CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
Between
UNIVERSAL PET CARE, INC.
and
THE PURCHASER(S) LISTED ON
SCHEDULE 1 HERETO
January 20, 2004
TABLE OF CONTENTS
Article I CERTAIN DEFINITIONS
1.1 Certain Definitions
ARTICLE II PURCHASE AND SALE OF
CONVERTIBLE DEBENTURES
2.2 Purchase and Sale;
Purchase Price
2.2 Execution and Delivery
of Documents; the Closing
2.3 The Post Closing
ARTICLE III REPRESENTATIONS AND WARRANTIES
3.1 Representations,
Warranties and Agreements of
the Company
3.2 Representations and
Warranties of the Purchaser
ARTICLE IV OTHER AGREEMENTS OF THE
PARTIES
4.1 Manner of Offering
4.2 Furnishing Information
4.3 Notice of Certain
Events
4.4 Copies and Use of
Disclosure Documents and
Non-Public Filings
4.5 Modification to
Disclosure Documents
4.6 Blue Sky Laws
4.7 Integration
4.8 Furnishing of Rule
144(c) Materials
4.9 Solicitation Materials
4.10
Subsequent
Financial Statements
4.11
Prohibition on
Certain Actions
4.12
Listing of
Common Stock
4.13
Escrow
4.15
Attorney-in-Fact
4.16
Indemnification
4.17
Exclusivity
4.18
Purchaser's
Ownership of Common Stock
4.19
Purchaser's
4.20
No Violation of
Applicable Law
4.21
Redemption
Restrictions
4.22
No Other
Registration Rights
4.23
Merger or
Consolidation
4.24
Registration of
Escrow Shares
4.25
Liquidated
Damages
4.26
Short Sale
4.27
Fees
4.28
Changes to
Federal and State Securities Laws
4.29
Merger Agreement
4.30
Future Financing
4.31
Applicability of
Agreements After Post Closing
4.32
Companies Right
of Redemption
ARTICLE V TERMINATION
5.1 Termination by The
Company or the Purchaser
5.2 Remedies
ARTICLE VI LEGAL FEES AND DEFAULT
INTEREST RATE
ARTICLE VII MISCELLANEOUS
7.1 Fees and Expenses
7.2 Entire Agreement;
Amendments
7.3 Notices
7.4 Amendments; Waivers
7.5 Headings
7.6 Successors and Assigns
7.7 No Third Party
Beneficiaries
7.8 Governing Law; Venue;
Service of Process
7.9 Survival
7.10
Counterparts
Signatures
7.11
Publicity
7.12
Severability
7.13
Limitation of
Remedies
7.14
Omnibus
Provision
LIST OF SCHEDULES:
Schedule 1
Purchaser(s)
Schedule 3.1(a) Subsidiaries
Schedule 3.1(c) Capitalization
and Registration Rights
Schedule 3.1(d) Equity and
Equity Equivalent Securities
Schedule 3.1(e) Conflicts
Schedule 3.1(f) Consents and
Approvals
Schedule 3.1(g) Litigation
Schedule 3.1(h) Defaults and
Violations
Schedule 5.1
Form 8-K Disclosure Obligations
LIST OF EXHIBITS:
Exhibit A
First Convertible Debenture A
Exhibit B
Second Convertible Debenture
Exhibit C
Merger Agreement
Exhibit D
Certificate of Merger
Exhibit E
Conversion Procedures
Exhibit F
Escrow Agreement
Exhibit G
Power of Attorney
Exhibit H
Legal Opinion
Exhibit I
Rule 504 Legal Opinion
Exhibit J
Officer's Certificate
Exhibit K
Company Certificate
Exhibit L
Company Certificate
THIS CONVERTIBLE
DEBENTURE PURCHASE AGREEMENT ("Agreement") is
made and entered into as of January 20,
2004, between Universal Pet
Care, Inc., a corporation organized and
existing under the laws of the
State of Hawaii (the "Company"), and the
purchaser(s) listed on
Schedule 1 hereto (the "Purchaser").
WHEREAS, subject
to the terms and conditions set forth in this
Agreement, the Company desires to issue and
sell to the Purchaser and
the Purchaser desires to acquire from the
Company (i) the Company's
$995,500, 1 percent Convertible Debentures,
due January 20, 2009 in the
aggregate amount of Nine Hundred Ninety
Five Thousand Five Hundred
Dollars ($995,500), at the aggregate price
of Nine Hundred Ninety Five
Thousand Five Hundred Dollars ($995,500) in
the forms of Exhibit A
("First Debenture"), annexed hereto and
made a part hereof and (ii) the
Company's $4,500, 1 percent Convertible
Debenture, due January 20,
2009, at the price of Four Thousand Five
Hundred Dollars ($4,500) in
the form of Exhibit B annexed hereto and
made a part hereof (the
"Second Debenture"; together, with the
First Debenture, the
"Debentures").
IN CONSIDERATION
of the mutual covenants contained in this
Agreement, the Company and each Purchaser
agree as follows:
ARTICLE I CERTAIN DEFINITIONS
Certain
Definitions. As used
in this Agreement, and unless the
context requires a different meaning, the
following terms have the
meanings indicated:
"Affiliate" means, with respect to any
Person, any Person that,
directly or indirectly, controls, is
controlled by or is under common
control with such Person. For the purposes of this
definition,
"control" (including, with correlative
meanings, the terms "controlled
by" and "under common control with") shall
mean the possession,
directly or indirectly, of the power to
direct or cause the direction
of the management and policies of such
Person, whether through the
ownership of voting securities or by
contract or otherwise.
"Agreement" shall have the meaning set
forth in the introductory
paragraph of this Agreement.
"Attorney-in-Fact" shall have the meaning
set forth in Section
2.2(a)(iv) hereof.
"Business Day" means any day except
Saturday, Sunday and any day which
shall be a legal holiday or a day on which
banking institutions in the
State of New York are authorized or
required by law or other government
actions to close.
"Closing" shall have the meaning set forth
in Section 2.2(a).
"Closing Date" shall have the meaning set
forth in Section 2.2(a).
"Commission" means the Securities and
Exchange Commission.
"Common Stock" means shares now or
hereafter authorized of the class of
common stock, par value $1.00, of the
Company and stock of any other
class into which such shares may hereafter
have been reclassified or
changed.
"Company" shall have the meaning set forth
in the introductory
paragraph.
"Control Person" shall have the meaning set
forth in Section 4.16(a)(i)
hereof.
"Conversion Date" shall have the meaning
set forth in the Debentures.
"Debenture Notice" shall have the meaning
set forth in Section 4.18
hereof.
"Debentures" shall have the meaning set
forth in the recital.
"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.
"Disclosure Documents" means (a) all
documents and written materials
provided to the Purchaser and/or its
representatives in connection with
the Company and this offering, including,
but not limited to, the
Company's unaudited balance sheet as at
December 31, 2003 and profit
and loss statement for the period from
inception to December 31, 2003
and (b) the Schedules required to be
furnished to the Purchaser by or
on behalf of the Company pursuant to
Section 3.1 hereof.
"Effective Date" shall mean the date on
which certificate of merger
(the "Certificate of Merger") annexed as
Exhibit D hereto is filed with
the Secretary of State of the State of
[Hawaii] to effect the merger of
[AIDO Acquisition, Inc.] ("Acquisition"), a
Hawaii corporation and a
wholly owned subsidiary of Advanced ID
Corporation ("AIDO"), a South
Dakota corporation, with and into the
Company (the "Merger") pursuant
to the Merger Agreement annexed as Exhibit
C hereto.
"Escrow Agent" means Gottbetter &
Partners, 488 Madison Avenue, 12th
Floor, New York, NY 10022; Tel:
212-400-6900; Fax: 212-400-6901.
"Escrow Agreement" shall have the meaning
set forth in Section 4.13
hereof.
"Escrow Shares" means the certificates
representing Fifty Million
(50,000,000) shares of duly issued Common
Stock, without restriction
and freely tradable pursuant to Rule 504 of
Regulation D of the
Securities Act, in the share denominations
specified by the Purchaser,
registered in the name of the Purchaser
and/or its assigns to be held
in escrow pursuant to this Agreement and
the Escrow Agreement.
"Event of Default" shall have the meaning
set forth in Section 5.1.
"Exchange Act" means the Securities
Exchange Act of 1934, as amended.
"Execution Date" means the date of this
Agreement first written above.
"First Debenture" shall have the meaning
set forth in the recitals.
"Full Conversion Shares" shall have the
meaning set forth in Section
4.14(b) hereof.
"G&P" means Gottbetter & Partners,
LLP.
"Indemnified Party" shall have the meaning
set forth in Section 4.16(b)
hereof.
"Indemnifying Party" shall have the meaning
set forth in Section
4.16(b) hereof.
"Limitation on Conversion" shall have the
meaning set forth in Section
4.18 hereof.
"Losses" shall have the meaning set forth
in Section 4.16(a) hereof.
"Lump Sum Payment" shall have the meaning
set forth in Section 4.31
hereof.
"Material" shall mean having a financial
consequence in excess of
$100,000.
"Material Adverse Effect" shall have the
meaning set forth in Section
3.1(e).
"Maximum Share Limit" shall have the
meaning set forth in Section
4.14(b).
"Merger Agreement" means the Merger
Agreement among AIDO, Acquisition
and the Company, annexed as Exhibit C
hereto.
"NASD" means the National Association of
Securities Dealers, Inc.
"Nasdaq" shall mean the Nasdaq Stock
Market, Inc.
"Non-Public Filings" shall have the meaning
set forth in Section 4.2
hereof.
"Notice of Conversion" shall have the
meaning set forth in paragraph 1
of Exhibit E annexed hereto.
"Original Issuance Date," shall have the
meaning set forth in the
Debentures.
"OTCBB" shall mean the NASD over-the
counter Bulletin Board
or similar
organization or agency succeeding to its
functions.
"Per Share Market Value" of the Common
Stock means on any particular
date (a) the last sale price of shares of
Common Stock on such date or,
if no such sale takes place on such date,
the last sale price on the
most recent prior date, in each case as
officially reported on the
principal national securities exchange on
which the Common Stock is
then listed or admitted to trading, or (b)
if the Common Stock is not
then listed or admitted to trading on any
national securities exchange,
the closing bid price per share as reported
by Nasdaq, or (c) if the
Common Stock is not then listed or admitted
to trading on the Nasdaq,
the closing bid price per share of the
Common Stock on such date as
reported on the OTCBB or if there is no
such price on such date, then
the last bid price on the date nearest
preceding such date, or (d) if
the Common Stock is not quoted on the
OTCBB, the closing bid price for
a share of Common Stock on such date in the
over-the-counter market as
reported by the Pinksheets LLC (or similar
organization or agency
succeeding to its functions of reporting
prices) or if there is no such
price on such date, then the last bid price
on the date nearest
preceding such date, or (e) if the Common
Stock is not publicly traded,
the fair market value of a share of the
Common Stock as determined by
an Appraiser (as defined in and pursuant to
the procedures set forth in
Section 4(c)(iv) of the Debentures)
selected in good faith by the
holders of a majority of the Debentures;
provided, however, that the
Company, after receipt of the determination
by such Appraiser, shall
have the right to select an additional
Appraiser, in which case, the
fair market value shall be equal to the
average of the determinations
by each such Appraiser.
"Person" means an individual or a
corporation, partnership, trust,
incorporated or unincorporated association,
joint venture, limited
liability company, joint stock company,
government (or an agency or
political subdivision thereof) or other
entity of any kind.
"Post-Closing" shall have the meaning set
forth in Section 2.3(a).
"Post-Closing Date" shall have the meaning
set forth in Section 2.3(a).
"Power of Attorney" means the power of
attorney in the form of Exhibit
G annexed hereto.
"Proceeding" means an action, claim, suit,
investigation or proceeding
(including, without limitation, an
investigation or partial proceeding,
such as a deposition), whether commenced or
threatened.
"Purchase Price" shall have the meaning set
forth in Section 2.1(a).
"Purchaser" shall have the meaning set
forth in the introductory
paragraph.
"Registrable Securities" means the
Underlying Shares and the Escrow
Shares entitled to registration pursuant to
Section 4.24 and Section
4.29.
"Reporting Issuer" means a company that is
subject to the reporting
requirements of Section 13 or 15(d) of the
Exchange Act.
"Required Approvals" shall have the meaning
set forth in Section
3.1(f).
"Restriction Period" shall have the meaning
set forth in Section
4.17(a).
"Second Debenture" shall have the meaning
set forth in the recital.
"Securities" means the Debentures, the
Underlying Shares and the Escrow
Shares.
"SEC" means the Securities and Exchange
Commission.
"Securities Act" means the Securities Act
of 1933, as amended.
"Short Sale" shall have the meaning set
forth in Section 4.26 hereof.
"Successors-in-Interest" shall have the
meaning set forth in Section
4.31 hereof.
"Trading Day" means (a) a day on which the
Common Stock is quoted on
the Nasdaq, the OTCBB or the principal
stock exchange on which the
Common Stock has been listed, or (b) if the
Common Stock is not quoted
on the Nasdaq, the OTCBB or any stock
exchange, a day on which the
Common Stock is quoted in the
over-the-counter market, as reported by
the Pinksheets LLC (or any similar
organization or agency succeeding
its functions of reporting prices).
"Transaction Documents" means this
Agreement and all exhibits and
schedules hereto and all other agreements
executed pursuant to this
Agreement.
"Underlying Shares" means the shares of
duly issued Common Stock,
without restriction and freely tradable
pursuant to Rule 504 of
Regulation D of the Securities Act, into
which the First Debenture and
Second Debenture are convertible in
accordance with the terms hereof,
the First Debenture and the Second
Debenture.
ARTICLE II PURCHASE AND SALE OF CONVERTIBLE
DEBENTURES
Purchase and
Sale; Purchase Price.
(a) Subject to the
terms and
conditions set forth herein, the Company
shall issue and sell and the
Purchaser shall purchase an aggregate
principal amount of One Million
($1,000,000) (the "Purchase Price") of the
Debentures, of which Nine
Hundred Ninety Five Thousand Five Hundred
Dollars ($995,500) shall be
attributable to the First Debenture and
Four Thousand Five Hundred
Dollars ($4,500) shall be attributable to
the Second Debenture.
The
Debentures shall have the respective
rights, preferences and privileges
as set forth in the respective Debentures
annexed as Exhibit A and
Exhibit B hereto.
(b)
The Purchase Price
shall be paid and attributable as
follows:
(i) for the First
Debenture substantially in the form of
Exhibit A annexed hereto cash in the amount
of Nine Hundred Ninety Five
Thousand Five Hundred Dollars
($995,500);
(ii) for the Second
Debenture substantially in the form of
Exhibit B, cash in the amount of Four
Thousand Five Hundred Dollars
($4,500).
Execution and
Delivery of Documents; The Closing. The Closing of
the purchase and sale of the Debentures
(the "Closing") shall take
place simultaneously with the execution and
delivery of this Agreement
(the "Closing Date"). On the Closing Date,
the
parties shall execute and deliver the Escrow Agreement to
the Escrow Agent;
the
Company shall deliver to the Purchaser the (A) the
Disclosure Documents, (B) a duly executed
copy of the Merger Agreement
and (B) the legal opinions of counsel to
the Company substantially in
the form of Exhibit H and Exhibit I annexed
hereto, addressed to the
Purchaser and dated the date hereof;
the
Company shall deliver to the Escrow Agent (A) original and
duly executed Debentures (First Debenture
and the Second Debenture)
registered in the name of the Purchaser
and/or its assigns in the
amount set forth in Schedule 1, (B) an
original and duly executed Power
of Attorney and (C) certificates
representing the original Escrow
Shares;
the
Company shall execute and deliver to the Purchaser a
certificate of its Chief Executive Officer,
in the form of Exhibit J
annexed hereto, certifying that attached
thereto is a copy of
resolutions duly adopted by the Board of
Directors of the Company
authorizing the Company to execute and
deliver the Transaction
Documents and to enter into the
transactions contemplated thereby and
the appointment, pursuant to Section 4.14
hereof, of the attorney-in-
fact pursuant to the Power of Attorney
annexed as Exhibit F hereto (the
"Attorney-in-Fact"); and
the
Purchaser shall deliver to the Escrow Agent the Purchase
Price by wire transfer of immediately
available funds in the amount of
One Million Dollars ($1,000,000) pursuant
to written wire transfer
instructions delivered by the Escrow Agent
to the Purchaser at least
three (3) Business Days prior to the
Closing.
If
this Agreement is terminated pursuant to Section 5.1 hereof,
then, within two (2) Business Days from the
date of termination, either
the Company or the Purchaser shall notify
the Escrow Agent of same, and
the
Escrow Agent shall, within two (2) Business Days of its
receipt of such notice,
return the Purchase Price to the Purchaser;
(B)
return the Debentures
to the Company; and
(C)
return the Escrow
Shares to the Company.
The
Post-Closing. The
post-closing of the purchase and sale of
the Debentures (the "Post-Closing") shall
take place immediately after
the Effective Date (the "Post-Closing
Date") at the offices of
Gottbetter & Partners, 488 Madison
Avenue, New York, NY 10022;
provided, however, that all of the
transactions contemplated by the
Merger Agreement annexed as Exhibit C
hereto shall have been
consummated in accordance with the terms of
the Merger Agreement prior
to the Post-Closing; and further, provided,
that the Post-Closing may
not occur later than ten (10) days after
the Closing Date (except if
such 10th day is not a Business Day, then
the next Business Day), unless
the Purchaser agrees in writing in advance
to an extension, which
writing shall set forth the new
Post-Closing Date. The
Merger
Agreement shall be executed immediately
after the Closing.
At
the Post-Closing,
the Escrow Agent shall deliver to the Purchaser and/or its
assigns an original and duly issued First
Debenture and Second
Debenture, each registered in the name of
the Purchaser and in
denominations specified by the Purchaser in
the amounts set forth in
Schedule 1 hereto or with written notice to
the Escrow Agent prior to
the Post-Closing;
the Company shall deliver to the Purchaser the following:
certified copies of the Certificate of Merger as filed with
the Secretary of State of the State of
Hawaii;
a certificate in the form of
Exhibit K annexed hereto, dated the
Post-Closing Date and signed by the
Secretary of the Company, certify-
ing (1) that attached thereto are true,
correct and complete copies of
(a) the Company's Certificate of
Incorporation, as amended to the date
thereof, (b) the Company's by-laws, as
amended to the date thereof, and
(c) a certificate of good standing from the
Secretary of State of
[Hawaii] and (2) the incumbency of the
officer executing this
Agreement;
a certificate of the Company's Chief Executive Officer, dated
the Post-Closing Date, in the form of
Exhibit L annexed hereto,
certifying that the representations and
warranties of the Company
contained in Article III hereof are true
and correct in all material
respects on the Post-Closing Date (except
for representations and
warranties that speak of a specific date,
which representations and
warrants shall be true, correct and
complete in all material respects
as of such date); and
(D) all other
documents, instruments and writings required to
have been delivered by the Company at or
prior to the Post-Closing
pursuant to this Agreement.
Upon
receipt by the Purchaser of those items set forth in
Sections 2.3(b)(i) through (ii) above, the
Escrow Agent shall as soon
as practicable deliver the following to or
on behalf of AIDO, as
applicable:
the Purchase Price by wire transfer of immediately available
funds in the amount of One Million Dollars
($1,000,000), minus all fees
and expenses due under the Transaction
Documents, to AIDO pursuant to
written wire transfer instructions
delivered by AIDO to the Escrow
Agent at least three (3) Business Days
prior to the Post-Closing Date;
and
all documents, instruments, and writings required to have been
delivered or necessary at or prior to the
Post-Closing by the Purchaser
pursuant to this Agreement.
The Escrow Agent shall retain and hold the Escrow Shares,
which shall be held in accordance with the
terms of this Agreement and
the Escrow Agreement.
ARTICLE III REPRESENTATIONS AND WARRANTIES
Representations,
Warranties and Agreements of the Company. The
Company hereby makes the following
representations and warranties to
the Purchaser, all of which shall survive
the Post-Closing until the
earlier of the maturity date or the date
all Debentures have been
converted or redeemed;
Organization and Qualification. The Company is a corporation,
duly incorporated, validly existing and in
good standing under the laws
of the State of Hawaii, with the requisite
corporate power and
authority to own and use its properties and
assets and to carry on its
business as currently conducted.
The Company has no
subsidiaries. The
Company is duly qualified to do business
and is in good standing as a
foreign corporation in each jurisdiction in
which the nature of the
business conducted or property owned by it
makes such qualification
necessary, except where the failure to be
so qualified or in good
standing, as the case may be, would not,
individually or in the
aggregate, have a material adverse effect
on the results of operations,
assets, prospects, or financial condition
of the Company, taken as a
whole (a "Material Adverse Effect").
Authorization, Enforcement. The Company has the requisite
corporate power and authority to enter into
and to consummate the
transactions contemplated hereby and by
each other Transaction Document
and to otherwise to carry out its
obligations hereunder and thereunder.
The execution and delivery of this
Agreement and each of the other
Transaction Documents to which it is a
party by the Company and the
consummation by it of the transactions
contemplated hereby and thereby
have been duly authorized by all necessary
action on the part of the
Company. Each of this Agreement and each of
the other Transaction
Documents to which it is a party has been
or will be duly executed by
the Company and when delivered in
accordance with the terms hereof or
thereof will constitute the valid and
binding obligation of the Company
enforceable against the Company in
accordance with its terms, except as
such enforceability may be limited by
applicable bankruptcy,
insolvency, reorganization, moratorium,
liquidation or similar laws
relating to, or affecting generally the
enforcement of, creditors'
rights and remedies or by other equitable
principles of general
application.
Capitalization. The
authorized, issued and outstanding capital
stock of the Company is set forth on
Schedule 3.1(c). No
Debentures
have been issued as of the date hereof.
No shares of Common
Stock are
entitled to preemptive or similar rights,
nor is any holder of the
Common Stock entitled to preemptive or
similar rights arising out of
any agreement or understanding with the
Company by virtue of this
Agreement. Except as described in this
Agreement, or disclosed in
Schedule 3.1(c), there are no outstanding
options, voting agreements or
merger agreements, arrangements, warrants,
script, rights to subscribe
to, registration rights, calls or
commitments of any character
whatsoever relating to, or, except as a
result of the purchase and sale
of the Debentures hereunder, securities,
rights or obligations
convertible into or exchangeable for, or
giving any person any right to
subscribe for or acquire, any shares of
Common Stock or other
securities, or contracts, commitments,
understandings, or arrangements
by which the Company is or may become bound
to issue additional shares
of Common Stock or other securities, or
securities or rights
convertible or exchangeable into shares of
Common Stock or other
securities. The Company is not in violation of
any of the provisions
of its Certificate of Incorporation, bylaws
or other charter documents.
Issuance of Securities. The Debentures and the Escrow
Shares
have been duly and validly authorized for
issuance, offer and sale
pursuant to this Agreement and, when issued
and delivered as provided
hereunder or in the Debentures against
payment in accordance with the
terms hereof, shall be valid and binding
obligations of the Company
enforceable against the Company in
accordance with their respective
terms. The Company has and at all times
while the Debentures are
outstanding will continue to maintain an
adequate reserve of shares of
Common Stock to enable it to perform its
obligations under this
Agreement and the Debentures except as
otherwise permitted in this
Agreement or the Debentures. When issued in accordance with the
terms
hereof and the Debentures, the Securities
will be duly authorized,
validly issued, fully paid and
non-assessable. Except
as set forth in
Schedule 3.1(d) or Schedule 3.1(c) hereto,
there is no equity, equity
equivalent security, debt or equity lines
of credit outstanding that is
substantially similar to the Debentures,
including any security having
a floating conversion substantially similar
to the Debentures;
provided, however, that, except, as
otherwise provided herein, nothing
contained in this Section 3.1(d) shall be
deemed to permit the Company
to issue any convertible security or
instrument or equity line of
credit.
No
Conflicts. The
execution, delivery and performance of this
Agreement and the other Transaction
Documents by the Company and the
consummation by the Company of the
transactions contemplated hereby and
thereby do not and will not (i) conflict
with or violate any provision
of its Certificate of Incorporation or
bylaws (each as amended through
the date hereof) or (ii) be subject to
obtaining any of the consents
referred to in Section 3.1(f), conflict
with, or constitute a default
(or an event which with notice or lapse of
time or both would become a
default) under, or give to others any
rights of termination, amendment,
acceleration or cancellation of, any
agreement, indenture or instrument
to which the Company is a party, or (iii)
result in a violation of any
law, rule, regulation, order, judgment,
injunction, decree or other
restriction of any court or governmental
authority to which the Company
is subject (including, but not limited to,
those of other countries and
the federal and state securities laws and
regulations), or by which any
property or asset of the Company is bound
or affected, except in the
case of clause (ii), such conflicts,
defaults, terminations,
amendments, accelerations, cancellations
and violations as would not,
individually or in the aggregate, have a
Material Adverse Effect. The
business of the Company is not being
conducted in violation in any
material respect of any law, ordinance or
regulation of any
governmental authority.
Consents and Approvals. Other than the approval of its
board of
directors and stockholders, which have been
obtained, and Except as
specifically set forth in Schedule 3.1(f),
the Company is not required
to obtain any consent, waiver,
authorization or order of, or make any
filing or registration with, any court or
other federal, state, local
or other governmental authority or other
Person in connection with the
execution, delivery and performance by the
Company of this Agreement
and each of the other Transaction
Documents, except for the filing of
the Certificate of Merger with the
Secretary of State of the State of
[Hawaii] to effect the Merger pursuant to
the Merger Agreement, which
shall be filed no later than ten (10) days
from the Closing Date
(together with the consents, waivers,
authorizations, orders, notices
and filings referred to in Schedule 3.1(f),
the "Required Approvals").
Litigation; Proceedings. Except as specifically disclosed
in
Schedule 3.1(g), there is no action, suit,
notice of violation,
proceeding or investigation pending or, to
the best knowledge of the
Company, threatened against the Company or
any of its properties before
or by any court, governmental or
administrative agency or regulatory
authority (federal, state, county, local or
foreign) which (i) relates
to or challenges the legality, validity or
enforceability of any of the
Transaction Documents, the Debentures and
the Underlying Shares (ii)
could, individually or in the aggregate,
have a Material Adverse Effect
or (iii) could, individually or in the
aggregate, materially impair the
ability of the Company to perform fully on
a timely basis its
obligations under the Transaction
Documents.
No
Default or Violation.
Except as set forth in Schedule 3.1(h)
hereto, the Company (i) is not in default
under or in violation of any
indenture, loan or credit agreement or any
other agreement or
instrument to which it is a party or by
which it or any of its
properties is bound, except such defaults
or violations as do not have
a Material Adverse Effect, (ii) is not in
violation of any order of any
court, arbitrator or governmental body,
except for such violations as
do not have a Material Adverse Effect, or
(iii) is not in violation of
any statute, rule or regulation of any
governmental authority which
could (individually or in the aggregate)
(x) adversely affect the
legality, validity or enforceability of
this Agreement, (y) have a
Material Adverse Effect or (z) adversely
impair the Company's ability
or obligation to perform fully on a timely
basis its obligations under
this Agreement.
Certain Fees. No fees
or commission will be payable by the
Company to any investment banker, broker,
placement agent or bank with
respect to the consummation of the
transactions contemplated hereby
except as provided in Section 4.27
hereof.
Disclosure Documents.
The Disclosure Documents taken as a whole
are accurate in all material respects and
do 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.
Manner of Offering.
Assuming the Purchaser's representations
and warranties contained in Section 3.2 are
true and correct (a) the
Securities are being offered and sold to
the Purchaser without
registration under the Securities Act in a
private placement that is
exempt from registration pursuant to Rule
504 of Regulation D of the
Securities Act and without registration
under the Colorado Securities
Act of the Colorado Revised Statues (the
"Colorado Act") in reliance
upon the exemption provided by Section
11-51-308 of the Colorado Act
and regulation 51-3.13B promulgated
thereunder; and (b) accordingly,
the Securities are being issued without
restriction and may be freely
traded pursuant to Rule 504 of Regulation D
of the Securities Act.
Non-Registered Offering. Neither the Company nor any
Person
acting on its behalf has taken or will take
any action (including,
without limitation, any offering of any
securities of the Company under
circumstances which would require the
integration of such offering with
the offering of the Securities under the
Securities Act) which might
subject the offering, issuance or sale of
the Securities to the
registration requirements of Section 5 of
the Securities Act.
Not
a Reporting Company; Eligibility to use Exemption under
504(b). The Company is not subject to the
reporting requirements of
Section 13 or Section 15(d) of the Exchange
Act. The Company has
not
sold any securities under Rule 504(b) in
the last twelve months. The
Company is eligible to issue securities
exempt from registration
pursuant to Rule 504 of Regulation D
promulgated under the Securities
Act. The Company is a development stage
company that has a specific
business plan that is other than to engage
in a merger or acquisition
with an unidentified company or
companies.
No
Undisclosed Liabilities. Except for the transactions
contemplated in this Agreement and the
Merger Agreement, there are no
material liabilities of the Company,
whether absolute, accrued,
contingent or otherwise.
The
Purchaser acknowledges and agrees that the Company makes no
representation or warranty with respect to
itself or the transactions
contemplated hereby other than those
specifically set forth in Section
3.1 hereof.
Representations
and Warranties of the Purchaser. The Purchaser
hereby represents and warrants to the
Company as follows:
Organization; Authority. The Purchaser is a limited
liability
company, duly organized, validly existing
and in good standing under
the laws of Colorado with the requisite
power and authority to enter
into and to consummate the transactions
contemplated hereby and by the
other Transaction Documents and otherwise
to carry out its obligations
hereunder and thereunder. The acquisition of the Debentures
to be
purchased by the Purchaser hereunder has
been duly authorized by all
necessary action on the part of the
Purchaser. This
Agreement has been
duly executed and delivered by the
Purchaser and constitutes the valid
and legally binding obligation of the
Purchaser, enforceable against it
in accordance with its terms, except as
such enforceability may be
limited by applicable bankruptcy,
insolvency, reorganization,
moratorium or similar laws relating to, or
affecting generally the
enforcement of, creditors rights and
remedies or by other general
principles of equity.
Investment Intent. The
Purchaser is acquiring the Debentures to
be purchased by it hereunder, and will
acquire the Underlying Shares
relating to such Debentures, for its own
account for investment
purposes only and not with a view to or for
distributing or reselling
such Debentures or Underlying Shares or any
part thereof or interest
therein, without prejudice, however, to
such Purchaser's right, subject
to the provisions of this Agreement, at all
times to sell or otherwise
dispose of all or any part of such
Debentures or Underlying Shares in
compliance with applicable federal and
state securities laws.
Purchaser Status. At
the time the Purchaser was offered the
Debentures to be acquired by it hereunder,
it was, at the date hereof
it is and at the Post-Closing it will be an
"accredited investor" as
defined in Rule 501(a) under the Securities
Act. Purchaser is
a
resident in the State of Colorado and no
other jurisdiction.
Experience of
Purchaser. The
Purchaser, either alone or
together with its representatives, has such
knowledge, sophistication
and experience in business and financial
matters so as to be capable of
evaluating the merits and risks of an
investment in the Securities to
be acquired by it hereunder, and has so
evaluated the merits and risks
of such investment.
Ability of Purchaser to Bear Risk of Investment. The Purchaser
is able to bear the economic risk of an
investment in the Securities to
be acquired by it hereunder and, at the
present time, is able to afford
a complete loss of such investment.
Prohibited Transactions. The securities to be acquired by
the
Purchaser hereunder are not being acquired,
directly or indirectly,
with the assets of any "employee benefit
plan," within the meaning of
Section 3(3) of the Employment Retirement
Income Security Act of 1974,
as amended.
Access to Information.
The Purchaser acknowledges receipt of
the Disclosure Documents and further
acknowledges that it has been
afforded (i) 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 Securities and the
merits and risks of investing in the
Securities; (ii) access to
information about the Company and the
Company's financial condition,
results of operations, business,
properties, management and prospects
sufficient to enable it to evaluate its
investment in the Securities;
and (iii) the opportunity to obtain such
additional information which
the Company possesses or can acquire
without unreasonable effort or
expense that is necessary to make an
informed investment decision with
respect to the investment and to verify the
accuracy and completeness
of the information contained in the
Disclosure Documents.
Reliance. The
Purchaser understands and acknowledges that (i)
the Debentures being offered and sold to it
hereunder are being offered
and sold without registration under the
Securities Act in a private
placement that is exempt from the
registration provisions of the
Securities Act under Rule 504 of Regulation
D under the Securities Act
and (ii) the availability of such exemption
depends in part on, and
that the Company will rely upon the
accuracy and truthfulness of, the
foregoing representations and such
Purchaser hereby consents to such
reliance.
The
Company acknowledges and agrees that the Purchaser makes no
representations or warranties with respect
to the transactions
contemplated hereby other than those
specifically set forth in this
Section 3.2.
ARTICLE IV OTHER AGREEMENTS OF THE
PARTIES
Manner of
Offering. The
Securities are being issued pursuant to
Rule 504 (b) of Regulation D of the
Securities Act. The
Securities
will be exempt from restrictions on
transfer, and will carry no
restrictive legend with respect to the
exemption from registration
under the Securities Act. The Company will use its best
efforts to
insure that it takes no actions that would
jeopardize the availability
of the exemption from registration under
Rule 504(b) for the Securities
and, if for any reason such exemption
becomes unavailable due to the
Company's action or failure to act, the
Company shall cause the
Securities to be registered under the
Securities Act as required by
Section 4.28.
Furnishing of
Information. As long
as the Purchaser owns any of
the Securities, and unless and until the
Securities are assumed by AIDO
or the Company becomes subject to the
reporting requirements under
Section 13(a) or 15(b) of the Exchange Act,
the Company will promptly
furnish to the Purchaser financial
information similar to that required
to be reported in annual and quarterly
reports comparable to those
required by Section 13(a) or 15(d) of the
Exc
