EXHIBIT 10.8
COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is
dated as of January 4, 2001 by and between XxxxxxxxXxxxxx.xxx, a Nevada
corporation (the "Company"), and Northwind Associates, Inc. (the "Purchaser").
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Certain Definitions.
(a) "DRAW DOWN" shall have the meaning assigned
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to such term in Section 6.1(a) hereof.
(b) "DRAW DOWN PRICING PERIOD" shall mean
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a period of twenty-two (22) consecutive Trading Days beginning on the date
specified in the Draw Down Notice (as defined in Section 6.1(e) hereof);
PROVIDED, HOWEVER, the Draw Down Pricing Period shall not begin before the day
on which receipt of such notice is confirmed by the Purchaser.
(c) "EFFECTIVE DATE" shall mean the date the
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Registration Statement of the Company covering the Shares being subscribed for
hereby is declared effective.
(d) "GAAP" shall mean the United States Gene-
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rally Accepted Accounting Principles as those conventions, rules and procedures
are determined by the Financial Accounting Standards Board and its predecessor
agencies.
(e) "INVESTMENT AMOUNT" shall have the meaning
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assigned to such term in Section 6.1(e) hereof.
(f) "MATERIAL ADVERSE EFFECT" shall mean any
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adverse effect on the business, operations, properties, prospects or financial
condition of the Company that is material and adverse to the Company and its
subsidiaries and affiliates, taken as a whole and/or any condition,
circumstance, or situation that would prohibit or otherwise materially interfere
with the ability of the Company to perform any of its material obligations under
this Agreement or the Registration Rights Agreement or to perform its
obligations under any other material agreement.
(h) "PRINCIPAL MARKET" shall mean initially
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the OTC Bulletin Board and shall include the American Stock Exchange, Nasdaq
Small-Cap Market, Nasdaq National
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Market or the New York Stock Exchange if the Company becomes listed and trades
on such market or exchange after the date hereof.
(i) "PURCHASE PRICE" shall mean 90% of the VWAP
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on the date in question.
(j) "REGISTRATION STATEMENT" shall mean the
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registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), to be filed with the Securities and Exchange Commission for
the registration of the Shares pursuant to the Registration Rights Agreement
attached hereto as EXHIBIT A (the "Registration Rights Agreement).
(k) "SEC DOCUMENTS" shall mean the Company's
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latest Form 10-KSB as of the time in question, all Forms 10-Q or 10-QSB and 8-K
filed thereafter, and the Proxy Statement for its latest fiscal year as of the
time in question until such time as the Company no longer has an obligation to
maintain the effectiveness of a Registration Statement as set forth in the
Registration Rights Agreement.
(l) "SETTLEMENT PERIOD" shall have the meaning
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assigned to such term in Section 6.1(b).
(m) "SHARES" shall mean, collectively, the
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shares of Common Stock of the Company being subscribed for hereunder (the "Draw
Down Shares") and those shares of Common Stock issuable to the Purchaser upon
exercise of the Warrant (the "Warrant Shares").
(n) "THRESHOLD PRICE" shall mean the price per
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Share designated by the Company as the lowest VWAPduring any Draw Down Pricing
Period at which the Company will sell its Common Stock with respect to this
Agreement.
(o) "TRADING DAY" shall mean any day on which
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the Principal Market is open for business.
(p) "VWAP" shall mean the daily volume weighted
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average price of the Company's Common Stock on the Principal Market as reported
by Bloomberg Financial L.P. (based on a trading day from 9:30 am EST to 4:00 pm
EST) using the VAP function on the date in question.
(q) "WARRANT" shall mean the meaning assigned to
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such term in Section 5.2(f) hereof.
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ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section 2.1. PURCHASE AND SALE OF STOCK. Subject to the
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terms and conditions of this Agreement, the Company may sell and issue to the
Purchaser and the Purchaser shall be obligated to purchase from the Company up
to an aggregate purchase price of ten million dollars ($10,000,000) of the
Company's Common Stock (the "Commitment Amount"), $0.001 par value per share
(the "Common Stock"), and the Warrant, based on Draw Downs of up to five hundred
thousand dollars ($500,000) per Draw Down.
Section 2.2. THE SHARES. The Company has authorized
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and has reserved and covenants to continue to reserve, free of preemptive rights
and other similar contractual rights of stockholders, a sufficient number of its
authorized but unissued shares of Common Stock to cover the Shares to be issued
in connection with all Draw Downs requested under this Agreement. Anything in
this Agreement to the contrary notwithstanding, (i) at no time will the Company
request a Draw Down which would result in the issuance of an aggregate number of
shares of Common Stock pursuant to this Agreement which exceeds 19.9% of the
number of shares of Common Stock issued and outstanding on the Initial Closing
Date without obtaining stockholder approval of such excess issuance, and (ii)
excluding the shares issued pursuant to the Warrant, the Company may not make a
Draw Down to the extent that such Draw Down equals or exceeds a number of shares
equal to or greater than 8% of the then outstanding shares of Common Stock.
Section 2.3. PURCHASE PRICE AND INITIAL CLOSING. The Com-
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pany agrees to issue and sell to the Purchaser and, in consideration of and in
express reliance upon the representations, warranties, covenants, terms and
conditions of this Agreement, the Purchaser agrees to purchase that number of
the Shares to be issued in connection with each Draw Down. The delivery of
executed documents under this Agreement and the other agreements referred to
herein and the payment of the fees set forth in Article I of the Escrow
Agreement, attached as EXHIBIT B hereto, (the "Initial Closing") shall take
place at the offices of Xxxxxxx Xxxxxx & Green, P.C., 000 Xxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000 (i) within fifteen (15) days from the date hereof, or (ii) such
other time and place or on such date as the Purchaser and the Company may agree
upon (the "Initial Closing Date"). Each party shall deliver all documents,
instruments and writings required to be delivered by such party pursuant to this
Agreement at or prior to the Initial Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1. REPRESENTATION AND WARRANTIES OF THE COMPANY
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The Company hereby makes the following representations and warranties to the
Purchaser:
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(a) ORGANIZATION, GOOD STANDING AND POWER.
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The Company is a corporation duly incorporated validly existing and in good
standing under the laws of the State of Nevada and has all requisite corporate
authority to own, lease and operate its properties and assets and to carry on
its business as now being conducted. The Company is duly qualified to do
business and is in good standing as a foreign corporation in every jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary, other than those in which the failure so to qualify
would not have a Material Adverse Effect.
(b) AUTHORIZATION, ENFORCEMENT. (i) The Company
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has the requisite corporate power and corporate authority to enter into and
perform its obligations under this Agreement, the Registration Rights Agreement,
the Escrow Agreement (collectively, the "Transaction Documents") and to issue
the Draw Down Shares pursuant to their respective terms, (ii) the execution and
delivery of the Transaction Documents by the Company and the consummation by it
of the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action and no further consent or authorization of the
Company or its Board of Directors or stockholders is required, and (iii) the
Transaction Documents have been duly executed and delivered by the Company and
at the Initial Closing shall constitute valid and binding obligations of the
Company enforceable against the Company in accordance with their terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application. The
Company has duly and validly authorized and reserved for issuance shares of
Common Stock sufficient in number for the issuance of the Draw Down Shares.
(c) CAPITALIZATION. The authorized capital
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stock of the Company consists of 50,000,000 shares of Common Stock of which
23,366,546 shares are issued and outstanding and 10,000,000 shares of preferred
stock, $0.001 par value, of which none are issued and outstanding. All of the
outstanding shares of the Company's Common Stock have been duly and validly
authorized and are fully paid and non-assessable, except as set forth in the SEC
Documents. Except as set forth in this Agreement and the Registration Rights
Agreement and as set forth in the SEC Documents, or on SCHEDULE 3.1(C) hereto,
no shares of Common Stock are entitled to preemptive rights or registration
rights and there are no outstanding options, warrant, scrip, rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities
or rights convertible into, any shares of capital stock of the Company.
Furthermore, except as set forth in this Agreement and as set forth in the SEC
Documents or on SCHEDULE 3.1(c), there are no contracts, commitments,
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understandings, or arrangements by which the Company is or may become bound to
issue additional shares of the capital stock of the Company or options,
securities or rights convertible into shares of capital stock of the Company.
Except as set forth on SCHEDULE 3.1(c), the Company is not a party to any
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agreement granting registration rights to any person with respect to any of its
equity or debt securities. Except as set forth on SCHEDULE 3.1(c), the Company
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is not a party to, and it has no knowledge of, any agreement restricting the
voting or transfer of any shares of the capital stock of the Company. Except as
set forth in the SEC Documents or on SCHEDULE 3.1(c) hereto, the offer and sale
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of all capital stock, convertible securities, rights, warrants, or options of
the Company issued prior to the Initial Closing complied with all applicable
federal and state securities laws, and no stockholder has a
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right of rescission or damages with respect thereto which would have a Material
Adverse Effect on the Company's financial condition or operating results. The
Company has made available to the Purchaser true and correct copies of the
Company's articles or certificate of incorporation as in effect on the date
hereof (the "Charter"), and the Company's bylaws as in effect on the date hereof
(the "Bylaws"). The Company has not received any notice from the Principal
Market questioning or threatening the continued inclusion of the Common Stock on
such market.
(d) ISSUANCE OF SHARES. The Shares to be issued
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under this Agreement have been duly authorized by all necessary corporate action
and, when paid for and issued in accordance with the terms hereof and the
Warrant, the Shares shall be validly issued and outstanding, fully paid and
non-assessable, and the Purchaser shall be entitled to all rights accorded to a
holder of Common Stock.
(e) NO CONFLICTS. Except as set forth on
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Schedule 3.1(e), the execution, delivery and performance of this Agreement by
the Company and the consummation by the Company of the transactions contemplated
herein do not and will not (i) violate any provision of the Company's Charter or
Bylaws, (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, mortgage, deed of trust, indenture, note, bond, license, lease
agreement, instrument or obligation to which the Company is a party, (iii)
create or impose a lien, charge or encumbrance on any property of the Company
under any agreement or any commitment to which the Company is a party or by
which the Company is bound or by which any of its respective properties or
assets are bound, or (iv) result in a violation of any federal, state, local or
other foreign statute, rule, regulation, order, judgment or decree (including
any federal or state securities laws and regulations) applicable to the Company
or any of its subsidiaries or by which any property or asset of the Company or
any of its subsidiaries are bound or affected, except, in all cases, for such
conflicts, defaults, termination, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect. The business of the Company and its subsidiaries is not being
conducted in violation of any laws, ordinances or regulations of any
governmental entity, except for possible violations which singularly or in the
aggregate do not and will not have a Material Adverse Effect. The Company is not
required under any federal, state or local law, rule or regulation to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform any
of its obligations under this Agreement, or issue and sell the Shares in
accordance with the terms hereof (other than any filings which may be required
to be made by the Company with the Securities and Exchange Commission (the
"SEC") or state securities administrators subsequent to the Initial Closing and
any registration statement which may be filed pursuant hereto); provided that,
for purpose of the representation made in this sentence, the Company is assuming
and relying upon the accuracy of the relevant representations and agreements of
the Purchaser herein.
(f) SEC DOCUMENTS, FINANCIAL STATEMENTS. The
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Common Stock of the Company is registered pursuant to Section 12(g) of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"), and,
except as disclosed in the SEC Documents or on SCHEDULE 3.1(f) hereto, the
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Company has timely filed all reports, schedules, forms, statements and other
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documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Exchange Act, including material filed pursuant to Section
13(a) or 15(d) of the Exchange Act (all of the foregoing including filings
incorporated by reference therein being referred to herein as the "SEC
Documents"). The Company has delivered or made available to the Purchaser,
through the XXXXX system or otherwise, true and complete copies of the SEC
Documents filed with the SEC since December 31, 1998. The Company has not
provided to the Purchaser any information which, according to applicable law,
rule or regulation, should have been disclosed publicly by the Company but which
has not been so disclosed, other than with respect to the transactions
contemplated by this Agreement. As of their respective filing dates, the SEC
Documents complied in all material respects with the requirements of the
Exchange Act or the Securities Act, as applicable, and the rules and regulations
of the SEC promulgated thereunder applicable to such documents, and, as of their
respective filing dates, none of the SEC Documents contained any untrue
statement of a material fact or omitted to state 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 financial
statements of the Company included in the SEC Documents comply as to form in all
material respects with applicable accounting requirements under GAAP and the
published rules and regulations of the SEC or other applicable rules and
regulations with respect thereto. Such financial statements have been prepared
in accordance with GAAP applied on a consistent basis during the periods
involved (except (i) as may be otherwise indicated in such financial statements
or the notes thereto or (ii) in the case of unaudited interim statements, to the
extent they may not include footnotes or may be condensed or summary
statements), and fairly present in all material respects the financial position
of the Company and its subsidiaries as of the dates thereof and the results of
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
(g) SUBSIDIARIES. The SEC Documents or Schedule
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3.1(g) hereto sets forth each subsidiary of the Company, showing the
jurisdiction of its incorporation or organization and showing the percentage of
the Company's ownership of the outstanding stock or other interests of such
subsidiary. For the purposes of this Agreement, "subsidiary" shall mean any
corporation or other entity of which at least a majority of the securities or
other ownership interests having ordinary voting power (absolutely or
contingently) for the election of directors or other persons performing similar
functions are at the time owned directly or indirectly by the Company and/or any
of its other subsidiaries. All of the issued and outstanding shares of capital
stock of each subsidiary have been duly authorized and validly issued, and are
fully paid and non-assessable. There are no outstanding preemptive, conversion
or other rights, options, warrants or agreements granted or issued by or binding
upon any subsidiary for the purchase or acquisition of any shares of capital
stock of any subsidiary or any other securities convertible into, exchangeable
for or evidencing the rights to subscribe for any shares of such capital stock.
Neither the Company nor any subsidiary is subject to any obligation (contingent
or otherwise) to repurchase or otherwise acquire or retire any shares of the
capital stock of any subsidiary or any convertible securities, rights, warrants
or options of the type described in the preceding sentence. Neither the Company
nor any subsidiary is a party to, nor has any knowledge of, any agreement
restricting the voting or transfer of any shares of the capital stock of any
subsidiary.
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(h) NO MATERIAL ADVERSE EFFECT. Since the
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date of the financial statement contained in the most recently filed Form 10-QSB
or Form 10-KSB, whichever is most current, no Material Adverse Effect has
occurred or exists with respect to the Company, except as disclosed in the SEC
Documents or on SCHEDULE 3.1(H) hereto.
(i) NO UNDISCLOSED LIABILITIES. Except as dis-
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closed in the SEC Documents or on SCHEDULE 3.1(I) hereto, neither the Company
nor any of its subsidiaries has any liabilities, obligations, claims or losses
(whether liquidated or unliquidated, secured or unsecured, absolute, accrued,
contingent or otherwise) that would be required to be disclosed on a balance
sheet of the Company or any subsidiary (including the notes thereto) in
conformity with GAAP which are not disclosed in the SEC Documents, other than
those incurred in the ordinary course of the Company's or its subsidiaries'
respective businesses since such date and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect on the Company or
its subsidiaries.
(j) NO UNDISCLOSED EVENTS OR CIRCUMSTANCES.
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Since the date of the financial statement contained in the most recently filed
Form 10-QSB or Form 10-KSB, whichever is most current, no event or circumstance
has occurred or exists with respect to the Company or its businesses,
properties, prospects, operations or financial condition, that, under applicable
law, rule or regulation, requires public disclosure or announcement prior to the
date hereof by the Company but which has not been so publicly announced or
disclosed in the SEC Documents.
(k) INDEBTEDNESS. The SEC Documents or
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SCHEDULE 3.1(k) hereto sets forth as of the date hereof all outstanding
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secured and unsecured Indebtedness of the Company or any subsidiary, or for
which the Company or any subsidiary has commitments. For the purposes of this
Agreement, "Indebtedness" shall mean (A) any liabilities for borrowed money or
amounts owed in excess of $250,000 (other than trade accounts payable incurred
in the ordinary course of business), (B) all guaranties, endorsements and
contingent obligations in respect of Indebtedness of others, whether or not the
same are or should be reflected in the Company's balance sheet (or the notes
thereto), except guaranties by endorsement of negotiable instruments for deposit
or collection or similar transactions in the ordinary course of business; and
(C) the present value of any lease payments in excess of $250,000 due under
leases required to be capitalized in accordance with GAAP. Neither the Company
nor any subsidiary is in default with respect to any Indebtedness.
(l) TITLE TO ASSETS. Each of the Company and
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the subsidiaries has good and marketable title to all of its real and personal
property reflected in the SEC Documents, free of any mortgages, pledges,
charges, liens, security interests or other encumbrances, except for those
indicated in the SEC Documents or on SCHEDULE 3.1(1) hereto or such that do not
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cause a Material Adverse Effect. All said leases of the Company and each of its
subsidiaries are valid and subsisting and in full force and effect.
(m) ACTIONS PENDING. There is no action,
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suit, claim, investigation or proceeding pending or, to the knowledge of the
Company, threatened against the Company or any subsidiary which questions the
validity of this Agreement or the transactions contemplated
7
hereby or any action taken or to be taken pursuant hereto or thereto. Except as
set forth in the SEC Documents or on SCHEDULE 3.1(m) hereto, there is no action,
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suit, claim, investigation or proceeding pending or, to the knowledge of
the Company, threatened, against or involving the Company, any subsidiary or any
of their respective properties or assets. There are no outstanding orders,
judgments, injunctions, awards or decrees of any court, arbitrator or
governmental or regulatory body against the Company or any subsidiary.
(n) COMPLIANCE WITH LAW. The Company and each
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of its subsidiaries have all franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals necessary for the
conduct of their respective businesses as now being conducted by them unless the
failure to possess such franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
(o) TAXES. The Company and each subsidiary has
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filed all Tax Returns which it is required to file under applicable laws; all
such Tax Returns are true and accurate and have been prepared in compliance with
all applicable laws; the Company has paid all Taxes due and owing by it or any
subsidiary (whether or not such Taxes are required to be shown on a Tax Return)
and has withheld and paid over to the appropriate taxing authorities all Taxes
which it is required to withhold from amounts paid or owing to any employee,
stockholder, creditor or other third parties; and since December 31, 1999, the
charges, accruals and reserves for Taxes with respect to the Company (including
any provisions for deferred income taxes) reflected on the books of the Company
are adequate to cover any Tax liabilities of the Company if its current tax year
were treated as ending on the date hereof.
No claim has been made by a taxing authority in a jurisdiction
where the Company does not file tax returns that the Company or any subsidiary
is or may be subject to taxation by that jurisdiction. There are no foreign,
federal, state or local tax audits or administrative or judicial proceedings
pending or being conducted with respect to the Company or any subsidiary; no
information related to Tax matters has been requested by any foreign, federal,
state or local taxing authority; and, except as disclosed above, no written
notice indicating an intent to open an audit or other review has been received
by the Company or any subsidiary from any foreign, federal, state or local
taxing authority. There are no material unresolved questions or claims
concerning the Company's Tax liability. The Company (A) has not executed or
entered into a closing agreement pursuant to ss. 7121 of the Internal Revenue
Code or any predecessor provision thereof or any similar provision of state,
local or foreign law; and (B) has not agreed to or is required to make any
adjustments pursuant to ss. 481 (a) of the Internal Revenue Code or any similar
provision of state, local or foreign law by reason of a change in accounting
method initiated by the Company or any of its subsidiaries or has any knowledge
that the IRS has proposed any such adjustment or change in accounting method, or
has any application pending with any taxing authority requesting permission for
any changes in accounting methods that relate to the business or operations of
the Company. The Company has not been a United States real property holding
corporation within the meaning of ss. 897(c)(2) of the Internal Revenue Code
during the applicable period specified in ss. 897(c)(1)(A)(ii) of the Internal
Revenue Code.
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The Company has not made an election under ss. 341(f) of the
Internal Revenue Code. The Company is not liable for the Taxes of another person
that is not a subsidiary of the Company under (A) Treas. Reg. ss. 1.1502-6 (or
comparable provisions of state, local or foreign law), (B) as a transferee or
successor, (C) by contract or indemnity or (D) otherwise. The Company is not a
party to any tax sharing agreement. The Company has not made any payments, is
not obligated to make payments nor is it a party to an agreement that could
obligate it to make any payments that would not be deductible under ss. 280G of
the Internal Revenue Code.
For purposes of this Section 3.1(o):
"IRS" means the United States Internal Revenue Service.
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"TAX" or "TAXES" means federal, state, county, local, foreign,
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or other income, gross receipts, ad valorem, franchise, profits, sales or use,
transfer, registration, excise, utility, environmental, communications, real or
personal property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.
"TAX RETURN" means any return, information report or filing
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with respect to Taxes, including any schedules attached thereto and including
any amendment thereof.
(p) CERTAIN FEES. Except as set forth on
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SCHEDULE 3.1(p) hereto, no brokers, finders or financial advisory fees or com-
---------------
missions will be payable by the Company or any subsidiary with respect to
the transactions contemplated by this Agreement.
(q) DISCLOSURE. To the best of the Company's
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knowledge, neither this Agreement or the Schedules hereto nor any other
documents, certificates or instruments furnished to the Purchaser by or on
behalf of the Company or any subsidiary in connection with the transactions
contemplated by this Agreement contains any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements made
herein or therein, in the light of the circumstances under which they were made
herein or therein, not misleading.
(r) OPERATION OF BUSINESS. The Company and each
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of the subsidiaries owns or possesses all patents, trademarks, service
marks, trade names, copyrights, licenses and authorizations as set forth in
the SEC Documents or on SCHEDULE 3.1(r) hereto, and all rights with respect to
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the foregoing, which are necessary for the conduct of its business as now con-
ducted without any conflict with the rights of others.
(s) INSURANCE. Except as disclosed in the SEC
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Documents or on Schedule 3.1(s) hereto, the Company carries or will have the
benefit of insurance in such amounts and covering such risks as is adequate for
the conduct of its business and the value of its properties and as is customary
for companies engaging in similar businesses and similar industries.
(t) BOOKS AND RECORDS. The records and docu-
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ments of the Company and its subsidiaries accurately reflect in all
material respects the information relating to the
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business of the Company and the subsidiaries, the location and collection of
their assets, and the nature of all transactions giving rise to the obligations
or accounts receivable of the Company or any subsidiary.
(u) MATERIAL AGREEMENTS. Except as set forth
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in the SEC Documents, or on SCHEDULE 3.1(u) hereto, neither the Company nor any
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subsidiary is a party to any written or oral contract, instrument, agreement,
commitment, obligation, plan or arrangement, a copy of which would be required
to be filed with the SEC as an exhibit to a registration statement on Form S-1
or other applicable form (collectively, "Material Agreements") if the Company or
any subsidiary were registering securities under the Securities Act. Except as
set forth on Schedule 3.1(u), the Company and each of its subsidiaries has in
all material respects performed all the obligations required to be performed by
them to date under the foregoing agreements, have received no notice of default
and, to the best of the Company's knowledge are not in default under any
Material Agreement now in effect, the result of which could cause a Material
Adverse Effect. Except as set forth in the SEC Documents, no written or oral
contract, instrument, agreement, commitment, obligation, plan or arrangement of
the Company or of any subsidiary limits or shall limit the payment of dividends
on the Company's Common Stock.
(v) TRANSACTIONS WITH AFFILIATES. Except as set
forth in the SEC Documents or on SCHEDULE 3.1(v) hereto, there are no loans,
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leases, agreements, contracts, royalty agreements, management contracts or
arrangements or other continuing transactions exceeding $100,000 between (A) the
Company, any subsidiary or any of their respective customers or suppliers on the
one hand, and (B) on the other hand, any officer, employee, consultant or
director of the Company, or any of its subsidiaries, or any person owning 5% or
more of the capital stock of the Company or any subsidiary or any member of the
immediate family of such officer, employee, consultant, director or stockholder
or any corporation or other entity controlled by such officer, employee,
consultant, director or stockholder, or a member of the immediate family of such
officer, employee, consultant, director or stockholder.
(w) SECURITIES LAWS. The Company has complied or
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will comply with all applicable federal and state securities laws in connection
with the offer, issuance and sale of the Shares hereunder. Neither the Company
nor anyone acting on its behalf, directly or indirectly, has or will sell, offer
to sell or solicit offers to buy the Shares or similar securities to, or solicit
offers with respect thereto from, or enter into any preliminary conversations or
negotiations relating thereto with, any person (other than the Purchaser), so as
to bring the issuance and sale of the Shares and/or Warrant under the
registration provisions of the Securities Act and applicable state securities
laws. Neither the Company nor any of its affiliates, nor any person acting on
its or their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D under the Securities Act) in
connection with the offer or sale of the Shares.
(x) EMPLOYEES. Neither the Company nor any
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subsidiary has any collective bargaining arrangements or agreements covering any
of its employees. Except as set forth in the SEC Documents or on SCHEDULE 3.1(x)
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hereto, neither the Company nor any subsidiary is in breach of any employment
contract, agreement regarding proprietary information, noncompetition agreement,
nonsolicitation agreement, confidentiality agreement, or any other
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similar contract or restrictive covenant, relating to the right of any officer,
employee or consultant to be employed or engaged by the Company or such
subsidiary. Since the date of the December 31, 1999 Form 10-KSB, no officer,
consultant or key employee of the Company or any subsidiary whose termination,
either individually or in the aggregate, could have a Material Adverse Effect,
has terminated or, to the knowledge of the Company, has any present intention of
terminating his or her employment or engagement with the Company or any
subsidiary.
(y) ABSENCE OF CERTAIN DEVELOPMENTS. Except as
-------------------------------
disclosed in SEC Documents or on SCHEDULE 3.1(y) hereto, since the date of the
---------------
financial statement contained in the most recently filed Form 10-QSB or Form
10-KSB, whichever is most current, neither the Company nor any subsidiary has:
(i) issued any stock, bonds or other
corporate securities or any rights, options or warrants with respect thereto;
(ii) borrowed any amount or incurred
or become subject to any liabilities (absolute or contingent) except current
liabilities incurred in the ordinary course of business which are comparable in
nature and amount to the current liabilities incurred in the ordinary course of
business during the comparable portion of its prior fiscal year, as adjusted to
reflect the current nature and volume of the Company's or such subsidiary's
business;
(iii) discharged or satisfied any lien or
encumbrance or paid any obligation or liability (absolute or contingent), other
than current liabilities paid in the ordinary course of business;
(iv) declared or made any payment or dis-
tribution of cash or other property to stockholders with respect to its stock,
or purchased or redeemed, or made any agreements so to purchase or redeem, any
shares of its capital stock;
(v) sold, assigned or transferred any
other tangible assets, or canceled any debts or claims, except in the ordi-
nary course of business;
(vi) sold, assigned or transferred any
patent rights, trademarks, trade names, copyrights, trade secrets or other
intangible assets or intellectual property rights, or disclosed any proprietary
confidential information to any person except to customers in the ordinary
course of business or to the Purchaser or its representatives;
(vii) suffered any material losses
(except for anticipated losses consistent with prior quarters) or waived any
rights of material value, whether or not in the ordinary course of business, or
suffered the loss of any material amount of prospective business;
(viii) made any changes in employee compen-
sation except in the ordinary course of business and consistent with past prac-
tices;
(ix) made capital expenditures or commit-
ments therefor that aggregate in excess of $500,000;
11
(x) entered into any other material
transaction, whether or not in the ordinary course of business;
(xi) suffered any material damage, des-
truction or casualty loss, whether or not covered by insurance;
(xii) experienced any material problems
with labor or management in connection with the terms and conditions of their
employment; or
(xiii) effected any two or more events
of the foregoing kind which in the aggregate would be material to the Company
or its subsidiaries.
(z) GOVERNMENTAL APPROVALS. Except as set
forth in the SEC Documents or on SCHEDULE 3.1(z) hereto, and except for the
----------------
filing of any notice prior or subsequent to any Settlement Date that may be
required under applicable federal or state securities laws (which if required,
shall be filed on a timely basis), including the filing of a registration
statement or post-effective amendment pursuant to this Agreement, no
authorization, consent, approval, license, exemption of, filing or registration
with any court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary for, or in
connection with, the delivery of the Shares, or for the performance by the
Company of its obligations under this Agreement.
(aa) USE OF PROCEEDS. The proceeds from the
----------------
sale of the Shares will be used by the Company and its subsidiaries for
general corporate purposes.
(bb) ACKNOWLEDGMENT REGARDING PURCHASER'S PURCHASE
---------------------------------------------
OF SHARES. Company acknowledges and agrees that Purchaser is acting solely
---------
in the capacity of arm's length purchaser with respect to this Agreement and the
transactions contemplated hereunder. The Company further acknowledges that the
Purchaser is not acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to this Agreement and the transactions
contemplated hereunder. The Company further represents to the Purchaser that the
Company's decision to enter into this Agreement has been based solely on (a) the
Purchaser's representations and warranties in Section 3.2, and (b) the
independent evaluation by the Company and its own representatives and counsel.
(cc) BROKERS AND FINDERS FEES. Except as set
-------------------------
forth on SCHEDULE 3.1(cc), the Company does not owe any broker or finder any
-----------------
fees in connection with the transactions contemplated under this Agreement.
Section 3.2. REPRESENTATIONS AND WARRANTIES OF THE
-------------------------------------
PURCHASER. The Purchaser hereby makes the following representations and
---------
warranties to the Company:
(a) ORGANIZATION AND STANDING OF THE PURCHASER.
--------------------------------------------
The Purchaser is a corporation duly incorporated, validly existing and in good
standing under the laws of the Cayman Islands.
12
(b) AUTHORIZATION AND POWER. The Purchaser has
-----------------------
the requisite power and authority to enter into and perform the Transaction
Documents and to purchase the Shares being sold to it hereunder. The execution,
delivery and performance of the Transaction Documents by Purchaser and the
consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate action and at the Initial Closing shall
constitute valid and binding obligations of the Purchaser enforceable against
the Purchaser in accordance with their terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application
(c) NO CONFLICTS. The execution, delivery and
------------
performance of this Agreement and the consummation by the Purchaser of the
transactions contemplated hereby or relating hereto do not and will not (i)
result in a violation of the Purchaser's charter documents or bylaws or (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of any agreement, indenture
or instrument to which the Purchaser is a party, or result in a violation of any
law, rule, or regulation, or any order, judgment or decree of any court or
governmental agency applicable to the Purchaser or its properties (except for
such conflicts, defaults and violations as would not, individually or in the
aggregate, have a Material Adverse Effect on Purchaser). The Purchaser is not
required to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement or to purchase
the Shares in accordance with the terms hereof.
(d) FINANCIAL RISKS. The Purchaser acknowledges
----------------
that it is able to bear the financial risks associated with an investment in the
Shares and that it has been given full access to such records of the Company and
the subsidiaries and to the officers of the Company and the subsidiaries as it
has deemed necessary or appropriate to conduct its due diligence investigation.
The Purchaser is capable of evaluating the risks and merits of an investment in
the Shares by virtue of its experience as an investor and its knowledge,
experience, and sophistication in financial and business matters and the
Purchaser is capable of bearing the entire loss of its investment in the Shares.
(e) ACCREDITED INVESTOR. The Purchaser is an
--------------------
"accredited investor" as defined in Rule 501(a)(8) of Regulation D promulgated
under the Securities Act.
(f) GENERAL. The Purchaser understands that
-------
the Company is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of the Purchaser set
forth herein in order to determine the suitability of the Purchaser to acquire
the Shares.
13
ARTICLE IV
COVENANTS
The Company covenants with the Purchaser as follows:
Section 4.1. SECURITIES COMPLIANCE.
---------------------
If applicable, the Company shall notify The Nasdaq Stock
Market, in accordance with its rules and regulations, of the transactions
contemplated by this Agreement, and shall take all other necessary action and
proceedings as may be required and permitted by applicable law, rule and
regulation, for the legal and valid issuance of the Shares and the Warrant to
the Purchaser or subsequent holders.
Section 4.2. REGISTRATION AND LISTING. The Company will
------------------------
cause its Common Stock to continue to be registered under Sections 12(b) or
12(g) of the Exchange Act, will comply in all respects with its reporting and
filing obligations under the Exchange Act, will comply with all requirements
related to any registration statement filed pursuant to this Agreement, and will
not take any action or file any document (whether or not permitted by the
Securities Act or the Exchange Act or the rules promulgated thereunder) to
terminate or suspend such registration or to terminate or suspend its reporting
and filing obligations under the Exchange Act or Securities Act, except as
permitted herein. The Company will take all action necessary to continue the
listing or trading of its Common Stock on the Principal Market and will comply
in all respects with the Company's reporting, filing and other obligations under
the bylaws or rules of the Principal Market and shall provide the Purchaser with
copies of any correspondence to or from such Principal Market which questions or
threatens delisting of the Common Stock, within three (3) Trading Days of the
Company's receipt thereof, until the Purchaser has disposed of all of the
Shares.
Section 4.3. ESCROW ARRANGEMENT. The Company and the
-------------------
Purchaser shall enter into an escrow arrangement with Xxxxxxx Xxxxxx & Green,
P.C. (the "Escrow Agent") in the Form of EXHIBIT B hereto respecting payment
---------
against delivery of the Shares.
Section 4.4. REGISTRATION RIGHTS AGREEMENT. The Company
-----------------------------
and the purchaser shall enter into the Registration Rights Agreement in the Form
of EXHIBIT A hereto. Before the Purchaser shall be obligated to accept a Draw
Down request from the Company, the Company shall have caused a sufficient number
of shares of Common Stock to be registered to cover the Shares to be issued in
connection with such Draw Down.
Section 4.5. ACCURACY OF REGISTRATION STATEMENT. On each
-----------------------------------
Settlement Date, the Registration Statement and the prospectus therein shall not
contain any untrue statement of a material fact or omit to state any material
fact to be required to be stated therein or necessary in order to make the
statements therein not misleading in light of the circumstances under which they
were made; and on such Settlement Date or date of filing of the Registration
Statement and the prospectus therein will not include any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances
14
under which they were made, not misleading; PROVIDED, HOWEVER, the Company makes
-----------------
no representations or warranties as to the information contained in or omitted
from the Registration Statement and the prospectus therein in reliance upon and
in conformity with the information furnished in writing to the Company by the
Purchaser specifically for inclusion in the Registration Statement and the
prospectus therein.
Section 4.6. COMPLIANCE WITH LAWS. The Company shall
comply, and cause each subsidiary to comply, with all applicable laws, rules,
regulations and orders, noncompliance with which could have a Material Adverse
Effect.
Section 4.7. KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The
---------------------------------------
Company shall keep and cause each subsidiary to keep adequate records and books
of account, in which complete entries will be made in accordance with GAAP
consistently applied, reflecting all financial transactions of the Company and
its subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
Section 4.8. OTHER AGREEMENTS. The Company shall not
-----------------
enter into any agreement the terms of which such agreement would restrict or
impair the ability of the Company to perform its obligations under this
Agreement.
Section 4.9. NOTICE OF CERTAIN EVENTS AFFECTING REGIS-
--------------------------------------------
TRATION; SUSPENSION OF RIGHT TO REQUEST A DRAW DOWN. THE COMPANY WILL IMMEDI-
----------------------------------------------------
ATELY NOTIFY THE PURCHASER IN WRITING AND OBTAIN AN ACKNOWLEDGMENT FROM
PURCHASER UPON THE OCCURRENCE OF ANY OF THE FOLLOWING EVENTS in respect of the
Registration Statement or related prospectus in respect of the Shares: (i)
receipt of any request for additional information from the SEC or any other
federal or state governmental authority during the period of effectiveness of
the Registration Statement the response to which would require any amendments or
supplements to the Registration Statement or related prospectus; (ii) the
issuance by the SEC or any other federal or state governmental authority of any
stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose; (iii) receipt of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Shares for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; (iv) the happening
of any event that makes any statement made in the Registration Statement or
related prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or that requires the making
of any changes in the Registration Statement, related prospectus or documents so
that, in the case of the Registration Statement, it will 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, and
that in the case of the related prospectus, it will 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, in the light of the
circumstances under which they were made, not misleading; and (v) the Company's
reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate. The Company shall not deliver to the Purchaser
any Draw Down Notice during the continuation of any of the foregoing events. The
Company shall promptly make available to the Purchaser any such supplements or
amendments to the related
15
prospectus, at which time, provided that the amendment is then effective, the
Company may recommence the delivery of Draw Down Notices.
Section 4.10. CONSOLIDATION; MERGER. The Company shall not
---------------------
at any time after the date hereof, effect any merger or consolidation of the
Company with or into, or a transfer of all or substantially all of the assets of
the Company to, another entity (a "Consolidation Event") unless the resulting
successor or acquiring entity (if not the Company) assumes by written instrument
or by operation of law the obligation to deliver to the Purchaser such shares of
stock and/or securities as the Purchaser is entitled to receive pursuant to this
Agreement.
Section 4.11. LIMITATION ON FUTURE FINANCING. The Company
------------------------------
agrees that, except as set forth below, it will not enter into any sale of its
Common Stock or securities convertible into cash at a discount to the current
VWAP until the earlier of (i) 20 months from the Effective Date, or (ii) sixty
(60) days after the entire Commitment Amount has been purchased by the
Purchaser. The foregoing shall not prevent or limit the Company from engaging in
any sale of securities (i) in a registered public offering by the Company which
is underwritten by one or more established investment banks (not including an
equity line type of financing), (ii) in one or more private placements where the
purchasers do not have registration rights, (iii) pursuant to any presently
existing or future employee benefit plan which plan has been or is approved by
the Company's stockholders, (iv) pursuant to any compensatory plan for
directors, officers, employees or key consultants, (v) in connection with a
strategic partnership or other business transaction, the principal purpose of
which is not simply to raise money, or (vi) to which Purchaser gives its prior
written consent, which it shall not unreasonably withhold. Further, the
Purchaser shall have a right of first refusal, to elect to participate, in such
subsequent transaction in the case of (i), (ii) and (vi) above. Such right of
first refusal must be exercised in writing and delivered pursuant to Section 9.4
hereof within seven (7) Trading Days of the Purchaser's receipt of notice of the
proposed terms of such financing.
The Purchaser covenants with the Company as follows:
Section 4.12. COMPLIANCE WITH LAW. The Purchaser agrees
that its trading activities with respect to shares of the Company's Common Stock
will be in compliance with all applicable state and federal securities laws,
rules and regulations and rules and regulations of the Principal Market on which
the Company's Common Stock is listed. Without limiting the generality of the
foregoing, the Purchaser agrees that it will, whenever required by federal
securities laws, deliver the prospectus included in the Registration Statement
to any purchaser of Shares from the Purchaser.
ARTICLE V
CONDITIONS TO INITIAL CLOSING AND DRAW DOWNS
Section 5.1. CONDITIONS PRECEDENT TO THE OBLIGATION OF
-----------------------------------------
THE COMPANY TO CLOSE OR SELL THE SHARES. The obligation hereunder of the
---------------------------------------
Company to proceed to close this Agreement and to issue and sell the Shares to
the Purchaser is subject to the satisfaction or waiver, at or
16
before the Initial Closing, and as of each Settlement Date of each of the
conditions set forth below. These conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion.
(a) ACCURACY OF THE PURCHASER'S REPRESENTA-
--------------------------------------------
TIONS AND WARRANTIES. The representations and warranties of the Purchaser
------------------------
shall be true and correct in all material respects as of the date when made and
as of the Initial Closing and as of each Settlement Date as though made at that
time, except for representations and warranties that speak as of a particular
date.
(b) PERFORMANCE BY THE PURCHASER. The Purchaser
----------------------------
shall have performed, satisfied and complied in all material respects with all
material covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Purchaser at or prior to the
Initial Closing and as of each Settlement Date.
(c) NO INJUNCTION. No statute, rule, regulation,
-------------
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement.
Section 5.2. CONDITIONS PRECEDENT TO THE OBLIGATION OF
-----------------------------------------
THE PURCHASER TO CLOSE. The obligation hereunder of the Purchaser to perform its
----------------------
obligations under this Agreement and to purchase the Shares is subject to the
satisfaction or waiver, at or before the Initial Closing, of each of the
conditions set forth below. These conditions are for the Purchaser's sole
benefit and may be waived by the Purchaser at any time in its sole discretion.
(a) ACCURACY OF THE COMPANY'S REPRESENTATIONS
--------------------------------------------
AND WARRANTIES. Each of the representations and warranties of the Company
---------------
shall be true and correct in all material respects as of the date when made and
as of the Initial Closing as though made at that time (except for
representations and warranties that speak as of a particular date).
(b) PERFORMANCE BY THE COMPANY. The Company
--------------------------
shall have performed, satisfied and complied in all respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Initial Closing.
(c) NO INJUNCTION. No statute, rule, regulation,
-------------
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement.
(d) NO PROCEEDINGS OR LITIGATION. No action,
------------------------------
suit or proceeding before any arbitrator or any governmental authority shall
have been commenced, and no investigation by any governmental authority shall
have been threatened, against the Purchaser or the Company or any subsidiary, or
any of the officers, directors or affiliates of the Company or any subsidiary
seeking to restrain, prevent or change the transactions contemplated by this
Agreement, or seeking damages in connection with such transactions.
17
(e) OPINION OF COUNSEL, ETC. At the Initial
------------------------
Closing, the Purchaser shall have received an opinion of counsel to the
Company, dated as of the Initial Closing Date, in the form of EXHIBIT C hereto.
(f) WARRANT. On the Initial Closing Date,
-------
the Company shall issue to the Purchaser a warrant certificate to purchase up to
a number of shares of Common Stock equal to $500,000 divided by the VWAP (the
"Base Price") of the Common Stock during the fifteen (15) Trading Days
immediately prior to the Initial Closing Date (the "Warrant"). The Warrant shall
have a term from its initial date of exercise of three (3) years. The exercise
price of the Warrant shall be 110% of the Base Price. The Common Stock
underlying the Warrant will be registered in the Registration Statement referred
to in Section 4.3 hereof. The Warrant shall be in the form of EXHIBIT E hereto.
Section 5.3. CONDITIONS PRECEDENT TO THE OBLIGATION OF
THE PURCHASER TO ACCEPT A DRAW DOWN AND PURCHASE THE SHARES. The obligation
hereunder of the Purchaser to accept a Draw Down request and to acquire and pay
for the Shares is subject to the satisfaction at or before each Settlement
Date, of each of the conditions set forth below.
(a) SATISFACTION OF CONDITIONS TO INITIAL
-----------------------------------------
CLOSING. The Company shall have satisfied, or the Purchaser shall have waived
-------
at the Initial Closing, the conditions set forth in Section 5.2 hereof
(b) EFFECTIVE REGISTRATION STATEMENT. The
----------------------------------
Registration Statement registering the Shares shall have been declared effective
by the SEC and shall remain effective on each Settlement Date.
(c) NO SUSPENSION. Trading in the Company's
-------------
Common Stock shall not have been suspended by the SEC or the Principal Market
(except for any suspension of trading of limited duration agreed to by the
Company, which suspension shall be terminated prior to the delivery of each Draw
Down Notice), and, at any time prior to such Draw Down Notice, trading in
securities generally as reported on the Principal Market shall not have been
suspended or limited, or minimum prices shall not have been established on
securities whose trades are reported on the Principal Market unless the general
suspension or limitation shall have been terminated prior to the delivery of
such Draw Down Notice.
(d) MATERIAL ADVERSE EFFECT. No Material
-----------------------
Adverse Effect and no Consolidation Event where the successor entity has not
agreed to perform the Company's obligations under this Agreement shall have
occurred.
(e) OPINION OF COUNSEL. The Purchaser shall
-------------------
have received a "down-to-date" letter from the Company's counsel, confirming
that there is no change from the counsel's previously delivered opinion, or else
specifying with particularity the reason for any change and an opinion as to the
additional items specified in EXHIBIT C hereto.
18
ARTICLE VI
DRAW DOWN TERMS
Section 6.1. DRAW DOWN TERMS. Subject to the satisfaction
---------------
of the conditions set forth in this Agreement, the parties agree as follows:
(a) The Company, may, in its sole discretion,
issue and exercise a draw down (a "Draw Down") during each Draw Down Pricing
Period, which Draw Down the Purchaser will be obligated to accept for a period
of 20 months commencing immediately after the Effective Date (the "Commitment
Period").
(b) Only one Draw Down shall be allowed in each
Draw Down Pricing Period. There shall be at least five (5) Trading Days between
Draw Down Pricing Periods. The number of shares of Common Stock purchased by the
Purchaser with respect to each Draw Down shall be determined as set forth in
Section 6.1(d) herein and settled on, (i) as to the 1st through the 11th Trading
Days after a Draw Down Pricing Period commences (the "First Settlement Period"),
on the 13th Trading Day after a Draw Down Pricing Period commences and (ii) as
to the 12th through the 22nd Trading Days after a Draw Down Pricing Period
commences (the "Second Settlement Period"), the 24th Trading Day after a Draw
Down Pricing Period. (each, a "Settlement Date" and the First and Second
Settlement Periods collectively referred to as "Settlement Periods"). In
connection with each Draw Down Pricing Period, the Company may set the Threshold
Price in the Draw Down Notice.
(c) The minimum Investment Amount for any Draw
Down shall be $50,000 and the maximum Investment Amount as to each Draw Down
shall be the lesser of (i) $500,000, and (ii) 4.5% of the average of the VWAPs
for the Common Stock for the sixty (60) calendar day period immediately prior to
the applicable Commencement Date (defined below) multiplied by the total trading
volume in respect of the Common Stock for the sixty (60) calendar day period
immediately prior to such Commencement Date.
(d) The number of Shares of Common Stock to be
issued on each Settlement Date shall be a number of shares equal to the sum of
the quotients (for each trading day within the Settlement Period) of (x) 1/22nd
of the Investment Amount and (y) the Purchase Price on each Trading Day within
the Settlement Period, subject to the following adjustments:
(i) if the VWAP on a given Trading Day is
less than the Threshold Price, then the Investment Amount will be reduced by
1/22nd and that day shall be withdrawn from the Settlement Period; and
(ii) trading of the Common Stock on the
Principal Market is suspended for more than three (3) hours, in the aggregate,
on any Trading Day during the Settlement Period, the Investment Amount shall
be reduced by 1/22nd and that day shall be withdrawn from the applicable Settle-
ment Period.
19
(e) The Company must inform the Purchaser by
delivering a draw down notice, in the form of EXHIBIT D hereto (the "Draw Down
Notice"), via facsimile transmission in accordance with Section 9.4 as to the
amount of the Draw Down (the "Investment Amount") the Company wishes to
exercise, before the first day of the Draw Down Pricing Period (the
"Commencement Date"). If the Commencement Date is to be the date of the Draw
Down Notice, the Draw Down Notice must be delivered to and receipt confirmed by
the Purchaser at least one hour before trading commences on such date. At no
time shall the Purchaser be required to purchase more than the maximum Draw Down
amount for a given Draw Down Pricing Period so that if the Company chooses not
to exercise the maximum permitted Draw Down in a given Draw Down Pricing Period
the Purchaser is not obligated to and shall not purchase more than the scheduled
maximum amount in a subsequent Draw Down Pricing Period.
(f) On or before each Settlement Date, the
Shares purchased by the Purchaser shall be delivered to The Depository Trust
Company ("DTC") account of the Purchaser or its designees via the Deposit
Withdrawal Agent Commission ("DWAC") system upon receipt by the Escrow Agent of
payment for the Draw Down Shares into the Escrow Agent's master escrow account
as provided in the Escrow Agreement. The Escrow Agent shall be directed to pay
the purchase price to the Company, net of Seven Hundred Fifty Dollars ($750) as
escrow expenses to the Escrow Agent and any additional fees as set forth in the
Escrow Agreement. The delivery of the Shares into the Purchaser's DTC account in
exchange for payment therefor shall be referred to herein as "Settlement".
ARTICLE VII
TERMINATION
Section 7.1. TERM. The term of this Agreement shall
----
begin on the date hereof and shall end twenty (20) months from the Effective
Date or as otherwise set forth in Section 7.2.
Section 7.2. OTHER TERMINATION.
-----------------
(a) The Purchaser may terminate this Agreement
upon one (1) Trading Day's notice if (i) an event resulting in a Material
Adverse Effect has occurred and has not been cured for a period of 60 days, (ii)
the Common Stock is de-listed from the Principal Market unless such de-listing
is in connection with the listing of the Common Stock on the Nasdaq National
Market, Nasdaq SmallCap Market, the American Stock Exchange or the New York
Stock Exchange, or (iii) the Company files for protection from creditors under
any applicable law.
(b) The Company may terminate this Agreement
upon one (1) Trading Day's notice if the Purchaser shall fail to fund more than
one properly noticed Draw Down within three (3) Trading Days of a Settlement
Date.
20
Section 7.3. EFFECT OF TERMINATION. In the event of
----------------------
termination by the Company or the Purchaser, written notice thereof shall
forthwith be given to the other party and the transactions contemplated by this
Agreement shall be terminated without further action by either party. If this
Agreement is terminated as provided in Section 7.1 or 7.2 herein, this Agreement
shall become void and of no further force and effect, except for Sections 9.1
and 9.2, and Article VIII herein. Nothing in this Section 7.3 shall be deemed to
release the Company or the Purchaser from any liability for any breach under
this Agreement, or to impair the rights of the Company or the Purchaser to
compel specific performance by the other party of its obligations under this
Agreement.
ARTICLE VIII
INDEMNIFICATION
Section 8.1. GENERAL INDEMNITY.
-----------------
(a) The Company agrees to indemnify and hold
harmless the Purchaser (and its directors, officers, affiliates, agents,
successors and assigns) from and against any and all losses, liabilities,
deficiencies, costs, damages and expenses (including, without limitation,
reasonable attorneys' fees, charges and disbursements) incurred by the Purchaser
as a result of any inaccuracy in or breach of the representations, warranties or
covenants made by the Company herein. Notwithstanding anything to the contrary
herein, the Company shall be liable under this Section 8.1 for only that amount
as does not exceed the gross proceeds to the Company as a result of the sale of
the Shares.
(b) The Purchaser agrees to indemnify and hold
harmless the Company and its directors, officers, affiliates, agents, successors
and assigns from and against any and all losses, liabilities, deficiencies,
costs, damages and expenses (including, without limitation, reasonable
attorneys' fees, charges and disbursements) incurred by the Company as result of
any material inaccuracy in or breach of the representations, warranties or
covenants made by the Purchaser herein. Notwithstanding anything to the contrary
herein, the Purchaser shall be liable under this Section 8.1 for only that
amount as does not exceed the net proceeds to the Purchaser as a result of the
sale of the Shares.
Section 8.2. INDEMNIFICATION PROCEDURE. Any party entitled
--------------------------
to indemnification under this Article VIII (an "Indemnified Party") will give
written notice to the indemnifying party of any matters giving rise to a claim
for indemnification; provided, that the failure of any party entitled to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Article VIII except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any action, proceeding or claim is brought against an
Indemnified Party in respect of which indemnification is sought hereunder, the
indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of counsel to the Indemnified Party a conflict of interest
between it and the indemnifying party may exist with respect of such action,
proceeding or claim, to assume the defense thereof with counsel reasonably
satisfactory to the Indemnified Party. In the event that
21
the indemnifying party advises an Indemnified Party that it will contest such a
claim for indemnification hereunder, or fails, within thirty (30) days of
receipt of any indemnification notice to notify, in writing, such person of its
election to defend, settle or compromise, at its sole cost and expense, any
action, proceeding or claim (or discontinues its defense at any time after it
commences such defense), then the Indemnified Party may, at its option, defend,
settle or otherwise compromise or pay such action or claim. In any event, unless
and until the indemnifying party elects in writing to assume and does so assume
the defense of any such claim, proceeding or action, the Indemnified Party's
costs (including reasonable attorneys' fees, charges and disbursements) and
expenses arising out of the defense, settlement or compromise of any such
action, claim or proceeding shall be losses subject to indemnification
hereunder. The Indemnified Party shall cooperate fully with the indemnifying
party in connection with any settlement negotiations or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the Indemnified Party, which
relates to such action or claim. The indemnifying party shall keep the
Indemnified Party fully apprised at all times as to the status of the defense or
any settlement negotiations with respect thereto. If the indemnifying party
elects to defend any such action or claim, then the Indemnified Party shall be
entitled to participate in such defense with counsel of its choice at its sole
cost and expense. The indemnifying party shall not be liable for any settlement
of any action, claim or proceeding effected without its prior written consent.
Notwithstanding anything in this Article VIII to the contrary, the indemnifying
party shall not, without the Indemnified Party's prior written consent, settle
or compromise any claim or consent to entry of any judgment in respect thereof
which imposes any future obligation on the Indemnified Party or which does not
include, as an unconditional term thereof, the giving by the claimant or the
plaintiff to the Indemnified Party of a release from all liability in respect of
such claim. The indemnification required by this Article VIII shall be made by
periodic payments of the amount thereof during the course of investigation or
defense, as and when bills are received or expense, loss, damage or liability is
incurred, within ten (10) Trading Days of written notice thereof to the
indemnifying party so long as the Indemnified Party irrevocably agrees to refund
such moneys, with interest, if it is ultimately determined by a court of
competent jurisdiction that such party was not entitled to indemnification. The
indemnity agreements contained herein shall be in addition to (a) any cause of
action or similar rights of the Indemnified Party against the indemnifying party
or others, and (b) any liabilities to which the indemnifying party may be
subject.
ARTICLE IX
MISCELLANEOUS
Section 9.1. FEES AND EXPENSES. Each of the parties to
-----------------
this Agreement shall pay its own fees and expenses related to the transactions
contemplated by this Agreement; except that, the Company shall pay, at the
Initial Closing, the fees and expenses incurred by the Purchaser in connection
with the preparation, negotiation, execution and delivery of this Agreement and
the transactions contemplated hereunder, as further set forth in the Escrow
Agreement. In addition, the Company shall pay all reasonable fees and expenses
incurred by the Purchaser in connection with any subsequent amendments,
modifications or waivers of this Agreement, the Escrow Agreement or the
Registration Rights Agreement or incurred in
22
connection with the enforcement of this Agreement, the Escrow Agreement and the
Registration Rights Agreement, including, without limitation, all reasonable
attorneys' fees and expenses if such subsequent amendment, modification or
waiver is at the request of the Company. The Company shall pay all stamp or
other similar taxes and duties levied in connection with issuance of the Shares
pursuant hereto.
Section 9.2. SPECIFIC ENFORCEMENT. The Company and the
--------------------
Purchaser acknowledge and agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent or
cure breaches of the provisions of this Agreement and to enforce specifically
the terms and provisions hereof or thereof, this being in addition to any other
remedy to which any of them may be entitled by law or equity.
Section 9.3. ENTIRE AGREEMENT; AMENDMENT. The Transaction
---------------------------
Documents contain the entire understanding of the parties with respect to the
matters covered in the Transaction Documents. No provision of this Agreement may
be waived or amended other than by a written instrument signed by the party
against whom enforcement of any such amendment or waiver is sought and no
condition to closing any Draw Down in favor of the Purchaser may be waived by
the Purchaser.
Section 9.4. NOTICES. Any notice, demand, request, waiver
-------
or other communication required or permitted to be given hereunder shall be in
writing and shall be effective (a) upon hand delivery or facsimile at the
address or number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the second
business day following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The addresses for such communications shall be:
If to the Company: 00000 X.X. 0xx Xxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attn: President
Tel: (000) 000-0000
Fax: (000) 000 0000
With copies to: Xxxxx Xxxxxx Xxxxxxxx LLP
(which shall not constitute 0000 0xx Xxxxxx, Xxxxx 0000
notice) Xxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
If to Purchaser: c/o International Management Services (IMS) Ltd.
X.X. Xxx 00
23
Xxxxxx Town
Cayman Islands, West Indies
Attn: Xxx Xxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
with copies to: Xxxxxxx Xxxxxx & Green P.C.
(which shall not constitute 000 Xxxx Xxxxxx
xxxxxx) Xxx Xxxx, XX 00000-0000
Tel: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx
Any party hereto may from time to time change its address for
notices by giving written notice of such changed address to the other party
hereto in accordance herewith.
Section 9.5. WAIVERS. No waiver by either party of any
-------
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provisions, condition or requirement hereof, nor shall any delay or
omission of any party to exercise any right hereunder in any manner impair the
exercise of any such right accruing to it thereafter.
Section 9.6. HEADINGS. The article, section and sub-
--------
section headings in this Agreement are for convenience only and shall not
constitute a part of this Agreement for any other purpose and shall not be
deemed to limit or affect any of the provisions hereof.
Section 9.7. SUCCESSORS AND ASSIGNS. This Agreement
----------------------
shall be binding upon and inure to the benefit of the parties and their
successors and assigns. The parties hereto may not amend this Agreement or any
rights or obligations hereunder without the prior written consent of the Company
and each Purchaser to be affected by the amendment. After Initial Closing, the
assignment by a party to this Agreement of any rights hereunder shall not affect
the obligations of such party under this Agreement.
Section 9.8. NO THIRD PARTY BENEFICIARIES.This Agreement
-----------------------------
is intended for the benefit of the parties hereto and their respective permitted
successors and assigns and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.
Section 9.9. GOVERNING LAW/ARBITRATION. This Agreement
-------------------------
shall be governed by and construed in accordance with the internal laws of the
State of New York, without giving effect to the choice of law provisions. Any
dispute under this Agreement or any Exhibit attached hereto shall be submitted
to arbitration under the American Arbitration Association (the "AAA") in New
York City, New York, and shall be finally and conclusively determined by the
decision of a board of arbitration consisting of three (3) members (hereinafter
referred to as the "Board of
24
Arbitration") selected as according to the rules governing the AAA. The Board of
Arbitration shall meet on consecutive business days in New York City, New York,
and shall reach and render a decision in writing (concurred in by a majority of
the members of the Board of Arbitration) with respect to the amount, if any,
which the losing party is required to pay to the other party in respect of a
claim filed. In connection with rendering its decisions, the Board of
Arbitration shall adopt and follow the laws of the State of New York. To the
extent practical, decisions of the Board of Arbitration shall be rendered no
more than thirty (30) calendar days following commencement of proceedings with
respect thereto. The Board of Arbitration shall cause its written decision to be
delivered to all parties involved in the dispute. The Board of Arbitration shall
be authorized and is directed to enter a default judgment against any party
refusing to participate in the arbitration proceeding within thirty days of any
deadline for such participation. Any decision made by the Board of Arbitration
(either prior to or after the expiration of such thirty (30) calendar day
period) shall be final, binding and conclusive on the parties to the dispute,
and entitled to be enforced to the fullest extent permitted by law and entered
in any court of competent jurisdiction. The substantially prevailing party shall
be awarded its costs, including attorneys' fees, from the non-prevailing party
as part of the arbitration award. Any party shall have the right to seek
injunctive relief from any court of competent jurisdiction in any case where
such relief is available. The prevailing party in such injunctive action shall
be awarded its costs, including reasonable attorney's fees, from the
non-prevailing party. Section 9.10. COUNTERPARTS. This Agreement may be executed
in any number of counterparts, all of which taken together shall constitute one
and the same instrument and shall become effective when counterparts have been
signed by each party and delivered to the other parties hereto, it being
understood that all parties need not sign the same counterpart. Execution may be
made by delivery by facsimile.
Section 9.11. PUBLICITY. Neither the Company nor the Pur-
---------
chaser shall issue any press release or otherwise make any public statement or
announcement with respect to this Agreement or the transactions contemplated
hereby or the existence of this Agreement. After the Initial Closing, the
Company may issue a press release or otherwise make a public statement or
announcement with respect to this Agreement or the transactions contemplated
hereby or the existence of this Agreement; provided, however, that prior to
issuing any such press release, making any such public statement or
announcement, the Company obtains the prior consent of the Purchaser, which
consent shall not be unreasonably withheld or delayed.
Section 9.12. SEVERABILITY. The provisions of this Agree-
------------
ment are severable and, in the event that The Board of Arbitration or any court
or officials of any regulatory agency of competent jurisdiction shall determine
that any one or more of the provisions or part of the provisions contained in
this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision or part of a provision of this Agreement
and this Agreement shall be reformed and construed as if such invalid or illegal
or unenforceable provision, or part of such provision, had never been contained
herein, so that such provisions would be valid, legal and enforceable to the
maximum extent possible, so long as such construction does not materially
adversely effect the economic rights of either party hereto.
25
Section 9.13. FURTHER ASSURANCES. From and after the date
------------------
of this Agreement, upon the request of the Purchaser or the Company, each of the
Company and the Purchaser shall execute and deliver such instruments, documents
and other writings as may be reasonably necessary or desirable to confirm and
carry out and to effectuate fully the intent and purposes of this Agreement.
Section 9.14. EFFECTIVENESS OF AGREEMENT. This Agreement
----------------------------
shall become effective only upon satisfaction of the conditions precedent
to the Initial Closing set forth in Article I of the Escrow Agreement.
[SIGNATURE PAGE FOLLOWS]
26
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorize officer as of this
4th day of January, 2001.
XXXXXXXXXXXXXX.XXX
By: /s/ XXXXXX XXXXXXX
-----------------------------------
Xxxxxx Xxxxxxx, President & CEO
NORTHWIND ASSOCIATES, INC.
By: /s/ XXX XXXXXXX
----------------------------------------
Name: Xxx Xxxxxxx
Title: Authorized Signatory
11th January 2001
