COMMON STOCK PURCHASE AGREEMENT
EXECUTION
COPY
COMMON
STOCK PURCHASE AGREEMENT
(the
“Agreement”), dated as of February 16, 2007, by and between O2DIESEL
CORPORATION,
a
Delaware corporation (the “Company”), and FUSION
CAPITAL FUND II, LLC,
an
Illinois limited liability company (the “Buyer”). Capitalized terms used herein
and not otherwise defined herein are defined in Section 10 hereof.
WHEREAS:
Subject
to the terms and conditions set forth in this Agreement, the Company wishes
to
sell to the Buyer, and the Buyer wishes to buy from the Company, up to Ten
Million Dollars ($10,000,000) of the Company's common stock, par value $0.0001
per share (the “Common Stock”). The shares of Common Stock to be purchased
hereunder are referred to herein as the "Purchase Shares."
NOW
THEREFORE,
the
Company and the Buyer hereby agree as follows:
1.
PURCHASE
OF COMMON STOCK.
Subject
to the terms and conditions set forth in this Agreement, the Company has the
right to sell to the Buyer, and the Buyer has the obligation to purchase from
the Company, Purchase Shares as follows:
(a) Commencement
of Purchases of Common Stock.
The
purchase and sale of Purchase Shares hereunder shall occur from time to time
upon written notices by the Company to the Buyer on the terms and conditions
as
set forth herein following the satisfaction of the conditions (the
“Commencement”) as set forth in Sections 6 and 7 below (the date of satisfaction
of such conditions, the "Commencement Date").
(b) The
Company’s Right to Require Purchases.
Any
time on or after the Commencement Date, the Company shall have the right but
not
the obligation to direct the Buyer by its delivery to the Buyer of Base Purchase
Notices from time to time to buy Purchase Shares (each such purchase a “Base
Purchase”) in any amount up to One Hundred Thousand Dollars ($100,000.00) per
Base Purchase Notice (the “Base Purchase Amount”) at the Purchase Price on the
Purchase Date. The Company may deliver multiple Base Purchase Notices to the
Buyer so long as at least three (3) Business Days have passed since the most
recent Base Purchase was completed. Notwithstanding the forgoing, any time
on or
after the Commencement Date, the Company shall also have the right but not
the
obligation by its delivery to the Buyer of Block Purchase Notices from time
to
time to direct the Buyer to buy Purchase Shares (each such purchase a “Block
Purchase”) in any amount up to One Million Dollars ($1,000,000.00) per Block
Purchase Notice at the Block Purchase Price on the Purchase Date as provided
herein. For a Block Purchase Notice to be valid the following conditions must
be
met: (1) the Block Purchase Amount shall not exceed One Hundred Thousand Dollars
($100,000.00) per Block Purchase Notice, (2) the Company must deliver the
Purchase Shares before 11:00 a.m. eastern time on the Purchase Date and (3)
the
Sale Price of the Common Stock must not be below $0.60 (subject to equitable
adjustment for any reorganization, recapitalization, non-cash dividend, stock
split or other similar transaction) during the Purchase Date, the date of the
delivery of the Block Purchase Notice and during the Business Day prior to
the
delivery of the Block Purchase Notice. The Block Purchase Amount may be
increased to up to Two Hundred Fifty Thousand Dollars ($250,000.00) per Block
Purchase Notice if the Sale Price of the Common Stock is not below $0.90
(subject to equitable adjustment for any reorganization,
recapitalization,
non-cash dividend, stock split or other similar transaction) during the Purchase
Date, the date of the delivery of the Block Purchase Notice and during the
Business Day prior to the delivery of the Block Purchase Notice. The Block
Purchase Amount may be increased to up to Five Hundred Thousand Dollars
($500,000.00) per Block Purchase Notice if the Sale Price of the Common Stock
is
not below $1.50 (subject to equitable adjustment for any reorganization,
recapitalization, non-cash dividend, stock split or other similar transaction)
during the Purchase Date, the date of the delivery of the Block Purchase Notice
and during the Business Day prior to the delivery of the Block Purchase Notice.
The Block Purchase Amount may be increased to up to One Million Dollars
($1,000,000.00) per Block Purchase Notice if the Sale Price of the Common Stock
is not below $2.50 (subject to equitable adjustment for any reorganization,
recapitalization, non-cash dividend, stock split or other similar transaction)
during the Purchase Date, the date of the delivery of the Block Purchase Notice
and during the Business Day prior to the delivery of the Block Purchase Notice.
As used herein, the term “Block Purchase Price” shall mean the lesser of (i) the
lowest Sale Price of the Common Stock on the Purchase Date or (ii) the lowest
Purchase Price during the previous ten (10) Business Days prior to the date
that
the valid Block Purchase Notice was received by the Buyer. However, if at any
time during the Purchase Date, the date of the delivery of the Block Purchase
Notice or during the Business Day prior to the delivery of the Block Purchase
Notice, the Sale Price of the Common Stock is below the applicable Block
Purchase threshold price, such Block Purchase shall be void and the Buyer’s
obligations to buy Purchase Shares in respect of that Block Purchase Notice
shall be terminated. Thereafter, the Company shall again have the right to
submit a Block Purchase Notice as set forth herein by delivery of a new Block
Purchase Notice only if the Sale Price of the Common Stock is above the
applicable Block Purchase threshold price during the date of the delivery of
the
Block Purchase Notice and during the Business Day prior to the delivery of
the
Block Purchase Notice. The Company may deliver multiple Block Purchase Notices
to the Buyer so long as at least two (2) Business Days have passed since the
most recent Block Purchase was completed.
(c) Payment
for Purchase Shares.
The
Buyer shall pay to the Company an amount equal to the Purchase Amount with
respect to such Purchase Shares as full payment for such Purchase Shares via
wire transfer of immediately available funds on the same Business Day that
the
Buyer receives such Purchase Shares if they are received by the Buyer before
11:00 a.m. eastern time or if received by the Buyer after 11:00 a.m. eastern
time, the next Business Day. The Company shall not issue any fraction of a
share
of Common Stock upon any purchase. If the issuance would result in the issuance
of a fraction of a share of Common Stock, the Company shall round such fraction
of a share of Common Stock up or down to the nearest whole share. All payments
made under this Agreement shall be made in lawful money of the United States
of
America or wire transfer of immediately available funds to such account as
the
Company may from time to time designate by written notice in accordance with
the
provisions of this Agreement. Whenever any amount expressed to be due by the
terms of this Agreement is due on any day that is not a Business Day, the same
shall instead be due on the next succeeding day that is a Business Day.
(d) Purchase
Price Floor.
The
Company and the Buyer shall not effect any sales under this Agreement on any
Purchase Date where the Purchase Price for any purchases of Purchase Shares
would be less than the Floor Price. “Floor Price” means $0.50, which
shall
be
appropriately adjusted for any reorganization, recapitalization, non-cash
dividend, stock split or other similar transaction.
(e) Records
of Purchases.
The
Buyer and the Company shall each maintain records showing the remaining
Available Amount at any given time and the dates and Purchase Amounts for each
purchase or shall use such other method, reasonably satisfactory to the Buyer
and the Company.
(f) Taxes.
The
Company shall pay any and all transfer, stamp or similar taxes that may be
payable with respect to the issuance and delivery of any shares of Common Stock
to the Buyer made under this Agreement.
(g) Compliance
with Principal Market Rules.
The
Company shall not effect any sale under this Agreement and the Buyer shall
not
have the right or the obligation to purchase shares of Common Stock under this
Agreement to the extent that after giving effect to such purchase the "Exchange
Cap" shall be deemed to be reached. The "Exchange Cap" shall be deemed to have
been reached if, at any time prior to the shareholders of the Company approving
the transaction contemplated by this Agreement, upon a purchase under this
Agreement, the Purchase Shares issuable pursuant to such purchase would,
together with all Purchase Shares previously issued under this Agreement, exceed
15,117,440 shares of Common Stock (19.99% of the 75,625,014outstanding shares
of
Common Stock as of the date of this Agreement). The Company may, but shall
be
under no obligation to, request its shareholders to approve the transaction
contemplated by this Agreement. The Company shall not be required to issue
any
Purchase Shares under this Agreement if such issuance would breach the Company's
obligations under the rules or regulations of the Principal Market.
2. BUYER'S
REPRESENTATIONS AND WARRANTIES.
The
Buyer
represents and warrants to the Company that as of the date hereof and as of
the
Commencement Date:
(a) Investment
Purpose.
The
Buyer is entering into this Agreement and acquiring the Commitment Shares,
(as
defined in Section 4(e) hereof) (this Agreement, the Purchase Shares and the
Commitment Shares are collectively referred to herein as the "Securities"),
for
its own account for investment only and not with a view towards, or for resale
in connection with, the public sale or distribution thereof; provided however,
by making the representations herein, the Buyer does not agree to hold any
of
the Securities for any minimum or other specific term.
(b) Accredited
Investor Status.
The
Buyer is an "accredited investor" as that term is defined in Rule 501(a)(3)
of
Regulation D.
(c) Reliance
on Exemptions.
The
Buyer understands that the Securities are being offered and sold to it in
reliance on specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying in
part
upon the truth and accuracy of, and the Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings
of
the Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of the Buyer to acquire the
Securities.
(d) Information.
The
Buyer has been furnished with all materials relating to the business, finances
and operations of the Company and materials relating to the offer and sale
of
the Securities that have been reasonably requested by the Buyer, including,
without limitation, the SEC Documents (as defined in Section 3(f) hereof).
The
Buyer understands that its investment in the Securities involves a high degree
of risk. The Buyer (i) is able to bear the economic risk of an investment in
the
Securities including a total loss, (ii) has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits
and
risks of the proposed investment in the Securities and (iii) has had an
opportunity to ask questions of and receive answers from the officers of the
Company concerning the financial condition and business of the Company and
others matters related to an investment in the Securities. Neither such
inquiries nor any other due diligence investigations conducted by the Buyer
or
its representatives shall modify, amend or affect the Buyer's right to rely
on
the Company's representations and warranties contained in Section 3 below.
The
Buyer has sought such accounting, legal and tax advice as it has considered
necessary to make an informed investment decision with respect to its
acquisition of the Securities.
(e) No
Governmental Review.
The
Buyer understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation
or
endorsement of the Securities or the fairness or suitability of the investment
in the Securities nor have such authorities passed upon or endorsed the merits
of the offering of the Securities.
(f) Transfer
or Sale.
The
Buyer understands that except as provided in the Registration Rights Agreement
(as defined in Section 4(a) hereof): (i) the Securities have not been and are
not being registered under the 1933 Act or any state securities laws, and may
not be offered for sale, sold, assigned or transferred unless (A) subsequently
registered thereunder or (B) an exemption exists permitting such Securities
to
be sold, assigned or transferred without such registration; (ii) any sale of
the
Securities made in reliance on Rule 144 may be made only in accordance with
the
terms of Rule 144 and further, if Rule 144 is not applicable, any resale of
the
Securities under circumstances in which the seller (or the person through whom
the sale is made) may be deemed to be an underwriter (as that term is defined
in
the 0000 Xxx) may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (iii) neither the
Company nor any other person is under any obligation to register the Securities
under the 1933 Act or any state securities laws or to comply with the terms
and
conditions of any exemption thereunder.
(g) Validity;
Enforcement.
This
Agreement has been duly and validly authorized, executed and delivered on behalf
of the Buyer and is a valid and binding agreement of the Buyer enforceable
against the Buyer in accordance with its terms, subject as to enforceability
to
general principles of equity and to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to,
or
affecting generally, the enforcement of applicable creditors' rights and
remedies.
(h) Residency.
The
Buyer is a resident of the State of Illinois.
(i) No
Prior Short Selling.
The
Buyer represents and warrants to the Company that at no time prior to the date
of this Agreement has any of the Buyer, its agents, representatives or
affiliates engaged in or effected, in any manner whatsoever, directly or
indirectly, any (i) "short sale" (as such term is defined in Section 242.200
of
Regulation SHO of the Securities Exchange Act of 1934, as amended (the "1934
Act")) of the Common Stock or (ii) hedging transaction, which establishes a
net
short position with respect to the Common Stock.
3. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
The
Company represents and warrants to the Buyer that as of the date hereof and
as
of the Commencement Date:
(a) Organization
and Qualification.
The
Company and its "Subsidiaries" (which for purposes of this Agreement means
any
entity in which the Company, directly or indirectly, owns 50% or more of the
voting stock or capital stock or other similar equity interests) are
corporations duly organized and validly existing in good standing under the
laws
of the jurisdiction in which they are incorporated, and have the requisite
corporate power and authority to own their properties and to carry on their
business as now being conducted. Each of the Company and its Subsidiaries is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing could not
reasonably be expected to have a Material Adverse Effect. As used in this
Agreement, "Material Adverse Effect" means any material adverse effect on any
of: (i) the business, properties, assets, operations, results of operations
or
financial condition of the Company and its Subsidiaries, if any, taken as a
whole, or (ii) the authority or ability of the Company to perform its
obligations under the Transaction Documents (as defined in Section 3(b) hereof).
The Company has no Subsidiaries except as set forth on Schedule
3(a).
(b) Authorization;
Enforcement; Validity.
(i) The
Company has the requisite corporate power and authority to enter into and
perform its obligations under this Agreement, the Registration Rights Agreement
and each of the other agreements entered into by the parties on the Commencement
Date and attached hereto as exhibits to this Agreement (collectively, the
"Transaction Documents"), and to issue the Securities in accordance with the
terms hereof and thereof, (ii) the execution and delivery of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated hereby and thereby, including without limitation, the issuance
of
the Commitment Shares and the reservation for issuance and the issuance of
the
Purchase Shares issuable under this Agreement, have been duly authorized by
the
Company's Board of Directors and no further consent or authorization is required
by the Company, its Board of Directors or its shareholders, (iii) this Agreement
has been, and each other Transaction Document shall be on the Commencement
Date,
duly executed and delivered by the Company and (iv) this Agreement constitutes,
and each other Transaction Document upon its execution on behalf of the Company,
shall constitute, the valid and binding obligations of the Company enforceable
against the Company in accordance with their terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar
laws
relating to, or affecting generally, the enforcement of creditors' rights and
remedies. The Board of Directors of the Company has approved the resolutions
(the “Signing Resolutions”) substantially in the form as set forth as
Exhibit
C-1
attached
hereto to authorize this Agreement and the transactions contemplated hereby.
The
Signing Resolutions are valid, in full force and effect and have not been
modified or supplemented in any respect other than by the resolutions set forth
in Exhibit
C-2
attached
hereto regarding the registration statement referred to in Section 4 hereof.
The
Company has delivered to the Buyer a true and correct copy of a unanimous
written consent adopting the Signing Resolutions executed by all of the members
of the Board of Directors of the Company. No other approvals or consents of
the
Company’s Board of Directors and/or shareholders is necessary under applicable
laws and the Company’s Certificate of Incorporation and/or Bylaws to authorize
the execution and delivery of this Agreement or any of the transactions
contemplated hereby, including, but not limited to, the issuance of the
Commitment Shares and the issuance of the Purchase Shares.
(c) Capitalization.
As of
the date hereof, the authorized capital stock of the Company consists of (i)
135,000,000 shares of Common Stock, of which as of the date hereof, 75,625,014
shares are issued and outstanding, none are held as treasury shares, 9,750,000
shares are reserved for issuance pursuant to the Company's stock option plans
of
which only approximately 2,250,000 shares remain available for future grants
and
12,306,636 shares are issuable and reserved for issuance pursuant to securities
(other than stock options issued pursuant to the Company's stock option plans)
exercisable or exchangeable for, or convertible into, shares of Common Stock
and
(ii) 20,000,000 shares of Preferred Stock, $0.0001 par value, of which as of
the
date hereof none are issued and outstanding. All of such outstanding shares
have
been, or upon issuance will be, validly issued and are fully paid and
nonassessable. Except as disclosed in Schedule 3(c), (i) no shares of the
Company's capital stock are subject to preemptive rights or any other similar
rights or any liens or encumbrances suffered or
permitted
by the Company, (ii) there are no outstanding debt securities, (iii) there
are
no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries, or contracts, commitments, understandings or arrangements by
which
the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries
or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into,
any
shares of capital stock of the Company or any of its Subsidiaries, (iv) there
are no agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of their securities under
the 1933 Act (except the Registration Rights Agreement), (v) there are no
outstanding securities or instruments of the Company or any of its Subsidiaries
which contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of
its
Subsidiaries is or may become bound to redeem a security of the Company or
any
of its Subsidiaries, (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance
of
the Securities as described in this Agreement and (vii) the Company does not
have any stock appreciation rights or "phantom stock" plans or agreements or
any
similar plan or agreement. The Company has furnished to the Buyer true and
correct copies of the Company's Certificate of Incorporation, as amended and
as
in effect on the date hereof (the "Certificate of Incorporation"), and the
Company's By-laws, as amended and as in effect on the date hereof (the
"By-laws"), and summaries of the terms of all securities convertible into or
exercisable for Common Stock, if any, and copies of any documents containing
the
material rights of the holders thereof in respect thereto.
(d) Issuance
of Securities.
The
Commitment Shares have been duly authorized and, upon issuance in accordance
with the terms hereof, the Commitment Shares shall be (i) validly issued, fully
paid and non-assessable and (ii) free from all taxes, liens and charges with
respect to the issue thereof. 12,000,000 shares of Common Stock have been duly
authorized and reserved for issuance upon purchase under this Agreement. Upon
issuance and payment therefor in accordance with the terms and conditions of
this Agreement, the Purchase Shares shall be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, with the holders being entitled to all rights accorded to a
holder of Common Stock.
(e) No
Conflicts.
Except
as disclosed in Schedule 3(e), the execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of
the
transactions contemplated hereby and thereby (including, without limitation,
the
reservation for issuance and issuance of the Purchase Shares) will not (i)
result in a violation of the Certificate of Incorporation, any Certificate
of
Designations, Preferences and Rights of any outstanding series of preferred
stock of the Company or the By-laws or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become
a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to
which
the Company or any of its Subsidiaries is a party, or result in a violation
of
any law, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations and the rules and regulations of the
Principal Market applicable to the Company or any of its Subsidiaries) or by
which any property or asset of the Company or any of its Subsidiaries is bound
or affected, except in the case of conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations under clause (ii),
which
could not reasonably be expected to result in a Material Adverse Effect. Except
as disclosed in Schedule 3(e), neither the Company nor its Subsidiaries is
in
violation of any term of or in default under its Certificate of Incorporation,
any Certificate of Designation, Preferences and Rights of any outstanding series
of preferred stock of the Company or By-laws or their organizational charter
or
by-laws, respectively. Except as disclosed in Schedule 3(e), neither the Company
nor any of its Subsidiaries is in violation of any term of or is in default
under any material contract, agreement, mortgage,
indebtedness,
indenture, instrument, judgment, decree or order or any statute, rule or
regulation applicable to the Company or its Subsidiaries, except for possible
conflicts, defaults, terminations or amendments which could not reasonably
be
expected to have a Material Adverse Effect. The business of the Company and
its
Subsidiaries is not being conducted, and shall not be conducted, in violation
of
any law, ordinance, regulation of any governmental entity, except for possible
violations, the sanctions for which either individually or in the aggregate
could not reasonably be expected to have a Material Adverse Effect. Except
as
specifically contemplated by this Agreement and as required under the 1933
Act
or applicable state securities laws, the Company is not required to obtain
any
consent, authorization or order of, or make any filing or registration with,
any
court or governmental agency or any regulatory or self-regulatory agency in
order for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents in accordance with the terms hereof
or
thereof. Except as disclosed in Schedule 3(e), all consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence shall be obtained or effected on or prior
to
the Commencement Date. Except as listed in Schedule 3(e), since January 1,
2006
the Company has not received nor delivered any notices or correspondence from
or
to the Principal Market. The Principal Market has not commenced any delisting
proceedings against the Company.
(f) SEC
Documents; Financial Statements.
Except
as disclosed in Schedule 3(f), since January 1, 2006, the Company has timely
filed all reports, schedules, forms, statements and other documents required
to
be filed by it with the SEC pursuant to the reporting requirements of the 1934
Act (all of the foregoing filed prior to the date hereof and all exhibits
included therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the "SEC
Documents"). As of their respective dates (except as they have been correctly
amended), the SEC Documents complied in all material respects with the
requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC (except as they may have
been properly amended), 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. As of their respective dates (except as they
have been properly amended), the financial statements of the Company included
in
the SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with
respect thereto. Such financial statements have been prepared in accordance
with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case
of
unaudited statements, to normal year-end audit adjustments). Except as listed
in
Schedule 3(f), the Company has received no notices or correspondence from the
SEC since January 1, 2006. The SEC has not commenced any enforcement proceedings
against the Company or any of its subsidiaries.
(g) Absence
of Certain Changes.
Except
as disclosed in Schedule 3(g), since September 30, 2006, there has been no
material adverse change in the business, properties, operations, financial
condition or results of operations of the Company or its Subsidiaries. The
Company has not taken any steps, and does not currently expect to take any
steps, to seek protection pursuant to any Bankruptcy Law nor does the Company
or
any of its Subsidiaries have any knowledge or reason to believe that its
creditors intend to initiate involuntary bankruptcy or
insolvency proceedings. The Company is financially solvent and is generally
able
to pay its debts as they become due.
(h) Absence
of Litigation.
There
is no action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body pending
or, to the knowledge of the Company or any of its Subsidiaries, threatened
against or affecting the Company, the Common Stock or any of the Company's
Subsidiaries or any of the Company's or the Company's Subsidiaries' officers
or
directors in their capacities as such, which could reasonably be expected to
have a Material Adverse Effect. A description of each action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body which, as of the date of this
Agreement, is pending or threatened in writing against or affecting the Company,
the Common Stock or any of the Company's Subsidiaries or any of the Company's
or
the Company's Subsidiaries' officers or directors in their capacities as such,
is set forth in Schedule 3(h).
(i) Acknowledgment
Regarding Buyer's Status.
The
Company acknowledges and agrees that the Buyer is acting solely in the capacity
of arm's length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby. The Company further acknowledges
that the Buyer is not acting as a financial advisor or fiduciary of the Company
(or in any similar capacity) with respect to the Transaction Documents and
the
transactions contemplated hereby and thereby and any advice given by the Buyer
or any of its representatives or agents in connection with the Transaction
Documents and the transactions contemplated hereby and thereby is merely
incidental to the Buyer's purchase of the Securities. The Company further
represents to the Buyer that the Company's decision to enter into the
Transaction Documents has been based solely on the independent evaluation by
the
Company and its representatives and advisors.
(j) No
General Solicitation.
Neither
the Company, nor any of its affiliates, nor any person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the 0000 Xxx) in connection with
the
offer or sale of the Securities.
(k) Intellectual
Property Rights.
The
Company and its Subsidiaries own or possess adequate rights or licenses to
use
all material trademarks, trade names, service marks, service xxxx registrations,
service names, patents, patent rights, copyrights, inventions, licenses,
approvals, governmental authorizations, trade secrets and rights necessary
to
conduct their respective businesses as now conducted. Except as set forth on
Schedule 3(k), none of the Company's material trademarks, trade names, service
marks, service xxxx registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, government authorizations, trade
secrets or other intellectual property rights have expired or terminated, or,
by
the terms and conditions thereof, could expire or terminate within two years
from the date of this Agreement. The Company and its Subsidiaries do not have
any knowledge of any infringement by the Company or its Subsidiaries of any
material trademark, trade name rights, patents, patent rights, copyrights,
inventions, licenses, service names, service marks, service xxxx registrations,
trade secret or other similar rights of others, or of any such development
of
similar or identical trade secrets or technical information by others and,
except as set forth on Schedule 3(k), there is no claim, action or proceeding
being made or brought against, or to the Company's knowledge, being threatened
against, the Company or its Subsidiaries regarding trademark, trade name,
patents, patent rights, invention, copyright, license, service names, service
marks, service xxxx registrations, trade secret or other infringement, which
could reasonably be expected to have a Material Adverse Effect.
(l) Environmental
Laws.
The
Company and its Subsidiaries (i) are in compliance with any and all applicable
foreign, federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants (“Environmental Laws”), (ii)
have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit, license
or
approval, except where, in each of the three foregoing clauses, the failure
to
so comply could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
(m) Title.
The
Company and its Subsidiaries have good and marketable title in fee simple to
all
real property and good and marketable title to all personal property owned
by
them which is material to the business of the Company and its Subsidiaries,
in
each case free and clear of all liens, encumbrances and defects except such
as
are described in Schedule 3(m) or such as do not materially affect the value
of
such property and do not interfere with the use made and proposed to be made
of
such property by the Company and any of its Subsidiaries. Any real property
and
facilities held under lease by the Company and any of its Subsidiaries are
held
by them under valid, subsisting and enforceable leases with such exceptions
as
are not material and do not interfere with the use made and proposed to be
made
of such property and buildings by the Company and its Subsidiaries.
(n) Insurance.
The
Company and each of its Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts
as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its Subsidiaries are engaged. Neither the Company
nor
any such Subsidiary has been refused any insurance coverage sought or applied
for and neither the Company nor any such Subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as
may
be necessary to continue its business at a cost that would not materially and
adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its Subsidiaries, taken as a
whole.
(o) Regulatory
Permits.
The
Company and its Subsidiaries possess all material certificates, authorizations
and permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct their respective businesses, and neither the
Company nor any such Subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or
permit.
(p) Tax
Status.
The
Company and each of its Subsidiaries has made or filed all federal and state
income and all other material tax returns, reports and declarations required
by
any jurisdiction to which it is subject (unless and only to the extent that
the
Company and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and
has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set aside
on
its books provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim.
(q) Transactions
With Affiliates.
Except
as set forth on Schedule 3(q) and other than the grant or exercise of stock
options disclosed on Schedule 3(c), none of the officers, directors, or
employees of the Company is presently a party to any transaction with the
Company or any of its Subsidiaries (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of
real
or personal property to or from, or otherwise requiring payments to or from
any
officer, director or such employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any officer, director,
or any such employee has an interest or is an officer, director, trustee or
partner.
(r) Application
of Takeover Protections.
The
Company and its board of directors have taken or will take prior to the
Commencement Date all necessary action, if any, in order to render inapplicable
any control share acquisition, business combination, poison pill (including
any
distribution under a rights agreement) or other similar anti-takeover provision
under the Certificate of Incorporation or the laws of the state of its
incorporation which is or could become applicable to the Buyer as a result
of
the transactions contemplated by this Agreement, including, without limitation,
the Company's issuance of the Securities and the Buyer's ownership of the
Securities.
(s) Foreign
Corrupt Practices.
Neither
the Company, nor any of its Subsidiaries, nor any director, officer, agent,
employee or other person acting on behalf of the Company or any of its
Subsidiaries has, in the course of its actions for, or on behalf of, the
Company, used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political activity; made
any direct or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or
made
any unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or
employee.
4. COVENANTS.
(a) Filing
of Form 8-K and Registration Statement.
The
Company agrees that it shall, within the time required under the 1934 Act file
a
Report on Form 8-K disclosing this Agreement and the transaction contemplated
hereby. The Company shall also file a new registration statement within ten
(10)
Business Days from the filing date of its next Annual Report on Form 10-K or
Form 10-KSB filed by the Company with the SEC covering only the sale of the
Commitment Shares and Purchase Shares in accordance with the terms of the
Registration Rights Agreement between the Company and the Buyer, dated as of
the
date hereof (“Registration Rights Agreement”). After such registration statement
is declared effective by the SEC, the Company agrees and acknowledges that
any
sales by the Company to the Buyer pursuant to this Agreement are sales of the
Company's equity securities in a transaction that is registered under the 1933
Act.
(b) Blue
Sky.
The
Company shall take such action, if any, as is reasonably necessary in order
to
obtain an exemption for or to qualify (i) the initial sale of the Commitment
Shares and any Purchase Shares to the Buyer under this Agreement and (ii) any
subsequent resale of the Commitment Shares and any Purchase Shares by the Buyer,
in each case, under applicable securities or "Blue Sky" laws of the states
of
the United States in such states as is reasonably requested by the Buyer from
time to time, and shall provide evidence of any such action so taken to the
Buyer.
(c) Listing.
The
Company shall promptly secure the listing of all of the Purchase Shares and
Commitment Shares upon each national securities exchange and automated quotation
system, if any, upon which shares of Common Stock are then listed (subject
to
official notice of issuance) and shall maintain, so long as any other shares
of
Common Stock shall be so listed, such listing of all such securities from time
to time issuable under the terms of the Transaction Documents. The Company
shall
maintain the Common Stock's authorization for quotation on the Principal Market.
Neither the Company nor any of its Subsidiaries shall take any action that
would
be reasonably expected to result in the delisting or suspension of the Common
Stock on the Principal Market. The Company shall promptly, and in no event
later
than the following Business Day, provide to the Buyer copies of any notices
it
receives from the Principal Market regarding the continued eligibility of the
Common Stock for listing on such automated quotation system or securities
exchange. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section.
(d) Limitation
on Short Sales and Hedging Transactions.
The
Buyer agrees that beginning on the date of this Agreement and ending on the
date
of termination of this Agreement as provided in Section 11(k), the Buyer and
its
agents, representatives and affiliates shall not in any manner whatsoever enter
into or effect, directly or indirectly, any (i) "short sale" (as such term
is
defined in Section 242.200 of Regulation SHO of the 0000 Xxx) of the Common
Stock or (ii) hedging transaction, which establishes a net short position with
respect to the Common Stock.
(e) Issuance
of Commitment Shares; Limitation on Sales of Commitment Shares.
Immediately upon the execution of this Agreement, the Company shall issue to
the
Buyer as consideration for the Buyer entering into this Agreement 805,987 shares
of Common Stock (the "Commitment Shares"). The Commitment Shares shall be issued
in certificated form and (subject to Section 5 hereof) shall bear only the
following restrictive legend:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR
APPLICABLE STATE SECURITIES LAWS, UNLESS SOLD PURSUANT TO: (1) RULE 144 UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR (2) AN OPINION OF HOLDER’S COUNSEL,
IN A CUSTOMARY FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS.
The
Buyer
agrees that the Buyer shall not transfer or sell the Commitment Shares until
the
earlier of 500 Business Days (25 Monthly Periods) from the date hereof or the
date on which this Agreement has been terminated, provided, however, that such
restrictions shall not apply: (i) in connection with any transfers to or among
affiliates (as defined in the 1934 Act), (ii) in connection with any pledge
in
connection with a bona fide loan or margin account, (iii) in the event that
the
Commencement does not occur on or before June 1, 2007, due to the failure of
the
Company to satisfy the conditions set forth in Section 7 or (iv) if an Event
of
Default has occurred, or any event which, after notice and/or lapse of time,
would become an Event of Default, including any failure by the Company to timely
issue Purchase Shares under this Agreement. Notwithstanding the forgoing, the
Buyer may transfer Commitment Shares to a third party in order to settle a
sale
made by the Buyer where the Buyer reasonably expects the Company to deliver
Purchase Shares to the Buyer under this Agreement so long as the Buyer maintains
ownership of the same overall number of shares of Common Stock by "replacing"
the Commitment Shares so transferred with Purchase Shares when the Purchase
Shares are actually issued by the Company to the Buyer.
(g) Due
Diligence.
The
Buyer shall have the right, from time to time as the Buyer may reasonably deem
appropriate, to perform reasonable due diligence on the Company during normal
business hours. The Company and its officers and employees shall provide
information and reasonably cooperate with the Buyer in connection with any
reasonable request by the Buyer related to the Buyer's due diligence of the
Company, including, but not limited to, any such request made by the Buyer
in
connection with (i) the filing of the registration statement described in
Section 4(a) hereof and (ii) the Commencement. Each party hereto agrees not
to
disclose any Confidential Information of the other party to any third party
and
shall not use the Confidential Information for any purpose other than in
connection with, or in furtherance of, the transactions contemplated hereby.
Each party hereto acknowledges that the Confidential Information shall remain
the property of the disclosing party and agrees that it shall take all
reasonable measures to protect the secrecy of any Confidential Information
disclosed by the other party.
5. TRANSFER
AGENT INSTRUCTIONS.
Immediately
upon the execution of this Agreement, the Company shall deliver to the Transfer
Agent a letter in the form as set forth as Exhibit
E
attached
hereto with respect to the issuance of the Commitment Shares. On
the
Commencement Date, the Company shall cause any restrictive legend on the
Commitment Shares to
be
removed and all of the Purchase Shares to be issued under this Agreement shall
be issued without any restrictive legend unless the Buyer expressly consents
otherwise. The Company shall issue irrevocable instructions to the Transfer
Agent, and any subsequent transfer agent, to issue Purchase Shares in the name
of the Buyer for the Purchase Shares (the "Irrevocable Transfer Agent
Instructions"). The Company warrants to the Buyer that no instruction other
than
the Irrevocable Transfer Agent Instructions referred to in this Section 5,
will
be given by the Company to the Transfer Agent with respect to the Purchase
Shares and that the Commitment Shares and the Purchase Shares shall otherwise
be
freely transferable on the books and records of the Company as and to the extent
provided in this Agreement and the Registration Rights Agreement subject to
the
provisions of Section 4(e) in the case of the Commitment Shares.
| 6. |
CONDITIONS
TO THE COMPANY'S RIGHT TO COMMENCE SALES
OF SHARES OF COMMON STOCK UNDER THIS
AGREEMENT.
|
The
right
of the Company hereunder to commence sales of the Purchase Shares is subject
to
the satisfaction of each of the following conditions on or before the
Commencement Date (the date that the Company may begin sales):
(a) The
Buyer
shall have executed each of the Transaction Documents and delivered the same
to
the Company;
(b) A
registration statement covering the sale of all of the Commitment Shares and
Purchase Shares shall have been declared effective under the 1933 Act by the
SEC
and no stop order with respect to the registration statement shall be pending
or
threatened by the SEC.
| 7. |
CONDITIONS
TO THE BUYER'S OBLIGATION TO MAKE PURCHASES
OF SHARES OF COMMON
STOCK.
|
The
obligation of the Buyer to buy Purchase Shares under this Agreement is subject
to the satisfaction of each of the following conditions on or before the
Commencement Date (the date that the Company may begin sales) and once such
conditions have been initially satisfied, there shall not be any ongoing
obligation to satisfy such conditions after the Commencement has
occurred:
(a) The
Company shall have executed each of the Transaction Documents and delivered
the
same to the Buyer;
(b) The
Company shall have issued to the Buyer the Commitment Shares and shall have
removed the restrictive transfer legend from the certificate representing the
Commitment Shares.
(c) The
Common Stock shall be authorized for quotation on the Principal Market, trading
in the Common Stock shall not have been within the last 365 days suspended
by
the SEC or the Principal Market and the Purchase Shares and the Commitment
Shares shall be approved for listing upon the Principal Market;
(d) The
Buyer
shall have received the opinions of the Company's legal counsel dated as of
the
Commencement Date substantially in the form of Exhibit
A
attached
hereto;
(e) The
representations and warranties of the Company shall be true and correct in
all
material respects (except to the extent that any of such representations and
warranties is already qualified as to materiality in Section 3 above, in which
case, such representations and warranties shall be true and correct without
further qualification) as of the date when made and as of the Commencement
Date
as though made at that time (except for representations and warranties that
speak as of a specific date) and the Company shall have performed, satisfied
and
complied with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the Company
at or prior to the Commencement Date. The Buyer shall have received a
certificate, executed by the CEO, President or CFO of the Company, dated as
of
the Commencement Date, to the foregoing effect in the form attached hereto
as
Exhibit
B;
(f) The
Board
of Directors of the Company shall have adopted resolutions in the form attached
hereto as Exhibit
C
which
shall be in full force and effect without any amendment or supplement thereto
as
of the Commencement Date;
(g) As
of the
Commencement Date, the Company shall have reserved out of its authorized and
unissued Common Stock, solely for the purpose of effecting purchases of Purchase
Shares hereunder, 12,000,000 shares of Common Stock;
(h) The
Irrevocable Transfer Agent Instructions, in form acceptable to the Buyer shall
have been delivered to and acknowledged in writing by the Company and the
Company's Transfer Agent;
(i) The
Company shall have delivered to the Buyer a certificate evidencing the
incorporation and good standing of the Company in the State of Delaware issued
by the Secretary of State of the State of Delaware as of a date within ten
(10)
Business Days of the Commencement Date;
(j) The
Company shall have delivered to the Buyer a certified copy of the Certificate
of
Incorporation as certified by the Secretary of State of the State of Delaware
within ten (10) Business Days of the Commencement Date;
(k) The
Company shall have delivered to the Buyer a secretary's certificate executed
by
the Secretary of the Company, dated as of the Commencement Date, in the form
attached hereto as Exhibit
D;
(l) A
registration statement covering the sale of all of the Commitment Shares and
Purchase Shares shall have been declared effective under the 1933 Act by the
SEC
and no stop order with respect to the registration statement shall be pending
or
threatened by the SEC. The Company shall have prepared and delivered to the
Buyer a final and complete form of prospectus, dated and current as of the
Commencement Date, to be used by the Buyer in connection with any sales of
any
Commitment Shares or any Purchase Shares, and to be filed by the Company one
Business Day after the Commencement Date. The Company shall have made all
filings under all applicable federal and state securities laws necessary to
consummate the issuance of the Commitment Shares and the Purchase Shares
pursuant to this Agreement in compliance with such laws;
(m) No
Event
of Default has occurred, or any event which, after notice and/or lapse of time,
would become an Event of Default has occurred;
(n) On
or
prior to the Commencement Date, the Company shall take all necessary action,
if
any, and such actions as reasonably requested by the Buyer, in order to render
inapplicable any control share acquisition, business combination, shareholder
rights plan or poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Certificate of Incorporation
or the laws of the state of its incorporation which is or could become
applicable to the Buyer as a result of the transactions contemplated by this
Agreement, including, without limitation, the Company's issuance of the
Securities and the Buyer's ownership of the Securities; and
(o) The
Company shall have provided the Buyer with the information requested by the
Buyer in connection with its due diligence requests made prior to, or in
connection with, the Commencement, in accordance with the terms of Section
4(g)
hereof.
|
8.
|
INDEMNIFICATION.
|
In
consideration of the Buyer's execution and delivery of the Transaction Documents
and acquiring the Securities hereunder and in addition to all of the Company's
other obligations under the Transaction Documents, the Company shall defend,
protect, indemnify and hold harmless the Buyer and all of its affiliates,
shareholders, officers, directors, employees and direct or indirect investors
and any of the foregoing person's agents or other representatives (including,
without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the "Indemnitees") from and
against any and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable attorneys' fees
and disbursements (the "Indemnified Liabilities"), incurred by any Indemnitee
as
a result of, or arising out of, or relating to (a) any misrepresentation or
breach of any representation or warranty made by the Company in the Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby, (b) any breach of any covenant, agreement or obligation of the
Company contained in the Transaction Documents or any other certificate,
instrument or document contemplated hereby or thereby, or (c) any cause of
action, suit or claim brought or made against such Indemnitee and arising out
of
or resulting from the execution, delivery, performance or enforcement of the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, other than with respect to Indemnified
Liabilities which directly and primarily result from the gross negligence or
willful misconduct of the Indemnitee. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each
of
the Indemnified Liabilities which is permissible under applicable
law.
9. EVENTS
OF DEFAULT.
An
"Event
of Default" shall be deemed to have occurred at any time as any of the following
events occurs:
(a) while
any
registration statement is required to be maintained effective pursuant to the
terms of the Registration Rights Agreement, the effectiveness of such
registration statement lapses for any reason (including, without limitation,
the
issuance of a stop order) or is unavailable to the Buyer for sale of all of
the
Registrable Securities (as defined in the Registration Rights Agreement) in
accordance with the terms of the Registration Rights Agreement, and such lapse
or unavailability continues for a period of five (5) consecutive Business Days
or for more than an aggregate of twenty (20) Business Days in any 365-day
period;
(b) the
suspension from trading or failure of the Common Stock to be listed on the
Principal Market for a period of three (3) consecutive Business
Days;
(c) the
delisting of the Company’s Common Stock from the Principal Market, provided,
however, that the Common Stock is not immediately thereafter trading on the
New
York Stock Exchange, the Nasdaq Global Market or the Nasdaq Capital
Market;
(d) the
failure for any reason by the Transfer Agent to issue Purchase Shares to the
Buyer within five (5) Business Days after the applicable Purchase Date which
the
Buyer is entitled to receive;
(e) the
Company breaches any representation, warranty, covenant or other term or
condition under any Transaction Document if such breach could have a Material
Adverse Effect and except, in the case of a breach of a covenant which is
reasonably curable, only if such breach continues for a period of at least
five
(5) Business Days;
(f) if
any
Person commences a proceeding against the Company pursuant to or within the
meaning of any Bankruptcy Law ;
(g) if
the
Company pursuant to or within the meaning of any Bankruptcy Law; (A) commences
a
voluntary case, (B) consents to the entry of an order for relief against it
in
an involuntary case, (C) consents to the appointment of a Custodian of it or
for
all or substantially all of its property, (D) makes a general assignment for
the
benefit of its creditors, (E) becomes insolvent, or (F) is generally unable
to
pay its debts as the same become due;
(h) a
court
of competent jurisdiction enters an order or decree under any Bankruptcy Law
that (A) is for relief against the Company in an involuntary case, (B) appoints
a Custodian of the Company or for all or substantially all of its property,
or
(C) orders the liquidation of the Company or any Subsidiary; or
(i) if
at any
time after the Commencement Date, the "Exchange Cap" is reached. The "Exchange
Cap" shall be deemed to be reached at such time if, upon submission of a
Purchase Notice under this Agreement, the issuance of such shares of Common
Stock would exceed that number of shares of Common Stock which the Company
may
issue under this Agreement without breaching the Company's obligations under
the
rules or regulations of the Principal Market.
In
addition to any other rights and remedies under applicable law and this
Agreement, including the Buyer termination rights under Section 11(k) hereof,
so
long as an Event of Default has occurred and is continuing, or if any event
which, after notice and/or lapse of time, would become an Event of Default,
has
occurred and is continuing, or so long as the Purchase Price is below the
Purchase Price Floor, the Buyer shall not be obligated to purchase any shares
of
Common Stock under this Agreement. If pursuant to or within the meaning of
any
Bankruptcy Law, the Company commences a voluntary case or any Person commences
a
proceeding against the Company, a Custodian is appointed for the Company or
for
all or substantially all of its property, or the Company makes a general
assignment for the benefit of its creditors, (any of which would be an Event
of
Default as described in Sections 9(f), 9(g) and 9(h) hereof)
this Agreement shall automatically terminate without any liability or payment
to
the Company without further action or notice by any Person. No such termination
of this Agreement under Section 11(k)(i) shall affect the Company's or the
Buyer's obligations under this Agreement with respect to pending purchases
and
the Company and the Buyer shall complete their respective obligations with
respect to any pending purchases under this Agreement.
10. CERTAIN
DEFINED TERMS.
For
purposes of this Agreement, the following terms shall have the following
meanings:
(a) “1933
Act” means the Securities Act of 1933, as amended.
(b) “Available
Amount” means initially Ten Million Dollars ($10,000,000.00) in the aggregate
which amount shall be reduced by the Purchase Amount each time the Buyer
purchases shares of Common Stock pursuant to Section 1 hereof.
(c) “Bankruptcy
Law” means Title 11, U.S. Code, or any similar federal or state law for the
relief of debtors.
(d)
“Base
Purchase Notice” shall mean an irrevocable written notice from the Company to
the Buyer directing the Buyer to buy up to the Base Purchase Amount in Purchase
Shares as specified by the Company therein at the applicable Purchase Price
on
the Purchase Date.
(e) “Block
Purchase Amount” shall mean such Block Purchase Amount as specified by the
Company in a Block Purchase Notice subject to Section 1(b) hereof.
(f) “Block
Purchase Notice” shall mean an irrevocable written notice from the Company to
the Buyer directing the Buyer to buy the Block Purchase Amount in Purchase
Shares as specified by the Company therein at the Block Purchase Price as of
the
Purchase Date subject to Section 1 hereof.
(d) “Business
Day” means any day on which the Principal Market is open for trading including
any day on which the Principal Market is open for trading for a period of time
less than the customary time.
(e) “Closing
Sale Price” means, for any security as of any date, the last closing trade price
for such security on the Principal Market as reported by the Principal Market,
or, if the Principal Market is not the principal securities exchange or trading
market for such security, the last closing trade price of such security on
the
principal securities exchange or trading market where such security is listed
or
traded as reported by the Principal Market.
(f) “Confidential
Information” means any information disclosed by either party to the other party,
either directly or indirectly, in writing, orally or by inspection of tangible
objects (including, without limitation, documents, prototypes, samples, plant
and equipment), which is designated as "Confidential," "Proprietary" or some
similar designation. Information communicated orally shall be considered
Confidential Information if such information is confirmed in writing as being
Confidential Information within ten (10) business days after the initial
disclosure. Confidential Information may also include information disclosed
to a
disclosing party by third parties. Confidential Information shall not, however,
include any information which (i) was publicly known and made generally
available in the public domain prior to the time of disclosure by the disclosing
party; (ii) becomes publicly known and made generally available after disclosure
by the disclosing party to the receiving party through no action or inaction
of
the receiving party; (iii) is already in the possession of the receiving party
at the time of disclosure by the disclosing party as shown by the receiving
party’s files and records immediately prior to the time of disclosure; (iv) is
obtained by the receiving party from a third party without a breach of such
third party’s obligations of confidentiality; (v) is independently developed by
the receiving party without use of or reference to the disclosing party’s
Confidential Information, as shown by documents and other competent evidence
in
the receiving party’s possession; or (vi) is required by law to be disclosed by
the receiving party, provided that the receiving party gives the disclosing
party prompt written notice of such requirement prior to such disclosure and
assistance in obtaining an order protecting the information from public
disclosure.
(g) “Custodian”
means any receiver, trustee, assignee, liquidator or similar official under
any
Bankruptcy Law.
(h) “Maturity
Date” means the date that is 500 Business Days (25 Monthly Periods) from the
Commencement Date.
(i) “Monthly
Period” means each successive 20 Business Day period commencing with the
Commencement Date.
(j) “Person”
means an individual or entity including any limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.
(k) “Principal
Market” means American Stock Exchange; provided however, that in the event the
Company’s Common Stock is ever listed or traded on the Nasdaq Global Market, the
Nasdaq Capital Market, the Nasdaq OTC Bulletin Board or the New York Stock
Exchange, than the “Principal Market” shall mean such other market or exchange
on which the Company’s Common Stock is then listed or traded.
(l) “Purchase
Amount” means, with respect to any particular purchase made hereunder, the
portion of the Available Amount to be purchased by the Buyer pursuant to Section
1 hereof as set forth in a valid Base Purchase Notice or a valid Block Purchase
Notice which the Company delivers to the Buyer.
(m) “Purchase
Date” means with respect to any particular purchase made hereunder, the Business
Day after receipt by the Buyer of a valid Base Purchase Notice or a valid Block
Purchase Notice that the Buyer is to buy Purchase Shares pursuant to Section
1
hereof.
(n) “Purchase
Price” means the lower of the (A) the lowest Sale Price of the Common
Stock on the Purchase Date and (B) the arithmetic average of the three (3)
lowest Closing Sale Prices for the Common Stock during the twelve (12)
consecutive Business Days ending on the Business Day immediately preceding
such
Purchase Date (to be appropriately adjusted for any reorganization,
recapitalization, non-cash dividend, stock split or other similar transaction).
(o) “Sale
Price” means, any trade price for the shares of Common Stock on the Principal
Market as reported by the Principal Market.
(q) “SEC”
means the United States Securities and Exchange Commission.
(r) “Transfer
Agent” means the transfer agent of the Company as set forth in Section 11(f)
hereof or such other person who is then serving as the transfer agent for the
Company in respect of the Common Stock.
11. MISCELLANEOUS.
(a) Governing
Law; Jurisdiction; Jury Trial.
The
corporate laws of the State of Delaware shall govern all issues concerning
the
relative rights of the Company and its shareholders. All other questions
concerning the construction, validity, enforcement and interpretation of this
Agreement and the other Transaction Documents shall be governed by the internal
laws of the State of Illinois, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of Illinois or any
other
jurisdictions) that would cause the application of the laws of any jurisdictions
other than the State of Illinois. Each party hereby irrevocably submits to
the
exclusive jurisdiction of the state and federal courts sitting in the City
of
Chicago, for the adjudication of any dispute hereunder or under the other
Transaction Documents or in connection herewith or therewith, or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that
the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to
such
party at the address for such notices to it under this Agreement and agrees
that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH
PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
(b) Counterparts.
This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party;
provided that a facsimile signature shall be considered due execution and shall
be binding upon the signatory thereto with the same force and effect as if
the
signature were an original, not a facsimile signature.
(c) Headings.
The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.
(d) Severability.
If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or
the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
(e) Entire
Agreement.
With
the exception of the Mutual Nondisclosure Agreement between the parties dated
as
of February 5, 2007, this Agreement supersedes all other prior oral or written
agreements between the Buyer, the Company, their affiliates and persons acting
on their behalf with respect to the matters discussed herein, and this
Agreement, the other Transaction Documents and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor the Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. The Company acknowledges
and agrees that is has not relied on, in any manner whatsoever, any
representations or statements, written or oral, other than as expressly set
forth in this Agreement.
(f) Notices.
Any
notices, consents or other communications required or permitted to be given
under the terms of this Agreement must be in writing and will be deemed to have
been delivered: (i) upon receipt when delivered personally; (ii) upon receipt
when sent by facsimile (provided confirmation of transmission is mechanically
or
electronically generated and kept on file by the sending party); or (iii) one
Business Day after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive the same.
The
addresses and facsimile numbers for such communications shall be:
If
to the
Company:
O2Diesel
Corporation
000
Xxxxxxxx Xxxxx
Xxxxxx,
Xxxxxxxx 00000
Telephone:
000-000-0000
Facsimile:
000-000-0000
Attention:
Chief
Financial Officer
With
a
copy to:
Xxxxxx
& Xxxxxx
0000
Xxxxxx Xxxxxxxxx, Xxxxx 000
XxXxxx,
XX 00000
Telephone:
000-000-0000
Facsimile:
000-000-0000
Attention:
Xxxxx
Xxxxx
If
to the
Buyer:
Fusion
Capital Fund II, LLC
000
Xxxxxxxxxxx Xxxx Xxxxx, Xxxxx 0-000
Xxxxxxx,
XX 00000
Telephone: 000-000-0000
Facsimile:
000-000-0000
Attention:
Xxxxxx
X.
Xxxxxx
If
to the
Transfer Agent:
Interwest
Transfer Company, Inc.
0000
Xxxx
Xxxxxx Xxxxxxxx Xxxx, Xxxxx 000
X.X.
Xxx
00000
Xxxx
Xxxx
Xxxx, XX 00000
Telephone:
000-000-0000
Ext. 18
Facsimile:
801-277-3147
Attention:
Xxxxxxxx
Brighton-Xxxxx -- XxxxxxxxX@xxxxxxxxxx.xxx
or
at
such other address and/or facsimile number and/or to the attention of such
other
person as the recipient party has specified by written notice given to each
other party three (3) Business Days prior to the effectiveness of such change.
Written confirmation of receipt (A) given by the recipient of such notice,
consent or other communication, (B) mechanically or electronically generated
by
the sender's facsimile machine containing the time, date, and recipient
facsimile number or (C) provided by a nationally recognized overnight delivery
service, shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
(g) Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns. The Company shall not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the Buyer, including by merger or consolidation. The Buyer may not
assign its rights or obligations under this Agreement.
(h) No
Third Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
(i) Publicity.
The
Buyer shall have the right to approve before issuance any press release, SEC
filing or any other public disclosure made by or on behalf of the Company
whatsoever with respect to, in any manner, the Buyer, its purchases hereunder
or
any aspect of this Agreement or the transactions contemplated hereby; provided,
however, that the Company shall be entitled, without the prior approval of
the
Buyer, to make any press release or other public disclosure (including any
filings with the SEC) with respect to such transactions as is required by
applicable law and regulations so long as the Company and its counsel consult
with the Buyer in connection with any such press release or other public
disclosure at least two (2) Business Days prior to its release. The Buyer must
be provided with a copy thereof at least two (2) Business Days prior to any
release or use by the Company thereof. The Company agrees and acknowledges
that
its failure to fully comply with this provision constitutes a material adverse
effect on its ability to perform its obligations under this Agreement.
(j) Further
Assurances.
Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
(k) Termination.
This
Agreement may be terminated only as follows:
(i) By
the
Buyer any time an Event of Default exists without any liability or payment
to
the Company. However, if pursuant to or within the meaning of any Bankruptcy
Law, the Company commences a voluntary case or any Person commences a proceeding
against the Company, a Custodian is appointed for the Company or for all or
substantially all of its property, or the Company makes a general assignment
for
the benefit of its creditors, (any of which would be an Event of Default as
described in Sections 9(f), 9(g) and 9(h) hereof) this Agreement shall
automatically terminate without any liability or payment to the Company without
further action or notice by any Person. No such termination of this Agreement
under this Section 11(k)(i) shall affect the Company's or the Buyer's
obligations under this Agreement with respect to pending purchases and the
Company and the Buyer shall complete their respective obligations with respect
to any pending purchases under this Agreement.
(ii) In
the
event that the Commencement shall not have occurred, the Company shall have
the
option to terminate this Agreement for any reason or for no reason without
liability of any party to any other party.
(iii) In
the
event that the Commencement shall not have occurred on or before June 1, 2007,
due to the failure to satisfy the conditions set forth in Sections 6 and 7
above
with respect to the Commencement, the nonbreaching party shall have the option
to terminate this Agreement at the close of business on such date or thereafter
without liability of any party to any other party.
(iv) If
by the
Maturity Date for any reason or for no reason the full Available Amount under
this Agreement has not been purchased as provided for in Section 1 of this
Agreement, by the Buyer without any liability or payment to the Company.
(v)
At any
time after the Commencement Date, the Company shall have the option to terminate
this Agreement for any reason or for no reason by delivering notice (a “Company
Termination Notice”) to the Buyer electing to terminate this Agreement without
any liability or payment to the Buyer. The Company Termination Notice shall
not
be effective until one (1) Business Day after it has been received by the Buyer.
(vi) This
Agreement shall automatically terminate on the date that the Company sells
and
the Buyer purchases the full Available Amount as provided herein, without any
action or notice on the part of any party.
Except
as
set forth in Sections 11(k)(i) (in respect of an Event of Default under Sections
9(f), 9(g) and 9(h)) and 11(k)(vi), any termination of this Agreement pursuant
to this Section 11(k) shall be effected by written notice from the Company
to
the Buyer, or the Buyer to the Company, as the case may be, setting forth the
basis for the termination hereof. The representations and warranties of the
Company and the Buyer contained in Sections 2, 3 and 5 hereof, the
indemnification provisions set forth in Section 8 hereof and the agreements
and
covenants set forth in Section 11,
shall
survive the Commencement and any termination of this Agreement. No termination
of this Agreement shall affect the Company's or the Buyer's rights or
obligations (i) under the Registration Rights Agreement which shall survive
any
such termination or (ii) under this Agreement with respect to pending purchases
and the Company and the Buyer shall complete their respective obligations with
respect to any pending purchases under this Agreement.
(l) No
Financial Advisor, Placement Agent, Broker or Finder.
The
Company represents and warrants to the Buyer that it has not engaged any
financial advisor, placement agent, broker or finder in connection with the
transactions contemplated hereby. The Buyer represents and warrants to the
Company that it has not engaged any financial advisor, placement agent, broker
or finder in connection with the transactions contemplated hereby. The Company
shall be responsible for the payment of any fees or commissions, if any, of
any
financial advisor, placement agent, broker or finder relating to or arising
out
of the transactions contemplated hereby. The Company shall pay, and hold the
Buyer harmless against, any liability, loss or expense (including, without
limitation, attorneys' fees and out of pocket expenses) arising in connection
with any such claim.
(m) No
Strict Construction.
The
language used in this Agreement will be deemed to be the language chosen by
the
parties to express their mutual intent, and no rules of strict construction
will
be applied against any party.
(n) Remedies,
Other Obligations, Breaches and Injunctive Relief.
The
Buyer’s remedies provided in this Agreement shall be cumulative and in addition
to all other remedies available to the Buyer under this Agreement, at law or
in
equity (including a decree of specific performance and/or other injunctive
relief), no remedy of the Buyer contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and nothing herein
shall limit the Buyer's right to pursue actual damages for any failure by the
Company to comply with the terms of this Agreement. The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm
to
the Buyer and that the remedy at law for any such breach may be inadequate.
The
Company therefore agrees that, in the event of any such breach or threatened
breach, the Buyer shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, without the necessity of
showing economic loss and without any bond or other security being
required.
(0) Enforcement
Costs.
If: (i)
this Agreement is placed by the Buyer in the hands of an attorney for
enforcement or is enforced by the Buyer through any legal proceeding; or (ii)
an
attorney is retained to represent the Buyer in any bankruptcy, reorganization,
receivership or other proceedings affecting creditors' rights and involving
a
claim under this Agreement; or (iii) an attorney is retained to represent the
Buyer in any other proceedings whatsoever in connection with this Agreement,
then the Company shall pay to the Buyer, as incurred by the Buyer, all
reasonable costs and expenses including attorneys' fees incurred in connection
therewith, in addition to all other amounts due hereunder.
(p) Failure
or Indulgence Not Waiver.
No
failure or delay in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise
of
any such power, right or privilege preclude other or further exercise thereof
or
of any other right, power or privilege.
*
* * * *
IN
WITNESS WHEREOF,
the
Buyer and the Company have caused this Common Stock Purchase Agreement to be
duly executed as of the date first written above.
THE
COMPANY:
O2DIESEL
CORPORATION
By:
/s/
Xxxx X. Xxx
Name:
Xxxx X. Xxx
Title:
Chief Executive Officer
BUYER:
FUSION
CAPITAL FUND II, LLC
BY:
FUSION CAPITAL PARTNERS, LLC
BY:
SGM HOLDINGS CORP.
By:
/s/
Xxxxxx X. Xxxxxx
Name:
Xxxxxx X. Xxxxxx
Title:
President
