulting, Inc. 600,000 0 600,000
International Boulevard Property, LP 400,000 400,000 0
Sherry Sagemiller 833,330 766,666 66,664
Jon Andersen 416,670 383,334 33,336
Linfert IRA 350,000 0 350,000
Jack Margheson 40,000 0 40,000
William McBraer 30,000 0 30,000
Wes Stucki 16,000 0 16,000
TOTAL 13,251,000 8,950,000 4,301,000
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
Shareholder or
Seller/Property or Retained Supporting
Services Shares Condition of Release Documents
-------- ------ -------------------- ---------
<S> <C> <C> <C>
Demeraus/Eutopean 800,000 a. General Warranty Deed in favor of Accent executed by L.
Enterprises/Bethel Scott Demerau and Julia A. Demerau
Road Property
b. Quitclaim Deed in Favor of Accent executed by L. Scott
Demerau and Julia A. Demerau with legal description of property from
most recent survey
c. Title insurance policy by a national title insurance company in
favor of Accent, insuring title to (i) the Property and (ii) all
necessary and appropriate appurtenant easements related thereto, subject
only to those exceptions and encumbrances agreed to by Lahaina.
Such policy shall have all endorsements that may be obtained for
no additional cost.
d. An ALTA survey of the Property certified to Accent.
e. A zoning letter issued by the appropriate governmental entity
confirming the zoning of the Property.
f. Report of a registered professional engineer certified to
Accent confirming that the soil conditions of the Property will allow
the feasible development of the Property.
g. Phase I Environmental Study of the Property prepared by a registered
professional engineer with such study being certified to Lahaina.
h. Executed easements in favor of Accent providing for access to
utilities and drainage (if necessary).
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
Shareholder or
Seller/Property or Retained Supporting
Services Shares Condition of Release Documents
-------- ------ -------------------- ---------
<S> <C> <C> <C>
Demeraus/Eutopean 3,800,000 a. General Warranty Deed in favor of Accent, executed by L. Scott Demerau and
Enterprises/Kingdom Julia A. Demerau.
Generals Swissaire Real
Property (including the b. General Warranty Deed in favor of Accent executed by Kingdom General, LLC.
"Rambo" tract)
c. Title insurance policy issued by a national title insurance company in
favor of Accent, insuring title to (i) the Property and (ii) all
necessary and appropriate appurtenant easements related thereto, subject
only to those exceptions and encumbrances agreed to by Lahaina.
Such policy shall have all endorsements that may be obtained for
no additional cost.
d. An ALTA survey of the Property certified to Accent.
e. A zoning letter issued by the appropriate governmental entity
evidencing the zoning of the Property.
f. Report of a registered professional engineer certified to
Accent confirming that the soil conditions of the Property will allow
the feasible development of the Property.
g. Consents to the conveyance of the Property to Accent and the assumption
of the associated loans executed by (i) Gainesville Bank and Trust, (ii)
Regions Bank, (iii) SunTrust Bank and (iv) Kingdom Generals, LLC.
</TABLE>
<PAGE> 10
<TABLE>
<CAPTION>
Shareholder or
Seller/Property or Retained Supporting
Services Shares Condition of Release Documents
-------- ------ -------------------- ---------
<S> <C> <C> <C>
Demeraus/Sutopean 3,800,000 Release of Lot Nos. 3 and 8 from the Deed to Secure Debt held by Merrill
Enterprises/Kingdom Lynch Credit Corporation.
Generals Swissaire Real
Property (including the h. Amendments to all outstanding Deeds to Secure Debt (as necessary)
"Rambo" tract) prohibiting the increase of any principal indebtedness secured
thereby.
i. General Warranty Deed to all common areas in favor of Accent or an
established homeowners association for Swissaire Estates executed by
L. Scott Demerau and Julia A. Demerau.
j. Easement Agreement executed by L. Scott Demerau and Julia A. Demerau in
favor of Accent and all Lots on the Property providing for (i) suitable
ingress and egress, (ii) access to utilities, (iii) drainage, (iv)
access to and use of common areas, and (v) access to boat dock area.
k. Permit or letter of approval or authorization from the U.S. Army
Corps of Engineers for the construction of a 14 slip boat dock
on Lake Lanier in the vicinity of the Property.
l. An assignment executed in recordable form by L. Scott Demerau
and Julia A. Demerau assigning their respective rights as "Declarants"
under that certain Declaration of Covenants, Conditions and
Restrictions for Swissaire Estate to Accent.
m. Phase I Environmental Study of the Property prepared by a registered
professional engineer with such study being certified to Lahaina.
</TABLE>
<PAGE> 11
<TABLE>
<CAPTION>
Shareholder or
Seller/Property or Retained Supporting
Services Shares Condition of Release Documents
-------- ------ -------------------- ---------
<S> <C> <C> <C>
Accent Associates 800,000 a. Assignment of Contract to purchase Bethel Road (2) - approximately 14 acres
b. Execution of Purchase Contract on Lakeside Trail property.
c. Title insurance policy issued by a national title insurance company in
favor of Accent, insuring title to (i) the Property and (ii) all
necessary and appropriate appurtenant easements related thereto, subject
only to those exceptions and encumbrances agreed to by Lahaina.
Such policy shall have all endorsements that may be obtained for
no additional cost.
d. An ALTA survey of the Property certified to Accent.
e. Report of a registered professional engineer certified to
Accent confirming that the soil conditions of the Property will allow
the feasible development of the Property.
f. Confirmation of proper zoning for Accent's planned development of the
Property.
g. Report of a registered professional engineer certified to
Accent confirming that the soil conditions of the Property will allow
the feasible development of the Property.
h. Executed easements in favor of Accent providing for access to
utilities and drainage (if necessary).
i. Phase I Environmental Study of the Property prepared by a registered
professional engineer with such study being certified to Lahaina.
</TABLE>
<PAGE> 12
<TABLE>
<CAPTION>
Shareholder or
Seller/Property or Retained Supporting
Services Shares Condition of Release Documents
-------- ------ -------------------- ---------
<S> <C> <C> <C>
Kaufman/Exit 17 Property N/A (Cash a. General Warranty Deed in favor of Accent, executed by Emory Lipscomb.
Purchase)
b. Title insurance policy issued by a national title insurance company in
favor of Accent, insuring title to (i) the Property and (ii) all
necessary and appropriate appurtenant easements related thereto, subject
only to those exceptions and encumbrances agreed to by Lahaina.
Such policy shall have all endorsements that may be obtained for
no additional cost.
c. An ALTA survey of the Property certified to Accent. Report of a
registered professional engineer certified to Accent confirming that
the soil conditions of the Property will allow the feasible development
of the Property.
d. Confirmation of proper zoning for Accent's planned development of the
Property.
e. Written approval by all necessary municipal or other governmental
agencies for the construction of a north/south road providing access to
the Property.
f. Written approval by all necessary governmental agencies for the
extension of adequate sewer capacity to the Property.
g. Executed easements in favor of Accent providing for access to
utilities and drainage (if necessary).
h. Consent to the conveyance of the Property to Accent and the assumption
of the associated loan executed by Union County Bank.
i. Amendment to the Deed to Secure Debt in favor of Union County Bank
(if necessary) providing that the principal indebtedness secured
thereby may not be increased.
j. Phase I Environmental Study of the Property prepared by a registered
professional engineer with such study being certified to Lahaina.
</TABLE>
<PAGE> 13
<TABLE>
<CAPTION>
Shareholder or
Seller/Property or Retained Supporting
Services Shares Condition of Release Documents
-------- ------ -------------------- ---------
<S> <C> <C> <C>
Millwood/Exit 17 N/A (Cash a. General Warranty Deed in favor of Accent, executed by Emory Lipscomb.
Purchase)
b. Title insurance policy issued by a national title insurance company in
favor of Accent, insuring title to (i) the Property and (ii) all
necessary and appropriate appurtenant easements related thereto, subject
only to those exceptions and encumbrances agreed to by Lahaina.
Such policy shall have all endorsements that may be obtained for
no additional cost.
c. An ALTA survey of the Property certified to Accent.
d. Report of a registered professional engineer certified to
Accent confirming that the soil conditions of the Property will allow
the feasible development of the Property.
e. Confirmation of proper zoning for Accent's planned development of the
Property.
f. Written approval by all necessary municipal or other governmental
agencies for the construction of a north/south road providing access to
the Property.
g. Written approval by all necessary governmental agencies for the
extension of adequate sewer capacity to the Property.
h. Executed easements in favor of Accent providing for access to
utilities and drainage (if necessary).
i. Consent to the conveyance of the Property to Accent and the assumption
of the associated loan executed by Union County Bank.
j. Amendment to the Deed to Secure Debt in favor of Union County Bank
(if necessary) providing that the principal indebtedness secured thereby may
not be increased.
k. Phase I Environmental Study of the Property prepared by a registered
professional engineer with such study being certified to Lahaina.
</TABLE>
<PAGE> 14
<TABLE>
<CAPTION>
Shareholder or
Seller/Property or Retained Supporting
Services Shares Condition of Release Documents
-------- ------ -------------------- ---------
<S> <C> <C> <C>
Youngblood/Exit 17 N/A (Cash a. General Warranty Deed in favor of Accent, executed by Emory Lipscomb.
Purchase)
b. Title insurance policy issued by a national title insurance company in
favor of Accent, insuring title to (i) the Property and (ii) all
necessary and appropriate appurtenant easements related thereto, subject
only to those exceptions and encumbrances agreed to by Lahaina.
Such policy shall have all endorsements that may be obtained for
no additional cost.
c. An ALTA survey of the Property certified to Accent.
d. Report of a registered professional engineer certified to
Accent confirming that the soil conditions of the Property will allow
the feasible development of the Property.
e. Confirmation of proper zoning for Accent's planned development of the
Property.
f. Written approval by all necessary municipal or other governmental
agencies for the construction of a north/south road providing access to
the Property.
g. Written approval by all necessary governmental agencies for the
extension of adequate sewer capacity to the Property.
h. Executed easements in favor of Accent providing for access to
utilities and drainage (if necessary).
i. Consent to the conveyance of the Property to Accent and the assumption
of the associated loan executed by Union County Bank.
j. Amendment to the Deed to Secure Debt in favor of Union County Bank
(if necessary) providing that the principal indebtedness secured
thereby may not be increased.
k. Phase I Environmental Study of the Property prepared by a registered
professional engineer with such study being certified to Lahaina.
</TABLE>
<PAGE> 15
<TABLE>
<CAPTION>
Shareholder or
Seller/Property or Retained Supporting
Services Shares Condition of Release Documents
-------- ------ -------------------- ---------
<S> <C> <C> <C>
Martin/Exit 17 N/A (Cash a. General Warranty Deed in favor of Accent, executed by Lymon Hugh Martin.
Purchase)
b. Title insurance policy issued by a national title insurance company in
favor of Accent, insuring title to (i) the Property and (ii) all
necessary and appropriate appurtenant easements related thereto, subject
only to those exceptions and encumbrances agreed to by Lahaina.
Such policy shall have all endorsements that may be obtained for
no additional cost.
c. An ALTA survey of the Property certified to Accent.
d. Report of a registered professional engineer certified to
Accent confirming that the soil conditions of the Property will allow
the feasible development of the Property.
e. Confirmation of proper zoning for Accent's planned development of the
Property.
f. Written approval by all necessary municipal or other governmental
agencies for the construction of a north/south road providing access to
the Property.
g. Written approval by all necessary governmental agencies for the
extension of adequate sewer capacity to the Property.
h. Executed easements in favor of Accent providing for access to
utilities and drainage (if necessary).
i. Phase I Environmental Study of the Property prepared by a registered
professional engineer with such study being certified to Lahaina.
</TABLE>
<PAGE> 16
<TABLE>
<CAPTION>
Shareholder or
Seller/Property or Retained Supporting
Services Shares Condition of Release Documents
-------- ------ -------------------- ---------
<S> <C> <C> <C>
Elrod/Exit 17 N/A (Cash a. General Warranty Deed in favor of Accent, executed by Stanley L. Elrod, as
Purchase) executor of the estate of Loy Blanche Morgan.
b. Title insurance policy issued by a national title insurance company in
favor of Accent, insuring title to (i) the Property and (ii) all
necessary and appropriate appurtenant easements related thereto, subject
only to those exceptions and encumbrances agreed to by Lahaina.
Such policy shall have all endorsements that may be obtained for
no additional cost.
c. An ALTA survey of the Property certified to Accent.
d. Report of a registered professional engineer certified to
Accent confirming that the soil conditions of the Property will allow
the feasible development of the Property.
e. Confirmation of proper zoning for Accent's planned development of the
Property.
f. Written approval by all necessary municipal or other governmental
agencies for the construction of a north/south road providing access to
the Property. g. Written approval by all necessary governmental agencies
for the extension of adequate sewer capacity to the Property.
h. Executed easements in favor of Accent providing for access to
utilities and drainage (if necessary).
i. Phase I Environmental Study of the Property prepared by a registered
professional engineer with such study being certified to Lahaina.
</TABLE>
<PAGE> 17
<TABLE>
<CAPTION>
Shareholder or
Seller/Property or Retained Supporting
Services Shares Condition of Release Documents
-------- ------ -------------------- ---------
<S> <C> <C> <C>
Baggett/Exit 17 N/A (Cash a. General Warranty Deed in favor of Accent, executed by
Purchase) Peggy M. Baggett, as holder of a life estate, and Sue M. Elrod
and Janice M. Freeman as to the remainder.
b. Title insurance policy issued by a national title insurance
company in favor of Accent, insuring title to (i) the Property
and (ii) all necessary and appropriate appurtenant easements related
thereto, subject only to those exceptions and encumbrances agreed to
by Lahaina. Such policy shall have all endorsements that may be
obtained for no additional cost.
c. An ALTA survey of the Property certified to Accent.
d. Report of a registered professional engineer certified to
Accent confirming that the soil conditions of the Property will allow
the feasible development of the Property.
e. Confirmation of proper zoning for Accent's planned development of
the Property.
f. Written approval by all necessary municipal or other governmental
agencies for the construction of a north/south road providing access to
the Property.
g. Written approval by all necessary governmental agencies for the
extension of adequate sewer capacity to the Property.
h. Executed easements in favor of Accent providing for access to
utilities and drainage (if necessary).
i. Phase I Environmental Study of the Property prepared by a registered
professional engineer with such study being certified to Lahaina.
</TABLE>
<PAGE> 18
<TABLE>
<CAPTION>
Shareholder or
Seller/Property or Retained Supporting
Services Shares Condition of Release Documents
-------- ------ -------------------- ---------
<S> <C> <C> <C>
Freeman/Exit 17 N/A (Cash a. General Warranty Deed in favor of Accent, executed by
Purchase) Janice Freeman and Jack Freeman.
b. Title insurance policy issued by a national title insurance company in
favor of Accent, insuring title to (i) the Property and (ii) all
necessary and appropriate appurtenant easements related thereto, subject
only to those exceptions and encumbrances agreed to by Lahaina.
Such policy shall have all endorsements that may be obtained for
no additional cost.
c. An ALTA survey of the Property certified to Accent.
d. Report of a registered professional engineer certified to
Accent confirming that the soil conditions of the Property will allow
the feasible development of the Property.
e. Confirmation of proper zoning for Accent's planned development of the
Property.
f. Written approval by all necessary municipal or other governmental
agencies for the construction of a north/south road providing access to
the Property.
g. Written approval by all necessary governmental agencies for the
extension of adequate sewer capacity to the Property.
h. Executed easements in favor of Accent providing for access to
utilities and drainage (if necessary).
i. Phase I Environmental Study of the Property prepared by a registered
professional engineer with such study being certified to Lahaina.
</TABLE>
<PAGE> 19
<TABLE>
<CAPTION>
Shareholder or
Seller/Property or Retained Supporting
Services Shares Condition of Release Documents
-------- ------ -------------------- ---------
<S> <C> <C> <C>
Taste of Country/Exit N/A (Cash a. General Warranty Deed in favor of Accent, executed by
17 Purchase) Ora Harris and LouinWagoner.
b. Title insurance policy issued by a national title insurance company in
favor of Accent, insuring title to (i) the Property and (ii) all
necessary and appropriate appurtenant easements related thereto, subject
only to those exceptions and encumbrances agreed to by Lahaina.
Such policy shall have all endorsements that may be obtained for
no additional cost.
c. An ALTA survey of the Property certified to Accent.
d. Report of a registered professional engineer certified to
Accent confirming that the soil conditions of the Property will allow
the feasible development of the Property.
e. Confirmation of proper zoning for Accent's planned development of the
Property.
f. Written approval by all necessary municipal or other governmental
agencies for the construction of a north/south road providing access to
the Property.
g. Written approval by all necessary governmental agencies for the
extension of adequate sewer capacity to the Property.
h. Executed easements in favor of Accent providing for access to
utilities and drainage (if necessary).
i. Phase I Environmental Study of the Property prepared by a registered
professional engineer with such study being certified to Lahaina.
</TABLE>
<PAGE> 20
<TABLE>
<CAPTION>
Shareholder or
Seller/Property or Retained Supporting
Services Shares Condition of Release Documents
-------- ------ -------------------- ---------
<S> <C> <C> <C>
Pilgrim/Exit 17 N/A (Cash a. General Warranty Deed in favor of Accent, executed by
Purchase) Thomas A. Pilgrim and Marie J. Pilgrim.
b. Title insurance policy issued by a title insurance company in
favor of Accent, insuring title to (i) the Property and (ii) all
necessary and appropriate appurtenant easements related thereto,
subject only to those exceptions and encumbrances agreed to by Lahaina.
Such policy shall have all endorsements that may be obtained for
no additional cost.
c. An ALTA survey of the Property certified to Accent.
d. Copy of Promissory Note executed in favor of Thomas A. Pilgrim for the
purchase price less $250,000. The Promissory Note shall bear interest
at 8% interest and shall mature thirty-five (35) months from the date
of the Promissory Note. Report of a registered professional engineer
certified to Accent confirming that the soil conditions of the Property
will allow the feasible development of the Property.
e. Confirmation of proper zoning for Accent's planned development of the
Property.
f. Written approval by all necessary municipal or other governmental
agencies for the construction of a north/south road providing access to
the Property.
g. Written approval by all necessary governmental agencies for the
extension of adequate sewer capacity to the Property.
h. Executed easements in favor of Accent providing for access to
utilities and drainage (if necessary).
i. Phase I Environmental Study of the Property prepared by a registered
professional engineer with such study being certified to Lahaina.
</TABLE>
<PAGE> 21
<TABLE>
<CAPTION>
Shareholder or
Seller/Property or Retained Supporting
Services Shares Condition of Release Documents
-------- ------ -------------------- ---------
<S> <C> <C> <C>
Smith/Exit 17 N/A (Cash a. General Warranty Deed in favor of Accent, executed by E. Alvin Smith.
Purchase)
b. Title insurance policy issued by a national title insurance company in
favor of Accent, insuring title to (i) the Property and (ii) all
necessary and appropriate appurtenant easements related thereto, subject
only to those exceptions and encumbrances agreed to by Lahaina.
Such policy shall have all endorsements that may be obtained for
no additional cost.
c. An ALTA survey of the Property to Accent.
d. A zoning letter issued by the appropriate governmental entity
evidencing the zoning of the Property.
e. Report of a registered professional engineer certified to Accent confirming
that the soil conditions of the Property will allow the feasible development of
the Property.
f. Executed easements in favor of Accent providing for access to
utilities and drainage (if necessary).
g. Phase I Environmental Study of the Property prepared by a registered
professional engineer with such study being certified to Lahaina.
</TABLE>
<PAGE> 22
<TABLE>
<CAPTION>
Shareholder or
Seller/Property or Retained Supporting
Services Shares Condition of Release Documents
-------- ------ -------------------- ---------
<S> <C> <C> <C>
Davis Estate/Exit 17 N/A (Cash a. General Warranty Deed in favor of Accent, executed
Purchase) by Ethel I. Davis Scott and Mildred E. Davis Tiner as Co-Executors
of the Last Will and Testament of Willie Irene Davis.
b. Title insurance policy issued by a national title insurance company in
favor of Accent, insuring title to (i) the Property and (ii) all
necessary and appropriate appurtenant easements related thereto, subject
only to those exceptions and encumbrances agreed to by Lahaina.
Such policy shall have all endorsements that may be obtained for
no additional cost.
c. An ALTA survey of the Property to Accent.
d. A zoning letter issued by the appropriate governmental entity
evidencing the zoning of the Property.
e. Report of a registered professional engineer certified to Accent confirming
that the soil conditions of the Property will allow the feasible development of
the Property.
f. Executed easements in favor of Accent providing for access to
utilities and drainage (if necessary).
g. Phase I Environmental Study of the Property prepared by a registered
professional engineer with such study being certified to Lahaina.
</TABLE>
<PAGE> 23
<TABLE>
<CAPTION>
Shareholder or
Seller/Property or Retained Supporting
Services Shares Condition of Release Documents
-------- ------ -------------------- ---------
<S> <C> <C> <C>
Hellerstedt/Exit 17 N/A (Cash a. General Warranty Deed in favor of Accent, executed by Charles Eric
Purchase) Hellerstedt and Robert A. Desman.
b. Title insurance policy issued by a national title insurance company in
favor of Accent, insuring title to (i) the Property and (ii) all
necessary and appropriate appurtenant easements related thereto, subject
only to those exceptions and encumbrances agreed to by Lahaina.
Such policy shall have all endorsements that may be obtained for
no additional cost.
c. An ALTA survey of the Property certified to Accent.
d. Report of a registered professional engineer certified to
Accent confirming that the soil conditions of the Property will allow
the feasible development of the Property.
e. Confirmation of proper zoning for Accent's planned development of the
Property.
f. Written approval by all necessary municipal or other governmental
agencies for the construction of a north/south road providing access to
the Property.
g. Written approval by all necessary governmental agencies for the
extension of adequate sewer capacity to the Property.
h. Phase I Environmental Study of the Property prepared by a registered
professional engineer with such study being certified to Lahaina.
i. Executed easements in favor of Accent providing for access to
utilities and drainage (if necessary).
</TABLE>
<PAGE> 24
<TABLE>
<CAPTION>
Shareholder or
Seller/Property or Retained Supporting
Services Shares Condition of Release Documents
-------- ------ -------------------- ---------
<S> <C> <C> <C>
Castleberry/ a. General Warranty Deed in favor of Accent, executed by Emory Lipscomb.
Cumming
b. Title insurance policy issued by a national title insurance company in
favor of Accent, insuring title to (i) the Property and (ii) all
necessary and appropriate appurtenant easements related thereto, subject
only to those exceptions and encumbrances agreed to by Lahaina.
Such policy shall have all endorsements that may be obtained for
no additional cost.
c. An ALTA survey of the Property to Accent.
d. Consent to the transfer of the Property to Accent and the assumption
of the associated loan executed by Premier Bank.
e. Amendment to the Deed to Secure Debt in favor of Premier Bank
prohibiting the increase of the principal indebtedness secured
thereby.
f. A zoning letter issued by the appropriate governmental entity
evidencing the zoning of the Property.
g. Report of a registered professional engineer certified to
Accent confirming that the soil conditions of the Property will allow
the feasible development of the Property.
h. Executed easements in favor of Accent providing for access to
utilities and drainage (if necessary).
i. Phase I Environmental Study of the Property prepared by a registered
professional engineer with such study being certified to Lahaina.
</TABLE>
<PAGE> 25
<TABLE>
<CAPTION>
Shareholder or
Seller/Property or Retained Supporting
Services Shares Condition of Release Documents
-------- ------ -------------------- ---------
<S> <C> <C> <C>
Diane Hutsell/Athens, 100,000 See Section 4(b) of the Shareholders' Agreement, as amended, attached as
Tennessee Exhibit C to the Merger Agreement (the "Shareholders' Agreement"). In
addition, the following conditions must be met:
a. General Warranty Deed in favor of Accent, executed by Jack McKinney and
Tom Reynolds.
b. Title insurance policy issued by a national title insurance company in
favor of Accent, insuring title to (i) the Property and (ii) all
necessary and appropriate appurtenant easements related thereto, subject
only to those exceptions and encumbrances agreed to by Lahaina.
Such policy shall have all endorsements that may be obtained for
no additional cost.
c. An ALTA survey of the Property to Accent.
d. Copy of Promissory Note executed in favor of Jack McKinney and Tom
Reynolds in the amount of $200,000 at 8% interest.
e. A zoning letter issued by the appropriate governmental entity
evidencing the zoning of the Property.
f. Report of a registered professional engineer certified to
Accent confirming that the soil conditions of the Property will allow
the feasible development of the Property.
g. Executed easements in favor of Accent providing for access to
utilities and drainage (if necessary).
</TABLE>
<PAGE> 26
<TABLE>
<CAPTION>
Shareholder or
Seller/Property or Retained Supporting
Services Shares Condition of Release Documents
-------- ------ -------------------- ---------
<S> <C> <C> <C>
International Boulevard 400,000 See Section 4(e) of the Shareholders' Agreement. In addition the following
Partners/Peachtree conditions must be satisfied:
Industrial Road
a. General Warranty Deed in favor of Accent, executed by the previous
owner of the Property.
b. Title insurance policy issued by a national title insurance company in
favor of Accent, insuring title to (i) the Property and (ii) all
necessary and appropriate appurtenant easements related thereto, subject
only to those exceptions and encumbrances agreed to by Lahaina.
Such policy shall have all endorsements that may be obtained for
no additional cost.
c. An ALTA survey of the Property to Accent.
d. A zoning letter issued by the appropriate governmental entity
evidencing the zoning of the Property.
e. Report of a registered professional engineer certified to
Accent confirming that the soil conditions of the Property will allow
the feasible development of the Property.
f. Executed easements in favor of Accent providing for access to
utilities and drainage.
g. Consent to the conveyance of the Property to Accent and the assumption
of the associated loan executed by any Lender having made a loan
affecting the Property.
h. Amendment to all outstanding deeds to secure debt (as necessary)
prohibiting any increase in the principal indebtedness secured
thereby.
i. Phase I Environmental Study of the Property prepared by a registered
professional engineer with such study being certified to Lahaina.
</TABLE>
<PAGE> 27
<TABLE>
<CAPTION>
Shareholder or
Seller/Property or Retained Supporting
Services Shares Condition of Release Documents
-------- ------ -------------------- ---------
<S> <C> <C> <C>
Demeraus/Family 600,000 See Section ____ of the Shareholders' Agreement. In addition the following
Entertainment Centers conditions must be satisfied:
(no intention to
operate the a. General Warranty Deed in favor of Accent, for the Roswell, Georgia and
entertainment Cocoa Beach, Florida facilities and an assignment of the lease for the
facilities long-term, Pensacola, Florida facility.
but rather to sell for
land value) b. Title insurance policy issued by a national title insurance company in
favor of Accent, insuring title to (i) the Property and (ii) all
necessary and appropriate appurtenant easements related thereto, subject
only to those exceptions and encumbrances agreed to by Lahaina.
Such policy shall have all endorsements that may be obtained for
no additional cost.
c. An ALTA survey of the Property to Accent.
d. A zoning letter issued by the appropriate governmental entity
evidencing the zoning of the Property.
e. Phase I Environmental Study of the Property prepared by a
registered professional engineer with such study being certified
to Lahaina.
Noel/Financial and 300,000 See Section 4(c) of the Shareholders' Agreement.
Business Consulting
</TABLE>
<PAGE> 28
<TABLE>
<CAPTION>
Shareholder or
Seller/Property or Retained Supporting
Services Shares Condition of Release Documents
-------- ------ -------------------- ---------
<S> <C> <C> <C>
Destiny/Financial and 300,000 See Section 4(c) of the Shareholders' Agreement
Business Consulting
Accent Holdings 300,000 See Section 4(b) of the First Amendment and Joinder to the Shareholders'
Agreement (the "First Amendment")
Sagemiller and Andersen 1,150,000 See Sections 3 and 4(a) of the First Amendment
TOTAL 8,950,000
</TABLE>
<PAGE> 29
Lahaina Acquisitions, Inc./The Accent Group, Inc. Merger
90 Day Cash Flow Statement-Post Closing
<TABLE>
<CAPTION>
Aug. 15, 1999- Sept. 1, 1999 Sept. 16, 1999 Oct. 1, 1999
Aug. 13 1999- Sept. 15, 1999 Sept. 30, 1999 Oct. 15, 1999
<S> <C> <C> <C> <C>
Cash sources:
Cash at beginning of Period -- (874,755) (1,399,168) (1,120,486)
Income from Financial Operations 28,775 44,712 44,712 61,775
Income from Real Estate Development -- -- 605,000 --
Peachtree Refinancing -- -- 200,000 --
----------- ---------- ------------ ------------
Total Cash 28,775 (830,043) (549,456) (1,058,711)
Cash Uses:
Closing Expenses-The Accent Group, Inc. 250,000 -- -- --
Accent Mortgage Services, Inc. Payables 150,000 -- -- --
Operating Expenses 66,125 66,125 66,125 66,125
Payroll 83,000 83,000 83,000 83,000
Athens Modular Development 50,000 100,000 -- 50,000
Bethel Road -- -- -- 15,000
Cumming Townhomes 50,000 75,000 -- 150,000
Kinzel Springs -- 25,000 -- --
Lakeside 5,000 5,000 -- --
Peachtree Industrial -- 15,000 -- 40,000
Swiss Air -- 200,000 100,000 --
Debt Service:
Interest 249,405 -- 66,905 --
Principal -- -- 255,000 --
Total Uses 903,530 569,125 571,030 404,125
----------- ---------- ------------ ------------
Cash at end of period (874,755) (1,399,168) (1,120,486) (1,462,836)
<CAPTION>
Oct. 16, 1999 Nov. 1, 1999 Nov. 16, 1999
Oct. 31, 1999 Nov. 15 1999 Nov. 30, 1999
<S> <C> <C> <C>
Cash sources:
Cash at beginning of Period (1,462,836) (1,704,329) (2,012,117)
Income from Financial Operations 61,775 91,337 91,337
Income from Real Estate Development 30,000 -- 630,000
Peachtree Refinancing -- -- --
----------- ---------- ------------
Total Cash (1,371,061) (1,612,992) (1,290,780)
Cash Uses:
Closing Expenses-The Accent Group, Inc. -- -- --
Accent Mortgage Services, Inc. Payables -- -- --
Operating Expenses 66,125 66,125 66,125
Payroll 83,000 83,000 83,000
Athens Modular Development -- -- --
Bethel Road -- -- --
Cumming Townhomes -- 250,000 --
Kinzel Springs -- -- --
Lakeside -- -- --
Peachtree Industrial -- -- --
Swiss Air 100,000 -- --
Debt Service:
Interest 84,143 -- 84,143
Principal -- -- 480,000
Total Uses 333,268 399,125 713,268
----------- ---------- ------------
Cash at end of period (1,704,329) (2,012,117) (2,004,048)
</TABLE>
<PAGE> 30
The Accent Group
Consolidated Income Statement
For the Period July 1, 1999 - June 30, 2000
Pro Forma - For Purposes of the Lahaina Acquisitions, Inc./
The Accent Group, Inc. Merger Only
Not To Be Relied Upon For Investment Purposes
<TABLE>
<CAPTION>
Revenues: July August September October November December January February
--------- -------- --------- ------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Mortgage 2,000 4,000 25,500 56,500 99,000 153,000 207,000 249,000
Accent Mortgage 16,175 22,425 22,425 25,550 31,800 31,800 31,800 31,800
Staged Financing 21,250 31,125 41,500 41,500 51,875 51,875 61,750 61,750
Recreation Sites -- -- 15,000 15,000 15,000 15,000 2,179,500 4,500
Modular Homes -- -- -- -- 234,000 234,000 234,000 234,000
Swiss Air -- 575,000 -- -- 600,000 700,000 -- --
Cumming Townhomes -- -- -- -- -- -- -- 690,000
Beachside Commons -- -- 2,360,000 -- -- -- -- --
Bethel Road 2 -- -- -- -- -- -- -- --
Lakeside Trail -- -- -- -- -- -- -- --
Cumming M1 Property -- -- -- -- -- -- -- --
International Boulevard -- -- -- 214,000 -- 386,000 250,000 --
--------- ------- --------- ------- --------- --------- --------- ---------
Total Revenues 39,425 632,550 2,464,425 352,550 1,031,675 1,571,675 2,964,050 1,281,050
Expenses:
Recreation Sites -- -- 4,000 4,000 4,000 4,000 701,200 1,200
Modular Homes -- -- -- -- 182,538 182,538 182,538 182,538
Swiss Air -- 74,750 -- -- 78,000 91,000 -- --
Cumming Townhomes -- -- -- -- -- -- -- 540,000
Beachside Commons -- -- 1,500,000 -- -- -- -- --
Bethel Road 2 -- -- -- -- -- -- -- --
Lakeside Trail -- -- -- -- -- -- -- --
Cumming M1 Property -- -- -- -- -- -- -- --
International Boulevard -- -- -- 132,680 -- 239,320 155,000 --
Lahaina Operating Expenses 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000
Accent Group Operating
Expenses 268,542 268,542 268,542 268,542 268,542 268,542 268,542 268,542
-------- ------- --------- ------- --------- --------- --------- ---------
Total Expenses 298,542 373,292 1,802,542 435,222 563,080 815,400 1,337,280 1,022,280
-------- ------- --------- ------- --------- --------- --------- ---------
Earnings Before Interest
and Taxes (259,117) 259,258 661,883 (82,672) 468,595 756,275 1,626,770 258,770
Interest Expense 66,905 66,905 84,143 54,231 87,766 85,663 83,601 73,517
-------- ------- --------- ------- --------- --------- --------- ---------
Net Income Before Tax (326,022) 192,353 577,740 (136,903) 380,829 670,612 1,543,169 185,253
Income Tax (130,409) 76,941 231,096 (54,761) 152,332 268,245 617,268 74,101
-------- ------- --------- ------- --------- --------- --------- ---------
Net Income (195,613) 115,412 346,644 (82,142) 228,498 402,367 925,902 111,152
Quarter Net Income 266,443 548,723
1st Quarter 2nd Quarter
</TABLE>
<TABLE>
<CAPTION>
Revenues: March April May June Total
--------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Net Mortgage 304,500 345,500 399,500 431,000 2,286,500
Accent Mortgage 31,800 31,800 31,800 36,050 345,225
Staged Financing 71,625 81,500 91,375 91,735 698,860
Recreation Sites 4,500 3,375 3,375 3,375 2,258,625
Modular Homes 234,000 234,000 234,000 234,000 1,872,000
Swiss Air -- 800,000 -- -- 2,675,000
Cumming Townhomes 920,000 920,000 1,150,000 1,150,000 4,830,000
Beachside Commons -- -- -- -- 2,360,000
Bethel Road 2 -- -- -- 230,000 230,000
Lakeside Trail -- -- 259,000 -- 259,000
Cumming M1 Property -- 2,550,000 -- -- 2,550,000
International Boulevard 350,000 -- -- -- 1,200,000
--------- --------- --------- --------- ----------
Total Revenues 1,916,425 4,966,175 2,169,050 2,176,160 21,565,210
Expenses:
Recreation Sites 1,200 900 900 900 722,300
Modular Homes 182,538 182,538 182,538 182,538 1,460,304
Swiss Air -- 104,000 -- -- 347,750
Cumming Townhomes 720,000 720,000 900,000 900,000 3,780,000
Beachside Commons -- -- -- -- 1,500,000
Bethel Road 2 -- -- -- 157,000 157,000
Lakeside Trail -- -- 156,000 -- 156,000
Cumming M1 Property -- 1,550,000 -- -- 1,550,000
International Boulevard 217,000 -- -- -- 744,000
Lahaina Operating Expense 30,000 30,000 30,000 30,000 360,000
Accent Group Operating
Expenses 268,542 283,542 283,542 283,542 3,267,504
--------- --------- --------- --------- ----------
Total Expenses 1,419,280 2,870,980 1,552,980 1,553,980 14,044,858
Earnings Before Interest
and Taxes 497,145 2,095,195 616,070 622,180 7,520,352
Interest Expense 67,511 57,869 50,749 70,954 849,813
--------- --------- --------- --------- ----------
Net Income Before Tax 429,634 2,037,326 565,321 551,226 6,670,539
Income Tax 171,854 814,930 226,128 220,490 2,668,216
--------- --------- --------- --------- ----------
Net Income 257,781 1,222,396 339,193 330,736 4,002,324
Quarter Net Income 1,294,834 1,892,324
3rd Quarter 4th Quarter
</TABLE>
<PAGE> 31
The Accent Group
Consolidated Income Statement
For The Period July 1, 2000-June 30, 2001
Pro Forma-For Purposes Of The Lahaina Acquisitions, Inc./The Accent Group, Inc.
Merger Only
Not To Be Relied Upon For Investment Purposes
<TABLE>
<CAPTION>
JULY AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER
REVENUES: --------- --------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Mortgage.................................. 449,000 480,000 507,000 534,000 561,000 587,000
Staged Financing.............................. 76,050 76,050 76,050 76,050 76,050 76,050
Recreation Sites.............................. 3,375 3,375 278,375 -- -- 1,000,000
Modular Homes................................. 234,000 234,000 234,000 234,000 234,000 234,000
Swiss Air..................................... 650,000 -- 800,000 -- 1,300,000 --
Cumming Townhomes............................. 920,000 920,000 920,000 920,000 920,000 920,000
Bethel Road................................... -- 125,000 -- -- 125,000 --
Bethel Road 2................................. 170,000 170,000 170,000 170,000 170,000 170,000
Beachside Condo............................... -- -- -- -- -- --
International Boulevard....................... 250,000 300,000 400,000 400,000 -- --
--------- --------- --------- --------- --------- ---------
Total Revenues................................ 2,812,425 2,368,425 3,445,425 2,397,425 3,446,050 3,047,050
Expenses:
Recreation Sites.............................. 900 900 92,400 900 -- 285,000
Modular Homes................................. 182,538 182,538 182,538 182,538 182,538 182,538
Swiss Air..................................... 84,500 -- 104,000 -- 169,000 --
Cumming Townhomes............................. 720,000 720,000 720,000 720,000 720,000 720,000
Bethel Road................................... -- 65,000 -- -- 65,000 --
Bethel Road 2................................. 230,000 230,000 230,000 230,000 230,000 230,000
Beachside Condo............................... -- -- -- -- -- --
International Boulevard....................... 115,000 186,000 248,000 248,000 -- --
Accent Group Operating Expenses............... 408,542 283,542 283,542 283,542 283,542 283,542
--------- --------- --------- --------- --------- ---------
Total Expenses................................ 1,723,480 1,609,980 1,802,480 1,606,980 1,592,080 1,643,080
--------- --------- --------- --------- --------- ---------
Earnings Before Interest and Taxes............ 1,088,945 758,445 1,642,945 790,445 1,853,970 1,403,970
Interest Expense.............................. 47,823 33,199 29,530 24,515 22,372 22,230
--------- --------- --------- --------- --------- ---------
Net Income Before Tax......................... 1,041,122 725,246 1,613,415 765,930 1,831,598 1,381,740
Income Tax.................................... 416,449 290,098 645,366 306,372 732,639 552,696
--------- --------- --------- --------- --------- ---------
Net Income.................................... 624,673 435,148 968,049 459,558 1,098,959 829,044
Quarter Net Income............................ 2,027,869 2,387,561
1st Quarter 2nd Quarter
<CAPTION>
JANUARY FEBRUARY MARCH APRIL MAY JUNE
REVENUES: --------- --------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Mortgage.................................. 609,750 634,500 652,500 670,500 688,500 698,500
Staged Financing.............................. 82,300 82,300 82,300 82,300 82,300 82,300
Recreation Sites.............................. -- -- -- -- -- --
Modular Homes................................. 234,000 234,000 390,000 390,000 390,000 390,000
Swiss Air..................................... 850,000 -- -- -- 300,000 --
Cumming Townhomes............................. 920,000 1,150,000 920,000 1,200,000 1,200,000 1,200,000
Bethel Road................................... 125,000 125,000 125,000 250,000 250,000 250,000
Bethel Road 2................................. 230,000 230,000 230,000 230,000 460,000 230,000
Beachside Condo............................... 395,000 790,000 790,000 790,000 790,000 790,000
International Boulevard....................... 300,000 250,000 500,000 500,000 -- 500,000
--------- --------- --------- --------- --------- ---------
Total Revenues................................ 3,495,800 3,689,800 4,112,800 4,160,800 4,140,800 4,140,800
Expenses:
Recreation Sites.............................. -- -- -- -- -- --
Modular Homes................................. 182,538 182,538 304,230 304,230 304,230 304,230
Swiss Air..................................... 110,500 -- -- -- 39,000 --
Cumming Townhomes............................. 720,000 900,000 720,000 949,130 939,130 939,130
Bethel Road................................... 65,000 65,000 65,000 130,000 130,000 130,000
Bethel Road 2................................. 172,000 172,000 172,000 172,000 344,000 172,000
Beachside Condo............................... 298,600 597,200 597,200 597,200 597,200 597,200
International Boulevard....................... 186,000 155,000 310,000 310,000 -- 310,000
Accent Group Operating Expenses............... 283,542 283,542 283,542 283,542 283,542 283,542
--------- --------- --------- --------- ---------
Total Expenses................................ 2,018,180 2,355,280 2,451,972 2,736,102 2,637,102 2,736,102
--------- --------- --------- --------- ---------
Earnings Before Interest and Taxes............ 1,727,870 1,140,520 1,237,828 1,376,698 1,376,698 1,404,698
Interest Expense.............................. 12,422 12,280 10,076 9,934 9,934 9,934
--------- --------- --------- --------- ---------
Net Income Before Tax......................... 1,715,448 1,128,240 1,227,752 1,366,763 1,513,763 1,394,763
Income Tax.................................... 686,179 451,296 491,101 546,705 605,505 557,905
--------- --------- --------- --------- ---------
Net Income.................................... 1,029,269 676,944 736,651 820,058 908,258 836,858
Quarter Net Income............................ 2,442,864 2,565,174
3rd Quarter 4th Quarter
<CAPTION>
TOTAL
REVENUES: ----------
<S> <C>
Net Mortgage.................................. 7,072,250
Staged Financing.............................. 950,100
Recreation Sites.............................. 1,288,500
Modular Homes................................. 3,342,000
Swiss Air..................................... 3,900,000
Cumming Townhomes............................. 12,110,000
Bethel Road................................... 1,375,000
Bethel Road 2................................. 2,990,000
Beachside Condo............................... 4,345,000
International Boulevard....................... 3,400,000
----------
Total Revenues................................ 40,862,850
Expenses:
Recreation Sites.............................. 380,100
Modular Homes................................. 2,677,224
Swiss Air..................................... 507,000
Cumming Townhomes............................. 9,477,391
Bethel Road................................... 715,000
Bethel Road 2................................. 2,236,000
Beachside Condo............................... 3,284,600
International Boulevard....................... 2,108,000
Accent Group Operating Expenses............... 3,527,504
Total Expenses................................ 24,912,819
Earnings Before Interest and Taxes............ 15,950,031
Interest Expense.............................. 244,251
Net Income Before Tax......................... 15,705,780
Income Tax.................................... 6,282,312
Net Income.................................... 9,423,468
Quarter Net Income............................
</TABLE>
<PAGE> 32
SCHEDULE 6.2
TO AGREEMENT AND PLAN OF MERGER
CAPITALIZATION - LAHAINA
(a) (i) Terms of Warrants
<TABLE>
<S> <C>
1. Number of Shares: 60,000
Strike Price: $0.91875
Expiration Date: December 20, 2003
Holder: LKB Financial, LLC
</TABLE>
*The above-described warrant has been converted into
48,990 shares of Lahaina Common Stock subsequent to the July
21, 1999 signing of the Merger Agreement. The shares have
been registered pursuant to Lahaina's Registration Statement
on Form S-1, Registration No. 333-74607, and will be
registered in the First Post-Effective Amendment to such
Registration Statement.
<TABLE>
<S> <C> <C>
2. Number of Shares: 100,000
Strike Price: $2.60
Expiration Date: January 19, 2004
Holder: GCA Strategic Investment Fund,
Ltd.
3. Number of Shares: 15,000
Strike Price: $2.16
Expiration Date: January 19, 2004
Holder: LKB Financial, LLC
</TABLE>
*The above-described warrant has been converted into
8,520 shares of Lahaina Common Stock subsequent to the July
21, 1999 signing of the Merger Agreement. The shares have
been registered pursuant to Lahaina's Registration Statement
on Form S-1, Registration No. 333-74607, and will be
registered in the First Post-Effective Amendment to such
Registration Statement.
<TABLE>
<S> <C> <C>
4. Number of Shares: 100,000
Strike Price: $2.19
Expiration Date: January 19, 2004
Holder: GCA Strategic Investment Fund,
Ltd.
</TABLE>
<PAGE> 33
(ii) Equity Formation of Lahaina
Lahaina Shares
Common Stock Issued and Outstanding
Calculation.............................................. 2,906,343
Gives effect to:
1) Cancellation of 60,000 shares of LahainaCommon Stock in
connection with the sale of JP Concepts
2) Conversion of 1,910,000 shares of Lahaina Preferred
Stock at approximately $4.60 per share
Shares underlying of other instruments as reported in Lahaina's S-1
Registration Statement, Registration No. 333-74607 dated March 26,
1999.... 2,042,490*
*Gives effect to the 2,100,000 shares of Lahaina
Common Stock registered pursuant to the above S-1 Registration
Statement minus the 48,990 shares of Lahaina Common Stock and
8,520 shares of Lahaina Common Stock issued and outstanding
pursuant to the conversion of the warrants described in (a)
(i)(1) and (a)(i)(3) above.
Fully Diluted............................................ 4,948,833
(b) Beneficial Owners
(i) of Lahaina
The following table sets forth certain information regarding the
beneficial ownership of the common stock of Lahaina immediately following
consummation of the Merger by each person known to Lahaina to own beneficially
more than 5% of the outstanding shares of the common stock of Lahaina.
<PAGE> 34
<TABLE>
<CAPTION>
Name Shares Beneficially Owned(1)
---- ----------------------------
Number Percent
------ -------
<S> <C> <C>
L. Scott Demerau 2,559,500 16.3%
Julia Demerau 2,537,500 16.2%
Mongoose Investments, LLC 1,715,000 15%
Name Shares Beneficially Owned
---- -------------------------
Number Percent
------ -------
Accent Associates, LLC 1,400,000 8.9%
Eutopean Enterprises, LLC 1,200,000 7.7%
Kingdom Generals, LLC 850,000 5.4%
Sherry Sagemiller 833,330 5.3%
</TABLE>
(ii) of an Entity which Beneficially Owns Lahaina
The following table sets forth the Persons who hold a beneficial
ownership in the entities included in the table on Schedule 6.2(b)(i).
<TABLE>
<CAPTION>
Entity Beneficial or Indirectly Beneficial Owner(s)
------ --------------------------------------------
<S> <C>
Eutopean Enterprises, LLC L. Scott Demerau and Julia Demerau (as owners)
Mongoose Investments, LLC Richard P. Smyth (as Managing Member)
Accent Associates, LLC Charles W. Demerau and Judith Demerau (as owners)
Kingdom Generals, LLC Judith Demerau (as Managing Member)
</TABLE>
- -------------
(1)Does not take into account shares of Lahaina Common Stock resulting
from the redemption of the Lahaina Preferred Stock or any exercises of warrants,
options or other instruments.
<PAGE> 35
SCHEDULE 6.15
TO AGREEMENT AND PLAN OF MERGER
ABSENCE OF CERTAIN CHANGES - LAHAINA
a. At the request of Accent, Lahaina has entered into an agreement with
GCA Strategic Investment Fund, Ltd. ("GCA") dated as of June 1, 1999
pursuant to which GCA agreed to convert the $300,000 working capital
line dated January 1, 1999 into 146,667 shares of Lahaina Common
Stock; and
Lahaina has negotiated an agreement with GCA pursuant to which (i)
GCA's buy-back rights and Lahaina's stand-still obligations with
respect to the $775,000 convertible note, as amended, will be amended,
(ii) the second mortgage on the Beachside property attached as
Schedule 6.6(a)(ii) hereto will be amended to include all amounts to
be owed to GCA and LKB Financial, LLC and (iii) GCA grants its consent
to this Agreement. (Form of Consent attached as Exhibit K hereto.)
b. None
c. None
<PAGE> 36
SCHEDULE 10.1
TO AGREEMENT AND PLAN OF MERGER
LAHAINA PAYABLES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Pre-Merger Merger Related
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
AAA Advertising Agency (Lee $ 2,975 0
- --------------------------------------------------------------------------------------
Allsafe $ 64 0
- --------------------------------------------------------------------------------------
Amelia Green $ 1,200 0
- --------------------------------------------------------------------------------------
Amelia Islander Magazine $ 8,649 0
- --------------------------------------------------------------------------------------
Arm & Associates 0 10,000
- --------------------------------------------------------------------------------------
AT&T (Long Distance) $ 1,222 0
- --------------------------------------------------------------------------------------
Boree Canvas $ 2,778 0
- --------------------------------------------------------------------------------------
Brad's Glass $ 4,426 0
- --------------------------------------------------------------------------------------
Cotner $ 22,342 0
- --------------------------------------------------------------------------------------
FPU (Shop's) $ 600 0
- --------------------------------------------------------------------------------------
FPU (In dispute) $ 4,200* 0
- --------------------------------------------------------------------------------------
Harbor Sound $ 1,049 0
- --------------------------------------------------------------------------------------
Kenneth Walters $ 12,000 8,000
- --------------------------------------------------------------------------------------
Masons Refrigeration $ 402 0
- --------------------------------------------------------------------------------------
Pacific Coast (August) $ 20,000 0
- --------------------------------------------------------------------------------------
Nationwide Ins. $ 2,966 0
- --------------------------------------------------------------------------------------
NewsLeader $ 1,578 0
- --------------------------------------------------------------------------------------
The Chamber $ 235 0
- --------------------------------------------------------------------------------------
Tribune-Georgian $ 957 0
- --------------------------------------------------------------------------------------
Waycross Journal-Herald $ 3,784 0
- --------------------------------------------------------------------------------------
WWRR-FM 100.7 $ 579 0
- --------------------------------------------------------------------------------------
Kres Real Estate (expenses) $ 2,116 0
- --------------------------------------------------------------------------------------
Sherry Klein (termination costs) $ 0 30,000
- --------------------------------------------------------------------------------------
</TABLE>
<PAGE> 37
<TABLE>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------
Signs & Frames $ 246 0
- --------------------------------------------------------------------------------------
AT&T $ 200 0
- --------------------------------------------------------------------------------------
Bearden & Smith $ 2,645 0
- --------------------------------------------------------------------------------------
BellSouth $ 894 0
- --------------------------------------------------------------------------------------
Bowne $ 10,000 5,000
- --------------------------------------------------------------------------------------
Boy Scouts of America $ 1,000 0
- --------------------------------------------------------------------------------------
Florida Times Union $ 49 0
- --------------------------------------------------------------------------------------
Georgia Secretary of State $ 50 0
- --------------------------------------------------------------------------------------
Milt's of Amelia $ 285 0
- --------------------------------------------------------------------------------------
Milward & Co. $ 2,061 0
- --------------------------------------------------------------------------------------
Paul Hastings $ 140,000 85,000*
- --------------------------------------------------------------------------------------
PR Newswire $ 4,200 0
- --------------------------------------------------------------------------------------
Internet Stock Market $ 3,325 0
- --------------------------------------------------------------------------------------
Nathan Sears $ 7,000 0
- --------------------------------------------------------------------------------------
Corporate Stock Transfer $ 9,100 0
- --------------------------------------------------------------------------------------
Smyth (Consulting) $ 0 60,000
- --------------------------------------------------------------------------------------
Sullivan (Consulting) $ 0 50,000
- --------------------------------------------------------------------------------------
Joe Powell $ 18,500 0
- --------------------------------------------------------------------------------------
W. Ross (CFO Recruitment) $ 12,500 0
- --------------------------------------------------------------------------------------
Fernandina Bch Newsleader $ 1,500 0
- --------------------------------------------------------------------------------------
TOTAL 285,335 238,000
- --------------------------------------------------------------------------------------
(1) water and sewer
dispute
(2)
includes 25,000 for
costs going forward
</TABLE>
<PAGE> 38
CONSENT TO AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT (the "Agreement") is made and entered into this 1st day of
August, 1999, by and among Lahaina Acquisitions, Inc. a Colorado corporation
("Lahaina"), LAHA NO. 1, INC, a Georgia corporation ("LAHA 1"), Mongoose
Investments, LLC, a Georgia limited liability company ("Mongoose"), Beachside
Commons L. Inc, a Florida corporation ("Beachside"), L. Scott Demerau
("Demerau"), The Accent Group, Inc. a Georgia corporation ("Accent"), and GCA
Stratagic Investment Fund, Limited, a Beachside corporation ("GCA").
Capitalized terms not defined herein shall have the meaning set forth in the
Securities Agreement, as defined below, unless otherwise specified.
WITNESSETH:
WHEREAS, Lahaina and GCA have entered into a Securities Purchase Agreement
dated as of December 7, 1998 (the "Securities Agreement");
WHEREAS, Section 8.4 of the Securities Agreement states that neither
Lahaina nor any Subsidiary will consummate an Asset Sale of material assets of
Lahaina or any Subsidiary, including but not limited to any disposition of
capital stock of a Subsidiary, property or other assets by means of a merger,
without the prior written consent of GCA, which consent shall not be
unreasonably withheld;
WHEREAS, Lahaina contemplates the merger of its wholly-owned Subsidiary,
LAHA 1, with and into Accent pursuant to that certain Agreement and Plan of
Merger by and among Lahaina, LAHA 1, Accent, Mongoose and Accent Mortgage
Services, Inc. dated as of July 21, 1999 (the "Merger Agreement"); and
as amended as on August 19, 1999;
WHEREAS, Lahaina and GCA wish to amend certain provisions of the
Securities Agreement and related Transaction Agreements prior to closing of the
Merger Agreement;
NOW THEREFORE, for and in consideration of the premises, the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
A. GCA Consent to Merger. GCA consents to the merger of LAHA 1 with and
into Accent pursuant to the terms of the Merger Agreement, subject to the
conditions precedent set forth in Section P below.
B. Forbearance of Redemption Rights under Convertible Notes. Lahaina
agrees to forbear from redeeming in whole or in part, the remaining unpaid
principal amount of the Convertible Notes for a period of 180 Trading Days from
the date hereof, subject to the Repurchase Option as set forth in the
Convertible Note No. 1 (defined below), as amended substantially in the
1
<PAGE> 39
form of Exhibit B attached hereto.
C. Moratorium on Issuance of Convertible Securities. Lahaina agrees not to
issue any additional convertible securities issuable or convertible at a
discount to the then current market price of Lahaina common stock until all of
the convertible notes and warrants held by GCA and LKB Financial, LLC ("LKB"),
as set forth more particularly in Schedule F(5)(d) attached hereto, are fully
converted.
D. Securities Filings. Lahaina, Accent and Demerau covenant to:
1. file all disclosure documents and amendments to the then current
Form S-1 Registration Statement of Lahaina within three (3) business
days of closing of the Merger Agreement, and subject to the liquidated
damages provisions set forth in Subsections 10.4(d) and (3) of the
Securities Agreement;
2. remove all restrictive legends from all shares of Common Stock of
Lahaina currently held by GCA and LKB; and
3. deliver such unlegended shares of Common Stock of Lahaina to GCA
and LKB, within five (5) business days after closing of the Merger
Agreement, subject to the liquidated damages provisions set forth in
Section 10.1 of the Securities Agreement.
E. Beachside Mortgage. Lahaina, Beachside, Accent and Demerau covenant
that GCA shall retain either a second mortgage and title insurance commitment on
the Beachside Property, or in the event of the sale of the Beachside Property, a
first or second mortgage and title insurance commitment on other comparable real
property satisfactory in form and substance to GCA in its sole discretion until
all of the convertible notes and warrants held by GCA and LKB, as set forth more
particularly in Schedule F(5)(d), are fully converted.
F. Conditions Precedent to GCA Consent to Merger. The consent of GCA to
the merger of LAHA 1 with and into Accent pursuant to the terms of the Merger
Agreement is subject to the fulfillment prior to or at the closing of the Merger
Agreement of the following conditions:
1. An amendment to the certain Guaranty, dated as of the 7th day of
December, 1998 made by Beachside Commons I, Inc. in its capacity as a
guarantor of Lahaina for the benefit of GCA ("Beachside Guaranty"),
substantially in the form of Exhibit A attached hereto, is properly
executed by Richard P. Smyth, and authorized officers of Mongoose,
Lahaina and Beachside Commons I, Inc. ("Beachside").
2. An amendment to the certain 9% Convertible Note No. 1 of Lahaina in
the principal amount of $775,000, as amended to date (the "Convertible
Note No. 1"), substantially in the form of Exhibit B attached hereto,
properly executed by an
2
<PAGE> 40
authorized officer of Lahaina.
3. An amendment to the Securities Agreement, substantially in the
form of Exhibit C attached hereto, is properly executed by an
authorized officer of Lahaina.
4. An Escrow Agreement, substantially in the form of Exhibit D
attached hereto, is properly executed by an authorized officer of
Lahaina.
5. The board of directors of Lahaina each properly resolve:
a. to exclusively retain the law firm of Paul, Hastings,
Janofsky & Walker, LLP as its legal counsel for all
securities-related matters of Lahaina and its subsidiaries until
or after February 14, 2000;
b. to: (i) file all disclosure documents and amendments to
the then current Form S-1 Registration Statement of Lahaina, (ii)
remove all restrictive legends from the Conversion Shares, and
(iii) deliver such newly unlegended Conversion Shares to GCA,
within five (5) business days of closing of the Merger Agreement,
subject to the liquidated damages provisions set forth in
Subsections 10.4(d) and (e) of the Securities Agreement.
c. to forbear from redeeming, in whole or in part, the
remaining unpaid principal amount of the Convertible Notes for a
period of 180 Trading Days from the closing date of the Merger
Agreement;
d. not to issue any additional convertible securities
issuable or convertible at a discount to the then current market
price of Lahaina common stock until all of the convertible notes
and warrants held by GCA and LKB Financial, LLC, as set forth more
particularly in Schedule F(5)(d), are fully converted; and
e. that GCA shall retain either a second mortgage and title
insurance commitment on the Beachside Property, or in the event of
the sale the Beachside Property, a mortgage and title insurance
commitment on other comparable real property satisfactory in form
and substance to GCA in its sole discretion until all of the
convertible notes and warrants held by GCA and LKB Financial LLC,
as set forth more particularly in Schedule F(5)(d), are fully
converted.
6. Lahaina delivers to GCA all Conversion Shares, subject to the
liquidated damages provisions set forth in Section 10.1 of the
Securities Agreement.
3
<PAGE> 41
7. Lahaina, Accent and Demerau covenant, by executing this
Agreement, to (a) file all disclosure documents and amendments to the
then current Form S-1 Registration Statement of Lahaina, (b) remove all
restrictive legends from the Conversion Shares, and (c) deliver such
newly legended Conversion Shares to GCA within five (5) days of closing
of the Merger Agreement.
G. Indemnification. Each of Lahaina, LAHA 1, Beachside and Accent will and
hereby agrees, in the event of any registration of any securities of Lahaina
under the Securities Act, to indemnify and hold harmless GCA, LKB, and any
other holder of any Registrable Securities covered by such registration
statement, its directors, employees and officers, each other Person who
participates as an underwriter in the offering or sale of such securities and
each other Person, if any, who controls such holder or any such underwriter
within the meaning of the Securities Act against any losses, claims, damages or
liabilities, joint or several, to which such holder or any such director or
officer or underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the Securities Act, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the Company will
reimburse such holder and each such director, officer, underwriter and
controlling person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding, provided that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage, liability,
(or action or proceeding in respect thereof) or expense arises out of or is
based upon an untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by such holder or underwriter
stating that it is for use in the preparation thereof and, provided further
that the Company shall not be liable to any Person who participates as an
underwriter in the offering or sale of Registrable Securities or to any other
Person, if any, who controls such underwriter within the meaning of the
Securities Act, in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense
arises out of such Person's failure to send or give a copy of the final
prospectus, as the same may be then supplemented or amended, within the time
required by the Securities Act to the Person assuming the existence of an
untrue statement or alleged untrue statement or omission or alleged omission at
or prior to the written confirmation of the sale of the Registrable Securities
to such Person if such statement or omission was corrected in such final
prospectus or an amendment or supplement thereto. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf
of such holder or any such director, officer, underwriter or controlling person
and shall survive the transfer of such securities by such holder. Capitalized
terms not otherwise defined in this Agreement shall have the meaning set forth
in the Registration Rights Agreement.
4
<PAGE> 42
H. Successors and Assigns. The provisions hereof shall be binding upon,
and inure to the benefit of, the parties hereto and their respective successors
and assigns.
I. Governing Laws. This Agreement shall be executed, construed and
enforced in accordance with the laws of the State of Georgia.
J. Amendments. No amendment of this Agreement shall be effective unless
it shall be in writing and signed on behalf of each of the parties hereto.
K. Notices.
If to Lahaina, Mongoose or Beachside:
c/o Lahaina Acquisitions, Inc.
2900 Atlantic Avenue
Fernandina Beach, Fl 32034
ATTN: Richard P. Smyth
with a copy to:
Paul Hastings, Janofsky & Walker LLP
600 Peachtree Street N.E. Suite 2400
Atlanta, GA 30308
ATTN: Wayne Shortridge, Esq.
If to GCA:
GCA Strategic Investment Fund, Ltd
Mechanic Building
12 Church Street
Hamilton, HM 11 Bermuda
ATTN: Lew Lester
with a copy to:
Sutherland, Asbill & Brennan LLP
999 Peachtree Street, N.E.
Atlanta, GA 30309
ATTN: Joseph L. Springsteen, Esq.
[signature page follows]
5
<PAGE> 43
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
on their behalf by their duly authorized representatives as of the day and year
first above written.
LAHAINA ACQUISITIONS, INC.
By: /s/ Richard P. Smyth
------------------------------------
Name: Richard P. Smyth
Title: Chief Executive Officer
LAHA NO. 1, INC.
By: /s/ Richard P. Smyth
-----------------------------------
Name: Richard P. Smyth
Title: President
MONGOOSE INVESTMENTS, INC.
By: /s/ Richard P. Smyth
-----------------------------------
Name: Richard P. Smyth
Title:
BEACHSIDE COMMONS, INC.
By: /s/ Richard P. Smyth
-----------------------------------
Richard P. Smyth
President
(signature page follows)
6
<PAGE> 44
THE ACCENT GROUP, INC.
By: /s/
---------------------------
Name: /s/
-------------------------
Title: President
------------------------
GCA STRATEGIC INVESTMENT FUND, LTD.
By: /s/
---------------------------
Name: /s/
-------------------------
Title: Director
------------------------
****
7
<PAGE> 45
Schedule F(5)(d)
GCA Strategic Investment Fund, Ltd.
25,000 Common Shares registered under current S-1.
20,666 Common Shares registered under current S-1.
775,000-9% Convertible Note--currently convertible into 885,714 Common Shares
registered under current S-1.
146,667 Common Shares, owed but not yet delivered, registered under current
S-1.
Warrants
100,000 Warrants @ Strike Price of $2.19--Expiration Date--January 19, 2004,
issued in connection with 1st drawdown on $300,000 credit line.
50,000 Warrants @ Strike Price of $2.16, owed but not yet delivered, issued in
connection with 2nd drawdown on $300,000 credit line.
50,000 Warrants @ Strike Price of $2.16, owed but not yet delivered, issued in
connection with 3rd drawdown on $300,000 credit line.
LKB Financial, LLC
8,520 Common Shares issued from Conversion of 15,000 Warrants issued in
connection with $300,000 Credit Line, registered under current S-1.
48,990 Common Shares issued from Conversion of 60,000 Warrants issued in
connection with $750,000 Convertible Debenture, registered under current S-1.
<PAGE> 46
EXHIBIT A
AMENDMENT TO GUARANTY
This Amendment is dated as of August 18, 1999 among Beachside Commons I,
Inc. ("Beachside"), Lahaina Acquisitions, Inc. ("Lahaina"), GCA Strategic
Investment Fund, Limited ("GCA"), Mongoose Investments, LLC ("Mongoose") and
Richard P. Smyth ("Smyth").
PRELIMINARY STATEMENT
WHEREAS, Beachside ("Beachside") made and executed that certain Guaranty
dated December 7, 1998 (the "Guaranty"; capitalized terms used but not defined
herein have the meanings assigned to such terms in the Guaranty), in favor of
GCA with respect to the payment and performance of the $775,000 indebtedness
and obligations of Lahaina to GCA under the Securities Purchase Agreement as
evidenced by the 9% Convertible Note No. 1 dated December 29, 1998 and amended
to date;
WHEREAS, GCA, Lahaina, Beachside, Mongoose and Smyth have agreed to
replace Beachside with Mongoose and Smyth as Guarantor under the Guaranty.
NOW, THEREFORE, for good and valuable consideration, the parties hereto
agree as follows:
1. Amendment to Guaranty
Effective as of the date of this Amendment, the Guaranty is amended in
accordance with this Amendment. Except as specifically amended by this
Amendment, all of the original terms and provisions of the Guaranty shall
continue in full force and effect.
The Guaranty is hereby amended by replacing Beachside with Mongoose and
Smyth, jointly and severally, as the Guarantor under the Guaranty.
2. Miscellaneous
2.1 Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Georgia.
2.2 Successors and Assigns. This Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective legal
representatives, successors and assigns.
2.3 Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall constitute an original, but all of which
taken together shall be one and the same instrument.
<PAGE> 47
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers hereunder duly authorized as of the day
and year first written above.
/s/ Richard P. Smyth
---------------------------
Richard P. Smyth
MONGOOSE INVESTMENTS LLC
By: /S/ Richard P. Smyth
---------------------------
Name: Richard P. Smyth
Title: Managing Member
LAHAINA ACQUISITIONS, INC.
By: /s/ Richard P. Smyth
---------------------------
Name: Richard P. Smyth
Title: Chairman
BEACHSIDE COMMONS I, INC.
By: /s/ Richard P. Smyth
---------------------------
Name: Richard P. Smyth
Title: President
CGA STRATEGIC INVESTMENT FUND,
LIMITED
By: /s/ Lewis N. Lester
---------------------------
Name: Lewis N. Lester
Title: Director
<PAGE> 48
EXHIBIT B
AMENDMENT NO. 1
TO
9% CONVERTIBLE NOTE NO. 1
PRINCIPLE AMOUNT $775,000
This is AMENDMENT NO. 1 (the "Amendment") to 9% Convertible Note No. 1
Principal Amount $775,000, dated as of December 7, 1998 and as amended to date
(the "Note"), dated August 18, 1999. by and between Lahaina Acquisitions, Inc.
("Lahaina") and GCA Strategic Investment Fund, Limited ("CGA").
Background Statement
--------------------
WHEREAS, Lahaina delivered to GCA, the Note, and
WHEREAS, Lahaina and GCA wish to amend by this Amendment certain provisions
of the Note (the "Amended Note"):
NOW THEREFORE, in consideration of the promises and other good and valuable
consideration, the parties hereby agree as follows:
1. The first two sentences of Section 4.2 of the Note shall be deleted in
its entirety and replaced with the following language:
"100% of the outstanding principal amount of this Convertible Note
shall be converted into a number of shares of Common Stock at a
conversion price (the "Conversion Price") equal to the lesser of
(i) $0.875, and (ii) based on a formula F/P, where F = the
principal amount of Convertible Note being converted plus accrued
and unpaid interest thereon through the date of conversion plus
Default Interest, if any, on such interest, and P = the product of
85% multiplied by the average of the ten (10) consecutive DWASP
for the Common Stock for the ten (10) Trading Days ending on the
day prior to the Conversion Date ("Floating Conversion Price")
(subject, in each case, to equitable adjustments for stock splits,
stock dividends or rights offerings by the Company relating to the
Company's securities or the securities of any subsidiary of the
Company, combinations, recapitalization, reclassifications,
extraordinary distributions and similar events as contemplated by
Article XI of the Agreement)."
<PAGE> 49
2. SUBSECTION 5.1 of the Note shall be deleted in its entirety and
replaced with the following:
5.1 Redemption Rights and Repurchase Option of Company. The Company
may elect, or be required, upon receipt of a Notice of Conversion
at any time after, but not prior to, the Option Expiration Date
(as defined below), to redeem in whole or in part the unpaid
principal amount of the Convertible Note, for each at a
redemption price (the "Redemption Price") equal to the product
of (x) the number of shares of Common Stock which are then
issuable upon conversion of the Convertible Note pursuant to
SECTION 4.1 (the "Conversion Shares"). multiplied by (y) the
average of the five (5) consecutive DWASP for the Common Stock
for the five (5) consecutive Trading Days ending on the day prior
to the date of redemption by the Company, plus accrued and unpaid
interest: provided that, GCA will grant the Company, or its
assignees, an option (the "Repurchase Option") to purchase the
Conversion Shares held by GCA, to be exercised under the
following terms:
(a) The Repurchase Option price per share is as follows:
(i) Beginning on the closing date of a certain Merger
Agreement dated as of July 21, 1999 and as amended on August 19,
1999, by and among the Company, LAHA NO. I, Inc., The Accent
Group, Inc., Accent Mortgage Services, Inc. and Mongoose
Investments, LLC, and closing on August 19, 1999, (the "Merger
Closing Date") and extending until five (5) business days
following the Merger Closing Date, the Conversion Shares may be
purchased for $3.25 per share, plus accrued and unpaid interest;
(ii) Beginning on the sixth (6th) business day
following the Merger Closing Date and extending until the tenth
(10th) business day following the Merger Closing Date, the
Conversion Shares may be purchased for $3.50 per share, plus and
accrued and unpaid interest; or
(iii) Beginning on the eleventh (11th) business day
following the Merger Closing Date and expiring on September 30,
1999 (the "Option Expiration Date"), the Conversion Shares may be
purchased for $3.75 per share, plus accrued and unpaid interest.
(b) The minimum number of Conversion Shares which may be
purchased under an exercise of the Repurchase Option is eighty
percent (80%) of the Shares issuable under the Convertible Note.
(c) For any and all Repurchase Options exercised by the
Company, the
2
<PAGE> 50
purchase monies must be delivered by wire transfer, in immediately
available funds, to the escrow account of an escrow agent appointed by
the Holder, within two (2) business days after notice of intent to
exercise the Repurchase Option (the "Funding Date"). Closing shall
occur as soon as the Shares are available from the Company's transfer
agent, but not later than three (3) days after notice that the funding
is available in the escrow account. All notices must be made in
writing, and are irrevocable.
(d) In the event that funding is not received in the escrow
account (the "Repurchase Default") on the Funding Date, the company
waives the current Repurchase Option and any Future Repurchase
Options. The Shares purchased under the Repurchase Option will have a
mandatory "lock-up" for the sooner of (i) one (1) year following the
exercise of the Repurchase Option or (ii) until such time that
Holder's fully diluted shareholdings (including all convertible debt
securities such as convertible notes and warrants) in the Company are
less than 30,000 shares."
3. Miscellaneous
2.1 Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Georgia.
2.2 Successors and Assigns. This Amendment shall be binding upon and inure
to the benefit of the parties hereto and their respective local representatives,
successors and assigns.
2.3 Counterparts. this Amendment may be executed in one or more
counterparts, each of which shall constitute an original, but all of which taken
together shall be one and the same instrument.
[signature page follows]
3
<PAGE> 51
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed hereunder duly authorized as of the day and year first above written.
LAHAINA ACQUISITIONS, INC.
By: /s/ Richard P. Smyth
------------------------------
Name: Richard P. Smyth
----------------------------
Title: Chairman
---------------------------
GCA STRATEGIC INVESTMENT FUND,
LIMITED
By: /s/ Lewis N. Lester
----------------------------
Name: Lewis N. Lester
----------------------------
Title: Director
----------------------------
4
<PAGE> 52
EXHIBIT C
AMENDMENT
TO
SECURITIES PURCHASE AGREEMENT
This is an AMENDMENT (the "Amendment") to the certain Securities Purchase
Agreement, dated as of December 7, 1998 (the "Securities Agreement"), by and
between Lahaina Acquisitions, Inc. ("Lahaina") and GCA Strategic Investment Fund
Limited ("GCA").
Background Statement
--------------------
WHEREAS, Lahaina and GCA have entered into a Securities Purchase Agreement
dated as of December 7, 1998 (the "Securities Agreement"):
WHEREAS, Lahaina and GCA wish to amend by this Amendment certain provisions
of the Securities Agreement;
NOW THEREFORE, in consideration of the promises and other good and valuable
consideration, the parties hereby agree as follows:
1. In the first sentence, third line, of Section 10.1(a) of the Securities
Agreement, the words "five (5) Trading Days" shall be deleted and replaced with
"three (3) Trading Days."
2. Section 3.4 of the Securities Agreement shall be deleted in its
entirety and replaced with the following language:
"Section 3.4 Mandatory Prepayments.
(a) Upon (i) the occurrence of a Change in Control of the Company, (ii) a
transfer of all or substantially all of the assets of the Company to any
Person in a single transaction or series of related transactions, (iii) a
consolidation, merger or amalgamation of the Company with or into another
Person in which the Company is not the surviving entity (other than a
merger which is effected solely to change the jurisdiction of incorporation
of the Company and results in a reclassification, conversion or exchange of
outstanding shares of Common Stock solely into shares of Common Stock)
(each of items (i), (ii) and (iii) being referred to as a "Sale Event"), or
(iv) the occurrence of a Registration Default which continues uncured for a
period of forty-five (45) days, then, in each case, the Company shall, upon
request of the Majority Holders, redeem the Convertible Notes, subject to
the provisions of Section 5 of the Convertible Notes.
(b) Upon the consummation of one or more Financings, the Company shall use
100% of the Net Cash Proceeds therefrom (unless such Net cash proceeds from
each such
<PAGE> 53
Financing is less than $250,000) to redeem the Convertible Notes. The
redemption price payable upon any such redemption shall be the Redemption Price
in Section 5 of the Convertible Notes, as amended (referred to herein as the
"Formula Price").
(c) Upon the issuance of the Maximum Number of Shares and the failure within 90
days of such issuance to obtain shareholder approval to issue additional shares
of Common Stock (the "Redemption Event"), the Company shall redeem the
outstanding balance of each Convertible Note for the Formula Price.
(d) In the event that there is an insufficient number of authorized; issuable,
unlegended and freely tradeable shares of Common Stock registered with the
latest Form S-1 or S-1/A (or other applicable) Registration Statement filed by
the Company to fully convert the Convertible Notes and exercise all warrants
held by GCA and LKB Financial, LLC, then the Company shall immediately file a
Form S-1/A (or other applicable) amendment to the then current Registration
Statement to register a sufficient number of such shares to convert said
Convertible Notes and warrants. Upon the failure within five (5) Trading Days
to register a sufficient number of such shares, the Company shall redeem the
outstanding balance of each Convertible Note for the Formula Price. In
addition, failure of the Company to register a sufficient number of such shares
to fully convert said Convertible Notes and exercise such warrants shall be a
Registered Default under Section 10.4(e) from the date of the Notice of
Conversion to the date of the earlier of (i) the redemption of the outstanding
balance of the Convertible Notes and exercise of all such warrants or (ii) full
conversion of the Convertible Notes and exercise of all such warrants."
3. Section 9.2 of the Security Agreement shall be deleted in its entirety
and replaced with the following language: "Section 9.3 [omitted]."
4. Miscellaneous
4.1. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Georgia.
4.2. Successors and Assigns. This Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective legal
representatives, successors and assigns.
4.3. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall constitute an original, but all of which
taken together shall be one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
2
<PAGE> 54
executed hereunder duly authorized as of the day and year first above written.
LAHAINA ACQUISITIONS, INC.
By: /s/ Richard P. Smyth
---------------------------
Name: Richard P. Smyth
------------------------
Title: Chairman
------------------------
GCA STRATEGIC INVESTMENT FUND,
LIMITED
By: /s/ Lewis N. Lestor
-----------------------------
Name: Lewis N. Lestor
---------------------------
Title: Director
--------------------------
****
3
<PAGE> 55
Exhibit D
ESCROW AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into this 18th day of
August 1999, by and among Lahaina Acquisitions, Inc., a Colorado corporation
(the "Company"), The Accent Group, Inc. ("Accent") and GCA Strategic Investment
Fund, Limited, a Bermuda corporation ("GCA"), and accepted by Kim T. Stephens,
as Escrow Agent. Capitalized terms not defined herein shall have the meaning
set forth in the Securities Agreement, as defined below, unless otherwise
specified.
WITNESSETH:
WHEREAS, GCA and the Company entered into a Securities Purchase Agreement
dated as of December 7, 1998 (the "Securities Agreement") providing for, among
other things, the purchase by GCA of the Note (defined below) which is
convertible into a certain number of shares of Common Stock of the Company:
WHEREAS, GCA purchased from the Company a 9% Convertible Note No. 1
Principal Amount $775,000, dated as of December 28, 1998 and as amended to date
(the "Securities"), pursuant to the terms of the Securities Agreement, and
WHEREAS, Lahaina contemplates the merger of its wholly-owned Subsidiary,
LAHA NO. 1, Inc. ("LAHA 1"), with and into Accent, pursuant to that certain
Agreement and Plan of Merger by and among the Company, LAHA 1, Accent, Mongoose
Investments, LLC and Accent Mortgage Services, Inc. dated as of July 21, 1998,
as amended on August 19, 1989, and closed on August 19, 1989 (the "Merger
Agreement"), and that pursuant to the Merger Agreement the shareholders of
Accent shall become the majority shareholders of the Company.
WHEREAS, prior to or as of the closing of the Merger Agreement, the
Company and GCA wish for the Escrow Agent to hold certain certificates
representing a sufficient number of authorized and non-outstanding shares of
Common Stock in the Company (the "Common Shares") to be issuable upon
conversion of the Securities, in escrow until the Escrow Agent receives, or is
copied, a written notice of election to convert the Securities (the "Conversion
Notice"); and
WHEREAS, the Company and GCA desire that the Escrow Agent be empowered to
complete delivery to GCA the number of Common Shares to be issued upon
conversion of the Securities:
NOW, THEREFORE, in consideration of the covenants and mutual promises
contained herein and other good and valuable consideration, the receipt and
legal sufficiency of
<PAGE> 56
which are hereby acknowledged, and intending to be legally bound hereby, the
parties agree as follows:
ARTICLE 1
TERMS OF THE ESCROW
1.1 The parties hereby agree to establish an escrow account with the
Escrow Agent whereby the Escrow Agent shall hold certain certificates
representing the Common Shares. The Company will deliver, within three (3) days
following the closing of the Merger Agreement, eight hundred eighty five
thousand seven hundred fourteen (885,714) authorized and non-outstanding shares
of Common Stock in the Company in the form of eighty-eight (88) certificates of
ten thousand Common Shares each, and one (1) certificate of five thousand
seven hundred fourteen (5,714) Common Shares.
1.2 Upon the Escrow Agent's receipt of the Conversion Notice, he
shall notify the Company, or the Company's designated attorney or agent, of the
amount of Common Shares convertible and deliverable to GCA pursuant to the
Conversion Notice.
1.3 In the event GCA elects to exercise its right to convert the
Securities, the parties hereby agree that any Conversion Notice to be delivered
by GCA shall be delivered to the Escrow Agent, along with evidence of the
Conversion Price (as defined in the Securities) as reported by Bloomberg L.P.
and a calculation of the Common Shares and accrued and unpaid interest. Upon
receipt of any Notice of Conversion from GCA (including a Notice of Conversion
delivered by facsimile), the Escrow Agent shall immediately deliver a copy of
such Notice of Conversion to the Company by facsimile or otherwise. The parties
hereto agree that the Escrow Agent shall be empowered to deliver the number of
converted Common Shares to be issued to GCA based on the information provided
to it in the applicable Conversion Notice within three (3) New York Stock
Exchange trading days of its receipt of the Conversion Notice, in accordance
with the conversion provisions set forth in the Securities Agreement.
1.4 This Agreement may be altered or amended only with the consent of
the parties hereto. Should the Company attempt to change this Agreement in a
manner which, in the Escrow Agent's discretion, shall be undesirable, the
Escrow Agent may resign as Escrow Agent by notifying the Company and GCA in
writing. In case of the Escrow Agent's resignation or removal pursuant to the
foregoing, his only duty, until receipt of notice from the Company and GCA or
their agents that a successor escrow agent shall have been appointed, shall be
to hold and preserve the Common Shares. Upon such event GCA will appoint a new
Escrow Agent. Upon receipt by the Escrow Agent of said notice from GCA of the
appointment of a successor escrow agent, the name of a successor escrow account
and a direction to transfer the Common Shares, the Escrow Agent shall promptly
thereafter transfer the Common Shares held in escrow to said successor escrow
agent. Immediately after said transfer of Common Shares, the Escrow Agent
shall furnish the Company and GCA with proof of such transfer. The Escrow Agent
is authorized to disregard any notices, request, instructions or demands
received by it from the
2 of 6
<PAGE> 57
Company after notice of resignation or removal shall have been given, unless the
same shall be the aforementioned notice from the Company and GCA to transfer the
Securities and funds to a successor escrow agent or to return same to the
respective parties.
1.5 The Escrow Agent shall be reimbursed by the Company for any
reasonable expenses incurred in connection with its performance
hereunder.
1.6 The Company and GCA warrant to and agree with the Escrow Agent
that:
(i) there is no security interest in the Securities or any part
thereof,
(ii) no financing statement under the Uniform Commercial Code is on
file in any jurisdiction claiming a security interest or in
describing (whether specifically or generally) the Securities
or any part thereof, and
(iii) the Escrow Agent shall have no responsibility at any time to
ascertain whether or not any security interest exists in the
Securities or any part thereof or to file any financing
statement under the Uniform Commercial Code with respect to the
Securities or any part thereof.
1.7 The Escrow Agent has no liability hereunder to either party
other than to hold and deliver the Common Shares in accordance with the Notice
of Conversion and any instructions it receives for the Company, and to deliver
them in accordance with the terms hereof. The Escrow Agent shall not be liable
for any action taken or omitted by him in good faith; and in no event shall the
Escrow Agent be liable or responsible except for the Escrow Agent's own gross
negligence or willful misconduct.
1.8 Each party hereto agrees to indemnify and hold harmless the
Escrow Agent from and with respect to any and all suits, claims, damages,
demands, actions, liabilities or losses arising in any way out of this
transaction including the obligation to defend any legal action brought
which in any way arises out of or is related to this Agreement.
1.9 Escrow Agent shall not be responsible for: (i) the sufficiency
or correctness as to the form, execution or the validity of this Agreement; or
(ii) the identity, authority or right of any person executing any notice or
document given to Escrow Agent.
ARTICLE 2
MISCELLANEOUS
2.1 No waiver or any breach of any covenant or provision herein
contained shall be deemed a waiver of any preceding or succeeding breach
thereof, or of any other
3 of 6
<PAGE> 58
covenant or provision herein contained. No extension of time for performance of
any obligation or act shall be deemed any extension of the time for performance
of any other obligation or act.
2.2 All notices or other communications required or permitted hereunder
shall be in writing, and shall be sent by fax, overnight courier, registered or
certified mail, postage prepaid, return receipt requested, and shall be deemed
received upon receipt thereof, as follows:
(i) To the Company
Lahaina Acquisitions, Inc.
2900 Atlantic Avenue
Fernandina Beach, Fl 32034
ATTN: Richard P. Smyth
(404) 272-4238 (phone)
(404) 272-9793 (fax)
(ii) To the Company's counsel:
Paul Hastings, Janofsky & Walker LLP
600 Peachtree Street N.E. Suite 2400
Atlanta, GA 30308
ATTN: Wayne Shortridge, Esq. or Michael T. Voytek, Esq.
(404) 815-2214 (phone)
(404) 815-2429 (fax)
(III) To GCA:
GCA Strategic Investment Fund, Limited
Mechanic Building 12 Church Street
Hamilton, HM11 Bermuda
ATTN: Joe Kelly
(441) 295-0329 (phone)
(441) 295-3926 (fax)
(IV) To the Escrow Agent:
Law offices of Kim T. Stephans
745 S. Milledge Ave. Suite B
Athens, GA 30605
Attention: Kim T. Stephens, Esq.
( ) (phone)
( ) (fax)
4 of 6
<PAGE> 59
2.3. This Agreement shall be binding upon and shall inure to the
benefit of the permitted successors and assigns of the parties hereto.
2.4. This Agreement is the final expression of, and contains the
entire Agreement between, the parties with respect to the subject matter hereof
and supersedes all prior understandings with respect thereto. This Agreement may
not be modified, changed, supplemented or terminated, nor may any obligations
hereunder be waived, except by written instrument signed by the parties to be
charged or by its agent duly authorized in writing or as otherwise expressly
permitted herein.
2.5. Whenever required by the context of this Agreement, the singular
shall include the plural and masculine shall include the feminine. This
Agreement shall not be construed as if it had been prepared by one of the
parties, but rather as if both parties had prepared the same, Unless otherwise
indicated, all references to Articles are to this Agreement.
2.6. The Company and CGA acknowledge and confirm that they are not
being represented in a legal capacity by the Law Office of Kim T. Stephens and
they have had the opportunity to consult with their own legal advisors prior to
the signing of this Agreement.
2.7. The parties hereto expressly agree that this Agreement shall be
governed by, interpreted under and construed and enforced in accordance with the
laws of the State of Georgia. Any motion to enforce, existing out of, or
relating in any way to, any provisions of this Agreement shall be brought
through the American Arbitration Association at the designated locale of
Atlanta, Georgia.
5 of 6
<PAGE> 60
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of this day of August 1999.
---
LAHAINA ACQUISITIONS, INC.
/s/ Richard P. Smyth
------------------------------
Name: Richard P. Smyth
Title: Chief Executive Officer
GCA STRATEGIC INVESTMENT FUND,
LIMITED
By: /S/ Lewis N. Lester
------------------------------
Name: Lewis N. Lester
Title: Director
LAW OFFICES OF KIM T. STEPHENS
By: /s/ Kim T. Stephens
------------------------------
Kim T. Stephens, Esq.
By: /s/ L. Scott Den????
------------------------------
Name: L. Scott Den????
Title: President
Company: The A???????????
6 of 6
<PAGE> 1
EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
DATED AS OF
AUGUST 19, 1999
BY AND BETWEEN
LAHAINA ACQUISITIONS, INC.
AS THE ISSUER,
AND
GCA STRATEGIC INVESTMENT FUND LIMITED
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I. DEFINITIONS............................................................................................1
SECTION 1.1 DEFINITIONS.................................................................................1
SECTION 1.2 ACCOUNTING TERMS AND DETERMINATIONS.........................................................9
ARTICLE II. PURCHASE AND SALE OF SECURITIES.......................................................................9
SECTION 2.1 PURCHASE AND SALE OF CONVERTIBLE NOTES......................................................9
SECTION 2.2 PURCHASE PRICE..............................................................................9
SECTION 2.3 CLOSING AND MECHANICS OF PAYMENT...........................................................10
ARTICLE III. PAYMENT TERMS OF CONVERTIBLE NOTES..................................................................10
SECTION 3.1 PAYMENT OF PRINCIPAL AND INTEREST; PAYMENT MECHANICS.......................................10
SECTION 3.2 PAYMENT OF INTEREST........................................................................10
SECTION 3.3 VOLUNTARY PREPAYMENT.......................................................................10
SECTION 3.4 MANDATORY PREPAYMENTS......................................................................10
SECTION 3.5 PREPAYMENT PROCEDURES......................................................................11
SECTION 3.6 PAYMENT OF ADDITIONAL AMOUNTS..............................................................12
ARTICLE IV. REPRESENTATIONS AND WARRANTIES.......................................................................14
SECTION 4.1 ORGANIZATION AND QUALIFICATION.............................................................14
SECTION 4.2 AUTHORIZATION AND EXECUTION................................................................14
SECTION 4.3 CAPITALIZATION ............................................................................14
SECTION 4.4 GOVERNMENTAL AUTHORIZATION.................................................................15
SECTION 4.5 ISSUANCE OF SHARES.........................................................................15
SECTION 4.6 NO CONFLICTS...............................................................................16
SECTION 4.7 FINANCIAL INFORMATION......................................................................16
SECTION 4.8 LITIGATION.................................................................................16
SECTION 4.9 COMPLIANCE WITH ERISA AND OTHER BENEFIT PLANS..............................................17
SECTION 4.10 ENVIRONMENTAL MATTERS.....................................................................17
SECTION 4.11 TAXES.....................................................................................17
SECTION 4.12 INVESTMENTS, JOINT VENTURES...............................................................18
SECTION 4.13 NOT AN INVESTMENT COMPANY.................................................................18
SECTION 4.14 FULL DISCLOSURE...........................................................................18
SECTION 4.15 NO SOLICITATION; NO INTEGRATION WITH OTHER OFFERINGS......................................18
SECTION 4.16 PERMITS...................................................................................18
SECTION 4.17 LEASES....................................................................................18
SECTION 4.18 ABSENCE OF ANY UNDISCLOSED LIABILITIES OR CAPITAL CALLS...................................18
SECTION 4.19 PUBLIC UTILITY HOLDING COMPANY............................................................19
SECTION 4.20 INTELLECTUAL PROPERTY RIGHTS..............................................................19
SECTION 4.21 INSURANCE.................................................................................19
SECTION 4.22 TITLE TO PROPERTIES.......................................................................19
SECTION 4.23 INTERNAL ACCOUNTING CONTROLS..............................................................19
SECTION 4.24 YEAR 2000 COMPLIANCE......................................................................19
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
SECTION 4.25 FOREIGN PRACTICES.........................................................................20
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PURCHASER...........................................................20
SECTION 5.1 PURCHASER..................................................................................20
ARTICLE VI. CONDITIONS PRECEDENT TO PURCHASE OF SECURITIES.......................................................22
SECTION 6.1 CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS TO PURCHASE................................22
SECTION 6.2 CONDITIONS TO THE COMPANY'S OBLIGATIONS....................................................24
ARTICLE VII. AFFIRMATIVE COVENANTS...............................................................................24
SECTION 7.1 INFORMATION................................................................................24
SECTION 7.2 PAYMENT OF OBLIGATIONS.....................................................................25
SECTION 7.3 MAINTENANCE OF PROPERTY; INSURANCE.........................................................25
SECTION 7.4 MAINTENANCE OF EXISTENCE...................................................................25
SECTION 7.5 COMPLIANCE WITH LAWS.......................................................................26
SECTION 7.6 INSPECTION OF PROPERTY, BOOKS AND RECORDS..................................................26
SECTION 7.7 INVESTMENT COMPANY ACT.....................................................................26
SECTION 7.8 USE OF PROCEEDS............................................................................26
SECTION 7.9 COMPLIANCE WITH TERMS AND CONDITIONS OF MATERIAL CONTRACTS.................................26
SECTION 7.10 RESERVED SHARES AND LISTINGS..............................................................26
SECTION 7.11 IRREVOCABLE INSTRUCTIONS..................................................................27
SECTION 7.12 MAINTENANCE OF REPORTING STATUS; SUPPLEMENTAL INFORMATION.................................28
SECTION 7.13 FORM D; BLUE SKY LAWS.....................................................................28
ARTICLE VIII. NEGATIVE COVENANTS.................................................................................28
SECTION 8.1 LIMITATIONS ON DEBT OR OTHER LIABILITIES...................................................28
SECTION 8.2 TRANSACTIONS WITH AFFILIATES...............................................................28
SECTION 8.3 MERGER OR CONSOLIDATION....................................................................29
SECTION 8.4 LIMITATION ON ASSET SALES..................................................................29
SECTION 8.5 RESTRICTIONS ON CERTAIN AMENDMENTS.........................................................29
SECTION 8.6 PROHIBITION ON DISCOUNTED EQUITY OFFERINGS; REGISTRATION RIGHTS............................29
SECTION 8.7 LIMITATION ON STOCK REPURCHASES............................................................30
ARTICLE IX. RESTRICTIVE LEGENDS..................................................................................30
SECTION 9.1 RESTRICTIONS ON TRANSFER...................................................................30
SECTION 9.2 LEGENDS....................................................................................30
SECTION 9.3 NOTICE OF PROPOSED TRANSFERS...............................................................31
ARTICLE X. ADDITIONAL AGREEMENTS AMONG THE PARTIES...............................................................31
SECTION 10.1 LIQUIDATED DAMAGES........................................................................31
SECTION 10.2 CONVERSION NOTICE.........................................................................32
SECTION 10.3 CONVERSION LIMIT..........................................................................32
SECTION 10.4 REGISTRATION RIGHTS.......................................................................32
SECTION 10.5 RESTRICTION ON ISSUANCE OF SECURITIES.....................................................33
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE XI. ADJUSTMENT OF FIXED PRICE............................................................................34
SECTION 11.1 REORGANIZATION............................................................................34
SECTION 11.2 SHARE REORGANIZATION......................................................................34
SECTION 11.3 RIGHTS OFFERING...........................................................................35
SECTION 11.4 SPECIAL DISTRIBUTION......................................................................36
SECTION 11.5 CAPITAL REORGANIZATION....................................................................36
SECTION 11.6 PURCHASE PRICE ADJUSTMENTS................................................................37
SECTION 11.7 ADJUSTMENT RULES..........................................................................37
SECTION 11.8 CERTIFICATE AS TO ADJUSTMENT..............................................................38
SECTION 11.9 NOTICE TO NOTEHOLDERS.....................................................................38
ARTICLE XII. EVENTS OF DEFAULT...................................................................................39
SECTION 12.1 EVENTS OF DEFAULT.........................................................................39
SECTION 12.2 POWERS AND REMEDIES CUMULATIVE............................................................41
ARTICLE XIII. MISCELLANEOUS......................................................................................41
SECTION 13.1 NOTICES...................................................................................41
SECTION 13.2 NO WAIVERS; AMENDMENTS....................................................................41
SECTION 13.3 INDEMNIFICATION...........................................................................42
SECTION 13.4 EXPENSES: DOCUMENTARY TAXES..............................................................44
SECTION 13.5 PAYMENT...................................................................................44
SECTION 13.6 SUCCESSORS AND ASSIGNS....................................................................44
SECTION 13.7 BROKERS...................................................................................44
SECTION 13.8 GEORGIA LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL;
APPOINTMENT OF AGENT......................................................................44
SECTION 13.9 ENTIRE AGREEMENT..........................................................................45
SECTION 13.10 SURVIVAL; SEVERABILITY....................................................................45
SECTION 13.12 REPORTING ENTITY FOR THE COMMON STOCK.....................................................45
SECTION 13.13 PUBLICITY.................................................................................45
</TABLE>
<PAGE> 5
LIST OF EXHIBITS
Exhibit A Form of Convertible Notes
Exhibit B Form of Registration Rights Agreement
Exhibit C Form of Solvency Certificate
Exhibit D Form of Officer's Certificate
Exhibit E Form of Escrow Agreement
Exhibit F Form of Pledge Agreement
Exhibit G Form of Common Stock Purchase Warrant
<PAGE> 6
LIST OF SCHEDULES
Schedule 4.1 Financings
Schedule 4.3 Capitalization Schedule
Schedule 4.7 Financial Information
Schedule 4.8 Litigation
Schedule 4.12 Investments, Joint Ventures
Schedule 6.1(q) Beachside Property
Schedule 7.8 Use of Proceeds
Schedule 8.2 Transactions with Affiliates
Schedule 8.3 Merger or Consolidation
<PAGE> 7
SECURITIES PURCHASE AGREEMENT
AGREEMENT, dated as of August 19, 1999, between Lahaina Acquisitions,
Inc. (the "Company") and GCA Strategic Investment Fund Limited ("Purchaser").
R E C I T A L S:
WHEREAS, the Company desires to sell and issue to Purchaser, and
Purchaser desire to purchase from the Company, $500,000 aggregate principal
amount of the Company's 9% Convertible Notes due August 18, 2001 (the
"Convertible Notes"), with terms and conditions as set forth in the form of
Convertible Note attached hereto as Exhibit A;
WHEREAS, the Convertible Notes will be convertible into shares of the
Company's common stock, no par value per share (the "Common Stock");
WHEREAS, Purchaser will have certain registration rights with respect
to such shares of Common Stock issuable as interest under, and upon conversion
of, the Convertible Notes (collectively, the "Conversion Shares") as set forth
in the Registration Rights Agreement in the form attached hereto as Exhibit B;
WHEREAS, the Company contemplates the merger of its wholly-owned
Subsidiary, LAHA NO. 1, Inc. ("LAHA 1"), with and into The Accent Group, Inc.
("Accent") pursuant to that certain Agreement and Plan of Merger by and among
the Company, LAHA 1, Accent, Mongoose (defined below) and Accent Mortgage
Services, Inc., dated as of August 19, 1999 (the "Merger Agreement");
WHEREAS, the Company and Purchaser wish to close this Agreement
simultaneously with the closing of the Merger Agreement; and
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I. DEFINITIONS
SECTION 1.1 DEFINITIONS. The following terms, as used herein, have the
following meanings:
"Additional Shares of Common Stock" has the meaning set forth in
Section 11.6.
"Affiliate" means, with respect to any Person (the "Subject Person"),
(i) any other Person (a "Controlling Person") that directly, or indirectly
through one or more intermediaries, Controls the Subject Person or (ii) any
other Person (other than the Subject Person or a Consolidated
<PAGE> 8
Subsidiary of the Subject Person) which is Controlled by or is under common
Control with a Controlling Person.
"Agreement" means this Securities Purchase Agreement, as amended,
supplemented or otherwise modified from time to time in accordance with its
terms.
"Asset Sale" has the meaning set forth in Section 8.4.
"Balance Sheet Date" has the meaning set forth in Section 4.7.
"Beachside" means Beachside Commons I, Inc.
"Benefit Arrangement" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by the
Company.
"Benefit Plans" has the meaning set forth in Section 4.9(b).
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized or required by
law to close.
"Capital Reorganization" has the meaning set forth in Section 11.5.
"Change in Control" means (i) after the date of this Agreement, any
person or group of persons (within the meaning of Sections 13 and 14 of the
Exchange Act and the rules and regulations of the Commission relating to such
sections) other than Purchaser shall have acquired beneficial ownership (within
the meaning of Rules 13d-3 and 13d-5 promulgated by the Commission pursuant to
the Exchange Act) of 33 1/3% or more of the outstanding shares of Common Stock
of the Company; (ii) any sale or other disposition (other than by reason of
death or disability) to any Person of more than 50,000 shares of Common Stock
of the Company by any executive officers and/or directors of the Company
(including, but not limited to, Richard P. Smyth) (iii) individuals
constituting the Board of Directors of the Company on the date hereof (together
with any new Directors whose election by such Board of Directors or whose
nomination for election by the stockholders of the Company was approved by a
vote of at least 50.1% of the Directors still in office who are either
Directors as of the date hereof or whose election or nomination for election
was previously so approved), cease for any reason to constitute at least
two-thirds of the Board of Directors of the Company then in office.
"Closing Bid Price" shall mean for any security as of any date, the
lowest closing bid price as reported by Bloomberg, L.P. ("Bloomberg") on the
principal securities exchange or trading market where such security is listed
or traded or, if the foregoing does not apply, the lowest closing bid price of
such security in the over-the-counter market on the electronic bulletin board
for such security as reported by Bloomberg, or, if no lowest trading price is
reported for such security by Bloomberg, then the average of the bid prices of
any market makers for such
<PAGE> 9
securities as reported in the "Pink Sheets" by the National Quotation Bureau,
Inc. If the lowest closing bid price cannot be calculated for such security on
such date on any of the foregoing bases, the lowest closing bid price of such
security on such date shall be the fair market value as mutually determined by
Purchaser and the Company for which the calculation of the closing bid price
requires, and in the absence of such mutual determination, as determined by the
Board of Directors of the Company in good faith.
"Closing Date" means the date on which all of the conditions set forth
in Sections 6.1 and 6.2 shall have been satisfied and Convertible Notes in the
aggregate principal amount of $500,000 are issued by the Company to Purchaser,
which date shall be simultaneous with the date of closing of the Merger
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission or any
entity succeeding to all of its material functions.
"Common Stock" means the freely tradeable, unrestricted and unlegended
common stock, no par value per share, of the Company.
"Company" means Lahaina Acquisitions, Inc., a Colorado corporation,
and its successors.
"Company Corporate Documents" means the certificate of incorporation
and bylaws of the Company.
"Consolidated Net Worth" means at any date the total shareholder's
equity which would appear on a consolidated balance sheet of the Company
prepared as of such date.
"Consolidated Subsidiary" means at any date with respect to any Person
or Subsidiary or other entity, the accounts of which would be consolidated with
those of such Person in its consolidated financial statements if such
statements were prepared as of such date.
"Control" (including, with correlative meanings, the terms
"Controlling," "Controlled by" and under "common Control with"), as used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of that
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Conversion Date" shall mean the date of delivery (including delivery
via telecopy) of a Notice of Conversion for all or a portion of a Convertible
Note by the holder thereof to the Company as specified in each Convertible
Note.
"Conversion Price" has the meaning set forth in the Convertible Notes.
<PAGE> 10
"Conversion Shares" has the meaning set forth in the Recitals.
"Convertible Notes" means the Company's Convertible Notes
substantially in the form set forth as Exhibit A hereto.
"Deadline" has the meaning set forth in Section 10.1.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes, or other similar instruments
issued by such Person, (iii) all obligations of such Person as lessee which (y)
are capitalized in accordance with GAAP or (z) arise pursuant to sale-leaseback
transactions, (iv) all reimbursement obligations of such Person in respect of
letters of credit or other similar instruments, (v) all Debt of others secured
by a Lien on any asset of such Person, whether or not such Debt is otherwise an
obligation of such Person and (vi) all Debt of others Guaranteed by such
Person.
"Default" means any event or condition which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Default Fee" has the meaning set forth in Section 10.4.
"Derivative Securities" has the meaning set forth in Section 8.6.
"Discounted Equity Offerings" has the meaning set forth in Section 8.6.
"Directors" means the individuals then serving on the Board of
Directors or similar such management council of the Company.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
other governmental restrictions relating to the environment or to emissions,
discharges or releases of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes into
the environment, including, without limitation, ambient air, surface water,
ground water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or hazardous substances or wastes or the cleanup or other
remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means the Company and each Subsidiary and all members of
a controlled group of corporation and all trades or businesses (whether or not
incorporated) under
<PAGE> 11
common control which, together with the Company or any Subsidiary, are treated
as a single employer under the Code.
"Event of Default" has the meaning set forth in Article XII hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expense Reimbursement Fee" has the meaning set forth in Section 13.4.
"Financing" means a public or private financing consummated (meaning
closing and funding) through the issuance of debt or equity securities (or
securities convertible into or exchangeable for debt or equity securities) of
the Company, other than Permitted Financings.
"Fixed Price(s)" has the meaning set forth in Section 11.1.
"GAAP" has the meaning set forth in Section 1.2.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing (whether by
virtue of partnership arrangements, by agreement to keep well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain a minimum
net worth, financial ratio or similar requirements, or otherwise) any Debt of
any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Debt or (ii) entered into for the purpose of assuring in any other manner
the holder of such Debt of the payment thereof or to protect such holder
against loss in respect thereof (in whole or in part); provided that the term
Guarantee shall not include endorsements for collection or deposit in the
ordinary course of business. The term Guarantee used as a verb has a
corresponding meaning.
"Guaranty" means a certain Guaranty dated as of the date hereof by and
between Company and Beachside.
"Hazardous Materials" means any hazardous materials, hazardous wastes,
hazardous constituents, hazardous or toxic substances or petroleum products
(including crude oil or any derivative or fraction thereof), defined or
regulated as such in or under any Environmental Laws.
"Intellectual Property" has the meaning set forth in Section 4.20.
"Investment" means any investment in any Person, whether by means of
share purchase, partnership interest, capital contribution, loan, time deposit
or otherwise.
"Lien" means any lien, mechanic's lien, materialmen's lien, lease,
easement, charge, encumbrance, mortgage, conditional sale agreement, title
retention agreement, agreement to sell or convey, option, claim, title
imperfection, encroachment or other survey defect, pledge,
<PAGE> 12
restriction, security interest or other adverse claim, whether arising by
contract or under law or otherwise (including, without limitation, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction in respect of any of the
foregoing).
"Listing Applications" has the meaning set forth in Section 4.4.
"Majority Holders" means (i) as of the Closing Date, Purchaser and
(ii) at any time thereafter, the holders of more than 50% in aggregate
principal amount of the Convertible Notes outstanding at such time.
"Market Price" shall mean the Closing Bid Price of the Common Stock
preceding the date of determination.
"Material Plan" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $500,000.
"Maturity Date" shall mean the date of maturity of the Convertible
Notes; specifically, August 18, 2001.
"Maximum Number of Shares" shall mean that percentage that the Company
may issue without shareholder approval under the applicable rules of the
National Market or the applicable OTC Bulletin Board or equivalent entity, of
the then issued and outstanding shares of Common Stock of the Company as of the
applicable date of determination, or such greater number of shares as the
stockholders of the Company may have previously approved.
"Merger Agreement" has the meaning set forth in the Recitals.
"Mongoose" means Mongoose Investments, LLC.
"NASD" has the meaning set forth in Section 7.10.
"Nasdaq Market" means the Nasdaq Stock Market's National Market System.
"National Market" means the Nasdaq Market, the Nasdaq Small Cap
Market, the New York Stock Exchange, Inc. or the American Stock Exchange, Inc..
"Net Cash Proceeds" means, with respect to any transaction, the total
amount of cash proceeds received by the Company or any Subsidiary less (i)
reasonable underwriters' fees, brokerage commissions, reasonable professional
fees and other customary out-of-pocket expenses payable in connection with such
transaction, and (ii) in the case of dispositions of assets, (A) actual
transfer taxes (but not income taxes) payable with respect to such
dispositions, and (B) the amount of Debt, if any, secured by a Lien on the
asset or assets disposed of and
<PAGE> 13
required to be, and actually repaid by the Company or any Subsidiary in
connection therewith, and any trade payables specifically relating to such
asset or assets sold by the Company or any Subsidiary that are not assumed by
the purchaser of such asset or assets.
"Recourse Financing" means Debt of the Company or any Subsidiary
which, by its terms, does not bar the lender thereof from action against the
Company or any Subsidiary, as borrower or guarantor, if the security value of
the project or asset pledged in respect thereof falls below the amount required
to repay such Debt.
"Notice of Conversion" means the form to be delivered by a holder of a
Convertible Note upon conversion of all or a portion thereof to the Company
substantially in the form of Exhibit A to the form of Convertible Note.
"Officer's Certificate" shall mean a certificate executed by the
President, chief executive officer or chief financial officer of the Company in
the form of Exhibit D attached hereto.
"OTC Bulletin Board" means the over-the-counter bulletin board
operated by the NASD.
"Other Taxes" has the meaning set forth in Section 3.6(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permits" means all domestic and foreign licenses, franchises, grants,
authorizations, permits, easements, variances, exemptions, consents,
certificates, orders and approvals necessary to own, lease and operate the
properties of, and to carry on the business of the Company and the
Subsidiaries.
"Permitted Financings" has the meaning set forth in Section 10.5.
"Person" means an individual, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock Company,
government (or any agency or political subdivision thereof) or other entity of
any kind.
"Plan" means at any time an employee pension benefit plan which is
covered by Title IV of ERISA or subject to the minimum funding standards under
the Code and either (i) is maintained, or contributed to, by any member of the
ERISA group for employees of any member of the ERISA group or (ii) has at any
time within the preceding five years been maintained, or contributed to, by any
Person which was at such time a member of the ERISA group for employees of the
Person which was at such time a member of the ERISA Group.
"Pledge Agreement" has the meaning set forth in Section 6.1(s).
"Preferred Stock" means the no par value per share Series A preferred
stock of the
<PAGE> 14
Company.
"Purchase Price" means the purchase price for the Securities set forth
in Section 2.2 hereof.
"Purchaser" means the entity listed on the signature page hereto and
its successors and assigns, including holders from time to time of the
Convertible Notes.
"Redemption Event" has the meaning set forth in Section 3.4.
"Registrable Securities" has the meaning set forth in Section 10.4(a).
"Registration Default" has the meaning set forth in Section 10.4(e).
"Registration Maintenance Period" has the meaning set forth in Section
10.4(c).
"Registration Statement" has the meaning set forth in Section 10.4(b).
"Registration Rights Agreement" means the agreement between the
Company and Purchaser dated the date hereof substantially in the form set forth
in Exhibit B attached hereto.
"Required Effectiveness Date" has the meaning set forth in Section
10.4(b).
"Reserved Amount" has the meaning set forth in Section 7.10(a).
"Restricted Payment" means, with respect to any Person, (i) any
dividend or other distribution on any shares of capital stock of such Person
(except dividends payable solely in shares of capital stock of the same or
junior class of such Person and dividends from a wholly-owned direct or
indirect Subsidiary of the Company to its parent corporation), (ii) any payment
on account of the purchase, redemption, retirement or acquisition of (a) any
shares of such Person's capital stock or (b) any option, warrant or other right
to acquire shares of such Person's capital stock or (iii) any loan, or advance
or capital contribution to any Person (a "Stockholder") owning any capital
stock of such Person other than relocation, travel or like advances to officers
and employees in the ordinary course of business, and other than reasonable
compensation as determined by the Board of Directors.
"Rights Offering" has the meaning set forth in Section 11.3.
"Sale Event" has the meaning set forth in Section 3.4.
"SEC Reports" has the meaning set forth in Section 7.1(a).
"Securities" means the Convertible Notes and, as applicable, the
Conversion Shares.
<PAGE> 15
"Securities Act" means the Securities Act of 1933, as amended.
"Share Reorganization" has the meaning set forth in Section 11.2.
"Solvency Certificate" shall mean a certificate executed by the
treasurer of the Company as to the solvency of the Company, the adequacy of its
capital and its ability to pay its debts, all after giving effect to the
issuance and sale of the Convertible Notes and the completion of the offering
(including without limitation the payment of any fees or expenses in connection
therewith), which such Solvency Certificate shall be in the form of Exhibit C
attached hereto.
"Special Distribution" has the meaning set forth in Section 11.4.
"Subsidiary" means, with respect to any Person, any corporation or
other entity of which (x) a majority of the capital stock or other ownership
interests having ordinary voting power to elect a majority of the Board of
Directors or other persons performing similar functions are at the time
directly or indirectly owned by such Person or (y) the results of operations,
the assets and the liabilities of which are consolidated with such Person under
GAAP. For purposes of this Agreement, Beachside shall be considered a
Subsidiary of the Company.
"Subsidiary Corporate Documents" means the certificates of
incorporation and bylaws of each Subsidiary.
"Taxes" has the meaning set forth in Section 3.6.
"Trading Day" shall mean any Business Day in which the OTC Bulletin
Board, National Market or other automated quotation system or exchange on which
the Common Stock is then traded is open for trading for at least four (4)
hours.
"Transaction Agreements" means this Agreement, the Convertible Notes,
and the Registration Rights Agreement, the Pledge Agreement, the Guaranty and
the other agreements contemplated by this Agreement.
"Transfer" means any disposition of Securities that would constitute a
sale thereof under the Securities Act.
"Unfunded Liabilities" means, with respect to any Plan at any time,
the amount (if any) by which (i) the present value of all benefits under Plan
exceeds (ii) the fair market value of all Plan assets allocable to such
benefits (excluding any accrued but unpaid contributions), all determined as of
the then most recent valuation date for such Plan, but only to the extent that
such excess represents a potential liability of a member of the ERISA Group to
the PBGC or any other Person under Title IV of ERISA.
"Warrant" has the meaning set forth in Section 13.7.
<PAGE> 16
SECTION 1.2 ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared, in accordance with
generally accepted accounting principles as in effect from time to time,
applied on a consistent basis (except for changes concurred in by the Company's
independent public accountants) ("GAAP"). All references to "dollars,"
"Dollars" or "$" are to United States dollars unless otherwise indicated.
ARTICLE II. PURCHASE AND SALE OF SECURITIES
SECTION 2.1 PURCHASE AND SALE OF CONVERTIBLE NOTES.
(a) Subject to the terms and conditions set forth herein,
the Company agrees to issue and sell to Purchaser, and Purchaser agrees to
purchase from the Company, Convertible Notes in the aggregate principal amount
of $500,000.00.
(b) Purchaser shall acquire the Convertible Notes on the
Closing Date in an aggregate principal amount of Five Hundred Thousand Dollars
($500,000.00).
SECTION 2.2 PURCHASE PRICE. The purchase price for the Convertible
Notes shall be 93% of the principal amount thereof. No part of the purchase
price of the Convertible Notes shall be allocated to the Warrant. Therefore,
the aggregate consideration payable by Purchaser to the Company for the
Convertible Notes shall be Four Hundred and Sixty Five Thousand Dollars
($465,000.00) (the "Purchase Price").
SECTION 2.3 CLOSING AND MECHANICS OF PAYMENT.
(a) The Purchase Price shall be paid on the Closing Date
by wire transfer of immediately available funds on or before 5:00 p.m. (EST).
(b) The Convertible Notes issued on the Closing Date
shall be dated the date hereof; provided, however, interest shall accrue on the
applicable Convertible Notes only from and after the date of funding thereof.
ARTICLE III. PAYMENT TERMS OF CONVERTIBLE NOTES
SECTION 3.1 PAYMENT OF PRINCIPAL AND INTEREST; PAYMENT MECHANICS. The
Company will pay all amounts due on each Convertible Note by the method and at
the address specified for such purpose by Purchaser in writing, without the
presentation or surrender of any Convertible Note or the making of any notation
thereon, except that upon written request of the Company made concurrently with
or reasonably promptly after payment or prepayment in full of this Convertible
Note, the holder shall surrender the Convertible Note for cancellation,
reasonably
<PAGE> 17
promptly after any such request, to the Company at its principal executive
office. Prior to any sale or other disposition of any Convertible Note, the
holder thereof will, at its election, either endorse thereon the amount of
principal paid thereon and the last date to which interest has been paid
thereon or surrender the Convertible Note to the Company in exchange for a new
Convertible Note or Convertible Notes. The Company will afford the benefits of
this Section 3.1 to any direct or indirect transferee of the Convertible Note
purchased under this Agreement and that has made the same agreement relating to
this Convertible Note as Purchaser has in this Section 3.1; provided that such
transferee is an "accredited investor" under Rule 501 of the Securities Act.
SECTION 3.2 PAYMENT OF INTEREST. Interest shall accrue on the
outstanding principal amount of each Convertible Note and shall be payable as
specified therein.
SECTION 3.3 VOLUNTARY PREPAYMENT. For so long as no Event of Default
shall have occurred and is continuing, the Company may, at its option, repay,
in whole or in part, the Convertible Notes, per the formula set forth in
Section 5.1 of Exhibit A hereto, thereof following at least five (5) Business
Days prior written notice to Purchaser (the expiration of such five (5)
Business Day period being referred to as the "prepayment date"); provided,
however, that if such date is not a Business Day, the prepayment date shall be
the next Business Day thereafter.
SECTION 3.4 MANDATORY PREPAYMENTS.
(a) Upon (i) the occurrence of a Change in Control of the
Company, (ii) a transfer of all or substantially all of the assets of
the Company to any Person in a single transaction or series of related
transactions, (iii) a consolidation, merger or amalgamation of the
Company with or into another Person in which the Company is not the
surviving entity (other than a merger which is effected solely to
change the jurisdiction of incorporation of the Company and results in
a reclassification, conversion or exchange of outstanding shares of
Common Stock solely into shares of Common Stock) (each of items (i),
(ii) and (iii) being referred to as a "Sale Event"), or (iv) the
occurrence of a Registration Default which continues uncured for a
period of ten (10) days, then, in each case, the Company shall, upon
request of the Majority Holders, redeem the Convertible Notes, subject
to the provisions of Section 5 of the Convertible Notes.
(b) Upon the consummation of one or more Financings, the
Company shall use 100% of the Net Cash Proceeds therefrom (unless such
Net Cash Proceeds from each such Financing is less than $250,000) to
redeem the Convertible Notes. The redemption price payable upon any
such redemption shall be the Redemption Price in Section 5 of the
Convertible Notes, as amended (referred to herein as the "Formula
Price").
(c) Upon the issuance of the Maximum Number of Shares and
the failure within 60 days of such issuance to obtain shareholder
approval to issue additional shares of Common Stock (the "Redemption
Event"), the Company shall redeem the outstanding balance of each
Convertible Note for the Formula Price.
<PAGE> 18
(d) In the event that there is an insufficient number of
authorized, issuable, unlegended and freely tradeable shares of Common
Stock registered with the latest Form S-1 or S-1/A (or other
applicable) Registration Statement filed by the Company to fully
convert the Convertible Notes and exercise all warrants held by GCA
and LKB Financial, LLC, then the Company shall immediately file a Form
S-1/A (or other applicable) amendment to the then current Registration
Statement to register a sufficient number of such shares to convert
said Convertible Notes and warrants. Upon the failure within five (5)
Trading Days to register a sufficient number of such shares, the
Company shall redeem the outstanding balance of each Convertible Note
for the Formula Price. In addition, failure of the Company to register
a sufficient number of such shares to fully convert said Convertible
Notes and exercise such warrants shall be a Registration Default under
Section 10.4(e) from the date of the Notice of Conversion to the date
of the earlier of (i) the redemption of the outstanding balance of the
Convertible Notes and exercise of all such warrants or (ii) full
conversion of the Convertible Notes and exercise of all such warrants.
SECTION 3.5 PREPAYMENT PROCEDURES.
(a) Any permitted prepayment or redemption of the
Convertible Notes pursuant to Sections 3.3 or 3.4 above shall be
deemed to be effective and consummated (for purposes of determining
the Formula Price and the time at which Purchaser shall thereafter not
be entitled to deliver a Notice of Conversion for the Convertible
Notes) as follows:
(i) A prepayment pursuant to Section 3.3, the
"prepayment date" specified therein;
(ii) A redemption pursuant to Section 3.4(a), the
date of consummation of the applicable Sale Event or the
Registration Default;
(iii) A redemption pursuant to Section 3.4(b),
three (3) Business Days following the date of consummation of
the applicable Financing (meaning closing and funding); and
(iv) A redemption pursuant to Section 3.4(c), the
date specified in each Convertible Note.
(b) On the Maturity Date and on the effective date of a
repayment or redemption of the Convertible Notes as specified in
Section 3.5(a) above, the Company shall deliver by wire transfer of
funds the repayment/redemption price to Purchaser of the Convertible
Notes subject to redemption. Should Purchaser not receive payment of
any amounts due on redemption of its Convertible Notes by reason of
the Company's failure to make payment at the times prescribed above
for any reason, the Company shall pay to
<PAGE> 19
the applicable holder on demand (x) interest on the sums not paid when
due at an annual rate equal to the lesser of (I) the maximum lawful
rate and (II) 18% per annum, compounded at the end of each thirty (30)
days, until the applicable holder is paid in full and (y) all costs of
collection, including, but not limited to, reasonable attorneys' fees
and costs, whether or not suit or other formal proceedings are
instituted.
(c) The Company shall select the Convertible Notes to be
redeemed in any redemption in which not all of the Convertible Notes
are to be redeemed so that the ratio of the Convertible Notes of each
holder selected for redemption to the total Convertible Notes owned by
that holder shall be the same as the ratio of all such Convertible
Notes selected for redemption bears to the total of all then
outstanding Convertible Notes. Should any Convertible Notes required
to be redeemed under the terms hereof not be redeemed solely by reason
of limitations imposed by law, the applicable Convertible Notes shall
be redeemed on the earliest possible dates thereafter to the maximum
extent permitted by law.
(d) Any Notice of Conversion delivered by Purchaser
(including delivery via telecopy) to the Company prior to the (x)
Maturity Date or (y) effective date of a voluntary repayment pursuant
to Section 3.3 or a mandatory prepayment pursuant to Section 3.4 as
specified in Section 3.5(a) above), shall be honored by the Company
and the conversion of the Convertible Notes shall be deemed effected
on the Conversion Date. In addition, between the effective date of a
voluntary prepayment pursuant to Section 3.3 or a mandatory prepayment
pursuant to Section 3.4 as specified in Section 3.5(a) above and the
date the Company is required to deliver the redemption proceeds in
full to Purchaser, Purchaser may deliver a Notice of Conversion to the
Company. Such notice will be (x) of no force or effect if the Company
timely pays the redemption proceeds to Purchaser when due or (y)
honored on or as of the date of the Notice of Conversion if the
Company fails to timely pay the redemption proceeds to Purchaser when
due.
SECTION 3.6 PAYMENT OF ADDITIONAL AMOUNTS.
(a) Any and all payments by the Company hereunder or
under the Convertible Notes to Purchaser and each "qualified assignee"
thereof shall be made free and clear of and without deduction or
withholding for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect
thereto (all such taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as "Taxes")
unless such Taxes are required by law or the administration thereof to
be deducted or withheld. If the Company shall be required by law or
the administration thereof to deduct or withhold any Taxes from or in
respect of any sum payable under the Convertible Notes (i) the holders
of the Convertible Notes subject to such Taxes shall have the right,
but not the obligation, for a period of thirty (30) days commencing
upon the day it shall have received written notice from the Company
that it is required to withhold Taxes to transfer all or any portion
of the
<PAGE> 20
Convertible Notes to a qualified assignee to the extent such transfer
can be effected in accordance with the other provisions of this
Agreement and applicable law; (ii) the Company shall make such
deductions or withholdings; (iii) the sum payable shall be increased
as may be necessary so that after making all required deductions or
withholdings (including deductions or withholdings applicable to
additional amounts paid under this Section 3.6) Purchaser receives an
amount equal to the sum it would have received if no such deduction or
withholding had been made; and (iv) the Company shall forthwith pay
the full amount deducted or withheld to the relevant taxation or other
authority in accordance with applicable. A "qualified assignee" of a
Purchaser is a Person that is organized under the laws of (I) the
United States or (II) any jurisdiction other than the United States or
any political subdivision thereof and that (y) represents and warrants
to the Company that payments of the Company to such assignee under the
laws in existence on the date of this Agreement would not be subject
to any Taxes and (z) from time to time, as and when requested by the
Company, executes and delivers to the Company and the Internal Revenue
Service forms, and provides the Company with any information necessary
to establish such assignee's continued exemption from Taxes under
applicable law.
(b) The Company shall forthwith pay any present or future
stamp or documentary taxes or any other excise or property taxes,
charges or similar levies (all such taxes, charges and levies
hereinafter referred to as "Other Taxes") which arise from any payment
made under any of the Transaction Agreements or from the execution,
delivery or registration of, or otherwise with respect to, this
Agreement other than Taxes payable solely as a result of the transfer
from Purchaser to a Person of any Security.
(c) The Company shall indemnify Purchaser, or qualified
assignee, for the full amount of Taxes or Other Taxes (including,
without limitation, any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section 3.6) paid by
Purchaser, or qualified assignee, and any liability (including
penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted. Payment under this indemnification shall be made
within 30 days from the date Purchaser or assignee makes written
demand therefor. A certificate as to the amount of such Taxes or Other
Taxes submitted to the Company by Purchaser or assignee shall be
conclusive evidence of the amount due from the Company to such party.
(d) Within 30 days after the date of any payment of
Taxes, the Company will furnish to Purchaser the original or a
certified copy of a receipt evidencing payment thereof.
(e) Purchaser shall provide to the Company a form W-8,
stating that it is a non-U.S. person, together with any additional
tax forms which may be required under the Code, as amended after the
date hereof, to allow interest payments to be made to it without
deduction.
<PAGE> 21
ARTICLE IV. REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to Purchaser, as of the Closing
Date, the following:
SECTION 4.1 ORGANIZATION AND QUALIFICATION. The Company and each
Subsidiary is a corporation (or other legal entity) duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, with full power and authority 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 is qualified to conduct business as a
foreign corporation and is in good standing in every jurisdiction in which the
nature of the business conducted by it makes such qualification necessary,
except where such failure would not have a Material Adverse Effect. A "Material
Adverse Effect" means any material adverse effect on the operations, results of
operations, properties, assets or condition (financial or otherwise) of the
Company or the Company and its Subsidiaries, taken as a whole, or on the
transactions contemplated hereby or by the agreements or instruments to be
entered into in connection herewith.
SECTION 4.2 AUTHORIZATION AND EXECUTION.
(a) The Company has all requisite corporate power and
authority to enter into and perform each Transaction Agreement and to
consummate the transactions contemplated hereby and thereby and to
issue the Securities in accordance with the terms hereof and thereof.
(b) The execution, delivery and performance by the
Company of each Transaction Agreement and the issuance by the Company
of the Securities have been duly and validly authorized and no further
consent or authorization of the Company, its Board of Directors or its
shareholders is required.
(c) This Agreement has been duly executed and delivered
by the Company.
(d) This Agreement constitutes, and upon execution and
delivery thereof by the Company, each of the Transaction Agreements
will constitute, a valid and binding agreement of the Company, in each
case enforceable against the Company in accordance with its respective
terms.
SECTION 4.3 CAPITALIZATION . As of the date hereof, the authorized,
issued and outstanding capital stock of the Company is as set forth on Schedule
4.3 hereto and except as set forth on Schedule 4.3 no other shares of capital
stock of the Company will be outstanding as of the Closing Date. 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
<PAGE> 22
Company are subject to preemptive rights or similar rights of the stockholders
of the Company or any liens or encumbrances imposed through the actions or
failure to act of the Company. Other than as set forth on Schedule 4.3 hereto,
as of the date hereof, (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 are obligated
to register the sale of any of its or their securities under the Securities Act
(except pursuant to the Registration Rights Agreement) and (iii) there are no
anti-dilution or price adjustment provisions contained in any security issued
by the Company (or in any agreement providing rights to security holders) that
will be triggered by the issuance of the Convertible Notes or Conversion
Shares. The Company has furnished to Purchaser true and correct copies of the
Company's Corporate Documents, and the terms of all securities convertible into
or exercisable for Common Stock and the material rights of the holders thereof
in respect thereto.
SECTION 4.4 GOVERNMENTAL AUTHORIZATION. The execution and delivery by
the Company of the Transaction Agreements does not and will not, the issuance
and sale by the Company of the Securities does not and will not, and the
consummation of the transactions contemplated hereby and by the other
Transaction Agreements will not, require any action by or in respect of, or
filing with, any governmental body, agency or governmental official except (a)
such actions or filings that have been undertaken or made prior to the date
hereof and that will be in full force and effect (or as to which all applicable
waiting periods have expired) on and as of the date hereof or which are not
required to be filed on or prior to the Closing Date, (b) such actions or
filings that, if not obtained, would not result in a Material Adverse Effect,
(c) listing applications ("Listing Applications") to be filed with the OTC
Bulletin Board or the National Market relating to the Conversion Shares of
Common Stock issuable upon conversion of the Convertible Notes, and (d) the
filing of a "Form D" as described in Section 7.13 below.
SECTION 4.5 ISSUANCE OF SHARES. Upon conversion in accordance with the
terms of the Convertible Notes, the Conversion Shares shall be duly and validly
issued and outstanding, fully paid and nonassessable, free and clear of any
Taxes, Liens and charges with respect to issuance and shall not be subject to
preemptive rights or similar rights of any other stockholders of the Company.
Assuming the representations and warranties of Purchaser herein are true and
correct in all material respects, each of the Securities will have been issued
in material compliance with all applicable U.S. federal and state securities
laws. The Company understands and acknowledges that, in certain circumstances,
the issuance of Conversion Shares could dilute the ownership interests of other
stockholders of the Company. The Company further acknowledges that its
obligation to issue Conversion Shares upon conversion of the Convertible Notes
is absolute and unconditional regardless of the dilutive effect that such
issuance may have on the ownership interests of other stockholders of the
Company.
<PAGE> 23
SECTION 4.6 NO CONFLICTS. The execution and delivery by the Company of
the Transaction Agreements to which it is a party did not and will not, the
issuance and sale by the Company of the Securities did not and will not and the
consummation of the transactions contemplated hereby and by the other
Transaction Agreements will not, contravene or constitute a default under or
violation of (i) any provision of applicable law or regulation, (ii) the
Company Corporate Documents, (iii) any agreement, judgment, injunction, order,
decree or other instrument binding upon the Company or any Subsidiary or any of
their respective assets, or result in the creation or imposition of any Lien on
any asset of the Company or any Subsidiary. The Company and each Subsidiary is
in compliance with and conforms to all statutes, laws, ordinances, rules,
regulations, orders, restrictions and all other legal requirements of any
domestic or foreign government or any instrumentality thereof having
jurisdiction over the conduct of its businesses or the ownership of its
properties, except where such failure would not have a Material Adverse Effect.
SECTION 4.7 FINANCIAL INFORMATION. Since June 30, 1999 (the "Balance
Sheet Date"), except as disclosed in Schedule 4.7, there has been (x) no
material adverse change in the assets or liabilities, or in the business or
condition, financial or otherwise, or in the results of operations or
prospects, of the Company and its Subsidiaries, whether as a result of any
legislative or regulatory change, revocation of any license or rights to do
business, fire, explosion, accident, casualty, labor trouble, flood, drought,
riot, storm, condemnation, act of God, public force or otherwise and (y) no
material adverse change in the assets or liabilities, or in the business or
condition, financial or otherwise, or in the results of operations or
prospects, of the Company and its subsidiaries except in the ordinary course of
business; and no fact or condition exists or is contemplated or threatened
which might cause such a change in the future. The audited and unaudited
consolidated balance sheets of the Company and its Subsidiaries for the periods
ending September 30, 1998, and June 30, 1999, respectively, and the related
consolidated statements of income, changes in stockholders' equity and changes
in cash flows for the periods then ended, including the footnotes thereto,
except as indicated therein, (i) complied in all material respects with
applicable accounting requirements and (ii) have been prepared in accordance
with GAAP consistently applied throughout the periods indicated, except that
the unaudited financial statements do not contain notes and may be subject to
normal audit adjustments and normal annual adjustments. Such financial
statements fairly present the financial condition of the Company and its
Subsidiaries at the dates indicated and the consolidated results of their
operations and cash flows for the periods then ended and, except as indicated
therein, reflect all claims against and all Debts and liabilities of the
Company and its Subsidiaries, fixed or contingent.
SECTION 4.8 LITIGATION. Except as set forth on Schedule 4.8, there is
no action, suit or proceeding pending or, to the knowledge of the Company,
threatened against the Company or any Subsidiary, before any court or
arbitrator or any governmental body, agency or official in which there is a
reasonable possibility of an adverse decision which could materially adversely
affect the business, condition (financial or otherwise), operations,
performance, properties or prospects of the Company or which challenges the
validity of any Transaction Agreements.
<PAGE> 24
SECTION 4.9 COMPLIANCE WITH ERISA AND OTHER BENEFIT PLANS.
(a) Each member of the ERISA Group has fulfilled its obligations
under the minimum funding standards of ERISA and the Code with respect to each
Plan and is in compliance in all material respects with the presently
applicable provisions of ERISA and the Code with respect to each Plan. No
member of the ERISA Group has (i) sought a waiver of the minimum funding
standard under Section 412 of the Code in respect of any Plan, (ii) failed to
make any required contribution or payment to any Plan or Multiemployer Plan or
in respect of any Benefit Arrangement, or made any amendment to any Plan or
Benefit Arrangement, which as resulted or could result in the imposition of a
Lien or the posting of a bond or other security under ERISA or the Code or
(iii) incurred any liability under Title IV of ERISA other than a liability to
the PBGC for premiums under Section 4007 of ERISA.
(b) The benefit plans not covered under clause (a) above
(including profit sharing, deferred compensation, stock option, employee stock
purchase, bonus, retirement, health or insurance plans, collectively the
"Benefit Plans") relating to the employees of the Company are duly registered
where required by, and are in good standing in all material respects under, all
applicable laws. All required employer and employee contributions and premiums
under the Benefit Plans to the date hereof have been made, the respective fund
or funds established under the Benefit Plans are funded in accordance with
applicable laws, and no past service funding liabilities exist thereunder.
(c) No Benefit Plans have any unfunded liabilities, either on a
"going concern" or "winding up" basis and determined in accordance with all
applicable laws and actuarial practices and using actuarial assumptions and
methods that are reasonable in the circumstances. No event has occurred and no
condition exists with respect to any Benefit Plans that has resulted or could
reasonably be expected to result in any pension plan having its registration
revoked or wound up (in whole or in part) or refused for the purposes of any
applicable laws or being placed under the administration of any relevant
pension benefits regulatory authority or being required to pay any taxes or
penalties (in any material amounts) under any applicable laws.
SECTION 4.10 ENVIRONMENTAL MATTERS. The costs and liabilities
associated with Environmental Laws (including the cost of compliance therewith)
are unlikely to have a material adverse effect on the business, condition
(financial or otherwise), operations, performance, properties or prospects of
the Company or any Subsidiary. Each of the Company and the Subsidiaries
conducts its businesses in compliance in all material respects with all
applicable Environmental Laws.
SECTION 4.11 TAXES. All United States federal, state, county,
municipality, local or foreign income tax returns and all other material tax
returns (including foreign tax returns) which are required to be filed by or on
behalf of the Company and each Subsidiary have been filed and all material
taxes due pursuant to such returns or pursuant to any assessment received by
the Company and each Subsidiary have been paid except those being disputed in
good faith and for which adequate reserves have been established. The charges,
accruals and reserves on
<PAGE> 25
the books of the Company and each Subsidiary in respect of taxes and other
governmental charges have been established in accordance with GAAP.
SECTION 4.12 INVESTMENTS, JOINT VENTURES. Other than as set forth in
Schedule 4.12, the Company has no Subsidiaries or other direct or indirect
Investment in any Person, and the Company is not a party to any partnership,
management, shareholders' or joint venture or similar agreement.
SECTION 4.13 NOT AN INVESTMENT COMPANY. Neither the Company nor any
Subsidiary is an "Investment Company" within the meaning of Investment Company
Act of 1940, as amended.
SECTION 4.14 FULL DISCLOSURE. The information heretofore furnished by
the Company to Purchaser for purposes of or in connection with this Agreement
or any transaction contemplated hereby does not, and all such information
hereafter furnished by the Company or any Subsidiary to Purchaser will not (in
each case taken together and on the date as of which such information is
furnished), contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements contained therein, in
the light of the circumstances under which they are made, not misleading.
SECTION 4.15 NO SOLICITATION; NO INTEGRATION WITH OTHER OFFERINGS. No
form of general solicitation or general advertising was used by the Company or,
to the best of its actual knowledge, any other Person acting on behalf of the
Company, in connection with the offer and sale of the Securities. Neither the
Company, nor, to its knowledge, any Person acting on behalf of the Company,
has, either directly or indirectly, sold or offered for sale to any Person
(other than Purchaser) any of the Securities or, within the six months prior to
the date hereof, any other similar security of the Company except as
contemplated by this Agreement, and the Company represents that neither itself
nor any Person authorized to act on its behalf (except that the Company makes
no representation as to Purchaser and their Affiliates) will sell or offer for
sale any such security to, or solicit any offers to buy any such security from,
or otherwise approach or negotiate in respect thereof with, any Person or
Persons so as thereby to cause the issuance or sale of any of the Securities to
be in violation of any of the provisions of Section 5 of the Securities Act.
The issuance of the Securities to Purchaser will not be integrated with any
other issuance of the Company's securities (past, current or future) which
requires stockholder approval under the rules of the OTC Bulletin Board.
SECTION 4.16 PERMITS. (a) Each of the Company and its Subsidiaries has
all material Permits; (b) all such Permits are in full force and effect, and
each of the Company and its Subsidiaries has fulfilled and performed all
material obligations with respect to such Permits; (c) no event has occurred
which allows, or after notice of lapse of time would allow, revocation or
termination by the issuer thereof or which results in any other material
impairment of the rights of the holder of any such Permit; and (d) the Company
has no reason to believe that any governmental body or agency is considering
limiting, suspending or revoking any such Permit.
SECTION 4.17 LEASES. Except for leases to tenants of the real property
of Beachside,
<PAGE> 26
neither the Company nor any Subsidiary is a party to any capital lease
obligation with a value greater than $100,000 or to any operating lease with an
aggregate annual rental greater than $100,000 during the life of such lease.
SECTION 4.18 ABSENCE OF ANY UNDISCLOSED LIABILITIES OR CAPITAL CALLS.
There are no liabilities of the Company or any Subsidiary of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable or
otherwise, and there is no existing condition, situation or set of
circumstances which would reasonably be expected to result in such a liability,
other than (i) those liabilities provided for in the financial statements
delivered pursuant to Section 4.7 and referred to on Schedule 4.3 and Schedule
6.1(q) hereof and (ii) other undisclosed liabilities which, individually or in
the aggregate, would not have a Material Adverse Effect.
SECTION 4.19 PUBLIC UTILITY HOLDING COMPANY. Neither the Company nor
any Subsidiary is, or will be upon issuance and sale of the Securities and the
use of the proceeds described herein, subject to regulation under the Public
Utility Holding Company Act of 1935, as amended, the Federal Power Act, the
Interstate Commerce Act or to any federal or state statute or regulation
limiting its ability to issue and perform its obligations under any Transaction
Agreement.
SECTION 4.20 INTELLECTUAL PROPERTY RIGHTS. Each of the Company and its
Subsidiaries owns, or is licensed under, and has the rights to use, all
material patents, trademarks, trade names, copyrights, technology, know-how and
processes (collectively, "Intellectual Property") used in, or necessary for the
conduct of its business; no claims have been asserted by any Person to the use
of any such Intellectual Property or challenging or questioning the validity or
effectiveness of any license or agreement related thereto. To the best of
Company's and its Subsidiaries' knowledge, there is no valid basis for any such
claim and the use of such Intellectual Property by the Company and its
Subsidiaries will not infringe upon the rights of any Person.
SECTION 4.21 INSURANCE. The Company and its Subsidiaries maintain,
with financially sound and reputable insurance companies, insurance in at least
such amounts and against such risks such that any uninsured loss would not have
a Material Adverse Effect. All insurance coverages of the Company and its
Subsidiaries are in full force and effect and there are no past due premiums in
respect of any such insurance.
SECTION 4.22 TITLE TO PROPERTIES. The Company and its Subsidiaries
have good and marketable title to all their respective properties reflected on
the financial statements referred to in Section 4.7 and Section 6.1(q), free
and clear of all Liens.
SECTION 4.23 INTERNAL ACCOUNTING CONTROLS. The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient, in
the judgment of the Company's Board of Directors, to provide reasonable
assurance that (i) transactions are executed in accordance with managements'
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to
<PAGE> 27
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.
SECTION 4.24 YEAR 2000 COMPLIANCE.
(a) COMPUTER AND OTHER SYSTEMS. (i) All software programs and
computer hardware that are owned, leased or licensed by the Company and each
Subsidiary, or used by third parties on behalf of the Company and each
Subsidiary ("Computer Systems"), are designated to be used prior to, during and
after the calendar year 2000 A.D., including leap years; (ii) all other
operational systems that use software or equipment that are owned, leased, or
licensed by the Company and each Subsidiary, or used by third parties on behalf
of the Company and each Subsidiary ("Other Systems"), are designated to be used
prior to, during or after the calendar year 2000 A.D., including leap years;
(iii) the Computer systems and Other Systems will properly operate during each
such period without error or degradation of performance caused by a lack of
Year 2000 Capabilities; and (iv) the Computer Systems and Other Systems will
properly operate during each such period without requiring intervention or
modification to Date Data.
(b) CAPABILITIES OF SUPPLIERS, VENDORS AND LANDLORDS. To the best
of the Company's knowledge after specific inquiry of all of its material
suppliers, vendors and landlords, the Company and each Subsidiary will not
suffer a loss from interruption or cessation of business operations, in whole
or in part, as a result of such suppliers, vendors or landlords failing to
provide materials, labor, supplies or access to leased space for the operation
of the Company and each Subsidiary as a result of such suppliers or vendors not
having Year 2000 Capabilities.
(c) CAPABILITIES. For purposes of this Agreement, (x) "Year 2000
Capabilities" means the ability to: (i) manage and manipulate data involving
dates, including single century formulas and multi-century formulas, in a
manner that will not cause an abnormally ending scenario or generate incorrect
values or invalid results involving such dates; (ii) include the indication of
proper century dates in all date-related user interface functions and date
fields; and (iii) operate with proper century dates in date-related software or
hardware interface functions; and (y) "Date Data" means any existing data or
input of date which includes an indication of or reference to date.
SECTION 4.25 FOREIGN PRACTICES. Neither the Company nor any of its
Subsidiaries nor, to the Company's knowledge, any employee or agent of the
Company or any Subsidiary has made any payments of funds of the Company or
Subsidiary, or received or retained any funds, in each case in violation of any
law, rule or regulation.
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PURCHASER
<PAGE> 28
SECTION 5.1 PURCHASER. Purchaser hereby represents and warrants to the
Company that:
(a) Purchaser is an "accredited investor" within the
meaning of Rule 501(a) under the Securities Act and the Securities to
be acquired by it pursuant to this Agreement are being acquired for
its own account and, as of the date hereof, not with a view toward, or
for sale in connection with, any distribution thereof except in
compliance with applicable United States federal and state securities
law; provided that the disposition of Purchaser's property shall at
all times be and remain within its control;
(b) the execution, delivery and performance of this
Agreement and the purchase of the Securities pursuant thereto are
within Purchaser's corporate or partnership powers, as applicable, and
have been duly and validly authorized by all requisite corporate or
partnership action;
(c) this Agreement has been duly executed and delivered
by Purchaser;
(d) the execution and delivery by Purchaser of the
Transaction Agreements to which it is a party does not, and the
consummation of the transactions contemplated hereby and thereby will
not, contravene or constitute a default under or violation of (i) any
provision of applicable law or regulation, or (ii) any agreement,
judgment, injunction, order, decree or other instrument binding upon
Purchaser;
(e) Purchaser understands that the Securities have not
been registered under the Securities Act and may not be transferred or
sold except as specified in this Agreement or the remaining
Transaction Agreements;
(f) this Agreement constitutes a valid and binding
agreement of Purchaser enforceable in accordance with its terms,
subject to (i) applicable bankruptcy, insolvency or similar laws
affecting the enforceability of creditors rights generally and (ii)
equitable principles of general applicability;
(g) Purchaser has such knowledge and experience in
financial and business matters so as to be capable of evaluating the
merits and risks of its investment in the Securities and Purchaser is
capable of bearing the economic risks of such investment;
(h) Purchaser is knowledgeable, sophisticated and
experienced in business and financial matters; Purchaser has
previously invested in securities similar to the Securities and fully
understands the limitations on transfer described herein; Purchaser
has been afforded access to information about the Company and the
financial condition, results of operations, property, management and
prospects of the Company sufficient to enable it to evaluate its
investment in the Securities; Purchaser has been afforded the
opportunity to ask such questions as it has deemed necessary of, and
to receive answers from, representatives of the Company concerning the
terms and conditions of the offering of the
<PAGE> 29
Securities and the merits and the risks of investing in the
Securities; and Purchaser has been afforded the opportunity to obtain
such additional information which the Company possesses or can acquire
that is necessary to verify the accuracy and completeness of the
information given to Purchaser concerning the Company. The foregoing
does not in any way relieve the Company of its representations and
other undertakings hereunder, and shall not limit Purchaser's ability
to rely thereon;
(i) no part of the source of funds used by Purchaser to
acquire the Securities constitutes assets allocated to any separate
account maintained by Purchaser in which any employee benefit plan (or
its related trust) has any interest; and
(j) Purchaser is a corporation organized under the laws
of Bermuda.
ARTICLE VI. CONDITIONS PRECEDENT TO PURCHASE OF SECURITIES
SECTION 6.1 CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS TO
PURCHASE. The obligation of Purchaser hereunder to purchase the Convertible
Notes at the Closing is subject to the satisfaction, on or before the Closing
Date of each of the following conditions, provided that these conditions are
for Purchaser's sole benefit and may be waived by Purchaser at any time in its
sole discretion:
(a) The Company shall have duly executed this Agreement
and the Registration Rights Agreement, and delivered the same to
Purchaser;
(b) The Company shall have delivered to Purchaser duly
executed certificates representing the Convertible Notes in accordance
with Section 2.3 hereof;
(c) The Company shall have delivered the Solvency
Certificate;
(d) The representations and warranties of the Company
contained in each Transaction Agreement 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 specified date) and the Company shall
have performed, satisfied and complied with all covenants, agreements
and conditions required by such Transaction Agreements to be
performed, satisfied or complied with by it at or prior to the Closing
Date. Purchaser shall have received an Officer's 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 Purchaser, including but not limited to
certificates with respect to the Company Corporate Documents,
resolutions relating to the transactions contemplated hereby and the
incumbencies of certain officers and Directors of the Company.
The form of such certificate is attached hereto as Exhibit D;
<PAGE> 30
(e) The Company shall have received all governmental,
Board of Directors, shareholders and third party consents and
approvals necessary or desirable in connection with the issuance and
sale of the Securities and the consummation of the transactions
contemplated by the Transaction Agreements;
(f) All applicable waiting periods in respect to the
issuance and sale of the Securities shall have expired without any
action having been taken by any competent authority that could
restrain, prevent or impose any materially adverse conditions thereon
or that could seek or threaten any of the foregoing;
(g) No law or regulation shall have been imposed or
enacted that, in the judgment of Purchaser, could adversely affect the
transactions set forth herein or in the other Transaction Agreements,
and no law or regulation shall have been proposed that in the
reasonable judgment of Purchaser could reasonably have any such
effect;
(h) Purchaser shall have received an opinion, dated the
Closing Date, of counsel to the Company, in form and substance
satisfactory to Purchaser;
(i) All fees and expenses due and payable by the Company
on or prior to the Closing Date shall have been paid;
(j) The Company Corporate Documents and the Subsidiary
Corporate Documents, if any, shall be in full force and effect and no
term or condition thereof shall have been amended, waived or otherwise
modified without the prior written consent of Purchaser;
(k) There shall have occurred no material adverse change
in the business, condition (financial or otherwise), operations,
performance, properties or prospects of the Company or any Subsidiary
since June 30, 1999;
(l) There shall exist no action, suit, investigation,
litigation or proceeding pending or threatened in any court or before
any arbitrator or governmental instrumentality that challenges the
validity of or purports to affect this Agreement or any other
Transaction Agreement, or other transaction contemplated hereby or
thereby or that could reasonably be expected to have a Material
Adverse Effect, or any material adverse effect on the enforceability
of the Transaction Agreements or the Securities or the rights of the
holders of the Securities or Purchaser hereunder;
(m) Purchaser shall have confirmed the receipt of the
Convertible Notes to be issued, duly executed by the Company in the
denominations and registered in the name of Purchaser;
(n) There shall not have occurred any disruption or
adverse change in the financial or capital markets generally, or in
the market for the Common Stock (including but not limited to any
suspension or delisting), which Purchaser reasonably deems
<PAGE> 31
material in connection with the purchase of the Securities;
(o) Immediately before and after the Closing Date, no
Default or Event of Default shall have occurred and be continuing;
(p) Purchaser shall have received all other opinions,
resolutions, certificates, instruments, agreements or other documents
as they shall reasonably request;
(q) Purchaser shall have received a second mortgage (or
written assurance that such second mortgage shall be issued after the
Closing Date, at the Purchaser's sole option) for at least $1,275,000,
together with a new title insurance commitment on the the real
property described in Schedule 6.1(q) (the "Beachside Property")
satisfactory in form and substance to Purchaser in its sole
discretion.
(r) An Escrow Agreement, substantially in the form of
Exhibit E, by and among the Company, Accent and Purchaser, and
accepted by Kim T. Stephens as escrow agent (the "Escrow Agent"),
shall have been duly executed by the said parties.
(s) Mongoose or Rick Smyth, individually, shall have (A)
pledged as collateral (i) for the certain Convertible Note No. 1 dated
December 7, 1998, 750,000 shares of Common Stock represented by
Certificate No. 490 and (ii) for the Convertible Note dated as of the
date hereof, 415,000 shares of Common Stock represented by Certificate
No. ____ (collectively, the "Pledged Shares") to Purchaser pursuant to
the terms of the Pledge Agreement substantially in the form of Exhibit
F and (B) delivered to Escrow Agent Purchaser duly executed
certificates representing the Pledged Shares.
(t) Company shall have delivered to the Company's
transfer agent an irrevocable stock transfer power in which Company
grants the Escrow Agent the power to deliver the Conversion Shares to
Purchaser upon Escrow Agent's receipt on behalf of the Company of a
Notice of Conversion.
(u) Company shall have delivered to Purchaser the Use of
Proceeds Schedule 7.8.
(v) The terms of the Preferred Stock is not in conflict
with the Transaction Agreements.
SECTION 6.2 CONDITIONS TO THE COMPANY'S OBLIGATIONS. The obligations
of the Company to issue and sell the Securities to Purchaser pursuant to this
Agreement are subject to the satisfaction, at or prior to any Closing Date, of
the following conditions:
(a) The representations and warranties of Purchaser
contained herein shall be true and correct in all material respects on
the Closing Date and Purchaser shall have performed and complied in
all material respects with all agreements required by this Agreement
to be performed or complied with by Purchaser at or prior to the
Closing
<PAGE> 32
Date;
(b) The issue and sale of the Securities by the Company
shall not be prohibited by any applicable law, court order or
governmental regulation;
(c) Receipt by the Company of duly executed counterparts
of this Agreement and the Registration Rights Agreement signed by
Purchaser;
(d) The Company shall have received payment of Purchase
Price, less the Expense Reimbursement Fee.
ARTICLE VII. AFFIRMATIVE COVENANTS
The Company hereby agrees that, from and after the date hereof for so
long as any Convertible Notes remain outstanding and for the benefit of
Purchaser:
SECTION 7.1 INFORMATION. The Company will deliver to each holder of
the Convertible Notes:
(a) promptly upon the filing thereof, copies of (i) all
registration statements (other than the exhibits thereto and any
registration statements on Form S-8 or its equivalent), and (ii) all
reports of Forms 10-K, 10-Q and 8-K (or other equivalents) which the
Company or any Subsidiary has filed with the Commission (collectively,
"SEC Reports");
(b) simultaneously with the delivery of each item
referred to in clause (a) above, a certificate from the chief
financial officer of the Company stating that no Default or Event of
Default has occurred and is continuing, or, if as of the date of such
delivery a Default shall have occurred and be continuing, a
certificate from the Company setting forth the details of such Default
or Event of Default and the action which the Company is taking or
proposes to take with respect thereto;
(c) within two (2) days after any officer of the Company
obtains knowledge of a Default or Event of Default, or that any Person
has given any notice or taken any action with respect to a claimed
Default hereunder, a certificate of the chief financial officer of the
Company setting forth the details thereof and the action which the
Company is taking or proposed to take with respect thereto;
(d) promptly upon the mailing thereof to the shareholders
of the Company generally, copies of all financial statements, reports
and proxy statements so mailed and any other document generally
distributed to shareholders;
(e) at least two (2) Business Days prior to the
consummation of any Financing
<PAGE> 33
or other event requiring a repayment of the Convertible Notes under
Section 3.4, notice thereof together with a summary of all material
terms thereof and copies of all documents and instruments associated
therewith;
(f) notice promptly upon the occurrence of any event by
which the Reserved Amount becomes less than the sum of (i) 1.5 times
the maximum number of Conversion Shares issuable pursuant to the
Transaction Agreements; and
(g) promptly following the commencement thereof, notice
and a description in reasonable detail of any litigation or proceeding
to which the Company or any Subsidiary is a party in which the amount
involved is $250,000 or more and not covered by insurance or in which
injunctive or similar relief is sought.
SECTION 7.2 PAYMENT OF OBLIGATIONS. The Company will, and will cause
each Subsidiary to, pay and discharge, at or before maturity, all their
respective material obligations, including, without limitation, tax
liabilities, except where the same may be contested in good faith by
appropriate proceedings and will maintain, in accordance with GAAP, appropriate
reserves for the accrual of any of the same.
SECTION 7.3 MAINTENANCE OF PROPERTY; INSURANCE. The Company will, and
will cause each Subsidiary to, keep all property useful and necessary in its
business in good working order and condition, ordinary wear and tear excepted.
In addition, the Company and each Subsidiary will maintain insurance in at
least such amounts and against such risks as it has insured against as of the
Closing Date.
SECTION 7.4 MAINTENANCE OF EXISTENCE. The Company will, and will cause
each Subsidiary to, continue to engage in business of the same general type as
now conducted by the Company and such Subsidiaries, and will preserve, renew
and keep in full force and effect its respective corporate existence and their
respective material rights, privileges and franchises necessary or desirable in
the normal conduct of business.
SECTION 7.5 COMPLIANCE WITH LAWS. The Company will, and will cause
each Subsidiary to, comply, in all material respects, with all federal, state,
municipal, local or foreign applicable laws, ordinances, rules, regulations,
municipal by-laws, codes and requirements of governmental authorities
(including, without limitation, Environmental Laws and ERISA and the rules and
regulations thereunder) except (i) where compliance therewith is contested in
good faith by appropriate proceedings or (ii) where non-compliance therewith
could not reasonably be expected, in the aggregate, to have a material adverse
effect on the business, condition (financial or otherwise), operations,
performance, properties or prospects of the Company or such Subsidiary.
SECTION 7.6 INSPECTION OF PROPERTY, BOOKS AND RECORDS. The Company
will, and will cause each Subsidiary to, keep proper books of record and
account in which full, true and correct entries shall be made of all dealings
and transactions in relation to their respective businesses and
<PAGE> 34
activities; and will permit, during normal business hours, Purchaser'
Representative or an affiliate thereof, as representatives of Purchaser, to
visit and inspect any of their respective properties, upon reasonable prior
notice, to examine and make abstracts from any of their respective books and
records and to discuss their respective affairs, finances and accounts with
their respective executive officers and independent public accountants (and by
this provision the Company authorizes its independent public accountants to
disclose and discuss with Purchaser the affairs, finances and accounts of the
Company and its Subsidiaries), all at such reasonable times.
SECTION 7.7 INVESTMENT COMPANY ACT. The Company will not be or become
an open-end investment trust, unit investment trust or face-amount certificate
company that is or is required to be registered under Section 8 of the
Investment Company Act of 1940, as amended.
SECTION 7.8 USE OF PROCEEDS. The proceeds from the issuance and sale
of the Convertible Notes by the Company shall be used in accordance with
Schedule 7.8 attached hereto. None of the proceeds from the issuance and sale
of the Convertible Notes by the Company pursuant to this Agreement will be used
directly or indirectly for the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying any "margin stock" within the meaning of
Regulation G of the Board of Governors of the Federal Reserve System.
SECTION 7.9 COMPLIANCE WITH TERMS AND CONDITIONS OF MATERIAL
CONTRACTS. The Company will, and will cause each Subsidiary to, comply, in all
respects, with all terms and conditions of all material contracts to which it
is subject.
SECTION 7.10 RESERVED SHARES AND LISTINGS.
(a) The Company shall at all times have authorized, and reserved
for the purpose of issuance, a sufficient number of shares of Common Stock to
provide for the full conversion of the outstanding Convertible Notes and
issuance of the Conversion Shares (based on the conversion price of the
Convertible Notes in effect from time to time) (the "Reserved Amount"). The
Company shall not reduce the Reserved Amount without the prior written consent
of Purchaser. With respect to all Securities which contain an indeterminate
number of shares of Common Stock issuable in connection therewith (such as the
Convertible Notes), the Company shall include in the Reserve Amount, no less
than two (2) times the number of shares that is then actually issuable upon
conversion or exercise of such Securities. If at any time the number of shares
of Common Stock authorized and reserved for issuance is below the number of
Conversion Shares issued or issuable upon conversion of the Convertible Notes,
the Company will promptly take all corporate action necessary to authorize and
reserve a sufficient number of shares, including, without limitation, either
(x) calling a special meeting of shareholders to authorize additional shares,
in the case of an insufficient number of authorized shares or (y) in lieu
thereof, consummating the immediate repurchase of the Convertible Notes
contemplated in Section 4.3 of each Convertible Note and Sections 3.4(c) and
10.3 hereof, respectively.
(b) The Company shall promptly file the Listing Applications and
secure the listing
<PAGE> 35
of the Conversion Shares upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance) and 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 upon conversion or exercise of the
Convertible Notes. The Company will maintain the listing and trading of its
Common Stock on the OTC Bulletin Board. The Company will use its commercially
reasonable best efforts to obtain as soon as practicable and maintain the
listing and trading of its Common Stock on a National Market. The Company will
comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the National Association of Securities
Dealers, Inc. (the "NASD") and such exchanges, as applicable. The Company shall
promptly provide to Purchaser copies of any notices it receives regarding the
continued eligibility of the Common Stock for listing on the OTC Bulletin Board
or any National Market.
SECTION 7.11 IRREVOCABLE INSTRUCTIONS. Upon receipt of a Notice of
Conversion or Notice of Exercise, as applicable, the Company shall immediately
issue irrevocable instructions to the Escrow Agent to direct (on authority of
an irrevocable stock transfer power granted by Company to Escrow Agent)
Company's transfer agent to issue certificates, registered in the name of
Purchaser or its nominee, for the Conversion Shares, in the amount of 142,857
shares of Common Stock at Closing, or otherwise in such amounts as specified
from time to time by Purchaser to the Company upon proper conversion of the
Convertible Notes or exercise of the Warrants. Upon conversion of any
Convertible Notes in accordance with their terms and/or exercise of any
Warrants in accordance with their terms, the Company will, and will use its
best lawful efforts to cause its transfer agent to, issue one or more
certificates representing shares of Common Stock in such name or names and in
such denominations specified by a Purchaser in a Notice of Conversion or Notice
of Exercise, as the case may be. As long as the Registration Statement
contemplated by the Registration Rights Agreement shall remain effective, the
shares of Common Stock issuable upon conversion of any Convertible Notes shall
be issued to any transferee of such shares from Purchaser without any
restrictive legend upon appropriate evidence of transfer in compliance with the
Securities Act and the rules and regulations of the Commission; provided that
for so long as the Registration Statement is effective, no opinion of counsel
will be required to effect any such transfer. The Company further warrants and
agrees that no instructions other than these instructions have been or will be
given to its transfer agent. Nothing in this Section 7.11 shall affect in any
way a Purchaser's obligation to comply with all securities laws applicable to
Purchaser upon resale of such shares of Common Stock, including any prospectus
delivery requirements.
SECTION 7.12 MAINTENANCE OF REPORTING STATUS; SUPPLEMENTAL
INFORMATION. So long as any of the Securities are outstanding, the Company
shall timely file all reports required to be filed with the Commission pursuant
to the Exchange Act. The Company shall not terminate its status as an issuer
required to file reports under the Exchange Act, even if the Exchange Act or
the rules and regulations thereunder would permit such termination. If at
anytime the Company is not subject to the requirements of Section 13 or 15(d)
of the Exchange Act, the Company will promptly furnish at its expense, upon
request, for the benefit of the holders from time to time of Securities, and
prospective purchasers of Securities, information satisfying the information
<PAGE> 36
requirements of Rule 144 under the Securities Act.
SECTION 7.13 FORM D; BLUE SKY LAWS. The Company agrees to file a "Form
D" with respect to the Securities as required under Regulation D of the
Securities Act and to provide a copy thereof to Purchaser 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 Securities
for sale to Purchaser at the Closing pursuant to this Agreement under
applicable securities or "blue sky" laws of the states of the United States (or
to obtain an exemption from such qualification), and shall provide evidence of
any such action so taken to Purchaser on or prior to the Closing Date.
ARTICLE VIII. NEGATIVE COVENANTS
The Company hereby agrees that after the date hereof for so long as
any Convertible Notes remain outstanding and for the benefit of Purchaser:
SECTION 8.1 LIMITATIONS ON DEBT OR OTHER LIABILITIES. Neither the
Company nor any Subsidiary will create, incur, assume or suffer to exist (at
any time after the Closing Date, after giving effect to the application of the
proceeds of the issuance of the Securities) (i) any Debt except (x) Debt
incurred in a Permitted Financing, (y) Debt incurred in connection with
equipment leases to which the Company or its Subsidiaries are a party incurred
in the ordinary course of business; and (z) Debt incurred in connection with
trade accounts payable, imbalances and refunds arising in the ordinary course
of business and (ii) any equity securities (including Derivative Securities)
(other than those securities that are issuable (x) under or pursuant to stock
option plans, warrants or other rights programs that exist as of the date
hereof, (z) in connection with the acquisition (including by merger) of a
business or of assets otherwise permitted under this Agreement), unless the
Company complies with the mandatory prepayment terms of Section 3.4(b) hereof.
SECTION 8.2 TRANSACTIONS WITH AFFILIATES. The Company and each
Subsidiary will not, directly or indirectly, pay any funds to or for the
account of, make any investment (whether by acquisition or stock or
indebtedness, by loan, advance, transfer of property, guarantee or other
agreement to pay, purchase or service, directly or indirectly, and Debt, or
otherwise) in, lease, sell, transfer or otherwise dispose of any assets,
tangible or intangible, to, or participate in, or effect any transaction in
connection with any joint enterprise or other joint arrangement with, any
Affiliate, except, (1) pursuant to those agreements specifically identified on
Schedule 8.2 attached hereto (with a copy of such agreements annexed to such
Schedule 8.2) and (2) on terms to the Company or such Subsidiary no less
favorable than terms that could be obtained by the Company or such Subsidiary
from a Person that is not an Affiliate of the Company upon negotiation at arms'
length, as determined in good faith by the Board of Directors of the Company;
provided that no determination of the Board of Directors shall be required with
respect to any such transactions entered into in the ordinary course of
business.
<PAGE> 37
SECTION 8.3 MERGER OR CONSOLIDATION. Except for those transactions, if
any, set forth in Schedule 8.3, all of which are contemplated to be consummated
prior to or simultaneously with the transactions contemplated by this
Agreement, the Company will not, in a single transaction or a series of related
transactions (i) consolidate with or merge with or into any other Person, or
(ii) permit any other Person to consolidate with or merge into it, unless the
Company shall be the survivor of such merger or consolidation and (x)
immediately before and immediately after given effect to such transaction
(including any indebtedness incurred or anticipated to be incurred in
connection with the transaction), no Default or Event of Default shall have
occurred and be continuing; and (y) the Company has delivered to Purchaser an
Officer's Certificate stating that such consolidation, merger or transfer
complies with this Agreement, and that all conditions precedent in this
Agreement relating to such transaction have been satisfied.
SECTION 8.4 LIMITATION ON ASSET SALES. Neither the Company nor any
Subsidiary will consummate an Asset Sale of material assets of the Company or
any Subsidiary without the prior written consent of Purchaser, which consent
shall not be unreasonably withheld. As used herein, "Asset Sale" means any
sale, lease, transfer or other disposition (or series of related sales, leases,
transfers or dispositions) or sales of capital stock of a Subsidiary (other
than directors' qualifying shares), property or other assets (each referred to
for the purpose of this definition as a "disposition"), including any
disposition by means of a merger, consolidation or similar transaction other
than a disposition of property or assets at fair market value in the ordinary
course of business.
SECTION 8.5 RESTRICTIONS ON CERTAIN AMENDMENTS. Neither the Company
nor any Subsidiary will waive any provision of, amend, or suffer to be amended,
any provision of such entity's existing Debt, any material contract or
agreement previously or hereafter filed by the Company with the Commission as
part of its SEC Reports, any Company Corporate Document or Subsidiary Corporate
Document if such amendment, in the Company's reasonable judgment, would
materially adversely affect Purchaser or the holders of the Securities without
the prior written consent of Purchaser.
SECTION 8.6 PROHIBITION ON DISCOUNTED EQUITY OFFERINGS; REGISTRATION
RIGHTS.
(a) In addition to and not in lieu of the covenant
specified in Section 8.1 above, until such time as all of the
Convertible Notes have been either redeemed or converted into
Conversion Shares in full, the Company agrees that it will not issue
any of its equity securities (or securities convertible into or
exchangeable or exercisable for equity securities (the "Derivative
Securities")) on terms that allow a holder thereof to acquire such
equity securities (or Derivative Securities) at a discount to the
Market Price of the Common Stock at the time of issuance or, in the
case of Derivative Securities at a conversion price based on any
formula (other than standard anti-dilution provisions) based on the
Market Price on a date later than the date of issuance so long as such
conversion is not below the Market Price on the date of issuance (each
such event, a "Discounted Equity Offering"). As used herein,
"discount" shall include, but not be limited to, (i) any warrant,
right or other security granted or offered in connection with
<PAGE> 38
such issuance which, on the applicable date of grant, is offered with
an exercise or conversion price, as the case may be, at less than the
then current Market Price of the Common Stock or, if such security has
an exercise or conversion price based on any formula (other than
standard anti-dilution provisions) based on the Market Price on a date
later than the date of issuance, then at a price below the Market
Price on such date of exercise or conversion, as the case may be, or
(ii) any commissions, fees or other allowances paid in connection with
such issuances (other than customary underwriter or placement agent
commissions, fees or allowances). For the purposes of determining the
Market Price at which Common Stock is acquired under this Section,
normal underwriting commissions and placement fees (including
underwriters' warrants) shall be excluded.
(b) Until such time as all of the Convertible Notes have
been either redeemed or converted into Conversion Shares in full, the
Company agrees it will not issue any of its equity securities (or
Derivative Securities), unless any shares of Common Stock issued or
issuable in connection therewith are "restricted securities." As used
herein "restricted securities" shall mean securities which may not be
sold by virtue of contractual restrictions imposed by the Company
either pursuant to an exemption from registration under the Securities
Act or pursuant to a registration statement filed by the Company with
the Commission, in each case prior to twelve (12) months following the
date of issuance of such securities.
(c) The restrictions contained in this Section 8.6 shall
not apply to the issuance by the Company of (or the agreement to
issue) Common Stock or Derivative Securities in connection with (i)
the acquisition (including by merger) of a business or of assets
otherwise permitted under this Agreement, or (ii) stock option or
other compensatory plans.
SECTION 8.7 LIMITATION ON STOCK REPURCHASES. Except as otherwise set
forth in the Convertible Notes, the Company shall not, without the written
consent of the Majority Holders, redeem, repurchase or otherwise acquire
(whether for cash or in exchange for property or other securities or otherwise)
any shares of capital stock of the Company or any warrants, rights or options
to purchase or acquire any such shares.
ARTICLE IX. RESTRICTIVE LEGENDS
SECTION 9.1 RESTRICTIONS ON TRANSFER. From and after their respective
dates of issuance, none of the Securities shall be transferable except upon the
conditions specified in this Article IX, which conditions are intended to
ensure compliance with the provisions of the Securities Act in respect of the
Transfer of any of such Securities or any interest therein. Each Purchaser will
use its best efforts to cause any proposed transferee of any Securities held by
it to agree to take and hold such Securities subject to the provisions and upon
the conditions specified in this Article IX.
<PAGE> 39
SECTION 9.2 LEGENDS. The Conversion Shares shall be considered
"unlegended" and/or "unrestricted" within the meaning of this Agreement and the
Transaction Agreements, provided that certain legends may be necessary under
the Securities Act, Exchange Act and relevant state laws.
SECTION 9.3 NOTICE OF PROPOSED TRANSFERS. Prior to any proposed
Transfer of the Securities (other than a Transfer (i) registered or exempt from
registration under the Securities Act, (ii) to an affiliate of a Purchaser
which is an "accredited investor" within the meaning of Rule 501(a) under the
Securities Act, provided that any such transferee shall agree to be bound by
the terms of this Agreement and the Registration Rights Agreement, or (iii) to
be made in reliance on Rule 144 under the Securities Act), the holder thereof
shall give written notice to the Company of such holder's intention to effect
such Transfer, setting forth the manner and circumstances of the proposed
Transfer, which shall be accompanied by (a) an opinion of counsel reasonably
acceptable to the Company, confirming that such transfer does not give rise to
a violation of the Securities Act, (B) representation letters in form and
substance reasonably satisfactory to the Company to ensure compliance with the
provisions of the Securities Act and (C) letters in form and substance
reasonably satisfactory to the Company from each such transferee stating such
transferee's agreement to be bound by the terms of this Agreement and the
Registration Rights Agreement. Such proposed Transfer may be effected only if
the Company shall have received such notice of transfer, opinion of counsel,
representation letters and other letters referred to in the immediately
preceding sentence, whereupon the holder of such Securities shall be entitled
to Transfer such Securities in accordance with the terms of the notice
delivered by the holder to the Company.
ARTICLE X. ADDITIONAL AGREEMENTS AMONG THE PARTIES
SECTION 10.1 LIQUIDATED DAMAGES.
(a) The Company shall, and shall use its commercially
reasonable best efforts to cause its transfer agent to, issue and
deliver shares of Common Stock consistent with Section 7.11 hereof
within three (3) Trading Days of delivery of a Notice of Conversion or
Notice of Exercise, as applicable (the "Deadline") to Purchaser (or
any party receiving Securities by transfer from Purchaser) at the
address of Purchaser set forth in the Notice of Conversion or Notice
of Exercise, as the case may be. The Company understands that a delay
in the issuance of such certificates after the Deadline could result
in economic loss to Purchaser.
(b) Without in any way limiting Purchaser's right to
pursue other remedies, including actual damages and/or equitable
relief, the Company agrees that if delivery of the Conversion Shares
is more than one (1) Business Day after the Deadline (other than a
failure due to the circumstances described in Section 4.3 of the
Convertible Notes, which failure shall be governed by such Section)
the Company shall pay to Purchaser, as liquidated damages and not as a
penalty, $500 for each $100,000 of Convertible Notes
<PAGE> 40
then outstanding per day in cash, for each of the first ten (10) days
beyond the Deadline, and $1,000 for each $100,000 of Convertible Notes
then outstanding per day in cash for each day thereafter that the
Company fails to deliver such Common Stock. Such cash amount shall be
paid to Purchaser by the fifth day of the month following the month in
which it has accrued or, at the option of Purchaser (by written notice
to the Company by the first day of the month following the month in
which it has accrued), shall be added to the principal amount of the
Convertible Note (if then outstanding) payable to Purchaser, in which
event interest shall accrue thereon in accordance with the terms of
the Convertible Notes and such additional principal amount shall be
convertible into Common Stock in accordance with the terms of the
Convertible Notes.
SECTION 10.2 CONVERSION NOTICE. The Company agrees that, in addition
to any other remedies which may be available to Purchaser, including, but not
limited to, the remedies available under Section 10.1, in the event the Company
fails for any reason (other than as a result of actions taken by a Purchaser in
breach of this Agreement) to effect delivery to a Purchaser of certificates
with or without restrictive legends as contemplated by Article IX representing
the shares of Common Stock on or prior to the Deadline after conversion of any
Convertible Notes, Purchaser will be entitled, if prior to the delivery of such
certificates, to revoke the Notice of Conversion, as applicable, by delivering
a notice to such effect to the Company whereupon the Company and Purchaser
shall each be restored to their respective positions immediately prior to
delivery of such Notice of Conversion.
SECTION 10.3 CONVERSION LIMIT. Notwithstanding the conversion rights
under the Convertible Notes, unless Purchaser delivers a waiver in accordance
with the immediately following sentence, in no event shall Purchaser be
entitled to convert any portion of the Convertible Notes, in excess of that
portion of the Convertible Notes, as applicable, of which the sum of (i) the
number of shares of Common Stock beneficially owned by Purchaser and its
Affiliates (other than shares of Common Stock which may be deemed beneficially
owned through the ownership of the unconverted portion of the Convertible Note
or other Derivative Securities convertible into or exchangeable for shares of
Common Stock which contain a limitation similar to that set forth in this
Section 10.3), and (ii) the number of shares of Common Stock issuable upon the
conversion of the portion of the Convertible Note with respect to which this
determination is being made, would result in beneficial ownership by Purchaser
and its Affiliates of more than 9.99% of the outstanding shares of Common
Stock. For purposes of Section 10.3(i) beneficial ownership shall be determined
in accordance with Rule 13d-3 of the Exchange Act and Regulations 13 D-G
thereunder, except as otherwise provided in this Section 10.3. The foregoing
limitation shall not apply and shall be of no further force or effect (i)
immediately preceding and upon the occurrence of any voluntary or mandatory
redemption or repayment transaction described herein or in the Convertible
Notes, (ii) immediately preceding and upon any Sale Event, (iii) on the
Maturity Date or (iv) following the occurrence of any Event of Default which is
not cured for a period of ten (10) calendar days.
SECTION 10.4 REGISTRATION RIGHTS.
(a) The Company shall grant Purchaser registration rights
covering the
<PAGE> 41
Conversion Shares and the Shares issued upon exercise of the Warrant
(the "Registrable Securities") on the terms set forth in the
Registration Rights Agreement and herein.
(b) The Company shall prepare and file within three (3)
business days following the Closing Date a registration statement or
amendment thereto (the "Registration Statement") on Form S-1 or Form
S-1/A (or such other form as is then available for registration)
covering the resale of the Registrable Securities. The Company shall
use its best efforts to cause the Registration Statement to be
declared effective by the Commission within five (5) business days
following the Closing Date (the "Required Effectiveness Date"). The
Company shall pay all expenses of registration (other than
underwriting fees and discounts, if any, in respect of Registrable
Securities offered and sold under such Registration Statement by
Purchaser).
(c) If the Registration Statement is not declared
effective by the Commission by the Required Effectiveness Date, the
Company shall pay to Purchaser, as liquidated damages and not as a
penalty, an amount equal to 2% of the outstanding principal amount of
the Convertible Notes, prorated, for each 10 day period the
Registration Statement is not declared effective by the Commission,
which amount will be increased to 3% of the outstanding principal
amount of the Convertible Notes in the event that the Registration
Statement is not declared effective by the Commission within 20 days
of the Closing Date. In addition, commencing 30 days following the
Closing Date, the Conversion Price of the Convertible Notes will
decrease by 1% for each 30-day period in which the Registration
Statement is not declared effective, up to a maximum discount of 30%.
In the event the Company fails to obtain a valid Registration
Statement by the 40th day following the Closing Date, the Company will
redeem the Convertible Notes as set forth in Section 5 of the
Convertible Notes. Additionally, the Company will grant to Purchaser
first priority piggyback registration rights in the event the Company
proposes to effect a registered offering of Common Stock or warrants
or both prior to the filing of the Registration Statement referenced
above.
(d) Any such liquidated damages shall be paid in cash by
the Company to Purchaser by wire transfer in immediately available
funds on the last day of each calendar week following the event
requiring its payment.
(e) If, following the declaration of effectiveness of the
Registration Statement, the Registration Statement (or any prospectus
or supplemental prospectus contained therein) shall cease to be
effective for any reason (including but not limited to the occurrence
of any event that results in any prospectus or supplemental prospectus
containing an untrue statement of a material fact or omitting a
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading), the Company fails to file required
amendments to the Registration Statement in order to allow the
Purchaser to exercise its rights to receive unrestricted, unlegended,
freely tradeable shares of Common Stock, or if for any reason there
are insufficient shares of such shares of Common Stock
<PAGE> 42
registered under the then current Registration Statement to effect
full conversion of the Convertible Notes (a "Registration Default"),
the Company shall immediately take all necessary steps to cause the
Registration Statement to be amended or supplemented so as to cure
such Registration Default. Failure to cure a Registration Default
within ten (10) business days shall result in the Company paying to
Purchaser liquidated damages at the rate of $1,000 per day from the
date of such Registration Default until the Registration Default is
cured.
SECTION 10.5 RESTRICTION ON ISSUANCE OF SECURITIES. For a period
beginning on the Closing Date and extending until the date that Convertible
Notes are fully converted into unrestricted, unlegended, freely tradeable
shares of Common Stock, the Company will not sell, or offer to sell, any
securities (including credit facilities which are convertible into securities
which may be issued at a discount to the then current Market Price) other than
borrowings under conventional credit facilities existing as of the date hereof,
stock issued or credit facilities to be established in connection with
acquisitions, employee and director stock options of the Company, existing
rights and warrants of the Company and securities issued under the Convertible
Notes. In addition, the Company shall not issue any securities in connection
with a strategic alliance entered into by the Company unless such securities
are the subject of a one year statutory or contractual hold period or, if not
subject to such a hold period, unless the Purchaser has fully converted all
outstanding Convertible Notes. Notwithstanding the foregoing, the Company may
enter into the following types of transactions (collectively referred to as
"Permitted Financings"): (1) "permanent financing" transactions, which would
include any form of debt or equity financing (other than an underwritten
offering), which is followed by a reduction of the said financing commitment to
zero and payment of all related fees and expenses; (2) "project financing"
which provide for the issuance of recourse debt instruments in connection with
the operation of the Company's business as presently conducted or as proposed
to be conducted; (3) an underwritten offering of Common Stock, provided that
such offering provides for the registration of the Common Stock to be received
by Purchaser as a result of the conversion of the Convertible Notes held by the
Purchaser; and (4) other financing transactions specifically consented to in
writing by the Purchaser.
ARTICLE XI. ADJUSTMENT OF FIXED PRICE
SECTION 11.1 REORGANIZATION. The Conversion Price and the dollar
amount set forth in (collectively, the "Fixed Prices") shall be adjusted, as
applicable, as hereafter provided.
SECTION 11.2 SHARE REORGANIZATION. If and whenever the Company shall:
(i) subdivide the outstanding shares of Common Stock into
a greater number of shares;
(ii) consolidate the outstanding shares of Common Stock
into a smaller number of shares;
(iii) issue Common Stock or securities convertible into or
exchangeable for
<PAGE> 43
shares of Common Stock as a stock dividend to all or substantially all
the holders of Common Stock; or
(iv) make a distribution on the outstanding Common Stock
to all or substantially all the holders of Common Stock payable in
Common Stock or securities convertible into or exchangeable for Common
Stock;
any of such events being herein called a "Share Reorganization," then in each
such case the applicable Fixed Price shall be adjusted, effective immediately
after the record date at which the holders of Common Stock are determined for
the purposes of the Share Reorganization or, if no record date is fixed, the
effective date of the Share Reorganization, by multiplying the applicable Fixed
Price in effect on such record or effective date, as the case may be, by a
fraction of which:
(I) the numerator shall be the number of shares of Common
Stock outstanding on such record or effective date (without giving
effect to the transaction); and
(II) the denominator shall be the number of shares of
Common Stock outstanding after giving effect to such Share
Reorganization, including, in the case of a distribution of securities
convertible into or exchangeable for shares of Common Stock, the
number of shares of Common Stock that would have been outstanding if
such securities had been converted into or exchanged for Common Stock
on such record or effective date.
SECTION 11.3 RIGHTS OFFERING. If and whenever the Company shall issue
to all or substantially all the holders of Common Stock, rights, options or
warrants under which such holders are entitled, during a period expiring not
more than 45 days after the record date of such issue, to subscribe for or
purchase Common Stock (or Derivative Securities), at a price per share (or, in
the case of securities convertible into or exchangeable for Common Stock, at an
exchange or conversion price per share at the date of issue of such securities)
of less than 95% of the Market Price of the Common Stock on such record date
(any such event being herein called a "Rights Offering"), then in each such
case the applicable Fixed Price shall be adjusted, effective immediately after
the record date at which holders of Common Stock are determined for the
purposes of the Rights Offering, by multiplying the applicable Fixed Price in
effect on such record date by a fraction of which:
(i) the numerator shall be the sum of:
(I) the number of shares of Common Stock outstanding on
such record date; and
(II) a number obtained by dividing:
(A) either,
<PAGE> 44
(x) the product of the total number of shares of
Common Stock so offered for subscription or purchase and the price at
which such shares are so offered, or
(y) the product of the maximum number of shares
of Common Stock into or for which the convertible or exchangeable
securities so offered for subscription or purchase may be converted or
exchanged and the conversion or exchange price of such securities, or,
as the case may be, by
(B) the Market Price of the Common Stock on such record
date; and
(ii) the denominator shall be the sum of:
(I) the number of shares of Common Stock outstanding on
such record date; and
(II) the number of shares of Common Stock so offered for
subscription or purchase (or, in the case of Derivative Securities,
the maximum number of shares of Common Stock for or into which the
securities so offered for subscription or purchase may be converted or
exchanged).
To the extent that such rights, options or warrants are not exercised prior to
the expiry time thereof, the applicable Fixed Price shall be readjusted
effective immediately after such expiry time to the applicable Fixed Price
which would then have been in effect upon the number of shares of Common Stock
(or Derivative Securities) actually delivered upon the exercise of such rights,
options or warrants.
SECTION 11.4 SPECIAL DISTRIBUTION. If and whenever the Company
shall issue or distribute to all or substantially all the holders of Common
Stock:
(i) shares of the Company of any class, other than Common
Stock;
(ii) rights, options or warrants; or
(iii) any other assets (excluding cash dividends and
equivalent dividends in shares paid in lieu of cash dividends in the
ordinary course);
and if such issuance or distribution does not constitute a Share Reorganization
or a Rights Offering (any such event being herein called a "Special
Distribution"), then in each such case the applicable Fixed Price shall be
adjusted, effective immediately after the record date at which the holders of
Common Stock are determined for purposes of the Special Distribution, by
multiplying the applicable Fixed Price in effect on such record date by a
fraction of which:
(i) the numerator shall be the difference between:
<PAGE> 45
(A) the product of the number of shares of Common Stock
outstanding on such record date and the Market Price of the Common
Stock on such date; and
(B) the fair market value, as determined by the Directors
(whose determination shall be conclusive), to the holders of Common
Stock of the shares, rights, options, warrants, evidences of
indebtedness or other assets issued or distributed in the Special
Distribution (net of any consideration paid therefor by the holders of
Common Stock), and
(ii) the denominator shall be the product of the number of
shares of Common Stock outstanding on such record date and the Market
Price of the Common Stock on such date.
SECTION 11.5 CAPITAL REORGANIZATION. If and whenever there shall
occur:
(i) a reclassification or redesignation of the shares of
Common Stock or any change of the shares of Common Stock into other
shares, other than in a Share Reorganization;
(ii) a consolidation, merger or amalgamation of the
Company with, or into another body corporate; or
(iii) the transfer of all or substantially all of the
assets of the Company to another body corporate;
(any such event being herein called a "Capital Reorganization"), then in each
such case the holder who exercises the right to convert Convertible Notes after
the effective date of such Capital Reorganization shall be entitled to receive
and shall accept, upon the exercise of such right, in lieu of the number of
shares of Common Stock to which such holder was theretofore entitled upon the
exercise of the conversion privilege, the aggregate number of shares or other
securities or property of the Company or of the body corporate resulting from
such Capital Reorganization that such holder would have been entitled to
receive as a result of such Capital Reorganization if, on the effective date
thereof, such holders had been the holder of the number of shares of Common
Stock to which such holder was theretofore entitled upon conversion; provided,
however, that no such Capital Reorganization shall be consummated in effect
unless all necessary steps shall have been taken so that such holders shall
thereafter be entitled to receive such number of shares or other securities of
the Company or of the body corporate resulting from such Capital
Reorganization, subject to adjustment thereafter in accordance with provisions
the same, as nearly as may be possible, as those contained above.
SECTION 11.6 PURCHASE PRICE ADJUSTMENTS. In case at any time and from
time to time the Company shall issue any shares of Common Stock or Derivative
Securities convertible or exercisable for shares of Common Stock (the number of
shares so issued, or issuable upon conversion or exercise of such Derivative
Securities, as applicable, being referred to as
<PAGE> 46
"Additional Shares of Common Stock") for consideration less than the then Market
Price at the date of issuance of such shares of Common Stock or such Derivative
Securities, in each such case the Conversion Price shall, concurrently with
such issuance, be adjusted by multiplying the Conversion Price immediately
prior to such event by a fraction: (i) the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to the issuance
of such Additional Shares of Common Stock plus the number of shares of Common
Stock that the aggregate consideration received by the Company for the total
number of such Additional Shares of Common Stock so issued would purchase at
the Market Price and (ii) the denominator of which shall be the number of
shares of Common Stock outstanding immediately prior to the issuance of
Additional Shares of Common Stock plus the number of such Additional Shares of
Common Stock so issued or sold.
SECTION 11.7 ADJUSTMENT RULES. The following rules and procedures
shall be applicable to adjustments made in this Article XI:
(a) no adjustment in the applicable Fixed Price shall be
required unless such adjustment would result in a change of at least
1% in the applicable Fixed Price then in effect, provided, however,
that any adjustments which, but for the provisions of this clause
would otherwise have been required to be made, shall be carried
forward and taken into account in any subsequent adjustment;
(b) if any event occurs of the type contemplated by the
adjustment provisions of this Article XI but not expressly provided
for by such provisions, the Company will give notice of such event as
provided herein, and the Company's board of directors will make an
appropriate adjustment in the Fixed Price so that the rights of the
holders of the applicable Security shall not be diminished by such
event; and
(c) if a dispute shall at any time arise with respect to
any adjustment of the applicable Fixed Price, such dispute shall be
conclusively determined by the auditors of the Company or, if they are
unable or unwilling to act, by a firm of independent chartered
accountants selected by the Directors and any such determination shall
be binding upon the Company and Purchaser.
SECTION 11.8 CERTIFICATE AS TO ADJUSTMENT. The Company shall from time
to time promptly after the occurrence of any event which requires an adjustment
in the applicable Fixed Price deliver to Purchaser a certificate specifying the
nature of the event requiring the adjustment, the amount of the adjustment
necessitated thereby, the applicable Fixed Price after giving effect to such
adjustment and setting forth, in reasonable detail, the method of calculation
and the facts upon which such calculation is based.
SECTION 11.9 NOTICE TO NOTEHOLDERS. If the Company shall fix a record
date for:
(a) any Share Reorganization (other than the subdivision
of outstanding Common Stock into a greater number of shares or the
consolidation of outstanding
<PAGE> 47
Common Stock into a smaller number of shares),
(b) any Rights Offering,
(c) any Special Distribution,
(d) any Capital Reorganization (other than a
reclassification or redesignation of the Common Stock into other
shares),
(e) Sale Event; or
(f) any cash dividend,
the Company shall, not less than 10 days prior to such record date or, if no
record date is fixed, prior to the effective date of such event, give to
Purchaser notice of the particulars of the proposed event or the extent that
such particulars have been determined at the time of giving the notice.
ARTICLE XII. EVENTS OF DEFAULT
SECTION 12.1 EVENTS OF DEFAULT. If one or more of the following events
(each an "Event of Default") shall have occurred and be continuing:
(a) failure by the Company to pay or repay when due, all
or any part of the principal on any of the Convertible Notes (whether
by virtue of the agreements specified in this Agreement or the
Convertible Notes);
(b) failure by the Company to pay (i) within five (5)
Business Days of the due date thereof any interest on any Convertible
Notes or (ii) within five (5) Business Days following the delivery of
notice to the Company of any fees or any other amount payable (not
otherwise referred to in (a) above or this clause (b)) by the Company
under this Agreement or any other Transaction Agreement;
(c) failure by the Company to timely comply with the
requirements of Section 7.11 or 10.1 hereof, which failure is not
cured within five (5) Business Days of such failure;
(d) failure on the part of the Company to observe or
perform any covenant contained in Section 7.10 or Article VIII of this
Agreement;
(e) failure on the part of the Company to observe or
perform any covenant or agreement contained in any Transaction
Agreement (other than those covered by clauses (a), (b), (c), (d) or
(e) above) for 30 days from the date of such occurrence;
<PAGE> 48
(f) the trading in the Common Stock shall have been
suspended by the Commission, OTC Bulletin Board or any National Market
(except for any suspension of trading of limited duration solely to
permit dissemination of material information regarding the Company and
except if, at the time there is any suspension on any National Market,
the Common Stock is then listed and approved for trading on another
National Market within ten (10) Trading Days thereof);
(g) failure of the Company to file the Listing
Applications within twenty (20) Business Days of the Closing Date,
which failure is not cured within five (5) Business Days of such
failure;
(h) the Company shall have its Common Stock delisted from
the OTC Bulletin Board or a National Market for at least ten (10)
consecutive Trading Days and is unable to obtain a listing on a
National Market within such ten (10) Trading Days;
(i) the Registration Statement shall not have been
declared effective by the Commission by the Required Effectiveness
Date, or such effectiveness shall not be maintained for the
Registration Maintenance Period, in each case which results in the
Company incurring the Default Fee for a period in excess of 45 days;
(j) the Company or any Subsidiary has commenced a
voluntary case or other proceeding seeking liquidation, winding-up,
reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency, moratorium or other similar law now
or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or has consented to any such relief
or to the appointment of or taking possession by any such official in
an involuntary case or other proceeding commenced against it, or has
made a general assignment for the benefit of creditors, or has failed
generally to pay its debts as they become due, or has taken any
corporate action to authorize any of the foregoing;
(k) an involuntary case or other proceeding has been
commenced against the Company or any Subsidiary seeking liquidation,
winding-up, reorganization or other relief with respect to it or its
debts under any bankruptcy, insolvency, moratorium or other similar
law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of
it or any substantial part of its property, and such involuntary case
or other proceeding shall remain undismissed and unstayed for a period
of 60 days, or an order for relief has been entered against the
Company or any Subsidiary under the federal bankruptcy laws as now or
hereafter in effect;
(l) default in any provision (including payment) or any
agreement governing the terms of any Debt of the Company or any
Subsidiary in excess of $500,000, which has not been cured within any
applicable period of grace associated therewith;
<PAGE> 49
(m) judgments or orders for the payment of money which in
the aggregate at any one time exceed $1,000,000 and are not covered by
insurance have been rendered against the Company or any Subsidiary by
a court of competent jurisdiction and such judgments or orders shall
continue unsatisfied and unstayed for a period of 60 days; or
(n) any representation, warranty, certification or
statement made by the Company in any Transaction Agreement or which is
contained in any certificate, document or financial or other statement
furnished at any time under or in connection with any Transaction
Agreement shall prove to have been untrue in any material respect when
made.
then, and in every such occurrence, Purchaser may, with respect to an Event of
Default specified in paragraphs (a) or (b), and the Majority Holders may, with
respect to any other Event of Default, by notice to the Company, declare the
Convertible Notes to be, and the Convertible Notes shall thereon become
immediately due and payable; provided that in the case of any of the Events of
Default specified in paragraph (k) or (l) above with respect to the Company or
any Subsidiary, then, without any notice to the Company or any other act by
Purchaser, the entire amount of the Convertible Notes shall become immediately
due and payable, provided, further, if any Event of Default has occurred and is
continuing, and irrespective of whether any Convertible Note has been declared
immediately due and payable hereunder, any Purchaser of Convertible Notes may
proceed to protect and enforce the rights of Purchaser by an action at law,
suit in equity or other appropriate proceeding, whether for the specific
performance of any agreement contained herein or in any Convertible Note, or
for an injunction against a violation of any of the terms hereof or thereof, or
in aid of the exercise of any power granted hereby or thereby or by law or
otherwise, and provided further, in the case of any Event of Default, the
amount declared due and payable on the Convertible Notes shall be the Formula
Price thereof.
SECTION 12.2 POWERS AND REMEDIES CUMULATIVE. No right or remedy herein
conferred upon or reserved to Purchaser is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy. Every power and remedy given by the Convertible Notes or by
law may be exercised from time to time, and as often as shall be deemed
expedient, by Purchaser.
ARTICLE XIII. MISCELLANEOUS
SECTION 13.1 NOTICES. All notices, demands and other communications to
any party hereunder shall be in writing (including telecopier or similar
writing) and shall be given to such party at its address set forth on the
signature pages hereof, or such other address as such party may hereafter
specify for the purpose to the other parties. Each such notice, demand or other
communication shall be effective (i) if given by telecopy, when such telecopy
is transmitted to the telecopy number specified on the signature page hereof,
(ii) if given by mail, four days after
<PAGE> 50
such communication is deposited in the mail with first class postage prepaid,
addressed as aforesaid or (iii) if given by any other means, when delivered at
the address specified in or pursuant to this Section.
SECTION 13.2 NO WAIVERS; AMENDMENTS.
(a) No failure or delay on the part of any party in
exercising any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such
right, power or remedy preclude any other or further exercise thereof
or the exercise of any other right, power or remedy.
(b) Any provision of this Agreement may be amended,
supplemented or waived if, but only if, such amendment, supplement or
waiver is in writing and is signed by the Company and the Majority
Holders; provided, that without the consent of each holder of any
Convertible Note affected thereby, an amendment or waiver may not (a)
reduce the aggregate principal amount of Convertible Notes whose
holders must consent to an amendment or waiver, (b) reduce the rate or
extend the time for payment of interest on any Convertible Note, (c)
reduce the principal amount of or extend the stated maturity of any
Convertible Note or (d) make any Convertible Note payable in money or
property other than as stated in such Convertible Note. In determining
whether the holders of the requisite principal amount of Convertible
Notes have concurred in any direction, consent, or waiver as provided
in any Transaction Agreement, Convertible Notes which are owned by the
Company or any other obligor on or guarantor of the convertible Notes,
or by any Person Controlling, Controlled by, or under common Control
with any of the foregoing, shall be disregarded and deemed not to be
outstanding for the purpose of any such determination; and provided
further that no such amendment, supplement or waiver which affects the
rights of Purchaser and their affiliates otherwise than solely in
their capacities as holders of Convertible Notes shall be effective
with respect to them without their prior written consent.
SECTION 13.3 INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless
Purchaser, its Affiliates, and each Person, if any, who controls
Purchaser, or any of its Affiliates, within the meaning of the
Securities Act or the Exchange Act (each, a "Controlling Person"), and
the respective partners, agents, employees, officers and Directors of
Purchaser, their Affiliates and any such Controlling Person (each an
"Indemnified Party") and collectively, the "Indemnified Parties"),
from and against any and all losses, claims, damages, liabilities and
expenses (including, without limitation and as incurred, reasonable
costs of investigating, preparing or defending any such claim or
action, whether or not such Indemnified Party is a party thereto,
provided that the Company shall not be obligated to advance such costs
to any Indemnified Party other than Purchaser unless it has received
from such Indemnified Party an undertaking to repay to the Company the
costs so advanced if it should be determined by final judgment of a
court of
<PAGE> 51
competent jurisdiction that such Indemnified Party was not entitled to
indemnification hereunder with respect to such costs) which may be
incurred by such Indemnified Party in connection with any
investigative, administrative or judicial proceeding brought or
threatened that relates to or arises out of, or is in connection with
any activities contemplated by any Transaction Agreement or any other
services rendered in connection herewith; provided that the Company
will not be responsible for any claims, liabilities, losses, damages
or expenses that are determined by final judgment of a court of
competent jurisdiction to result from such Indemnified Party's gross
negligence, willful misconduct or bad faith.
(b) If any action shall be brought against an Indemnified
Party with respect to which indemnity may be sought against the
Company under this Agreement, such Indemnified Party shall promptly
notify the Company in writing and the Company, at its option, may,
assume the defense thereof, including the employment of counsel
reasonably satisfactory to such Indemnified Party and payment of all
reasonable fees and expenses. The failure to so notify the Company
shall not affect any obligations the Company may have to such
Indemnified Party under this Agreement or otherwise unless the Company
is materially adversely affected by such failure. Such Indemnified
Party shall have the right to employ separate counsel in such action
and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of such Indemnified Party, unless
(i) the Company has failed to assume the defense and employ counsel or
(ii) the named parties to any such action (including any impleaded
parties) include such Indemnified Party and the Company, and such
Indemnified Party shall have been advised by counsel that there may be
one or more legal defenses available to it which are different from or
additional to those available to the Company, in which case, if such
Indemnified Party notifies the Company in writing that it elects to
employ separate counsel at the expense of the Company, the Company
shall not have the right to assume the defense of such action or
proceeding on behalf of such Indemnified Party, provided, however,
that the Company shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be responsible hereunder for the
reasonable fees and expenses of more than one such firm of separate
counsel, in addition to any local counsel, which counsel shall be
designated by Purchaser. The Company shall not be liable for any
settlement of any such action effected without the written consent of
the Company (which shall not be unreasonably withheld) and the Company
agrees to indemnify and hold harmless each Indemnified Party from and
against any loss or liability by reason of settlement of any action
effected with the consent of the Company. In addition, the Company
will not, without the prior written consent of Purchaser, settle or
compromise or consent to the entry of any judgment in or otherwise
seek to terminate any pending or threatened action, claim, suit or
proceeding in respect to which indemnification or contribution may be
sought hereunder (whether or not any Indemnified Party is a party
thereto) unless such settlement, compromise, consent or termination
includes an express unconditional release of Purchaser and the other
Indemnified Parties, satisfactory in form and substance to Purchaser,
from all liability
<PAGE> 52
arising out of such action, claim, suit or proceeding.
(c) If for any reason the foregoing indemnity is
unavailable (otherwise than pursuant to the express terms of such
indemnity) to an Indemnified Party or insufficient to hold an
Indemnified Party harmless, then in lieu of indemnifying such
Indemnified Party, the Company shall contribute to the amount paid or
payable by such Indemnified Party as a result of such claims,
labilities, losses, damages, or expenses (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company
on the one hand and by Purchaser on the other from the transactions
contemplated by this Agreement or (ii) if the allocation provided by
clause (i) is not permitted under applicable law, in such proportion
as is appropriate to reflect not only the relative benefits received
by the Company on the one hand and Purchaser on the other, but also
the relative fault of the Company and Purchaser as well as any other
relevant equitable considerations. Notwithstanding the provisions of
this Section 13.3, the aggregate contribution of all Indemnified
Parties shall not exceed the amount of interest and fees actually
received by Purchaser pursuant to this Agreement. It is hereby further
agreed that the relative benefits to the Company on the one hand and
Purchaser on the other with respect to the transactions contemplated
hereby shall be determined by reference to, among other things,
whether any untrue or alleged untrue statement of material fact or the
omission or alleged omission to state a material fact related to
information supplied by the Company or by Purchaser and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
(d) The indemnification, contribution and expense
reimbursement obligations set forth in this Section 13.3 (i) shall be
in addition to any liability the Company may have to any Indemnified
Party at common law or otherwise; (ii) shall survive the termination
of this Agreement and the other Transaction Agreements and the payment
in full of the Convertible Notes and (iii) shall remain operative and
in full force and effect regardless of any investigation made by or on
behalf of Purchaser or any other Indemnified Party.
SECTION 13.4 EXPENSES: DOCUMENTARY TAXES. The Company agrees to pay to
Purchaser a fee of $15,000.00 (the "Expense Reimbursement Fee") in full
satisfaction of all obligations of the Company to Purchaser and its agents in
connection with the negotiation and preparation of the Transaction Agreements,
relevant due diligence, and fees and disbursements of legal counsel. In
addition, the Company agrees to pay any and all stamp, transfer and other
similar taxes, assessments or charges payable in connection with the execution
and delivery of any Transaction Agreement or the issuance of the Securities to
Purchaser, excluding their assigns.
SECTION 13.5 PAYMENT. The Company agrees that, so long as Purchaser
shall own any Convertible Notes purchased by it from the Company hereunder, the
Company will make
<PAGE> 53
payments to Purchaser of all amounts due thereon by wire transfer by 4:00 P.M.
(New York City time).
SECTION 13.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon the Company and upon Purchaser and its respective successors and assigns;
provided that the Company shall not assign or otherwise transfer its rights or
obligations under this Agreement to any other Person without the prior written
consent of the Majority Holders. All provisions hereunder purporting to give
rights to Purchaser and its affiliates or to holders of Securities are for the
express benefit of such Persons and their successors and assigns.
SECTION 13.7 BROKERS. Except for a fee payable in the form of
$50,000.00 in cash and a warrant (the "Warrant") for 50,000 shares of the
Common Stock to LKB Financial, LLC, the Company represents and warrants that it
has not employed any broker, finder, financial advisor or investment banker who
would be entitled to any brokerage, finder's or other fee or commission payable
by the Company or Purchaser in connection with the sale of the Securities.
SECTION 13.8 GEORGIA LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL; APPOINTMENT OF AGENT. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF GEORGIA. EACH PARTY HERETO HEREBY
SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR
THE NORTHERN DISTRICT OF GEORGIA AND OF ANY FEDERAL DISTRICT COURT SITTING IN
ATLANTA, GEORGIA FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY
HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY
SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY
TO THIS AGREEMENT IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS IN ANY SUCH
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS SET FORTH HEREIN. NOTHING HEREIN
SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW. EACH PARTY WAIVES ITS RIGHT TO A TRIAL BY JURY.
SECTION 13.9 ENTIRE AGREEMENT. This Agreement, the Exhibits or
Schedules hereto, which include, but are not limited to the Convertible Note,
the Registration Rights Agreement and the Pledge Agreement, set forth the
entire agreement and understanding of the parties relating to the subject
matter hereof and supersedes all prior and contemporaneous agreements,
negotiations and understandings between the parties, both oral and written
relating to the subject matter hereof. The terms and conditions of all Exhibits
and Schedules to this Agreement are incorporated herein by this reference and
shall constitute part of this Agreement as is fully set forth herein.
<PAGE> 54
SECTION 13.10 SURVIVAL; SEVERABILITY. The representations, warranties,
covenants and agreements of the parties hereto shall survive the Closing
hereunder. In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that such severability shall be ineffective if it
materially changes the economic benefit of this Agreement to any party.
SECTION 13.11 TITLE AND SUBTITLES. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
SECTION 13.12 REPORTING ENTITY FOR THE COMMON STOCK. The reporting
entity relied upon for the determination of the trading price or trading volume
of the Common Stock on any given Trading Day for the purposes of this Agreement
and all Exhibits shall be Bloomberg, L.P. or any successor thereto. The written
mutual consent of the Purchaser and the Company shall be required to employ any
other reporting entity.
SECTION 13.13 PUBLICITY. The Company and the Purchaser shall consult
with each other in issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby and no party
shall issue any such press release or otherwise make any such public statement
without the prior written consent of the other parties, which consent shall not
be unreasonably withheld or delayed, except that no prior consent shall be
required if such disclosure is required by law, in which such case the
disclosing party shall provide the other parties with prior notice of such
public statement. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of Purchaser without the prior written consent of Purchaser,
except to the extent required by law, in which case the Company shall provide
Purchaser with prior written notice of such public disclosure.
[SIGNATURE PAGE FOLLOWS]
<PAGE> 55
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers, as of the date first
above written.
LAHAINA ACQUISITIONS, INC.
By:
Name:
Title:
Address:
Fax:
Tel.:
GCA STRATEGIC INVESTMENT FUND, LIMITED
By:
Name: Lewis N. Lester
Title: Director
Address: c/o Prime Management Limited
Mechanics Building
12 Church Street
Hamilton HM II, Bermuda
Fax: 441-295-3926
Tel.: 441-295-0329
Securities Purchase Agreement
<PAGE> 1
EXHIBIT 10.2
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER
HEREOF, BY PURCHASING SUCH SECURITIES AGREES FOR THE BENEFIT OF THE COMPANY
THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO
THE COMPANY, (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT, OR (C) IF REGISTERED UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS. IN ADDITION, A SECURITIES PURCHASE AGREEMENT,
DATED AS OF THE DATE HEREOF, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY
AT ITS PRINCIPAL EXECUTIVE OFFICE, CONTAINS CERTAIN ADDITIONAL AGREEMENTS AMONG
THE PARTIES, INCLUDING, WITHOUT LIMITATION, PROVISIONS WHICH (A) LIMIT THE
CONVERSION RIGHTS OF THE HOLDER, (B) SPECIFY VOLUNTARY AND MANDATORY REPAYMENT,
PREPAYMENT AND REDEMPTION RIGHTS AND OBLIGATIONS AND (C) SPECIFY EVENTS OF
DEFAULT FOLLOWING WHICH THE REMAINING BALANCE DUE AND OWING HEREUNDER MAY BE
ACCELERATED.
No. 2 $500,000
9% CONVERTIBLE NOTE
of
LAHAINA ACQUISITIONS, INC., a Colorado corporation (together with its
successors, the "Company"), for value received hereby promises to pay to:
GCA STRATEGIC INVESTMENT FUND LIMITED
(The "Holder") and registered assigns, the principal sum of Five Hundred
Thousand ($500,000) or, if less, the principal amount of this Note then
outstanding, on the Maturity Date by wire transfer of immediately available
funds to the Holder in such coin or currency of the United States of America as
at the time of payment shall be legal tender for the payment of public and
private debts, and to pay interest, quarterly in arrears, on (i) the last day
of March, June, September and December of each year until the Maturity Date,
commencing September 30, 1999 (unless such day is not a Business Day, in which
event on the next succeeding Business Day) (each an "Interest Payment Date"),
(ii) the Maturity Date, (iii) each Conversion Date, as hereafter defined, and
(iv) the date the principal amount of the Convertible Notes shall be declared
to be or shall automatically become due and payable, on the principal sum
hereof outstanding in like coin or currency, at the rates per annum set forth
below, from the most recent Interest Payment Date to which interest has been
paid on this Convertible Note, or if no interest has been paid on this
<PAGE> 2
Convertible Note, from the date of this Convertible Note until payment in full
of the principal sum hereof has been made. The Maturity Date is August 18, 2001.
The interest rate shall be nine percent (9%) per annum (the "Interest
Rate") or, if less, the maximum rate permitted by applicable law. Past due
amounts (including interest, to the extent permitted by law) will also accrue
interest at the Interest Rate plus 2% per annum or, if less, the maximum rate
permitted by applicable law, and will be payable on demand ("Default
Interest"). Interest on this Convertible Note will be calculated on the basis
of a 360-day year of twelve 30 day months. All payments of principal and
interest hereunder shall be made for the benefit of the Holder pursuant to the
terms of the Agreement (hereafter defined). At the option of the Company,
interest may be paid in cash or in shares of Common Stock. If the Company
determines to pay interest in shares of Common Stock, it shall be required to
notify the Holder of such election at least five (5) Business Days prior to the
applicable Interest Payment Date. On each Conversion Date, interest shall be
paid in shares of Common Stock on the portion of the principal balance of the
Convertible Note then being converted. The number of shares of Common Stock
issued as interest shall be determined by dividing the dollar amount of
interest due on the applicable Interest Payment Date by the product of 9%
multiplied by the Conversion Price then in effect.
This Convertible Note (this "Convertible Note") is one of a duly
authorized issuance of $500,000 aggregate principal amount of Convertible Notes
of the Company referred to in that certain Securities Purchase Agreement dated
as of the date hereof between the Company and the Purchasers named therein (the
"Agreement"). The Agreement contains certain additional agreements among the
parties with respect to the terms of this Convertible Note, including, without
limitation, provisions which (A) limit the conversion rights of the Holder, (B)
specify voluntary and mandatory repayment, prepayment and redemption rights and
obligations and (C) specify Events of Default following which the remaining
balance due and owing hereunder may be accelerated. All such provisions are an
integral part of this Convertible Note and are incorporated herein by
reference. This Convertible Note is transferable and assignable to one or more
Persons, in accordance with the limitations set forth in the Agreement.
The Company shall keep a register (the "Register") in which shall be
entered the names and addresses of the registered holder of this Convertible
Note and particulars of this Convertible Note held by such holder and of all
transfers of this Convertible Note. References to the Holder or "Holders" shall
mean the Person listed in the Register as registered holder of such Convertible
Notes. The ownership of this Convertible Note shall be proven by the Register.
1. CERTAIN TERMS DEFINED. All terms defined in the Agreement and
not otherwise defined herein shall have for purposes hereof the meanings
provided for in the Agreement.
2. COVENANTS. Unless the Majority Holders otherwise consent in
writing, the
<PAGE> 3
Company covenants and agrees to observe and perform each of its covenants,
obligations and undertakings contained in the Agreement, which obligations and
undertakings are expressly assumed herein by the Company and made for the
benefit of the holder hereof.
3. PAYMENT OF PRINCIPAL. The Company shall repay the remaining
unpaid balance of this Convertible Note on the Maturity Date. The Company may,
and shall be obligated to, prepay all or a portion of this Convertible Note on
the terms specified in the Agreement.
4. CONVERSION.
4.1 CONVERSION OF CONVERTIBLE NOTE. Subject to Section 5 hereof,
the Holder shall have the right, at its option, at any time from and
after the date of issuance of this Convertible Note, convert the
principal amount of this Convertible Note, or any portion of such
principal amount, into that number of fully paid and nonassessable
shares of Common Stock (as such shares shall then be constituted)
determined pursuant to this Section 4.1. The number of shares of
Common Stock to be issued upon each conversion of this Convertible
Note shall be determined by dividing the Conversion Amount (as defined
below) by the Conversion Price in effect on the date (the "Conversion
Date") a Notice of Conversion is delivered to the Escrow Agent and
Company, as applicable, by the Holder by facsimile or other reasonable
means of communication dispatched prior to 5:00 p.m., New York City
Time. The term "Conversion Amount" means, with respect to any
conversion of this Convertible Note, the sum of (1) the principal
amount of this Convertible Note to be converted in such conversion
plus (2) accrued and unpaid interest, if any, on such principal amount
at the interest rates provided in this Convertible Note to the
Conversion Date plus (3) Default Interest, if any, on the interest
referred to in the immediately preceding clause (2) plus (4) at the
Holder's option, any amounts owed to the Holder pursuant to Section
4.3 hereof, Section 10.1 of the Agreement or Section 10.4 of the
Agreement.
4.2 CONVERSION PRICE. All of the outstanding principal amount of
this Convertible Note shall be converted into a number of shares of
Common Stock at a conversion price of $3.50 (the "Conversion Price").
4.3 AUTHORIZED SHARES.
(a) Consistent with Section 7.11 of the Agreement, the
Company (i) shall promptly irrevocably instruct the Escrow Agent to
direct (on authority of an irrevocable stock transfer power granted by
Company to Escrow Agent) Company's transfer agent to issue
certificates for the Common Stock issuable upon conversion of this
Convertible Note and (ii) agrees that its issuance of this Convertible
Note shall constitute full authority to its officers and agents who
are charged with the duty of executing stock certificates to execute
and issue the necessary certificates for shares of Common Stock in
<PAGE> 4
accordance with the terms and conditions of this Convertible Note.
(b) If at any time a Holder of this Convertible Note
submits a Notice of Conversion (x) the Company does not have
sufficient authorized but unissued shares of Common Stock available to
effect such conversion in full in accordance with the provisions of
this Article 4 or (y) the Company is prohibited by the applicable
rules of the OTC Bulletin Board or the National Market on which the
Common Shares are listed and traded at that time to effect such
conversion in full as provided in subsection (d) below, without
stockholder approval (each, a "Conversion Default"), the Company shall
issue to the Holder all of the shares of Common Stock which are then
available to effect such conversion. The portion of this Convertible
Note which the Holder included in its Conversion Notice and which
exceeds the amount which is then convertible into available shares of
Common Stock (the "Excess Amount") shall, notwithstanding anything to
the contrary contained herein, not be convertible into Common Stock in
accordance with the terms hereof until (and at the Holder's option at
any time after) the date additional shares of Common Stock are
authorized by the Company, or its stockholders, as applicable, at
which time the Conversion Price in respect thereof shall be the lower
of (i) the Conversion Price on the Conversion Default Date (as defined
below) and (ii) the Conversion Price on the Conversion Date thereafter
elected by the Holder in respect thereof. The Company shall pay to the
Holder payments ("Conversion Default Payments") for a Conversion
Default in the amount of (N/365) x .24 x the Excess Amount on the
Conversion Date in respect of the Conversion Default (the "Conversion
Default Date"), where N = the number of days from the Conversion
Default Date to the date (the "Authorization Date") that the Company,
or its stockholders, as applicable, authorizes a sufficient number of
shares of Common Stock to effect conversion of the full outstanding
principal balance of this Convertible Note. The Company shall use its
best efforts to authorize, or cause its stockholders to authorize
within 60 days of the occurrence of a Conversion Default, as
applicable, a sufficient number of shares of Common Stock as soon as
practicable following the earlier of (i) such time that the Holder
notifies the Company or that the Company otherwise becomes aware that
there are or likely will be insufficient shares to allow full
conversion thereof and (ii) a Conversion Default. The Company shall
send notice to the Holder of the authorization of additional shares of
Common Stock, the Authorization Date and the amount of Holder's
accrued Conversion Default Payments. The accrued Conversion Default
Payments for each calendar month shall be paid in cash or shall be
convertible into Common Stock (at such time as there are sufficient
authorized shares of Common Stock) at the Market Price, at the
Holder's option, as follows:
(i) In the event the Holder elects to take such
payment in cash, cash payment shall be made to Holder by the
fifth Business Day of the month following the month in which
it has accrued; and
<PAGE> 5
(ii) In the event the Holder elects to take such
payment in Common Stock, the Holder may convert such payment
amount into Common Stock at the Conversion Price (as in
effect at the time of conversion) at any time after the fifth
Business Day of the month following the month in which it has
accrued (at such time as there are sufficient authorized
shares of Common Stock) in accordance with the terms of this
Article 4.
(c) The Holder's election pursuant to this Section 4.3
shall be made in writing to the Company at any time prior to 5:00
p.m., New York City Time, on the third Business Day of the month
following the month in which Conversion Default payments have accrued.
If no election is made, the Holder shall be deemed to have elected to
receive cash. Nothing herein shall limit the Holders right to pursue
actual damages (to the extent in excess of the Conversion Default
Payments) due to the Company's failure to maintain a sufficient number
of authorized shares of Common Stock.
(d) In no event shall the Company issue more than the
Maximum Number of Shares upon conversion of this Convertible Note,
unless the Company shall have obtained approval by the stockholders of
the Company ("Stockholder Approval") or a waiver of such requirement
by the OTC Bulletin Board or the National Market on which the Common
Shares are listed and traded at that time. Once the Maximum Number of
Shares has been issued (the date of which is hereinafter referred to
as the "Maximum Conversion Date"), unless the Company shall have
obtained Stockholder Approval or a waiver of such requirement by the
OTC Bulletin Board or the National Market on which the Common Shares
are listed and traded at that time within 60 days of the Maximum
Conversion Date, the Company shall pay to the Holder within five (5)
Business Days of the Maximum Conversion Date (or, if the Company is,
in good faith, using its best efforts to obtain Stockholder Approval,
then the earlier of (x) 60 days following the Maximum Conversion Date,
and (y) such date that it becomes reasonably apparent that Stockholder
Approval will not be obtained within such 60 days period), the Formula
Price plus accrued and unpaid Default Interest, if any. The Maximum
Number of Shares shall be subject to adjustment from time to time for
stock splits, stock dividends, combinations, capital reorganizations
and similar events relating to the Common Stock occurring after the
date hereof as contemplated by Article XI of the Agreement. With
respect to each Holder of Convertible Notes, the Maximum Number of
Shares shall refer to such Holder's pro rata share thereof based upon
the aggregate principal balance of the Convertible Notes then
outstanding. In the event that the Company obtains Stockholder
Approval, approval of the OTC Bulletin Board or the National Market on
which the Common Shares are listed and traded at that time, or
otherwise is able to increase the number of shares to be issued above
the Maximum Number of Shares (such increased number being the "New
Maximum Number of Shares"), the references to Maximum Number of Shares
above shall be deemed to be, instead, references to the New Maximum
<PAGE> 6
Number of Shares.
4.4 METHOD OF CONVERSION.
(a) Notwithstanding anything to the contrary set forth
herein, upon conversion of this Convertible Note in accordance with
the terms hereof, the Holder shall not be required to physically
surrender this Convertible Note to the Company unless the entire
unpaid principal amount of this Convertible Note is so converted.
Rather, records showing the principal amount converted (or otherwise
repaid) and the date of such conversion or repayment shall be
maintained on a ledger substantially in the form of Annex A attached
hereto (a copy of which shall be delivered to the Company or transfer
agent with each Notice of Conversion). It is specifically contemplated
that the Holder hereof shall act as the calculation agent for
conversions and repayments. In the event of any dispute or
discrepancies, such records maintained by the Holder shall be
controlling and determinative in the absence of manifest error or
failure of Holder to record the principal amount converted (or
otherwise repaid) from time to time, in which events the record of the
Company shall be controlling and determinative. The Holder and any
assignee, by acceptance of this Convertible Note, acknowledge and
agree that, by reason of the provisions of this paragraph, following a
conversion of a portion of this Convertible Note, the principal amount
represented by this Convertible Note will be the amount indicated on
Annex A attached hereto (which may be less than the amount stated on
the face hereof).
(b) The Company shall not be required to pay any tax
which may be payable in respect of any transfer involved in the
issuance and delivery of shares of Common Stock or other securities or
property on conversion of this Convertible Note in a name other than
that of the Holder (or in street name), and the Company shall not be
required to issue or deliver any such shares or other securities or
property unless and until the person or persons (other than the Holder
or the custodian in whose street name such shares are to be held for
the Holder's account) requesting the issuance thereof shall have paid
to the Company the amount of any such tax or shall have established to
the satisfaction of the Company that such tax has been paid.
(c) Subject to Section 5 hereof, upon receipt by the
Company of a Notice of Conversion, the Holder shall be deemed to be
the holder of record of the Common Stock issuable upon such
conversion, the outstanding principal amount and the amount of accrued
and unpaid interest on this Convertible Note shall be deemed reduced
to reflect such conversion, and, unless the Company defaults on its
obligations under this Article 4, all rights with respect to the
portion of this Convertible Note being so converted shall forthwith
terminate except the right to receive the Common Stock or other
securities, cash or other assets, as herein provided, on such
conversion. Subject to Section 5 hereof, if the Holder shall have
given a Notice of Conversion as provided herein, the Company's
<PAGE> 7
obligation to issue and deliver the certificates for shares of Common
Stock shall be absolute and unconditional, irrespective of the absence
of any action by the Holder to enforce the same, any waiver or consent
with respect to any provisions thereof, the recovery of any judgment
against any person or any action by the Holder to enforce the same,
any failure or delay in the enforcement of any other obligation of the
Company to the Holder of record, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach
by the Holder of any obligation to the Company, and subject to Section
4.4(a) irrespective of any other circumstance which might otherwise
limit such obligation of the Company to the Holder in connection with
such conversion. The date of receipt (including receipt via telecopy)
of such Notice of Conversion shall be the Conversion Date so long as
it is received before 5:00 p.m., New York City Time, on such date.
(d) Notwithstanding the foregoing, if a Holder has not
received certificates for all shares of Common Stock prior to the
expiration of the Deadline with respect to a conversion of any portion
of this Convertible Note for any reason, then (unless the Holder
otherwise elects to retain its status as a holder of Common Stock by
so notifying the Company), the Holder shall regain the rights of a
Holder of this Convertible Note with respect to such unconverted
portions of this Convertible Note and the Company shall, as soon as
practicable, return such unconverted Convertible Note to the holder
or, if the Convertible Note has not been surrendered, adjust its
records to reflect that such portion of this Convertible Note not been
converted. In all cases, the Holder shall retain all of its rights and
remedies (including, without limitation, (i) the right to receive
Conversion Default Payments to the extent required thereby for such
Conversion Default and any subsequent Conversion Default and (ii) the
right to have the Conversion Price with respect to subsequent
conversions determined in accordance with Section 4.3 for the
Company's failure to convert this Convertible Note.
(e) In lieu of delivering physical certificates
representing the Common Stock issuable upon conversion, provided the
Company's transfer agent is participating in the Depository Trust
Company ("DTC") Fast Automated Securities Transfer program, upon
request of the Holder and its compliance with the provisions contained
in Section 4.1 and in this Section 4.4, the Company shall use its best
efforts to cause its transfer agent to electronically transmit the
Common Stock issuable upon conversion to the Holder by crediting the
account of Holder's Prime Broker with DTC through its Deposit
Withdrawal Agent Commission System.
5. REDEMPTION BY COMPANY.
5.1 COMPANY'S RIGHT TO REDEEM. The Company may elect, or be
required, upon
<PAGE> 8
receipt of a Notice of Conversion, to redeem in whole or in part, the
remaining unpaid principal amount of this Convertible Note, for cash
at a redemption price equal to (x) the number of Common Shares into
which this Convertible Note is then convertible, times (y) the DWASP
for the ten (10) Trading Days immediately prior to the date that this
Convertible Note is called for redemption, plus accrued and unpaid
interest. The term "DWASP" means, for any security as of any date, the
daily-weighted average sales price on the Nasdaq Market as reported by
Bloomberg or, if the Nasdaq Market is not the principal trading market
for such security, the daily-weighted average sales price of such
security on the principal securities exchange or trading market where
such security is listed or traded as reported by Bloomberg, or if the
foregoing do not apply, the daily-weighted average sales price of such
security in the over-the-counter market on the electronic bulletin
board for such security as reported by Bloomberg, or, if no
daily-weighted average sales price is reported for such security by
Bloomberg, then the average of the bid prices of any market makers for
such security as reported in the "pink sheets" by the National
Quotation Bureau, Inc. If the DWASP cannot be calculated for such
security on such date on any of the foregoing bases, the DWASP of such
security on such date shall be the fair market value as mutually
determined by the Company and the Holder.
5.2 MECHANICS OF REDEMPTION. The Company shall effect each such
redemption by giving notice of its election to redeem, by facsimile
within 2 business days following receipt of a Notice of Conversion,
with a copy by either overnight or 2-day courier, with a copy by U.S.
Air Mail to the Holder of this Convertible Note to be redeemed at the
address and facsimile number of such Holder appearing in the Company's
register for the Convertible Notes. Such redemption notice shall
indicate whether the Company will redeem all or part of such portion
of the Convertible Note to be redeemed and the applicable redemption
price. The Company shall not be entitled to send any notice of
redemption and begin the redemption procedure unless it has (i) the
full amount of the redemption price, in cash, available in a demand or
other immediately available account in a bank or similar financial
institution or (ii) immediately available credit facilities, in the
full amount of the redemption price, with a bank or similar financial
institution on the date the redemption notice is sent to the Holders
of this Convertible Note.
5.3 REDEMPTION PRICE. The redemption price shall be paid to the
Holder of this Convertible Note within 5 business days of the delivery
of the notice of such redemption to such Holder.
6. HOLDER'S RIGHT TO ADVANCE NOTICE OF ELECTION REDEEM.
6.1 HOLDER'S RIGHT TO ELECT TO RECEIVE NOTICE OF CASH REDEMPTION
BY COMPANY. The Holder of this Convertible Note shall have the right
to require Company to provide
<PAGE> 9
advance notice stating whether the Company will elect to redeem all or
part of the redeemable portion in cash, pursuant to the Company's
redemption rights discussed in Section 5.1 above.
6.2 MECHANICS OF HOLDER'S ELECTION NOTICE. Holder shall give
notice to the Company by facsimile (the "Election Notice"), requiring
that the Company disclose whether the Company would elect to redeem
the redeemable portion of this Convertible Note (in whole or in part)
if the Holder were to provide a Notice of Conversion and sought to
convert the Convertible Note in such principal amount as is specified
in the Notice of Election.
6.3 COMPANY'S RESPONSE. Company must respond, disclosing its
election, within two (2) business days of receipt of Holder's Election
Notice via facsimile. If Company does not respond to Holder within two
(2) business days (by 12:00 noon, if required above) via facsimile,
Company shall be deemed to have forfeited its right to exercise
redemption pursuant to Section 5(a) upon its receipt of (but only with
respect to) that Notice of Conversion.
7. MISCELLANEOUS. This Convertible Note shall be deemed to be a
contract made under the laws of the State of Georgia, and for all purposes
shall be governed by and construed in accordance with the laws of said State.
The parties hereto, including all guarantors or endorsers, hereby waive
presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance and enforcement of this
Convertible Note, except as specifically provided herein, and asset to
extensions of the time of payment, or forbearance or other indulgence without
notice. The Company hereby submits to the exclusive jurisdiction of the United
States District Court for the Northern District of Georgia and of any Georgia
state court sitting in Atlanta, Georgia for purposes of all legal proceedings
arising out of or relating to this Convertible Note. The Company irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such proceeding brought in
such a court and any claim that any such proceeding brought in such a court has
been brought in an inconvenient forum. The Company hereby irrevocably waives
any and all right to trial by jury in any legal proceeding arising out of or
relating to this Convertible Note.
The Holder of this Convertible Note by acceptance of this Convertible
Note agrees to be bound by the provisions of this Convertible Note which are
expressly binding on such Holder.
[SIGNATURE PAGE FOLLOWS]
<PAGE> 10
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
Dated: August 19, 1999
LAHAINA ACQUISITIONS, INC.
By:
Name:
Title:
Convertible Note
<PAGE> 11
ANNEX A
CONVERSION AND REPAYMENT LEDGER
<TABLE>
<CAPTION>
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INTEREST PRINCIPAL CONVERTED
DATE PRINCIPAL BALANCE CONVERTED OR PAID OR PAID NEW PRINCIPAL BALANCE ISSUER INITIALS HOLDER INITIALS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 12
FULL NAME AND ADDRESS OF SUBSCRIBER FOR REGISTRATION PURPOSES:
NAME:
ADDRESS:
TEL NO:
FAX NO:
CONTACT
NAME:
DELIVERY INSTRUCTIONS (IF DIFFERENT FROM REGISTRATION NAME):
NAME:
ADDRESS:
TEL NO:
FAX NO:
CONTACT
NAME:
SPECIAL INSTRUCTIONS:
<PAGE> 13
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Convertible Note)
The undersigned hereby irrevocably elects to convert
$________ of the principal balance of the Convertible Note into shares of
Common Stock, no par value per share (the "Common Stock"), of Lahaina
Acquisitions, Inc. (the "Company") according to the conditions hereof, as of
the date written below. No fee will be charged to the Holder for any
conversion, except for transfer taxes, if any. The undersigned, as contemplated
by Section 5.1 of the Securities Purchase Agreement pursuant to which the
Convertible Note was issued, hereby states that the representations and
warranties of the undersigned set forth therein are true and correct in all
material respects as of the date hereof (provided, the undersigned makes no
representations concerning its investment intent with respect to the Common
Stock received upon this conversion).
Conversion calculations:
Date of Conversion
Applicable Conversion Price
Number of Shares
Name/Signature
Address:
<PAGE> 1
EXHIBIT 10.3
Registration Rights Agreement
dated as of
August 19, 1999
by and between
Lahaina Acquisitions, Inc.
and
GCA Strategic Investment Fund Limited
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. Introduction..............................................................2
1.1 Securities Purchase Agreement....................................2
1.2 Definition of Securities.........................................2
1.3 National Market Representation...................................2
2. Registration under Securities Act, etc....................................2
2.1 Mandatory Registration...........................................2
(a) Registration of Registrable Securities..................2
(b) Registration Statement Form.............................2
(c) Expenses................................................2
(d) Effective Registration Statement........................2
(e) Plan of Distribution....................................2
2.2 Incidental Registration..........................................2
(a) Right to Include Registrable Securities.................2
(b) Priority in Incidental Registrations....................3
2.3 Registration Procedures..........................................3
2.4 Underwritten Offerings...........................................7
(a) Incidental Underwritten Offerings.......................7
(b) Holdback Agreements.....................................7
(c) Participation in Underwritten Offerings.................7
2.5 Preparation; Reasonable Investigation............................8
2.6 Registration Default Fee.........................................8
2.7 Indemnification..................................................8
(a) Indemnification by the Company..........................8
(b) Indemnification by the Sellers..........................9
(c) Notices of Claims, etc..................................9
(d) Other Indemnification..................................10
(e) Indemnification Payments...............................10
(f) Contribution...........................................10
3. Definitions.....................................................11
4. Rule 144........................................................13
5. Amendments and Waivers..........................................13
6. Nominees for Beneficial Owners..................................14
7. Notices.........................................................14
8. Assignment......................................................14
9. Descriptive Headings............................................14
10. GOVERNING LAW...................................................15
11. Counterparts....................................................15
12. Entire Agreement................................................15
13. Severability....................................................15
</TABLE>
i
<PAGE> 3
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
August 19, 1999, between Lahaina Acquisitions, Inc., a Colorado corporation (the
"Company"), and GCA Strategic Investment Fund Limited (the "Fund").
1. INTRODUCTION.
1.1 SECURITIES PURCHASE AGREEMENT The Company and the
Fund has today executed that certain Securities Purchase Agreement (the
"Securities Purchase Agreement"), pursuant to which the Company has agreed,
among other things, to issue an aggregate of Five Hundred Thousand Dollars
($500,000.00) (U.S.) principal amount of 9% Convertible Notes of the Company
(the "Notes") to the Fund or its successors, assigns or transferees
(collectively, the "Holders"). The Notes are convertible into an indeterminable
number of shares (the "Note Conversion Shares") of the Company's common stock,
no par value per share (the "Common Stock") pursuant to the terms of the Notes.
The number of Note Conversion Shares is subject to adjustment upon the
occurrence of stock splits, recapitalizations and similar events occurring after
the date hereof.
1.2 DEFINITION OF SECURITIES. The Note Conversion Shares
are herein referred to as the "Securities."
1.3 NATIONAL MARKET REPRESENTATION. The Company
represents and warrants that the Company's Common Stock is currently eligible
for trading on the over-the-counter Bulletin Board operated by the National
Association of Securities Dealers, Inc. (the "OTC Bulletin Board") under the
symbol "LAHA." Certain capitalized terms used in this Agreement are defined in
Section 3 hereof; references to sections shall be to sections of this Agreement.
2. REGISTRATION UNDER SECURITIES ACT, ETC.
2.1 MANDATORY REGISTRATION.
(A) REGISTRATION OF REGISTRABLE SECURITIES. The
Company shall prepare and file within three (3) business days following the
Closing Date a registration statement or amendment thereto (the "Registration
Statement") on Form S-1 or Form S-1/A (or such other form as is then available
for registration) covering the resale of the Registrable Securities. The Company
shall use its best efforts to cause the Registration Statement to be declared
effective by the Commission within five (5) business days following the Closing
Date (the "Required Effectiveness Date"). Nothing contained herein shall be
deemed to limit the number of Registrable Securities to be registered by the
Company hereunder. As a result, should the Registration Statement not relate to
the maximum number of Registrable Securities acquired by (or potentially
acquirable by) the holders thereof upon conversion of the Notes, or exercise of
the Common Stock Purchase Warrants described in Section 1 above, the Company
shall be required to promptly file a separate registration
<PAGE> 4
statement (utilizing Rule 462 promulgated under the Exchange Act, where
applicable) relating to such Registrable Securities which then remain
unregistered. The provisions of this Agreement shall relate to such separate
registration statement as if it were an amendment to the Registration Statement.
(B) REGISTRATION STATEMENT FORM. Registrations
under this Section 2.1 shall be on Form S-1, Form S-1/A or such other
appropriate registration form of the Commission as shall permit the disposition
of such Registrable Securities in accordance with the intended method or methods
of disposition specified by the Fund; provided, however, such intended method of
deposition shall not include an underwritten offering of the Registrable
Securities.
(C) EXPENSES. The Company will pay all
Registration Expenses in connection with any registration required by this
Section 2.1.
(D) EFFECTIVE REGISTRATION STATEMENT. A
registration requested pursuant to this Section 2.1 shall not be deemed to have
been effected (i) unless a registration statement with respect thereto has
become effective within the time period specified herein, provided that a
registration which does not become effective after the Company filed a
registration statement with respect thereto solely by reason of the refusal to
proceed of any holder of Registrable Securities (other than a refusal to proceed
based upon the advice of counsel in the form of a letter signed by such counsel
and provided to the Company relating to a disclosure matter unrelated to such
holder) shall be deemed to have been effected by the Company unless the holders
of the Registrable Securities shall have elected to pay all Registration
Expenses in connection with such registration, (ii) if, after it has become
effective, such registration becomes subject to any stop order, injunction or
other order or extraordinary requirement of the Commission or other governmental
agency or court for any reason or (iii) if, after it has become effective, such
registration ceases to be effective for more than an aggregate of ninety (90)
days.
(E) PLAN OF DISTRIBUTION. The Company hereby
agrees that the Registration Statement shall include a plan of distribution
section reasonably acceptable to the Fund and substantially in the form annexed
hereto; provided, however, such plan of distribution section shall be modified
by the Company so as to not provide for the disposition of the Registrable
Securities on the basis of an underwritten offering.
2.2 INCIDENTAL REGISTRATION.
(A) RIGHT TO INCLUDE REGISTRABLE SECURITIES. If
at any time after the date hereof but before the third anniversary of the date
hereof, the Company proposes to register any of its securities under the
Securities Act (other than by a registration in connection with an acquisition
in a manner which would not permit registration of Registrable Securities for
sale to the public, on Form S-8, or any successor form thereto, on Form S-4, or
any successor form thereto and other than pursuant to Section 2.1), on an
underwritten basis (either best-efforts or firm-commitment), then, the Company
will each such time give prompt written notice to all Holders of its intention
to do so and
2
<PAGE> 5
of such Holders' rights under this Section 2.2. Upon the written request of any
such Holder made within twenty (20) days after the receipt of any such notice
(which request shall specify the Registrable Securities intended to be disposed
of by such Holder an and the intended method of disposition thereof), the
Company will, subject to the terms of this Agreement, use its commercially
reasonable best efforts to effect the registration under the Securities Act of
the Registrable Securities, to the extent requisite to permit the disposition
(in accordance with the intended methods thereof as aforesaid) of such
Registrable Securities so to be registered, by inclusion of such Registrable
Securities in the registration statement which covers the securities which the
Company proposes to register, provided that if, at any time after written notice
of its intention to register any securities and prior to the effective date of
the registration statement filed in connection with such registration, the
Company shall determine for any reason either not to register or to delay
registration of such securities, the Company may, at its election, give written
notice of such determination to each Holder and, thereupon, (i) in the case of a
determination not to register, shall be relieved of this obligation to register
any Registrable Securities in connection with such registration (but not from
its obligation to pay the Registration Expenses in connection therewith),
without prejudice, however, to the rights of any holder or holders of
Registrable Securities entitled to do so to request that such registration be
effected as a registration under Section 2.1, and (ii) in the case of a
determination to delay registering, shall be permitted to delay registering any
Registrable Securities, for the same period as the delay in registering such
other securities. No registration effected under this Section 2.2 shall relieve
the Company of its obligation to effect any registration upon request under
Section 2.1, nor shall any such registration hereunder be deemed to have been
effected pursuant to Section 2.1. The Company will pay all Registration Expenses
in connection with each registration of Registrable Securities requested
pursuant to this Section 2.2. The right provided the Holders of the Registrable
Securities pursuant to this Section shall be exercisable at their sole
discretion and will in no way limit any of the Company's obligations to pay the
Securities according to their terms.
(B) PRIORITY IN INCIDENTAL REGISTRATIONS. If the
managing underwriter of the underwritten offering contemplated by this Section
2.2 shall inform the Company and holders of the Registrable Securities
requesting such registration by letter of its belief that the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering, then the Company will include in such
registration, to the extent of the number which the Company is so advised can be
sold in such offering, (i) first securities proposed by the Company to be sold
for its own account, and (iii) second Registrable Securities and securities of
other selling security holders requested to be included in such registration pro
rata on the basis of the number of shares of such securities so proposed to be
sold and so requested to be included; provided, however, the holders of
Registrable Securities shall have priority to all shares sought to be included
by officers and directors of the Company as well as holders of ten percent (10%)
or more of the Company's Common Stock.
2.3 REGISTRATION PROCEDURES. If and whenever the Company
is required to effect the registration of any Registrable Securities under the
Securities Act as provided in Section 2.1 and, as applicable, 2.2, the Company
shall, as expeditiously as possible:
3
<PAGE> 6
(i) prepare and file with the Commission the
Registration Statement, or amendments thereto, to effect such registration
(including such audited financial statements as may be required by the
Securities Act or the rules and regulations promulgated thereunder) and
thereafter use its commercially reasonable best efforts to cause such
registration statement to be declared effective by the Commission, as soon as
practicable, but in any event no later than the Required Effectiveness Date
(with respect to a registration pursuant to Section 2.1); provided, however,
that before filing such registration statement or any amendments thereto, the
Company will furnish to the counsel selected by the holders of Registrable
Securities which are to be included in such registration, copies of all such
documents proposed to be filed;
(ii) with respect to any Registration Statement
pursuant to Section 2.1, prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Securities Act with respect
to the disposition of all Registrable Securities covered by such registration
statement until the earlier to occur of six (6) years after the date of this
Agreement(subject to the right of the Company to suspend the effectiveness
thereof for not more than 10 consecutive days or an aggregate of 30 days in such
six (6) years period) or such time as all of the securities which are the
subject of such registration statement cease to be Registrable Securities (such
period, in each case, the "Registration Maintenance Period");
(iii) furnish to each seller of Registrable
Securities covered by such registration statement such number of conformed
copies of such registration statement and of each such amendment and supplement
thereto (in each case including all exhibits), such number of copies of the
prospectus contained in such registration statement (including each preliminary
prospectus and any summary prospectus) and any other prospectus filed under Rule
424 under the Securities Act, in conformity with the requirements of the
Securities Act, and such other documents, as such seller and underwriter, if
any, may reasonably request in order to facilitate the public sale or other
disposition of the Registrable Securities owned by such seller;
(iv) use its commercially reasonable best efforts
to register or qualify all Registrable Securities and other securities covered
by such registration statement under such other securities laws or blue sky laws
as any seller thereof shall reasonably request, to keep such registrations or
qualifications in effect for so long as such registration statement remains in
effect, and take any other action which may be reasonably necessary to enable
such seller to consummate the disposition in such jurisdictions of the
securities owned by such seller, except that the Company shall not for any such
purpose be required to qualify generally to do business as a foreign corporation
in any jurisdiction wherein it would not but for the requirements of this
subdivision (iv) be obligated to be so qualified or to consent to general
service of process in any such jurisdiction;
(v) use its commercially reasonable best efforts
to cause all Registrable Securities covered by such registration statement to be
registered with or approved by such other
4
<PAGE> 7
governmental agencies or authorities as may be necessary to enable the seller or
sellers thereof to consummate the disposition of such Registrable Securities;
(vi) furnish to each seller of Registrable
Securities a signed counterpart, addressed to such seller, and the underwriters,
if any, of:
(A) an opinion of counsel for the
Company, dated the effective date of such registration statement (or, if such
registration includes an underwritten public offering, an opinion dated the date
of the closing under the underwriting agreement),reasonably satisfactory in form
and substance to such seller) including that the prospectus and any prospectus
supplement forming a part of the Registration Statement does not contain an
untrue statement of a material fact or omits a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, and
(B) a "comfort" letter (or, in the case
of any Person which does not satisfy the conditions for receipt of a "comfort"
letter specified in Statement on Auditing Standards No. 72, an "agreed upon
procedures" letter), dated the effective date of such registration statement
(and, if such registration includes an underwritten public offering, a letter of
like kind dated the date of the closing under the underwriting agreement),
signed by the independent public accountants who have certified the Company's
financial statement included in such registration statement, covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) and, in the case of the accountants' letter,
with respect to events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to the underwriters in underwritten public offerings of
securities (with, in the case of an "agreed upon procedures" letter, such
modifications or deletions as may be required under Statement on Auditing
Standards No. 35) and, in the case of the accountants' letter, such other
financial matters, and, in the case of the legal opinion, such other legal
matters, as such seller (or the underwriters, if any) may reasonably request;
(vii) notify the Sellers' Representative and its
counsel promptly and confirm such advice in writing promptly after the Company
has knowledge thereof:
(A) when the Registration Statement,
the prospectus or any prospectus supplement related thereto or post-effective
amendment to the Registration Statement has been filed, and, with respect to the
Registration Statement or any post-effective amendment thereto, when the same
has become effective;
(B) of any request by the Commission
for amendments or supplements to the Registration Statement or the prospectus or
for additional information;
(C) of the issuance by the Commission
of any stop order suspending the effectiveness of the Registration Statement or
the initiation of any proceedings by an Person for that purpose; and
5
<PAGE> 8
(D) of the receipt by the Company of
any notification with respect to the suspension of the qualification of any
Registrable Securities for sale under the securities or blue sky laws of any
jurisdiction or the initiation or threat of any proceeding for such purpose;
(viii) notify each seller of Registrable Securities
covered by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, upon discovery
that, or upon the happening of any event as a result of which, the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material facts required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing, and at the request of any such seller
promptly prepare and furnish to such seller a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such prospectus shall
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing;
(ix) use its best efforts to obtain the
withdrawal of any order suspending the effectiveness of the Registration
Statement at the earliest possible moment;
(x) otherwise use its commercially reasonable
best efforts to comply with all applicable rules and regulations of the
Commission, and make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least twelve
months, but not more than eighteen months, beginning with the first full
calendar month after the effective date of such registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder;
(xi) enter into such agreements and take such
other actions as the Sellers' Representative shall reasonably request in writing
(at the expense of the requesting or benefiting sellers) in order to expedite or
facilitate the disposition of such Registrable Securities; and
(xii) use its commercially reasonable best efforts
to list all Registrable Securities covered by such registration statement on any
securities exchange on which any of the Registrable Securities are then listed.
The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish the Company such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request in writing.
The Company will not file any registration statement pursuant to
Section 2.1, or amendment thereto or any prospectus or any supplement thereto
(including such documents incorporated by reference and proposed to be filed
after the initial filing of the Registration Statement) to which the Sellers'
Representative shall reasonably object, provided that the Company may file such
documents in a form required by law or upon the advice of its counsel.
6
<PAGE> 9
The Company represents and warrants to each holder of Registrable
Securities that it has obtained all necessary waivers, consents and
authorizations necessary to execute this Agreement and consummate the
transactions contemplated hereby other than such waivers, consents and/or
authorizations specifically contemplated by the Securities Purchase Agreement.
Each Fund agrees that, upon receipt of any notice from the Company of
the occurrence of any event of the kind described in subdivision (viii) of this
Section 2.3, such Fund will forthwith discontinue such Fund's disposition of
Registrable Securities pursuant to the Registration Statement relating to such
Registrable Securities until such Fund's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (viii) of this
Section 2.3 and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in
such Fund's possession of the prospectus relating to such Registrable Securities
current at the time of receipt of such notice.
2.4 UNDERWRITTEN OFFERINGS.
(A) INCIDENTAL UNDERWRITTEN OFFERINGS. If the
Company at any time proposes to register any of its securities under the
Securities Act as contemplated by Section 2.2 and such securities are to be
distributed by or through one or more underwriters, the Company will, if
requested by any holder of Registrable Securities as provided in Section 2.2 and
subject to the provisions of Section 2.2(a), use its commercially reasonable
best efforts to arrange for such underwriters to include all the Registrable
Securities to be offered and sold by such holder among the securities to be
distributed by such underwriters.
(B) HOLDBACK AGREEMENTS. Subject to such other
reasonable requirements as may be imposed by the underwriter as a condition of
inclusion of a Fund's Registrable Securities in the registration statement, each
Fund agrees by acquisition of Registrable Securities, if so required by the
managing underwriter, not to sell, make any short sale of, loan, grant any
option for the purchase of, effect any public sale or distribution of or
otherwise dispose of, except as part of such underwritten registration, any
equity securities of the Company, during such reasonable period of time
requested by the underwriter; provided however, such period shall not exceed the
120 day period commencing 30 days prior to the commencement of such underwritten
offering and ending 90 days following the completion of such underwritten
offering.
(C) PARTICIPATION IN UNDERWRITTEN OFFERINGS. No
holder of Registrable Securities may participate in any underwritten offering
under Section 2.2 unless such holder of Registrable Securities (i) agrees to
sell such Person's securities on the basis provided in any underwriting
arrangements approved, subject to the terms and conditions hereof, by the
holders of a majority of Registrable Securities to be included in such
underwritten offering and (ii) completes and executes all questionnaires,
indemnities, underwriting agreements and other documents (other than powers of
attorney) required under the terms of such underwriting arrangements.
Notwithstanding the foregoing, no underwriting agreement (or other agreement in
connection with such offering) shall require any holder of Registrable
Securities to make an representations or
7
<PAGE> 10
warranties to or agreements with the Company or the underwriters other than
representations and warranties contained in a writing furnished by such holder
expressly for use in the related registration statement or representations,
warranties or agreements regarding such holder, such holder's Registrable
Securities and such holder's intended method of distribution and any other
representation required by law.
2.5 PREPARATION; REASONABLE INVESTIGATION. In connection
with the preparation and filing of each registration statement under the
Securities Act pursuant to this Agreement, the Company will give the holders of
Registrable Securities registered under such registration statement, and their
respective counsel and accountants, the opportunity to participate in the
preparation of such registration statement, each prospectus included therein or
filed with the Commission, and each amendment thereof or supplement thereto, and
will give each of them such access to its books and records and such
opportunities to discuss the business of the Company with its officers and the
independent public accountants who have certified its financial statements as
shall be necessary, in the reasonable opinion of such holders' and such
underwriters' respective counsel, to conduct a reasonable investigation within
the meaning of the Securities Act.
2.6 REGISTRATION DEFAULT FEE. If the Registration
Statement contemplated in Section 2.1 is (x) not declared effective by the
Required Effectiveness Date or (y) such effectiveness is not maintained for the
Registration Maintenance Period, then the Company shall pay to the Fund the
Default Fee specified in Section 10.4 of the Securities Purchase Agreement.
2.7 INDEMNIFICATION.
(A) INDEMNIFICATION BY THE COMPANY. In the event
of any registration of any securities of the Company under the Securities Act,
the Company will, and hereby does agree to indemnify and hold harmless the
holder of any Registrable Securities covered by such registration statement, its
directors and officers, each other Person who participates as an underwriter in
the offering or sale of such securities and each other Person, if any, who
controls such holder or any such underwriter within the meaning of the
Securities Act against any losses, claims, damages or liabilities, joint or
several, to which such holder or any such director or officer or underwriter or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and the Company will reimburse such holder and each such
director, officer, underwriter and controlling person for any legal or any other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceeding, provided that
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage, liability, (or action or proceeding in respect thereof) or
expense arises out of or is based
8
<PAGE> 11
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, any such preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
holder or underwriter stating that it is for use in the preparation thereof and,
provided further that the Company shall not be liable to any Person who
participates as an underwriter in the offering or sale of Registrable Securities
or to any other Person, if any, who controls such underwriter within the meaning
of the Securities Act, in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of such Person's failure to send or give a copy of the final prospectus, as
the same may be then supplemented or amended, within the time required by the
Securities Act to the Person asserting the existence of an untrue statement or
alleged untrue statement or omission or alleged omission at or prior to the
written confirmation of the sale of Registrable Securities to such Person if
such statement or omission was corrected in such final prospectus or an
amendment or supplement thereto. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such holder or
any such director, officer, underwriter or controlling person and shall survive
the transfer of such securities by such holder.
(B) INDEMNIFICATION BY THE SELLERS. The Company
may require, as a condition to including any Registrable Securities in any
registration statement filed pursuant to this Agreement, that the Company shall
have received an undertaking satisfactory to it from the prospective seller of
such Registrable Securities, to indemnify and hold harmless (in the same manner
and to the same extent as set forth in subdivision (a) of this Section 2.7) the
Company, each director of the Company, each officer of the Company and each
other Person, if any, who controls the Company within the meaning of the
Securities Act, with respect to any statement or alleged statement in or
omission or alleged omission from such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company through an instrument duly executed
by such seller specifically stating that it is for use in the preparation of
such registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement. Any such indemnity shall remain in full
force and effect, regardless of any investigation made by or on behalf of the
Company or any such director, officer or controlling person and shall survive
the transfer of such securities by such seller.
(C) NOTICES OF CLAIMS, ETC. Promptly after
receipt by an indemnified party of notice of the commencement of any action or
proceeding involving a claim referred to in the preceding subdivisions of this
Section 2.7, such indemnified party will, if a claim in respect thereof is to be
made against an indemnifying party, give written notice to the latter of the
commencement of such action, provided that the failure of any indemnified party
to give notice as provided herein shall not relieve the indemnifying party of
its obligations under the preceding subdivisions of this Section 2.7, except to
the extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against an indemnified party,
unless in such indemnified party's reasonable judgment a conflict of interest
between such indemnified and
9
<PAGE> 12
indemnifying parties may exist in respect of such claim, the indemnifying party
shall be entitled to participate in and to assume the defense thereof, jointly
with any other indemnifying party similarly notified, to the extent that the
indemnifying party may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement of any such action which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability, or a covenant not to
sue, in respect to such claim or litigation. No indemnified party shall consent
to entry of any judgment or enter into any settlement of any such action the
defense of which has been assumed by an indemnifying party without the consent
of such indemnifying party.
(D) OTHER INDEMNIFICATION. Indemnification
similar to that specified in the preceding subdivisions of this Section 2.7
(with appropriate modifications) shall be given by the Company and each seller
of Registrable Securities (but only if and to the extent required pursuant to
the terms of Section 2.7(b)) with respect to any required registration or other
qualification of securities under any Federal or state law or regulation of any
governmental authority, other than the Securities Act.
(E) INDEMNIFICATION PAYMENTS. The
indemnification required by this Section 2.7 shall be made by periodic payments
of the amount thereof during the course of the investigation or defense, as and
when bills are received or expense, loss, damage or liability is incurred.
(F) CONTRIBUTION. If the indemnification
provided for in the preceding subdivision of this Section 2.7 is unavailable to
an indemnified party in respect of any expense, loss, claim, damage or liability
referred to therein, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such expense, loss, claim, damage or liability
(i) in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and the holder or underwriter, as the
case may be, on the other from the distribution of the Registrable Securities or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company on the one hand and of the holder or underwriter, as the case may
be, on the other in connection with the statements or omissions which resulted
in such expense, loss, damage or liability, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the holder or underwriter, as the case may be, on the other in
connection with the distribution of the Registrable Securities shall be deemed
to be in the same proportion as the total net proceeds received by the Company
from the initial sale of the Registrable Securities by the Company to the
purchasers bear to the gain, if any, realized by all selling holders
participating in such offering or the underwriting discounts and commissions
received
10
<PAGE> 13
by the underwriter, as the case may be. The relative fault of the Company on the
one hand and of the holder or underwriter, as the case may be, on the other
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or omission to state a material fact
relates to information supplied by the Company, by the holder or by the
underwriter and the parties' relative intent, knowledge, access to information
supplied by the Company, by the holder or by the underwriter and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission, provided that the foregoing contribution
agreement shall not inure to the benefit of any indemnified party if
indemnification would be unavailable to such indemnified party by reason of the
provisions contained in the first sentence of subdivision (a) of this Section
2.7, and in no event shall the obligation of any indemnifying party to
contribute under this subdivision (f) exceed the amount that such indemnifying
party would have been obligated to pay by way of indemnification if the
indemnification provided for under subdivisions (b) of this Section 2.7 had been
available under the circumstances.
The Company and the holders of Registrable Securities agree that it
would not be just and equitable if contribution pursuant to this subdivision (f)
were determined by pro rata allocation (even if the holders and any underwriters
were treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations referred
to in the immediately preceding paragraph. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages and liabilities
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth in the preceding sentence and subdivision
(c) of this Section 2.7, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim.
Notwithstanding the provisions of this subdivision (f), no holder of
Registrable Securities or underwriter shall be required to contribute any amount
in excess of the amount by which (i) in the case of any such holder, the net
proceeds received by such holder from the sale of Registrable Securities or (ii)
in the case of an underwriter, the total price at which the Registrable
Securities purchased by it and distributed to the public were offered to the
public exceeds, in any such case, the amount of any damages that such holder or
underwriter has otherwise been required to pay by reason of such untrue or
allege untrue statement or omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
3. DEFINITIONS. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
"Agreement": As defined in Section 1.
"Commission": The Securities and Exchange Commission or any
other Federal agency at the time administering the Securities Act.
11
<PAGE> 14
"Common Stock": As defined in Section 1.
"Company": As defined in the introductory paragraph of this
Agreement.
"Conversion Shares": As defined in Section 1.
"Exchange Act": The Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder.
"Notes": As defined in Section 1, such term to include any
securities issued in substitution of or in addition to such Notes.
"OTC Bulletin Board": As defined in Section 1.
"Person": A corporation, association, partnership,
organization, business, individual, governmental or political subdivision
thereof or a governmental agency.
"Registrable Securities": The Securities and any securities
issued or issuable with respect to such Securities by way of stock dividend or
stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise. Once issued such
securities shall cease to be Registrable Securities when (a) a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, (b) they shall have been
distributed to the public pursuant to Rule 144 (or any successor provision)
under the Securities Act, (c) they shall have been otherwise transferred, new
certificates for them not bearing a legend restricting further transfer shall
have been delivered by the Company and subsequent disposition of them shall not
require registration or qualification of them under the Securities Act or any
similar state law then in force, (d) they shall have ceased to be outstanding,
(e) on the expiration of the applicable Registration Maintenance Period or (f)
any and all legends restricting transfer thereof have been removed in accordance
with the provisions of Rule 144(k) (or any successor provision) under the
Securities Act.
"Registration Expenses": All expenses incident to the
Company's performance of or compliance with this Agreement, including, without
limitation, all registration, filing and NASD fees, all stock exchange and OTC
Bulletin Board or other NASD or stock exchange listing fees, all fees and
expenses of complying with securities or blue sky laws, all word processing,
duplicating and printing expenses, messenger and delivery expenses, the fees and
disbursements of counsel for the Company and of its independent public
accountants, including the expenses of any special audits or "cold comfort"
letters required by or incident to such performance and compliance, the
reasonable fees and disbursements of not more than one law firm (not to exceed
$25,000) retained by the holder or holders of more than 50% of the Registrable
Securities, premiums and other costs of policies of insurance of the Company
against liabilities arising out of the public offering of the Registrable
Securities being registered and any fees and disbursements of underwriters
customarily paid by
12
<PAGE> 15
issuers or sellers of securities, but excluding underwriting discounts and
commissions and transfer taxes, if any, provided that, in any case where
Registration Expenses are not to be borne by the Company, such expenses shall
not include salaries of Company personnel or general overhead expenses of the
Company, auditing fees, premiums or other expenses relating to liability
insurance required by underwriters of the Company or other expenses for the
preparation of financial statements or other data normally prepared by the
Company in the ordinary course of its business or which the Company would have
incurred in any event.
"Registration Maintenance Period": As defined in Section 2.3.
"Required Effectiveness Date": As defined in Section 2.1.
"Securities Act": The Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder.
"Securities Purchase Agreement": As defined in Section 1.
"Sellers' Representative": Global Capital Advisors Ltd. or
such Person designated by Global Capital Advisors Ltd. as of the time of
disposition of the last of the Notes held by the Fund (or subsequent Sellers'
Representative).
4. RULE 144. The Company shall timely file the reports required
to be filed by it under the Securities Act and the Exchange Act (including but
not limited to the reports under Sections 13 and 15(d) of the Exchange Act
referred to in subparagraph (c) of Rule 144 adopted by the Commission under the
Securities Act) and the rules and regulations adopted by the Commission
thereunder (or, if the Company is not required to file such reports, will, upon
the request of any holder of Registrable Securities, make publicly available
other information) and will take such further action as any holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (b) any similar rule or regulation hereafter adopted by
the Commission. Upon the request of any holder of Registrable Securities, the
Company will deliver to such holder a written statement as to whether it has
complied with the requirements of this Section 4.
5. AMENDMENTS AND WAIVERS. This Agreement may be amended and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the holder or
holders of the sum of the 51% or more of the shares of (i) Registrable
Securities issued at such time, plus (ii) Registrable Securities issuable upon
exercise or conversion of the Securities then constituting derivative securities
(if such Securities were not fully exchanged or converted in full as of the date
such consent if sought). Each holder of any Registrable Securities at the time
or thereafter outstanding shall be bound by any consent authorized by this
13
<PAGE> 16
Section 5, whether or not such Registrable Securities shall have been marked to
indicate such consent.
6. NOMINEES FOR BENEFICIAL OWNERS. In the event that any
Registrable Securities are held by a nominee for the beneficial owner thereof,
the beneficial owner thereof may, at its election, be treated as the holder of
such Registrable Securities for purposes of any request or other action by any
holder or holders of Registrable Securities pursuant to this Agreement or any
determination of any number of percentage of shares of Registrable Securities
held by an holder or holders of Registrable Securities contemplated by this
Agreement. If the beneficial owner of any Registrable Securities so elects, the
Company may require assurances reasonably satisfactory to it of such owner's
beneficial owner ship or such Registrable Securities.
7. NOTICES. Except as otherwise provided in this Agreement, all
notices, requests and other communications to any Person provided for hereunder
shall be in writing and shall be given to such Person (a) in the case of a party
hereto other than the Company, addressed to such party in the manner set forth
in the Securities Purchase Agreement or at such other address as such party
shall have furnished to the Company in writing, or (b) in the case of any other
holder of Registrable Securities, at the address that such holder shall have
furnished to the Company in writing, or, until any such other holder so
furnishes to the Company an address, then to and at the address of the last
holder of such Registrable Securities who has furnished an address to the
Company, or (c) in the case of the Company, at the address set forth on the
signature page hereto, to the attention of its President, or at such other
address, or to the attention of such other officer, as the Company shall have
furnished to each holder of Registrable Securities at the time outstanding. Each
such notice, request or other communication shall be effective (i) if given by
mail, 72 hours after such communication is deposited in the mails with first
class postage prepaid, addressed as aforesaid or (ii) if given by any other
means (including, without limitation, by fax or air courier), when delivered at
the address specified above, provided that any such notice, request or
communication shall not be effective until received.
8. ASSIGNMENT. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the parties hereto. In addition, and
whether or not any express assignment shall have been made, the provisions of
this Agreement which are for the benefit of the parties hereto other than the
Company shall also be for the benefit of and enforceable by any subsequent
holder of any Registrable Securities. Each of the Holders of the Registrable
Securities agrees, by accepting any portion of the Registrable Securities after
the date hereof, to the provisions of this Agreement including, without
limitation, appointment of the Sellers' Representative to act on behalf of such
Holder pursuant to the terms hereof which such actions shall be made in the good
faith discretion of the Sellers' Representative and be binding on all persons
for all purposes.
9. DESCRIPTIVE HEADINGS. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
14
<PAGE> 17
10. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS
OF THE STATE OF GEORGIA WITHOUT REFERENCE TO THE PRINCIPLES OF CONFLICTS OF
LAWS.
11. COUNTERPARTS. This Agreement may be executed by facsimile and
may be signed simultaneously in any number of counterparts, each of which shall
be deemed an original, but all such counterparts shall together constitute one
and the same instrument.
12. ENTIRE AGREEMENT. This Agreement embodies the entire agreement
and understanding between the Company and each other party hereto relating to
the subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter.
13. SEVERABILITY. If any provision of this Agreement, or the
application of such provisions to any Person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to Persons or circumstances other than those to which it is held invalid, shall
not be affected thereby.
15
<PAGE> 18
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
LAHAINA ACQUISITIONS, INC.
By: /s/ Richard P. Smyth
--------------------------------
Name: Richard P. Smyth
--------------------------------
Title: Chairman and CEO
--------------------------------
Address: 2900 Atlantic Avenue
--------------------------------
Fernandina Beach, FL 32034
--------------------------------
Fax: (904) 277-9742
Tel.: (904) 277-4438
GCA STRATEGIC INVESTMENT FUND LIMITED
By: /s/ Lewis N. Lester
--------------------------------
Name: Lewis N. Lester
Title: Director
Address: 106 Colony Park Drive
Suite 900
Cumming, Georgia 30040
Fax: 678 947-6499
Tel.: 678 947-0028
<PAGE> 1
EXHIBIT 10.4
THIS COMMON STOCK PURCHASE WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY
PURCHASING THIS COMMON STOCK PURCHASE WARRANT, AGREES FOR THE BENEFIT OF THE
COMPANY THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY
(A) TO THE COMPANY, (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT, OR (C) IF REGISTERED UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS. IN ADDITION, A SECURITIES PURCHASE AGREEMENT
("PURCHASE AGREEMENT"), DATED THE DATE HEREOF, A COPY OF WHICH MAY BE OBTAINED
FROM THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICE, CONTAINS CERTAIN ADDITIONAL
AGREEMENTS AMONG THE PARTIES, INCLUDING, WITHOUT LIMITATION, PROVISIONS WHICH
LIMIT THE EXERCISE RIGHTS OF THE HOLDER AND SPECIFY MANDATORY REDEMPTION
OBLIGATIONS OF THE COMPANY.
------------------------------
LAHAINA ACQUISITIONS, INC.
COMMON STOCK PURCHASE WARRANT
<TABLE>
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
No. 3
Number of shares: 50,000 Holder: GCA Strategic Investment
Fund Limited
Mechanics Building
12 Church Street
Hamilton HM II, Bermuda
</TABLE>
For identification only. The governing terms of this Warrant
are set forth below.
- --------------------------------------------------------------------------------
Lahaina Acquisitions, Inc., a Colorado corporation (the "Company"), hereby
certifies that, for value received, GCA Strategic Investment Fund Limited or
assigns, is entitled, subject to the terms set forth below, to purchase from
the Company at any time or from time to time after the date hereof and prior to
the fifth anniversary hereof (the "Exercise Period"), at the Purchase Price
hereinafter set forth, Fifty Thousand (50,000) shares of the fully paid and
nonassessable shares of Common Stock of the Company. The number and character
of such shares of Common Stock and the Purchase Price are subject to adjustment
as provided herein.
The purchase price per share of Common Stock issuable upon exercise of
this Warrant (the "Purchase Price") shall initially be equal to 102% of the
simple average of the weighted average sales price as published by Bloomberg,
L.P. ("Bloomberg") of the Common Stock on the NASDAQ Stock Market or, if the
NASDAQ Market is not the principal trading market for such
<PAGE> 2
security, the simple average sales price of such security on the principal
securities exchange or trading market where such security is listed or traded
as reported by Bloomberg, or if the foregoing do not apply, the simple average
sales price of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, for the ten (10)
completed trading days immediately preceding the date hereof; provided,
however, that the Purchase Price shall be adjusted from time to time as
provided herein.
Capitalized terms used herein not otherwise defined shall have the
meanings ascribed thereto in the Purchase Agreement. As used herein the
following terms, unless the context otherwise requires, have the following
respective meanings:
(a) The term "Company" shall include American
International Petroleum Corporation and any corporation that shall
succeed or assume the obligations of such corporation hereunder.
(b) The term "Common Stock" includes (a) the Company's
common stock, no par value per share, (b) any other capital stock of
any class or classes (however designated) of the Company, authorized
on or after such date, the Holders of which shall have the right,
without limitation as to amount, either to all or to a share of the
balance of current dividends and liquidating dividends after the
payment of dividends and distributions on any shares entitled to
preference, and the Holders of which shall ordinarily, in the absence
of contingencies, be entitled to vote for the election of a majority
of directors of the Company (even though the right so to vote has been
suspended by the happening of such a contingency) and (c) any other
securities into which or for which any of the securities described in
(a) or (b) may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise.
(c) The term "Other Securities" refers to any stock
(other than Common Stock) and other securities of the Company or any
other person (corporate or otherwise) that the Holder of this warrant
at any time shall be entitled to receive, or shall have received, on
the exercise of this Warrant, in lieu of or in addition to Common
Stock, or that at any time shall be issuable or shall have been issued
in exchange for or in replacement of Common Stock or Other Securities
pursuant to Section 4 or otherwise.
1. Exercise of Warrant.
1.1 Method of Exercise.
(a) This warrant may be exercised in whole or in part
(but not as to a fractional share of Common Stock), at any time and
from time to time during the Exercise Period by the Holder hereof by
delivery of a notice of exercise (a "Notice of Exercise")
substantially in the form attached hereto as Exhibit A via facsimile
to the Company. Promptly thereafter the Holder shall surrender this
Warrant to the Company at
<PAGE> 3
its principal office, accompanied by payment of the Purchase Price
multiplied by the number of shares of Common Stock for which this
Warrant is being exercised (the "Exercise Price"). Payment of the
Exercise Price shall be made, at the option of the Holder, (i) by
check or bank draft payable to the order of the Company, (ii) by wire
transfer to the account of the Company, (iii) in shares of Common
Stock having a Market Value on the Exercise Date (as hereinafter
defined) equal to the aggregate Exercise Price, or (iv) by
presentation and surrender of this Warrant to the Company for cashless
exercise (a "Cashless Exercise"), which such surrender being deemed a
waiver of the Holder's obligation to pay all or any portion of the
Exercise Price. In the event the Holder elects a Cashless Exercise
(which such election shall be irrevocable) the Holder shall exchange
this Warrant for that number of shares of Common Stock determined by
multiplying the number of shares of Common Stock being exercised by a
fraction, the numerator of which shall be the difference between the
then current Market Value of the Common Stock and the Purchase Price,
and the denominator of which shall be the then current Market Value of
the Common Stock. If the amount of the payment received by the Company
is less than the Exercise Price, the Holder will be notified of the
deficiency and shall make payment in that amount within five (5)
business days. In the event the payment exceeds the Exercise Price,
the Company will promptly refund the excess to the Holder. Upon
exercise, the Holder shall be entitled to receive, promptly refund the
excess to the Holder. Upon exercise, the Holder shall be entitled to
receive, promptly after payment in full, one or more certificates,
issued in the Holder's name or in such name or names as the Holder may
direct, subject to the limitations on transfer contained herein, for
the number of shares of Common Stock so purchased. The shares of
Common Stock so purchased shall be deemed to be issued as of the close
of business on the date on which the Company shall have received from
the Holder payment in full of the Exercise Price (the "Exercise
Date").
(b) Notwithstanding anything to the contrary set forth
herein, upon exercise of all or a portion of this Warrant in
accordance with the terms hereof, the Holder shall not be required to
physically surrender this Warrant to the Company. Rather, records
showing the amount so exercised and the date of exercise shall be
maintained on a ledger substantially in the form of Annex B attached
hereto (a copy of which shall be delivered to the Company or transfer
agent with each Notice of Exercise). It is specifically contemplated
that the Holder hereof shall act as the calculation agent for all
exercises of this Warrant. In the event of any dispute or
discrepancies, such records maintained by the Holders shall be
controlling and determinative in the absence of manifest error. The
Holder and any assignee, by acceptance of this Warrant, acknowledge
and agree that, by reason of the provisions of this paragraph,
following an exercise of a portion of this Warrant, the number of
shares of Common Stock represented by this Warrant will be the amount
indicated on Annex B attached hereto (which may be less than the
amount stated on the face hereof).
1.2 Regulation D Restrictions. The Holder hereof
represents and warrants to the Company that it has acquired this Warrant and
anticipates acquiring the shares of Common
<PAGE> 4
Stock issuable upon exercise of the Warrant solely for its own account for
investment purposes and not with a view to or for resale of such securities
unless such resale has been registered with the Commission or an applicable
exemption is available therefor. At the time this Warrant is exercised, the
Company may require the Holder to state in the Notice of Exercise such
representations concerning the Holder as are necessary or appropriate to assure
compliance by the Holder with the Securities Act.
1.3 Company Acknowledgment. The Company will, at the time
of the exercise of this Warrant, upon request of the Holder hereof, acknowledge
in writing its continuing obligation to afford to such Holder the registration
rights to which such Holder shall continue to be entitled after such exercise
in accordance with the provisions of a Registration Rights Agreement dated the
date hereof (the "Registration Rights Agreement"). If the Holder shall fail to
make any such request, such failure shall not affect the continuing obligation
of the Company to afford such Holder any such rights.
1.4 Limitation on Exercise. Notwithstanding the rights of
the Holder to exercise all or a portion of this Warrant as described herein,
such exercise rights shall be limited, solely to the extent set forth in the
Purchase Agreement as if such provisions were specifically set forth herein. In
addition, the number of shares of Common Stock issuable upon exercise of this
Warrant is subject to reduction as specified in Section 10.3 of the Purchase
Agreement.
2. Delivery of Stock Certificates, etc., on Exercise. As soon as
practicable after the exercise of this Warrant, and in any event within five
(5) business days thereafter, the Company at its expense (including the payment
by it of any applicable issue, stamp or transfer taxes) will cause to be issued
in the name of and delivered to the Holder thereof, or, to the extent
permissible hereunder, to such other person as such Holder may direct, a
certificate or certificates for the number of fully paid and nonassessable
shares of Common Stock (or Other Securities) to which such Holder shall be
entitled on such exercise, plus, in lieu of any fractional share to which such
Holder would otherwise be entitled, cash equal to such fraction multiplied by
the then applicable Purchase Price, together with any other stock or other
securities and property (including cash, where applicable) to which such Holder
is entitled upon such exercise pursuant to Section 1 or otherwise.
3. Adjustment for Extraordinary Events. The Purchase Price to be
paid by the Holder upon exercise of this Warrant, and the consideration to be
received upon exercise of this Warrant, shall be adjusted in case at any time
or from time to time pursuant to Article XI of the Purchase Agreement as if
such provisions were specifically set forth herein.
4. No Impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Holder of this
warrant against
<PAGE> 5
impairment. Without limiting the generality of the foregoing, the Company (a)
will not increase the par value of any shares of stock receivable on the
exercise of this Warrant above the amount payable therefor on such exercise,
(b) will take all such action as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and unassessable shares of
stock on the exercise of this Warrant, and (c) will not transfer all or
substantially all of its properties and assets to any other person (corporate
or otherwise), or consolidate with or merge into any other person or permit any
such person to consolidate with or merge into the Company (if the Company is
not the surviving person), unless such other person shall expressly assume in
writing and will be bound by all the terms of this Warrant.
5. Accountant's Certificate as to Adjustments. In each case of
any adjustment or readjustment in the shares of Common Stock (or Other
Securities) issuable on the exercise of this Warrant, the Company at its
expense will promptly cause independent certified public accountants of
national standing selected by the Company to compute such adjustment or
readjustment in accordance with the terms of this Warrant and prepare a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for
any additional shares of Common Stock (or Other Securities) issued or sold or
deemed to have been issued or sold, (b) the number of shares of Common Stock
(or Other Securities) outstanding or deemed to be outstanding, and (c) the
Purchase Price and the number of shares of Common Stock to be received upon
exercise of this Warrant, in effect immediately prior to such issue or sale and
as adjusted and readjusted as provided in this Warrant. The Company will
forthwith mail a copy of each such certificate to the Holder of this Warrant,
and will, on the written request at any time of the Holder of this Warrant,
furnish to such Holder a like certificate setting forth the Purchase Price at
the time in effect and showing how it was calculated.
6. Notices of Record Date, etc. In the event of
(a) any taking by the Company of a record of
the Holders of any class or securities for
the purpose of determining the Holders
thereof who are entitled to receive any
dividend or other distribution, or any
right to subscribe for, purchase or
otherwise acquire any shares of stock of
any class or any other securities or
property, or to receive any other right, or
(b) any capital reorganization of the Company,
any reclassification or recapitalization of
the capital stock of the Company or any
transfer of all or substantially all the
assets of the Company to or consolidation
or merger of the Company with or into any
other person, or
(c) any voluntary or involuntary dissolution,
liquidation or winding-up of the Company,
<PAGE> 6
then and in each such event the Company will mail or cause to be mailed to the
Holder of this Warrant a notice specifying (i) the date on which any such
record is to be taken for the purpose of such dividend, distribution or right,
and stating the amount and character of such dividend, distribution or right,
and (ii) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up is to take place, and the time, if any, as of which the Holders of
record of Common Stock (or Other Securities) shall be entitled to exchange
their shares of Common Stock (or Other Securities) for then and in each such
event the Company will mail or cause to be mailed to the Holder of this Warrant
a notice specifying (i) the date on which any such record is to be taken for
the purpose of such dividend, distribution or right, and stating the amount of
character of such dividend, distribution or right, and (ii) the date on which
any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place,
and the time, if any, as of which the Holders of record of Common Stock (or
Other Securities) shall be entitled to exchange their shares of Common Stock
(or Other Securities) for securities or other property deliverable on such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding-up. Such notice shall be mailed at
least 20 days prior to the date specified in such notice on which any action is
to be taken.
7. Reservation of Stock, etc. Issuable on Exercise of Warrant.
The Company will at all times reserve and keep available, solely for issuance
and delivery on the exercise of this Warrant, all shares of Common Stock (or
Other Securities) from time to time issuable on the exercise of this Warrant.
8. Exchange of Warrant.
(a) On surrender for exchange of this Warrant, properly
endorsed and in compliance with the restrictions on transfer set forth in the
legend on the face of this Warrant, to the Company, the Company at its expense
will issue and deliver to or on the order of the Holder thereof a new Warrant
of like tenor, in the name of such Holder or as such Holder (on payment by such
Holder of any applicable transfer taxes) may direct, calling in the aggregate
on the face or faces thereof for the number of shares of Common Stock called
for on the face of the Warrant so surrendered.
(b) Upon written notice from the Purchasers pursuant to
Section 2.5(b)(iii) of the Purchase Agreement that the Purchasers have elected
to transfer amongst each other a portion of this Warrant, and on surrender for
amendment and restatement of this Warrant, the Company at its expense will
issue and deliver to or on the order of the Holder thereof a new Warrant of
like tenor, in the name of such Holder as the Purchasers (on payment by such
Holder of any applicable transfer taxes) may direct, calling in the aggregate
on the face or faces thereof for the number of shares of Common Stock as set
forth in such notice reflecting such transfer.
9. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction of this
Warrant, on delivery of an indemnity agreement or security
<PAGE> 7
reasonably satisfactory in form and amount to the Company or, in the case of
any such mutilation, on surrender and cancellation of this Warrant, the Company
at its expense will execute and deliver, in lieu thereof, a new Warrant of like
tenor.
10. Remedies. The Company stipulates that the remedies at law of
the Holder of this Warrant in the event of any default or threatened default by
the Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
11. Negotiability, etc. This Warrant is issued upon the following
terms, to all of which each Holder or owner hereof by the taking hereof
consents and agrees:
(a) title to this Warrant may be transferred by
endorsement and delivery in the same manner as in the case of a negotiable
instrument transferable by endorsement and delivery.
(b) any person in possession of this Warrant properly
endorsed is authorized to represent himself as absolute owner hereof and is
empowered to transfer absolute title hereto by endorsement and delivery hereof
to a bona fide purchaser hereof for value; each prior taker or owner waives and
renounces all of his equities or rights in this Warrant in favor of such bona
fide purchaser, and each such bona fide purchaser shall acquire absolute title
hereto and to all rights represented hereby;
(c) until this Warrant is transferred on the books of the
Company, the Company may treat the registered Holder hereof as the absolute
owner hereof for all purposes, notwithstanding any notice to the contrary; and
(d) notwithstanding the foregoing, this Warrant may be
sold, transferred or assigned except pursuant to an effective registration
statement under the Securities Act or pursuant to an applicable exemption
therefrom.
12. Registration Rights. The Company is obligated to register the
shares of Common Stock issuable upon exercise of this Warrant in accordance
with the terms of the Registration Rights Agreement.
13. Notices, etc. All notices and other communications from the
Company to the Holder of this Warrant shall be mailed by first class registered
or certified mail, postage prepaid, at such address as may have been furnished
to the Company in writing by such Holder or, until any such Holder furnishes to
the Company any address, then to, and at the address of, the last Holder of
this Warrant who has so furnished an address to the Company.
14. Miscellaneous. This Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought. This Warrant shall be
<PAGE> 8
construed and enforced in accordance with and governed by the internal laws of
the State of New York. The headings in this Warrant are for the purposes of
reference only, and shall not limit or otherwise affect any of the terms
hereof. The invalidity or unenforceability of any provision hereof shall in no
way affect the validity or enforceability of any other provision.
[SIGNATURE PAGE FOLLOWS]
<PAGE> 9
DATED as of August __, 1999.
LAHAINA ACQUISITIONS, INC.
By:
Name:
Title:
[Corporate Seal]
Attest:
By:
Secretary
<PAGE> 10
EXHIBIT A
FORM OF NOTICE EXERCISE - WARRANT
(To be executed only upon exercise
of the Warrant in whole or in part)
To ____________________________________________
The undersigned registered Holder of the accompanying Warrant, hereby
exercises such Warrant or portion thereof for, and purchases thereunder,
__________ (1) shares of Common Stock (as defined in such Warrant) and herewith
makes payment therefor in the amount and manner set forth below, as of the date
written below. The undersigned requests that the certificates for such shares
of Common Stock be issued in the name of, and delivered to, ________________
whose address is .
The Exercise Price is paid as follows:
[ ] Bank draft payable to the Company in the amount of
$_____________.
[ ] Wire transfer to the account of the Company in the amount
of $___________.
[ ] Cashless exercise. Surrender of ___________ shares
purchasable under this Warrant for such shares of Common
Stock issuable in exchange therefor pursuant to the Cashless
Exercise provisions of the Warrant, as provided in Section
1.1(iv) thereto.
Upon exercise pursuant to this Notice of Exercise, the Holder will be
in compliance with the Limitation on Exercise (as defined in the Securities
Purchase Agreement pursuant to which this Warrant was issued).
Date:
(Name must conform to name of Holder as
specified on the face of the Warrant)
By:
Name:
Title:
Address of Holder:
Date of exercise:
- --------------------
(1) Insert the number of shares of Common Stock as to which the
accompanying Warrant is being exercised. In the case of a partial exercise, a
new Warrant or Warrants will be issued and delivered, representing the
unexercised portion of the accompanying Warrant, to the Holder surrendering the
same.
<PAGE> 11
ANNEX B
WARRANT EXERCISE LEDGER
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
ORIGINAL NUMBER WARRANTS EXERCISE PRICE NEW BALANCE ISSUER HOLDER
DATE OF WARRANTS EXERCISED PAID OF WARRANTS INITIALS INITIALS
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 10.5
STOCK PLEDGE AGREEMENT
THIS IS A STOCK PLEDGE AGREEMENT (this "Agreement") by and between
Mongoose Investments, LLC and Rick Smyth (collectively and individually
referred to as the "Pledgor"), and GCA Strategic Investment Fund Limited (the
"Pledgee"), and dated effective as of August 18, 1999, and by which the parties
to this Agreement, for good and valuable consideration, hereby agree as
follows:
1. Background Information. The Pledgor is the owner of shares of
stock described in Schedule I attached hereto and incorporated herein by
reference (the "Pledged Shares"). The Pledgor is a shareholder of Lahaina
Acquisitions, Inc. ("Lahaina") which has delivered Pledgee a convertible note
of even date herewith in the principal amount of $500,000.00 (the "Note").
Pledgor will benefit from the pledge of the Pledged Collateral (as defined
below) in order to induce Pledgor to purchase the Note from Lahaina.
2. Pledge. The Pledgor hereby pledges to the Pledgee, and grants to
the Pledgee a security interest in, the Pledged Shares and the certificates
representing the Pledged Shares, and all dividends, cash, instruments and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Pledge Shares and all proceeds
of any of the foregoing (collectively, the "Pledged Collateral").
3. Security for Obligations. The Pledgor's security interest in the
Pledged Collateral secures the payment and performance of all obligations of
Lahaina now or hereafter existing under the Note, whether for principal,
interest, fees, expenses or otherwise, and all obligations of the Pledgor now
or hereafter existing under this Agreement and any and all extensions or
renewals of the foregoing in whole or in part, whether direct or indirect,
absolute or contingent, individual, joint or several, now due or to become due,
and whether owed under the foregoing as a drawer, maker, endorser, guarantor,
surety or otherwise to the Pledgee by the Pledgor (all such obligations being
the "Obligations").
4. Delivery of Pledged Collateral; Further Assurances. All
certificates or instruments representing or evidencing the Pledged Collateral
shall be delivered to and held by or on behalf of the Pledgee pursuant hereto
and shall be in suitable form for transfer by delivery, or shall be accompanied
by duly executed instruments of transfer or assignment in blank, all in form
and substance satisfactory to the Pledgee. The Pledgee shall have the right, at
any time in its discretion and without notice to the Pledgor, to transfer to or
to register in the name of the Pledgee or any of its nominees any or all of the
Pledged Collateral, subject only to the revocable rights specified in section
5(a) of this Agreement. In addition, the Pledgee shall have the right at any
time to exchange certificates or instruments representing or evidencing Pledged
Collateral for certificates or instruments of smaller or larger denominations.
The Pledgor agrees that at any time and from time to time, at the expense of
the Pledgor, the Pledgor will promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary
or desirable, or that the Pledgee may request, in order to perfect and protect
any security interest granted or purported to be granted hereby or to enable
the Pledgee to exercise and enforce its rights and remedies hereunder with
respect to any Pledged Collateral.
5. Voting Rights; Dividends; Etc.
<PAGE> 2
(a) General. So long as no Event of Default (as defined below) or
event which, with the giving of notice or the lapse of time, or both, would
become an Event of Default shall have occurred and be continuing:
(i) Voting Rights. The Pledgor shall be entitled to exercise
any and all voting and other consensual rights pertaining to the Pledged
Collateral or any part thereof for any purpose not inconsistent with the terms
of this Agreement or the Note; provided, however, that the Pledgor shall not
exercise or refrain from exercising any such right if, in the Pledgee's
judgment, such action would have a material adverse effect on the value of the
Pledged Collateral or any part thereof, and provided, further, that the Pledgor
shall give the Pledgee at least five (5) days' written notice of the manner in
which the Pledgor intends to exercise, or the reasons for refraining from
exercising, any such right.
(ii) Dividends. The Pledgor shall be entitled to receive and
retain any and all dividends and other payments in respect of the Pledged
Collateral; provided, however, that any and all:
(A) dividends paid or payable other than in cash, and
instruments and other property received or receivable in respect of any Pledged
Collateral,
(B) dividends and other distributions paid or payable in
cash in respect of any Pledged Collateral in connection with a partial or total
liquidation or dissolution or in connection with a reduction of capital,
capital surplus or paid-in-surplus, and
(C) cash paid or payable in redemption of, or in exchange
for, any Pledged Collateral, shall be, and shall be forthwith delivered to the
Pledgee to hold as, Pledged Collateral and shall, if received by the Pledgor,
be received in trust for the benefit of the Pledgee and be segregated from the
other property or funds of the Pledgor (with any necessary endorsement).
(iii) Proxies and Other Instruments. The Pledgee shall execute
and deliver (or cause to be executed and delivered) to the Pledgor all such
proxies and other instruments as the Pledgor may reasonably request for the
purposes of enabling the Pledgor to exercise the voting and other rights which
it is entitled to exercise pursuant to section 5(a)(i) of this Agreement and to
receive the dividends or other payments which it is authorized to receive and
retain pursuant to section 5(a)(ii) of this Agreement.
(b) Upon Default. Upon the occurrence and during the continuance of
an Event of Default or an event which, with the giving of notice or the lapse
of time, or both, would become an Event of Default, all rights of the Pledgor
to exercise the voting and other consensual rights which the Pledgor would
otherwise be entitled to exercise pursuant to section 5(a)(i) of this Agreement
and to receive the dividends and interest payments which the Pledgor would
otherwise be authorized to receive and retain pursuant to section 5(a)(ii) of
this Agreement shall cease, and all such rights shall thereupon become vested
in the Pledgee who shall thereupon have the sole right to exercise such
<PAGE> 3
voting and other consensual rights and to receive and hold as Pledged
Collateral such dividends and interest payments.
6. No Transfers or Liens; Substitute Shares.
(a) No Transfer or Liens. The Pledgor agrees that the Pledgor
will not sell or otherwise dispose of, or grant any option with respect to, any
of the Pledged Collateral, or create or permit to exist any lien, security
interest, or other charge or encumbrance upon or with respect to any of the
Pledged Collateral, except for the security interest under this Agreement.
(b) Substitute Shares. The Pledgor agrees that it will (i)
cause the issuer of the Pledged Shares not to issue any stock or other
securities in substitution for the Pledged Shares issued by such issuer, except
to the Pledgor, and (ii) pledge hereunder, immediately upon its acquisition
(directly or indirectly) thereof, any such substitute shares of stock or other
securities of the issuer of the Pledged Shares.
7. Pledgee May Perform; Pledgee Appointed Attorney-in-Fact. The
Pledgor hereby appoints the Pledgee as the Pledgor's attorney-in-fact, with
full authority in the place and stead of the Pledgor and in the name of the
Pledgor or otherwise, from time to time in the Pledgee's discretion to take any
action and to execute any instrument which the Pledgee deems necessary or
advisable to accomplish the purposes of this Agreement, including, without
limitation, to receive, endorse and collect all instruments made payable to the
Pledgor representing any dividend, interest payment or other distribution in
respect of the Pledged Collateral or any part thereof and to give full
discharge for the same. If the Pledgor fails to perform any agreement contained
herein, the Pledgee may itself perform, or cause performance of, such
agreement.
8. Reasonable Care. The Pledgee shall be deemed to have exercised
reasonable care in the custody and preservation of the Pledged Collateral in
its possession if the Pledged Collateral is accorded treatment substantially
equal to that which the Pledgee accords its own property, it being understood
that the Pledgee shall not have any responsibility for ascertaining or taking
action with respect to calls, conversions, exchanges, maturities, tenders or
other matters relative to any Pledged Collateral, whether or not the Pledgee
has or is deemed to have knowledge of such matters, or taking any necessary
steps to preserve rights against any parties with respect to any Pledged
Collateral.
9. Events of Default; Remedies upon Default.
(a) Events of Default. The occurrence of any one or more of the
following events shall constitute a default (an "Event of Default") by the
Pledgor:
(i) the Pledgor fails to pay any Obligation when due and
payable or declared due and payable and such failure shall continue for five
(5) business days; or
(ii) the Pledgor fails or neglects to perform, keep or
observe any term, provision, condition, covenant or agreement contained in this
Agreement (other than those referred to in section 9(a)(i) of this Agreement)
or in any other instrument or document delivered pursuant hereto or in
connection herewith, including without limitation the Note of even date
herewith from Pledgor
<PAGE> 4
to Pledgee, and such failure or neglect shall have continued for a period of
ten (10) business days after receipt of written notice from the Pledgee of such
failure or neglect; or
(iii) the Pledgor makes or submits any false, untrue,
incomplete or misleading representation, warranty, schedule, report or other
communication to the Pledgee in connection with this Agreement or the Note or
any transaction relating hereto or thereto; or
(iv) the Pledgor becomes insolvent or generally fails to
pay, or admits in writing the Pledgor's inability to pay, the Pledgor's debts
as they mature; or
(v) there occurs an Event of Default under the Note; or
(vi) the Pledgor makes a general assignment for the
benefit of creditors, convenes or causes to be convened a meeting of the
Pledgor's creditors or the Pledgor's principal creditors, or takes advantage of
the insolvency laws of any state, or a petition in bankruptcy or an arrangement
or reorganization under the Federal Bankruptcy Code is filed by or against the
Pledgor.
(b) Remedies Upon Default. If any Event of Default shall have
occurred and be continuing:
(i) Sale. The Pledgee may exercise in respect of the
Pledged Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of a secured
party on default under the applicable Uniform Commercial Code in effect at that
time, and the Pledgee may also, without notice except as specified below, sell
the Pledged Collateral or any part thereof in one or more parcels at public or
private sale, at any exchange, broker's board or at any of the Pledgee's
offices or elsewhere, for cash, on credit or for future delivery, and at such
price or prices and upon such other terms as the Pledgee may deem commercially
reasonable. The Pledgor agrees that, to the extent notice of sale shall be
required by law, at least ten (10) days' notice to the Pledgor of the time and
place of any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. The Pledgee shall not be obligated to
make any sale of Pledged Collateral regardless of notice of sale having been
given. The Pledgee may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
(ii) Proceeds. Any cash held by the Pledgee as Pledged
Collateral and all cash proceeds received by the Pledgee in respect of any sale
of, collection from, or other realization upon all or any part of the Pledged
Collateral may, in the discretion of the Pledgee, be held by the Pledgee as
collateral for, or then or at any time thereafter applied (after payment of any
amounts payable to the Pledgee pursuant to section 10 of this Agreement) in
whole or in part by the Pledgee against, all or any part of the Obligations in
such order as the Pledgee shall elect. Any surplus of such cash or cash
proceeds held by the Pledgee and remaining after payment in full of all the
Obligations shall be paid over to the Pledgor or to whomsoever may be lawfully
entitled to receive such surplus.
10. Expenses. The Pledgor will upon demand pay to the Pledgee the
amount of any and all reasonable expenses, including the reasonable fees and
expenses of its counsel and of any experts and
<PAGE> 5
agents, which the Pledgee may incur after the date hereof in connection with
the administration of this Agreement, the custody or preservation of, or the
sale of, collection from, or other realization upon, any of the Pledged
Collateral, the exercise or enforcement of any of the rights of the Pledgee
hereunder, or the failure by the Pledgor to perform or observe any of the
provisions hereof.
11. Continuing Security Interest; Transfer of Note. This Agreement
shall create a continuing security interest in the Pledged Collateral and shall
remain in full force and effect until payment in full of the Obligations, be
binding upon the Pledgor, and the Pledgor's successors and assigns, and inure
to the benefit of the Pledgee and the Pledgee's successors, transferees and
assigns. Without limiting the generality of the foregoing, the Pledgee may
assign or otherwise transfer the Note to any other person or entity, and such
other person or entity shall thereupon become vested with all the benefits in
respect thereof granted to the Pledgee herein or otherwise. Upon the payment in
full of the Obligations, the Pledgor shall be entitled to the return, upon the
Pledgor's request and at the Pledgor's expense, of such of the Pledged
Collateral as shall not have been sold or otherwise applied pursuant to the
terms hereof.
12. Indemnification. The Pledgor hereby agrees that the Pledgor shall
indemnify and hold the Pledgee harmless from and against any and all costs,
expenses, claims, causes of action, damages, injury, or harm suffered by the
Pledgee or asserted against the Pledgee relating to Pledgee's performance under
this Agreement. In addition, the Pledgor hereby acknowledges and affirms that
the Pledgee shall not be obligated to incur any costs or expenses whatsoever in
connection with or arising out of or relating to the Pledgee's performance
under this Agreement, and the Pledgee, so long as it acts diligently in good
faith, shall not have any liability whatsoever to the Pledgor for any act,
failure, refusal or omission to act under this Agreement.
13. Termination. Upon the final payment of all Obligations, this
Agreement shall terminate and the Pledgee shall transfer and deliver the
Pledged Collateral and the accompanying stock transfer powers to the Pledgor or
to whosoever shall be lawfully entitled to the same marked
"Terminated--Underlying Obligations Satisfied" and dated and signed by the
Pledgee.
14. Miscellaneous.
(a) Survival. All representations, warranties, covenants and
agreements herein contained shall survive the execution and delivery of this
Agreement. The remedies of a party for breaches of representations, warranties,
covenants or agreements shall not be affected by any investigation by, or
knowledge of, the non-breaching party prior to the date of this Agreement. Each
party agrees to indemnify, defend and hold the other harmless for all losses,
costs and expenses (including without limitation reasonable attorney's fees)
arising out of its breach of any representation, warranty, covenant or
agreement made by him or it in this Agreement.
(b) Notices. All notices and other communications under this
Agreement shall be made in writing signed by the party making the same, and
shall be deemed given on the date of personal delivery or if mailed by
certified or registered United States mail, postage prepaid, on the date mailed
(and shall be deemed received on the date of personal delivery or, if so
mailed, on the third business day after so mailed), to:
<PAGE> 6
If to the Pledgor, to:
Lahaina Acquisitions, Inc.
ATTN:
Telecopy:
With a copy to:
Paul, Hastings, Janofsky & Walker, LLP
600 Peachtree Street, N.E., Suite 2400
Atlanta, Georgia 30308-2222
ATTN: Wayne Shortridge, Esq.
Telecopy: (404) 815-2424
If to the Pledgee, to:
GCA Strategic Investment Fund Limited
106 Colony Park Drive, Suite 900
Cumming, Georgia 30040
ATTN: Global Capital Advisors, Ltd.
Telecopy: (678) 947-6499
with a copy to:
Sutherland, Asbill & Brennan LLP
999 Peachtree Street, N.E.
Atlanta, Georgia 30309-3996
ATTN: Mark D. Kaufman, Esq. or Joseph L. Springsteen, Esq.
Telecopy: (404) 853-8806
or to such other person or at such other address as either party may specify by
written notice to the other party in accordance with this section 14(b).
(c) Further Assurances. Each party agrees to do such further
acts, and to execute and deliver such additional conveyances, assignments,
agreements and instruments as the other may at any time request in connection
with the administration and enforcement of this Agreement or relative to the
Pledged Collateral or any part thereof, or in order better to assure and
confirm to the requesting party his or its rights, powers and remedies under
this Agreement.
(d) Severability. If any provision of this Agreement shall be
invalid or unenforce able under applicable law, such provision shall be
ineffective to the extent of such invalidity or unenforceability only, without
in any way affecting the remaining provisions.
(e) Time of the Essence. Time is of the essence of each and
every provision of this
<PAGE> 7
Agreement.
(f) Assignment; Successors in Interest.
(i) Assignment. Except with the prior written consent
of the Pledgee, no assignment or transfer by the Pledgor of the Pledgor's
rights and obligations under this Agreement may be made.
(ii) Binding Nature. This Agreement shall be binding
upon the parties to this Agreement and their respective successors and assigns,
shall inure to the benefit of the parties to this Agreement and their
respective permitted successors and assigns and any reference to a party to
this Agreement shall also be a reference to a successor or assign.
(g) Number; Gender. Whenever the context so requires, the
singular number shall include the plural and the plural shall include the
singular, and the gender of any pronoun shall include the other genders.
(h) Captions; Certain Definitions. Titles and captions of or
in this Agreement are inserted only as a matter of convenience and for
reference and in no way define, limit, extend or describe the scope of this
Agreement or the intent of any provision of this Agreement.
(i) Controlling Law; Integration; Amendment; Waiver. This
Agreement shall be governed by and construed and enforced in accordance with
the internal laws of the State of Georgia without regard to those relating to
conflicts of laws. This Agreement supersedes all prior negotiations, agreements
and understandings between the parties with respect to the subject matter
hereof, constitutes the entire agreement between the parties with respect to
the subject matter hereof, and may not be altered or amended except in writing
signed by the Pledgor and the Pledgee. The failure of either party to this
Agreement at any time or times to require performance of any provisions of this
Agreement shall in no manner affect the right to enforce the same. No waiver by
either party to this Agreement of any condition, or of the breach of any term,
provision, warranty, representation, agreement or covenant contained in this
Agreement, whether by conduct or otherwise, in any one or more instances shall
be deemed or construed as a further or continuing waiver of any such condition
or breach or a waiver of any other condition or of the breach of any other
term, provision, warranty, representation, agreement or covenant contained in
this Agreement.
(j) Counterparts. This Agreement may be executed by each
party upon a separate copy, and in such case one counterpart of this Agreement
shall consist of enough of such copies to reflect the signatures of all of the
parties to this Agreement. This Agreement shall become effective when one or
more counterparts have been signed by each of the parties to this Agreement and
delivered to the other party to this Agreement. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original, and it
shall not be necessary in making proof of this Agreement or the terms of this
Agreement to provide or account for more than one of such counterparts.
[EXECUTION PAGE FOLLOWS]
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed by their respective authorized officers, as of
the date first above written.
MONGOOSE INVESTMENTS, LLC
By:
--------------------------------
Name: Rick Smyth
Title: President
Address:
--------------------------------
Fax:
-----------------------
Tel.:
-----------------------
RICK SMYTH
-----------------------------------------
Rick Smyth
GCA STRATEGIC INVESTMENT FUND, LIMITED
By:
--------------------------------
Name: Lewis N. Lester
Title: Director
Address: c/o 106 Colony Park Drive
Suite 900
Cumming, Georgia 30040
Fax: 678 947-6499
Tel.: 678 947-0028
Pledge Agreement -- $500K
<PAGE> 9
SCHEDULE I
Four Hundred and Fifteen Thousand (415,000) shares of common stock, no par
value, of Lahaina Acquisitions, Inc., represented as of the date hereof by
Certificate No. _____.
<PAGE> 1
EXHIBIT 10.6
ESCROW AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into this 19th day
of August, 1999, by and among Lahaina Acquisitions, Inc., a Colorado corporation
(the "Company"), GCA Strategic Investment Fund Limited, a Bermuda corporation
("Purchaser"), and accepted by Kim T. Stephens, as Escrow Agent. Capitalized
terms not defined herein shall have the meaning set forth in the Securities
Agreement, as defined below, unless otherwise specified.
W I T N E S S E T H:
WHEREAS, Purchaser and the Company entered into a Securities
Purchase Agreement dated as of August 19, 1999 (the "Securities Agreement")
providing for the purchase by Purchaser of Convertible Note No. 2 in the
principal amount of $500,000 dated as of the same date (the "Securities");
WHEREAS, the Company and Purchaser desire for the Escrow Agent
to hold in escrow the Purchase Price of $465,000 pending confirmation of the
receipt and issuance of the Securities, to pay the Purchase Price by wire
transfer of immediately available funds (or otherwise deliver at the Company's
direction immediately available funds) to the Company or the Company's account
upon such confirmation, and to arrange for delivery of the Securities to the
Purchaser per the Purchaser's written instructions;
WHEREAS, the Company and Purchaser wish for the Escrow Agent
to hold certain certificates representing a sufficient number of authorized and
non-outstanding shares of Common Stock in the Company (the "Common Shares") to
be issuable upon conversion of the Securities, in escrow until the Escrow Agent
receives, or is copied, a written notice of election to convert the Securities
(the "Conversion Notice"); and
WHEREAS, the Company and Purchaser desire that the Escrow
Agent be empowered to complete delivery to the Purchaser the number of Common
Shares issuable upon conversion of the Securities;
NOW, THEREFORE, in consideration of the covenants and mutual
promises contained herein and other good and valuable consideration, the receipt
and legal sufficiency of which are hereby acknowledged, and intending to be
legally bound hereby, the parties agree as follows:
-2-
<PAGE> 2
ARTICLE 1.
TERMS OF THE ESCROW
1.1. The parties hereby agree to establish an escrow
account with the Escrow Agent whereby the Escrow Agent shall (a) hold the
Purchase Price funds for the Securities, (b) hold the Securities, and (c) hold
certain certificates representing the Common Shares. The Purchaser will deliver
by wire transfer of immediately available funds, or otherwise deliver in
immediately available funds, the Purchase Price to the Escrow Agent. The Company
will deliver the Securities to the Escrow Agent. The Company will deliver,
within three (3) days following the closing of the Merger Agreement, one hundred
forty two thousand eight hundred fifty seven (142,857) authorized and
non-outstanding shares of Common Stock in the Company in the form of fourteen
(14) certificates of ten thousand Common Shares each, and one (1) certificate of
two thousand eight hundred fifty seven (2,857) Common Shares.
1.2. Upon the Escrow Agent's receipt of the Purchase Price
funds into his attorney trustee account, he shall notify the Company, or the
Company's designated attorney or agent, of the amount of funds he has received
into his account.
1.3. Upon the Escrow Agent's receipt of notice that the
Securities Agreement was properly executed by the Company and Purchaser, he
shall then communicate with the Company to confirm the valid issuance of the
Securities.
1.4. Once the Escrow Agent confirms the validity of the
issuance of the Securities, he shall promptly wire transfer in immediately
available funds the Purchase Price to the Company, per the written wire
instructions of the Company. Upon confirmation (outgoing federal funds
confirmation) of payment of the Purchase Price, the Escrow Agent shall then
arrange to have the Securities delivered as per instructions from the Purchaser.
1.5. If, for any reason, these transactions contemplated
by the Securities Agreement are not consummated within five (5) days of the date
hereof, the Escrow Agent will promptly return the amount of the Purchase Price
and the Common Shares received by it from the Purchaser to the Purchaser,
without any further instructions from either the Company or Purchaser.
1.6. In the event the Purchaser elects to exercise its
right to convert the Securities, the parties hereby agree that any Conversion
Notice to be delivered by the Purchaser shall be delivered to the Escrow Agent,
along with evidence of the Conversion Price (as defined in the Securities) as
reported by Bloomberg L.P.and a calculation of the converted Common Shares and
accrued and unpaid interest. Upon receipt of any Notice of Conversion from the
Purchaser (including a Notice of Conversion delivered by facsimile), the Escrow
Agent shall immediately deliver a copy of such Notice of Conversion to the
Company by facsimile or otherwise. The parties hereto agree that the Escrow
Agent shall be empowered to deliver the number of converted Common Shares to be
issued to the Purchaser based on the information provided to it in the
applicable Conversion Notice within three (3) New York Stock Exchange
-3-
<PAGE> 3
trading days of its receipt of the Conversion Notice, in accordance with the
conversion provisions set forth in the Securities Agreement.
1.7. Upon the Escrow Agent's receipt of the Conversion
Notice, he shall notify the Company, or the Company's designated attorney or
agent, of the amount of Common Shares convertible and deliverable to the
Purchaser pursuant to the Conversion Notice.
1.8. This Agreement may be altered or amended only with
the consent of all of the parties hereto. Should the Company attempt to change
this Agreement in a manner which, in the Escrow Agent's discretion, shall be
undesirable, the Escrow Agent may resign as Escrow Agent by notifying the
Company and the Purchasers in writing. In the case of the Escrow Agent's
resignation or removal pursuant to the foregoing, his only duty, until receipt
of notice from the Company and the Purchasers or their agents that a successor
escrow agent shall have been appointed, shall be to hold and preserve the
Securities and/or funds. Upon receipt by the Escrow Agent of said notice from
the Company and the Purchasers of the appointment of a successor escrow agent,
the name of a successor escrow account and a direction to transfer the
Securities and/or funds, the Escrow Agent shall promptly thereafter transfer all
of the Securities and/or funds held in escrow to said successor escrow agent.
Immediately after said transfer of Securities, the Escrow Agent shall furnish
the Company and the Purchasers with proof of such transfer. The Escrow Agent is
authorized to disregard any notices, request, instructions or demands received
by it from the Company or the Purchasers after notice of resignation or removal
shall have been given, unless the same shall be the aforementioned notice from
the Company and the Purchasers to transfer the Securities and funds to a
successor escrow agent or to return same to the respective parties.
1.9. The Escrow Agent shall be paid a fee in the amount of
$3,000 by the Company in connection with its performance hereunder.
1.10. The Company and the Purchaser warrant to and agree
with the Escrow Agent that:
(i) there is no security interest in the Securities or
any part thereof;
(ii) no financing statement under the Uniform Commercial
Code is on file in any jurisdiction claiming a
security interest or in describing (whether
specifically or generally) the Securities or any part
thereof; and
(iii) the Escrow Agent shall have no responsibility at any
time to ascertain whether or not any security
interest exists in the Securities or any part thereof
or to file any financing statement under the Uniform
Commercial Code with respect to the Securities or any
part thereof.
1.11. The Escrow Agent has no liability hereunder to either
party other than to hold the Securities and funds, to complete the Orders in
accordance with the Notice of
-4-
<PAGE> 4
Conversion and any instructions it receives for the Company, and to deliver them
in accordance with the terms hereof. The Escrow Agent shall not be liable for
any action taken or omitted by him in good faith; and in no event shall the
Escrow Agent be liable or responsible except for the Escrow Agent's own gross
negligence or willful misconduct.
1.12. Each party hereto agrees to indemnify and hold
harmless the Escrow Agent from and with respect to any and all suits, claims,
damages, demands, actions, liabilities or losses arising in any way out of this
transaction including the obligation to defend any legal action brought which in
any way arises out of or is related to this Agreement.
1.13. Escrow Agent shall not be responsible for: (i) the
sufficiency or correctness as to the form, execution or the validity of this
Agreement; or (ii) the identity, authority or right of any person executing any
notice or document given to Escrow Agent.
ARTICLE 2.
MISCELLANEOUS
2.1. No waiver or any breach of any covenant or provision
herein contained shall be deemed a waiver of any preceding or succeeding breach
thereof, or of any other covenant or provision herein contained. No extension of
time for performance of any obligation or act shall be deemed any extension of
the time for performance of any other obligation or act.
2.2. All notices or other communications required or
permitted hereunder shall be in writing, and shall be sent by fax, overnight
courier, registered or certified mail, postage prepaid, return receipt
requested, and shall be deemed received upon receipt thereof, as follows:
(i) To the Company
Lahaina Acquisitions Inc.
2900 Atlantic Ave.
Fernandina Beach, FL 32034
Attn: Richard P Smyth
(904) 277-4438 (phone)
(904) 277-9792 (fax)
(ii) To the Purchaser:
GCA Strategic Investment Fund Limited
c/o Prime Management Limited
Mechanics Building, 12 Church Street
Hamilton HM11 Bermuda
Attn: Joe Kelly
(441) 295-0329 (phone)
(441) 295-3926 (fax)
-5-
<PAGE> 5
(iii) To the Company's counsel:
Paul, Hastings, Janofsky and Walker LLP
600 Peachtree Street N.E., Suite 2400
Atlanta GA 30308
Attn: Wayne Shortridge, Esq.
(404) 815-2214 (phone)
(404) 815-2424 (fax)
(iv) To the Transfer Agent:
-----------------------
-----------------------
-----------------------
Attn:
(___) _____________ (phone)
(___) _____________ (fax)
(v) To the Escrow Agent:
The Law Offices of Kim T. Stephens
220 College Ave., Suite 319
Athens GA 30601
Attention: Kim T. Stephens, Esq.
(706) 548-3933 (phone)
(706) 548-6229 (fax)
2.3. This Agreement shall be binding upon and shall inure
to the benefit of the permitted successors and assigns of the parties hereto.
2.4. This Agreement is the final expression of, and
contains the entire Agreement between, the parties with respect to the subject
matter hereof and supersedes all prior understandings with respect thereto. This
Agreement may not be modified, changed, supplemented or terminated, nor may any
obligations hereunder be waived, except by written instrument signed by the
parties to be charged or by its agent duly authorized in writing or as otherwise
expressly permitted herein.
2.5. Whenever required by the context of this Agreement,
the singular shall include the plural and masculine shall include the feminine.
This Agreement shall not be construed as if it had been prepared by one of the
parties, but rather as if both parties had prepared the same. Unless otherwise
indicated, all references to Articles are to this Agreement.
-6-
<PAGE> 6
2.6. The Company and the Purchaser acknowledge and confirm
that they are not being represented in a legal capacity by Sutherland, Asbill &
Brennan and they have had the opportunity to consult with their own legal
advisors prior to the signing of this Agreement.
2.7. The parties hereto expressly agree that this
Agreement shall be governed by, interpreted under and construed and enforced in
accordance with the laws of the State of Georgia. Any action to enforce,
existing out of, or relating in any way to, any provisions of this Agreement
shall be brought through the American Arbitration Association at the designated
locale of Atlanta, Georgia.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the 19th day of August, 1999.
LAHAINA ACQUISITIONS INC
By /S/ Richard P. Smyth
--------------------------
Name: Richard P. Smyth
Title: Chairman and CEO
GCA STRATEGIC INVESTMENT FUND LIMITED
By: /S/ Lewis N. Lester
--------------------------
Name: Lewis N. Lester
Title: Director
THE LAW OFFICES OF KIM T. STEPHENS
By: /S/ Kim t. Stephens, Esq
--------------------------
Name: Kim t. Stephens, Esq
-7-
<PAGE> 1
EXHIBIT 10.11
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made and entered into on
the 16th day of August, 1999, by and among LAHAINA ACQUISITIONS, INC., a
Colorado corporation ("Lahaina"), LAHA No. 1, Inc., a Georgia corporation
("LAHA 1"), MONGOOSE INVESTMENTS, LLC, a Georgia limited liability company
("Mongoose"), THE ACCENT GROUP, INC., a Georgia corporation ("Accent"), ACCENT
MORTGAGE SERVICES, INC., a Georgia corporation ("AMSI") and ALTMAN, KRITZER &
LEVICK, P.C., a Georgia professional corporation ("Escrow Agent").
WITNESSETH:
WHEREAS, LAHA 1, a wholly-owned subsidiary of Lahaina, and Accent have
agreed to merge, with Accent surviving the merger, pursuant to the terms and
conditions of that certain Agreement and Plan of Merger among Lahaina, LAHA 1,
Mongoose, Accent and AMSI, to be dated July 21, 1999 (the "Merger"), and
delivered to Escrow Agent pursuant hereto (the "Merger Agreement");
WHEREAS, the parties have agreed to place all of the closing documents
with Escrow Agent for delivery (i) upon receipt of that certain consent to the
Merger by and between Lahaina and GCA Strategic Investment Fund, Ltd., a
Bermuda corporation ("GCA") to be attached to the Merger Agreement as Exhibit K
(the "GCA Consent") and (ii) payment of the Lahaina payables, as set forth on
Schedule 10.1 to the Merger Agreement (the "Delivery Date");
WHEREAS, in an effort to expedite the Closing, Lahaina has agreed to
temporarily waive receipt of the estoppel certificates as a closing condition
(the "Estoppel Certificates"), as set forth in Section 10.3 of the Merger
Agreement, for a period of 45 calendar days from the date hereof;
WHEREAS, in an effort to expedite the Closing, Lahaina has agreed to
temporarily waive receipt of the documents to be provided at or prior to the
Closing pursuant to Section 10.3(d)-(g) (the "Real Estate Documents") until
such time as such documents are required to release the Merger Shares pursuant
to Schedule 4.1 to the Merger Agreement; and
WHEREAS, the parties set forth above have agreed to require the letter
of the Shareholders and the Beneficial Owners setting forth their respective
representations, warranties and covenants, attached as Exhibit A hereto, be
signed by all Shareholders and Beneficial Owners as a condition to closing.
1. Deferral of Certain Closing Conditions.
<PAGE> 2
A. Unless otherwise altered or waived by the then
current Board of Lahaina, failure to provide the Estoppel Certificates within
45 days of the date hereof will constitute a breach under the Merger Agreement.
B. Unless otherwise altered or waived by the then
current Board of Lahaina, the Conditions of Release, as set forth on Schedule
4.1 to the Merger Agreement, for any property listed on such schedule will not
be deemed satisfied until the Real Estate Documents corresponding with such
property have been provided to Lahaina, as set forth more fully in the Merger
Agreement.
2. Additional Conditions to Closing. The obligations of Lahaina
and LAHA 1 to effect the Merger shall be subject to (i) the execution of the
letter attached as Exhibit A hereto by the Shareholders and Beneficial Owners
at or prior to the Closing (ii) the execution of an Amendment to the Agreement
and Plan of Merger in a form mutually acceptable to the parties to the Merger
Agreement, and (iii) the execution of a mutually acceptable agreement with GCA
LNB.
3. Deliveries. Contemporaneously with the execution of this
Escrow Agreement, the parties have delivered to Escrow Agent, and Escrow Agent
acknowledges the receipt of, the following original documents, each dated July
21, 1999, August 16, 1999 or undated, and properly executed on behalf of the
applicable parties (collectively, the "Closing Documents"):
A. The Merger Agreement, together with the Schedules and
Exhibits thereto;
B. The Amended Agreement and Plan of Merger, dated
August 16, 1999, by and among the parties listed in
the Preamble above;
C. Resignations as directors of the Lahaina of Richard
P. Smyth, Gerald F. Sullivan, Sidney E. Brown and D.
Nelson Lester;
D. Resolutions of directors of Lahaina electing new
directors;
E. Opinions of Paul, Hastings, Janofsky & Walker LLP,
of Holland & Hart LLP and of Altman, Kritzer &
Levick, P.C.;
F. Officer's Certificates of each of Lahaina and Accent;
G. Secretary's Certificates of each of Lahaina and
Accent;
H. Certificate of Merger of LAHA 1 with and into Accent;
I. Articles of Merger of LAHA 1 into Accent.
4. Closing Instructions. Escrow Agent agrees to hold all of the
Closing Documents until the Delivery Date.
<PAGE> 3
Prior to delivery on the Delivery Date, Lahaina shall pay the
payables set forth on Schedule 10.1, including but not limited to, payment of
$225,000 to Paul, Hastings, Janofsky & Walker LLP.
On the Delivery Date, Escrow Agent will (with the
cooperation of counsel to Lahaina) distribute the Closing Documents as
appropriate among the parties and file the Articles of Merger with the
Secretary of State of the State of Georgia.
Upon payment of such payables, filing of the
Articles of Merger and distribution of the Closing Documents, the
"Closing" contemplated by the Merger Agreement shall have occurred.
5. Liability of Escrow Agent.
A. In performing any of its duties hereunder, Escrow Agent shall
not incur any liability to anyone for any damages, losses or
expenses, except for any negligence, willful misconduct or
breach of trust by Escrow Agent under this Agreement, and,
accordingly, Escrow Agent shall not incur any such liability
with respect to the following:
(1) any action taken or omitted in good faith upon
advice of its legal counsel given with respect to
any questions relating to the duties and
responsibilities of Escrow Agent under this
Agreement; or
(2) any action taken or omitted in reliance on any
instrument, including any notice or instruction
provided for in this Agreement, not only as to its
due execution and the validity and effectiveness of
its provisions but also as to the truth and accuracy
of any information contained therein, which Escrow
Agent shall in good faith believe to be genuine, to
have been signed or presented by a person or persons
having authority to sign or present such instrument,
and to conform with the provisions of this
Agreement.
B. Notwithstanding anything in this Agreement to the contrary,
upon a dispute between Sellers and Buyer sufficient in the
sole discretion of Escrow Agent to justify its doing so, then
Escrow Agent shall be entitled to tender the Closing
Documents into the registry or custody of any court of
competent jurisdiction in Fulton County, Georgia, together
with such pleadings as it may deem appropriate, and thereupon
be discharged from all further duties and liabilities under
this Agreement (other than with respect to any liabilities
for negligence, willful misconduct or breach of trust by
Escrow Agent).
C. Sellers and Buyer indemnify Escrow Agent against, and hold
Escrow Agent harmless from, any and all claims, actions
demands, losses, damages, expenses
<PAGE> 4
(including, without limitation, court costs, attorney's fees
and accountant's fees) and liabilities that may be imposed
upon performance of its duties under this Escrow Agreement,
including, without limitation, any litigation arising from
this Agreement or involving the subject matter of this
Agreement, but excluding any such claims, actions, demands,
losses, damages, expenses and liabilities resulting from or
arising out of any negligence, willful misconduct or breach
of trust by Escrow Agent under this Agreement. If there is
litigation arising from this Agreement or involving the
subject matter hereof, and if Sellers and Buyer are opposing
parties in such litigation, then the party prevailing in such
litigation shall be reimbursed promptly upon demand by the
other party in an amount equal to that amount which the
prevailing party shall have paid Escrow Agent with respect to
such litigation and its subject matter pursuant to the
indemnification agreement contained in this Escrow Agreement.
The provisions of this Section 3 shall survive the closing of
the purchase of the Companies or any termination,
cancellation or rescission of this Agreement.
D. Any notice to be given by Escrow Agent to Sellers or Buyer
shall be given in writing in accordance with the provisions
of the Merger Agreement.
6. Governing Law. This Escrow Agreement is to be performed in the
State of Georgia and shall be binding upon and inure to the benefit of the
successors and assigns of the parties hereto, provided that Escrow Agent shall
not assign its rights, duties or obligations hereunder in whole or in part
without the prior written consent of the other parties hereto and any such
assignment without said consent shall be void.
7. Severability. If any clause, provision or section of this
Agreement be ruled invalid or unenforceable by any court of competent
jurisdiction, the invalidity of such clause, provision or section shall not
affect any of the remaining clauses, provisions or sections hereof.
8. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which shall
constitute one agreement and the signatures of any party to any counterpart
shall be deemed to be a signature to, and may be appended to, any other
counterpart.
9. Waiver. Each party waives any claim such party may have
arising from Altman, Kritzer & Levick, P.C.'s acting as Escrow Agent hereunder
and as counsel to Accent and AMSI in connection with the Merger Agreement.
[SIGNATURES FOLLOW ON NEXT PAGE]
<PAGE> 5
IN WITNESS WHEREOF, the undersigned have executed this Agreement on
August 16, 1999.
LAHAINA ACQUISITIONS, INC.
By: /s/ Richard P. Smyth
-------------------------------------
Richard P. Smyth
Chief Executive Officer
LAHA NO. 1, INC.
By: /s/ Richard P. Smyth
-------------------------------------
Richard P. Smyth
President and Chief Executive Officer
MONGOOSE INVESTMENTS, LLC
By: /s/ Richard P. Smyth
-------------------------------------
Richard P. Smyth
Managing Member
THE ACCENT GROUP, INC.
By: /s/ L Scott Demerau
-------------------------------------
Name: L Scott Demerau
--------------------------------
Title: President
-------------------------------
ACCENT MORTGAGE SERVICES, INC.
By: /s/ L Scott Demerau
-------------------------------------
Name: L Scott Demerau
--------------------------------
Title: President
-------------------------------
<PAGE> 6
ALTMAN, KRITZER & LEVICK, P.C.
By: /s/ Steven A. Cunningham
-------------------------------------
Name: Steven A. Cunningham
--------------------------------
Shareholder
<PAGE> 1
EXHIBIT 99.1
THURSDAY JULY 22, 11:38 AM EASTERN TIME
COMPANY PRESS RELEASE
LAHAINA IN DEFINITIVE MERGER PACT
EXPANDS REAL ESTATE ACTIVITIES, ADDS 'NET-MORTGAGE'
OPERATIONS
FERNANDINA BEACH, Fla.--(BUSINESS WIRE)--July 22, 1999--Lahaina Acquisitions,
Inc. (OTC BB:LAHA - news) announced today that it has entered into a definitive
merger agreement with The Accent Group, Inc., and Atlanta-based real estate
development and mortgage company. The agreement is subject to final approval by
the Board of Directors of both companies and completion of certain
documentation. A formal closing is expected within 10 days.
"This is an excellent fit with our strategy and will provide a significant
expansion of both the real estate and mortgage aspects of our business," stated
Richard P. Smyth, Lahaina's Chairman and CEO. He continued, "The Accent Group
strategy closely follows our own with regard to the opportunities in both
mortgage financing and real estate development. Further, with their focus on
fast-growing Sunbelt areas, such as Atlanta, and their extensive presence in the
residential mortgage banking arena, the potential for increased profitability is
enhanced."
The Accent Group, Inc. (TAGI) is a recently formed organization consisting of a
financial services arm, with both traditional and new, "net-branch" residential
mortgage banking operations, as well as a group with commercial, residential and
industrial real estate activities, primarily in Atlanta and other Sunbelt
markets. The Chairman and CEO of TAGI, L. Scott Demerau, will be responsible for
the combined entity upon closing. "We are very excited about the potential of
both our mortgage and real estate operations, and feel that the combination with
Lahaina will allow us to provide a platform for increased revenues and earnings
as we go forward," stated Demerau, who is based at the combined entities' new
headquarters in Alpharetta, Ga., a suburb of Atlanta.
The Company intends to release further information on the combined operations
over the next few weeks, including information on the specific real estate
operation and the Company's financial services activities. Further, a complete
filing detailing the transaction on Form 8-K with the SEC is expected within 45
days of closing.
Lahaina Acquisitions, Inc. is a public holding company who, upon completion
of its merger with The Accent Group, Inc., will operate real estate development
and financial services groups, including a
<PAGE> 2
nationwide, "net-branch" mortgage organization. For more information, contact
Richard P. Smyth, Chairman, at 904/277-4438, or look on the Internet at www.
lahainausa.com. Information on The Accent Group, Inc. may be obtained by
calling Scott Demerau, Chairman at 770/754-6140, or on the Internet at www.
accentmortgage.com.
This press release may contain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These statements are
based on current plans and expectations of Lahaina, its affiliates or
subsidiaries, and involve risks and uncertainties that could cause actual
future activities and results of operations to be materially different from
those suggested or described in the forward-looking statements contained in
this press release. Important factors that could cause actual results to differ
include, among others, risks associated with announced or future acquisitions
(such as the uncertainties of the successful conclusion of ongoing discussions,
the quality of projects acquired, financing costs and profitability of
operations), fluctuations in operating results, variations in stock prices,
change in public interest in resorts, political and economic climate,
competition, weather conditions, risks of operations, regulatory agencies,
policies, financing difficulties and difficulties in integrating newly acquired
businesses. Additional information concerning factors that could cause actual
results to differ from those in the forward-looking statements is contained
from time to time in the Company's SEC filings. Copies of these filings may be
obtained by contacting the Company of the SEC.
Contact:
Lahaina Acquisitions Inc., Fernandina Beach
Richard P. Smyth, Chairman, 904/277-4438
www.Lahainausa.com
or
The Accent Group, Inc., Atlanta
Scott Demerau, Chairman, 770/754-6140
www. accentmortgage.com
<PAGE> 1
EXHIBIT 99.2
WEDNESDAY AUGUST 4, 2:38 PM EASTERN TIME
COMPANY PRESS RELEASE
LAHAINA CONVERTS $1.9 MILLION PREFERRED,
ELIMINATES $600,000 DEBT
ACCENT MORTGAGE REPORTS 97TH "NET BRANCH"
COMPLETION OF MERGER NEARS
AMELIA ISLAND, Fla--(BUSINESS WIRE)--Aug. 4, 1999--Lahaina Acquisitions, Inc.
(Nasdaq OTC:LAHA - news) today announced a number of transactions aimed at
improving its balance sheet and positioning it for growth as it nears
completion of its pending merger with The Accent Group, Inc. (TAGI), a large
Atlanta, Georgia based real estate and mortgage provider. The actions include
the reduction of over $600,000 of debt related to operations, and an agreement
for the conversion of $1.9 million of the Company's Preferred "A" stock into
common stock of the Company at $5.00 per share.
Separately, Accent Mortgage,the mortgage-financing subsidiary of TAGI, also
reports that it has signed its 97th "Net-Branch" to its expanded mortgage
processing operation. This operation, using the Internet as a technology
backbone, allows for the opening of geographical branches without the investment
and overhead of traditional "brick and mortar" sites. "We are quite pleased with
the progress of our new, Net-Branch organization and believe that they
will contribute sizably to the financial future of the Company," said L. Scott
Demerau, Chairman and CEO of TAGI. Mr. Demerau will be the new Chairman and CEO
of the combined operations of Lahaina and TAGI upon completion of the pending
merger.
"All of these moves further strengthen the financial position of the Company
and provide an endorsement of the potential benefits of the pending merger
with The Accent Group," stated Richard P. Smyth, who has been the Chairman and
CEO of Lahaina. Mr. Smyth indirectly controls approximately 2 million shares of
the Company's common stock through his involvement in Mongoose Investments,
LLC, an investment group based in Amelia Island, Florida.
In the larger of the transactions, Mongoose Investments, LLC, has agreed to
convert all of its $1.9 million in preferred stock, whose original terms
include the right to convert into shares of the Company's common stock at $1.00
per share, into common shares at $5.00 per share. Approximately 415,000 shares
will be issued, including accrued interest, in this transaction. No
registration rights are provided for in this transaction, though the conversion
is contingent on completion of the pending merger. Further, it has agreed to
waive obligations to it from the Company for its line of credit, which has an
outstanding balance of over $160,000, and accept assignment of other debts,
which total over $170,000.
<PAGE> 2
Additionally, in June, the Company reached agreement with another of its lenders
for the conversion of over $300,000 of debt related to its line of credit into
shares of the Company's common stock eliminating that obligation entirely.
"These actions all provide an enhanced balance sheet, but more importantly
speak to the potential of the Company going forward," explained Mr. Smyth.
Lahaina Acquisitions, Inc. is a public holding company who, upon completion of
its merger with The Accent Group, Inc., will operate real estate development
and financial services groups, including a nationwide, "net-branch" mortgage
organization. For more information, contact Richard P. Smyth, Chairman, at
(904) 277-4438, or look on the Internet at www.lahainausa.com. Information on
The Accent Group, Inc. may be obtained by calling L. Scott Demerau, Chairman,
at (770) 754-6140, or on the Internet at www.accentmortgage.com.
This press release may contain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These statements are based
on current plans and expectations of Lahaina, its affiliates or subsidiaries,
and involve risks and uncertainties that could cause actual future activities
and results of operations to be materially different from those suggested or
described in the forward-looking statements contained in this press release.
Important factors that could cause actual results to differ include, among
others, risks associated with announced or future acquisitions (such as the
uncertainties of successful conclusion of ongoing discussions, the quality of
projects acquired, financing costs and profitability of operations),
fluctuations in operating results, variations in stock prices, change in public
interest in resorts, political and economic climate, competition, weather
conditions, risks of operations, regulatory agencies, policies, financing
difficulties and difficulties in integrating newly acquired businesses.
Additional information concerning factors that could cause actual results to
differ from those in the forward-looking statements is contained from time to
time in the Company's SEC filings. Copies of these filings may be obtained by
contacting the Company or the SEC.
Contact:
Lahaina Acquisitions Inc., Fernandina Beach, Fla.
Richard P. Smyth, Chairman 904/277-4438
www.lahainausa.com
or
The Accent Group, Inc., Atlanta
Scott Demerau, Chairman, 770/754-6140
www.accentmortgage.com
<PAGE> 1
EXHIBIT 99.3
THURSDAY AUGUST 5, 10:13 AM EASTERN TIME
COMPANY PRESS RELEASE
LAHAINA ANNOUNCES PLANS FOR AMEX LISTING
APPLICATION
NAME CHANGE TO "THE ACCENT GROUP, INC."
AMELIA ISLAND, Fla--(BUSINESS WIRE)--Aug. 5, 1999--Lahaina Acquisitions, Inc.
(Nasdaq OTC:LAHA - news) today announced that it intends to apply to the
American Stock Exchange for listing of its common stock.
This listing application is expected to be filed later this quarter. It also
said that it intends to change the name of the Company to "The Accent Group,
Inc." upon completion of the merger, though it expects the common stock of the
Company to continue to trade under the current symbol of "LAHA" until approval
of another symbol is completed by the appropriate exchanges.
"These steps are all part of the repositioning of the Company to a higher
level," stated L. Scott Demerau, Chairman and CEO of The Accent Group, Inc., who
will also become the Chairman and CEO of Lahaina upon completion of its
pending merger. "The management of the Company is committed to a plan that
allows for significant growth. The application for listing on the American Stock
Exchange reflects our plans for that growth, while the change in the name of
the Company demonstrates that we have a specific direction and place in the
market," he continued. "We are in full support of this direction and intend to
continue to work with the Company going forward," said Richard P. Smyth, the
current Chairman and CEO of Lahaina, who will remain a consultant to the
Company after completion of the merger with TAGI.
The Company believes it will qualify for this listing based on its balance
sheet upon completion of its recently announced merger with The Accent Group,
Inc. (TAGI) and completion of additional financing. It recently announced a
number of transactions aimed at enhancing its net equity, including the
conversion of certain debts to equity and elimination of its Preferred "A"
shares through conversion to common stock. It is currently in discussions with
a number of investment banking firms for this additional financing and expects
to finalize an agreement subsequent to completion of the merger.
Lahaina Acquisitions, Inc. is a public holding company who, upon completion of
its merger with The Accent Group, Inc., will operate real estate development
and financial services groups, including a nationwide, "net-branch" mortgage
organization. For more information, contact Richard P. Smyth, Chairman, at (904)
277-4438, or look on the Internet at www.lahainausa.com. Information on The
Accent
<PAGE> 2
Group, Inc. may be obtained by calling L. Scott Demerau, Chairman at (770)
754-6140, or on the Internet at www.accentmortgage.com.
This press release may contain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These statements are based
on current plans and expectations of Lahaina, its affiliates or subsidiaries,
and involve risks and uncertainties that could cause actual future activities
and results of operations to be materially different from those suggested or
described in the forward-looking statements contained in this press release.
Important factors that could cause actual results to differ include, among
others, risks associated with announced or future acquisitions (such as the
uncertainties of the successful conclusion of ongoing discussions, the quality
of projects acquired, financing costs and profitability of operations),
fluctuations in operating results, variations in stock prices, change in public
interest in resorts, political and economic climate, completion, weather
conditions, risks of operations, regulatory agencies, policies, financing
difficulties and difficulties in integrating newly acquired businesses.
Additional information concerning factors that could cause actual results to
differ from those in the forward-looking statements is contained from time to
time in the Company's SEC filings. Copies of these filing may be obtained by
contacting the Company or the SEC.
Contact:
Lahaina Acquisitions, Inc., Amelia Island
Richard P. Smyth, Chairman, 904/277-4438
www.lahainausa.com
or
The Accent Group, Inc., Atlanta
L. Scott Demerau, Chairman, 770/754-6140
www.accentmortgage.com
