EXHIBIT 10.26
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of March 3, 2000,
by and among Xxxxxxxxx.Xxx, a Nevada corporation, with headquarters located at
000 Xxxxxxx Xxxx Xxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxxxx 00000 (the "Company"),
and the investor listed on the Schedule of Buyers attached hereto (individually,
a "Buyer" or collectively "Buyers").
WHEREAS:
A. The Company and the Buyer(s) are executing and delivering this Agreement
in reliance upon the exemption from securities registration pursuant to Section
4(2) and/or Regulation D ("Regulation D") at the sole election of Buyer(s) in
the event that a registration statement filed by the Company pursuant to Section
2(a) of the Registration Rights Agreement (described below) is not declared
effective by the Registration Deadline (as defined therein) as promulgated by
the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933; as amended (the "1933 Act") by the Registration Deadline (as defined in
the Registration Rights Agreement);
B. The Company has authorized the following new series of its Preferred
Stock, $.001 par value per share (the "Preferred Stock"): the Company's Series A
Convertible Preferred Stock (the "Series A Preferred Shares"), which shall be
convertible into shares of the Company's Common Stock, $.001 par value per share
(the "Common Stock") (as converted, the "Conversion Shares"), in accordance with
the terms of the Company Certificate of Designations, Preferences, and Rights of
the Series A Preferred Shares, substantially in the form attached hereto as
Exhibit "A" (the "Certificate of Designations");
C. The Buyer(s) wish to purchase, upon the terms and conditions stated in
this Agreement, an aggregate amount of up to 125 shares of Series A Preferred
Stock in the respective amounts set forth opposite each Buyer(s) name on the
Schedule of Buyers;
D. Contemporaneously with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement
substantially in the form attached hereto as Exhibit "B" (the "Registration
Rights Agreement") pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws; and
NOW THEREFORE, the Company and the Buyer(s) hereby agree as follows:
1. PURCHASE AND SALE OF SERIES A PREFERRED STOCK.
-----------------------------------------------------
90
a. Purchase of Series A Preferred Stock.Subject to the satisfaction (or
----------------------------------------
waiver) of the conditions set forth in Sections 6 and 7 below, the Company shall
issue and sell to the Buyer(s) and the Buyer(s) shall purchase from the Company
an aggregate principal amount of 125 shares of Series A Preferred Stock, in the
respective amounts set forth opposite each Buyer(s) name on the Schedule of
Buyers (the "Closing").
b. Closing Date.The date and time of the Closing (the "Closing Date") shall
-------------
be 10:00 a.m. Eastern Standard Time, within five (5) business days following the
date hereof, subject to notification of satisfaction (or waiver) of the
conditions to the Closing set forth in Sections 6 and 7 below (or such later
date as is mutually agreed to by the Company and the Buyer(s)). The Closing
shall occur on the Closing Date at the offices of Xxxxxx Xxxxxxxx, LLP, 0000
Xxxxxxxxxx Xxxxxx, Xxxxx 0, Xxxxx, Xxx Xxxxxx 00000.
c. Form of Payment.On the Closing Date, (i) each Buyer shall pay the
------------------
Purchase Price to the Company for the Series A Preferred Shares to be issued and
sold to the Buyer(s) at the Closing, by wire transfer of immediately available
funds in accordance with the Company's written wire instructions, and (ii) the
Company shall deliver to each Buyer, certificates representing such Series A
Preferred Stock which Buyer(s) are then purchasing (as indicated opposite such
Buyer's name on the Schedule of Buyers), duly executed on behalf of the Company
and registered in the name of such Buyer or its designee (the "Certificates").
2. BUYER(S) REPRESENTATIONS AND WARRANTEES.
-------------------------------------------
Each Buyer represents and warrants with respect to only itself that:
a. Investment Purpose.Such Buyer (i) is acquiring the Series A Preferred
--------------------
Shares, (ii) upon conversion of the Series A Preferred Shares, will acquire the
Conversion Shares then issuable, 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, except pursuant to sales registered or exempted under the
1933 Act; provided, however, that by making the representations herein, such
Buyer does not agree to hold any Series A Preferred Shares and Conversion
Shares, for any minimum or other specific term and reserves the right to dispose
of Series A Preferred Shares, Conversion Shares at any time, subject to any
underwriter lock up, in accordance with or pursuant to a registration statement
or an exemption under the 1933 Act.
b. Accredited Investor Status.Such Buyer(s) are an "accredited investor" as
---------------------------
that term is defined in Rule 501(a)(3) of Regulation D.
c. Reliance on Exemptions.Such Buyer(s) understand that the Series A
-------------------------
Preferred Shares, the Conversion Shares 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 such Buyer(s) compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
such Buyer(s) set forth herein in order to determine the availability of such
exemptions and the eligibility of such Buyer to acquire such securities.
91
d. Information. Such Buyer(s) and their advisors, if any, have 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 Series A
Preferred Shares and the Conversion Shares which have been requested by such
Buyer(s). Such Buyer(s) and their advisors, if any, have been afforded the
opportunity to ask questions of the Company. Neither such inquiries nor any
other due diligence investigations conducted by such Buyer(s) or its advisors,
if any, or its representatives shall modify, amend or affect such Buyer(s) right
to rely on the Company's representations and warranties contained in Section 3
below. Such Buyer(s) understand that its investment in the Series A Preferred
Shares and the Conversion Shares involves a high degree of risk. Such Buyer(s)
have 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
Series A Preferred Shares and the Conversion Shares.
e. No Governmental Review. Such Buyer(s) understand 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 Series A Preferred
Shares and the Conversion Shares or the fairness or suitability of the
investment in the Series A Preferred Shares and the Conversion Shares nor have
such authorities passed upon or endorsed the merits of the offering of the
Series A Preferred Shares and the Conversion Shares.
f. Transfer or Resale.Such Buyer(s) understand that except as provided in
--------------------
the Registration Rights Agreement: (i) the Series A Preferred Shares and the
Conversion Shares 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, (b) such Buyer(s)
shall have delivered to the Company an opinion of counsel, in a generally
acceptable form, to the effect that such securities to be sold, assigned or
transferred may be sold, assigned or transferred pursuant to an exemption from
such registration, or (c) such Buyer(s) provide the Company with reasonable
assurance that such securities can be sold, assigned or transferred pursuant to
Rule 144 or promulgated under the 1933 Act (or a successor rule thereto); (ii)
any sale of such securities made in reliance on Rule 144 promulgated under the
1933 Act (or a successor rule thereto) .
g. Legends.Such Buyer(s) understand that the certificates or other instruments
--------
representing the Series A Preferred Shares, until such time as the sale of the
Conversion Shares have been registered under the 1933 Act as contemplated by the
Registration Rights Agreement, the stock certificates representing the
Conversion Shares shall bear a restrictive legend in substantially the following
form (and a stop-transfer order may be placed against transfer of such stock
certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS.
92
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, OR AN OPINION OF COUNSEL, IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO
RULE 144 UNDER SAID ACT.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Series A Preferred Shares
and the Conversion Shares upon which it is stamped, if, unless otherwise
required by state securities laws, (i) the sale of the Conversion Shares are
registered under the 1933 Act, (ii) in connection with a sale transaction, such
holder provides the Company with an opinion of counsel, in a generally
acceptable form, to the effect that a public sale, assignment or transfer of the
Series A Preferred Shares and the Conversion Shares may be made without
registration under the 1933 Act, or (iii) such holder provides the Company with
reasonable assurances that the Series A Preferred Shares and the Conversion
Shares can be sold pursuant to Rule 144 without any restriction as to the number
of securities acquired as of a particular date that can then be immediately
sold.
h. Authorization, Enforcement.This Agreement has been duly and validly
----------------------------
authorized, executed and delivered on behalf of such Buyer(s) and is a valid and
binding agreement of such Buyer(s) enforceable in accordance with its terms,
subject as 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.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
---------------------------------------------------
The Company represents and warrants to each of the Buyer(s) that:
a. Organization and Qualification. The Company and its subsidiaries 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 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 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 would not have a material adverse effect on the Company and its
subsidiaries taken as a whole.
93
b. Authorization, Enforcement, Compliance with Other Instruments.(i) The
----------------------------------------------------------------
Company has the requisite corporate power and authority to enter into and
perform this Agreement, the Registration Rights Agreement and any related
agreements, and to issue the Series A Preferred Shares and the Conversion Shares
in accordance with the terms hereof and thereof, (ii) the execution and delivery
of this Agreement, the Registration Rights Agreement and any related agreements
by the Company and the consummation by it of the transactions contemplated
hereby and thereby, including without limitation the issuance of the Series A
Preferred Shares and the reservation for issuance and the issuance of the
Conversion Shares issuable upon conversion or exercise thereof, 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
stockholders, (iii) this Agreement and the Registration Rights Agreement and any
related agreements have been duly executed and delivered by the Company, (iv)
this Agreement, the Registration Rights Agreement and any related agreements
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, and (v)
prior to the Closing Date, the Certificate of Designations has been filed with
the Secretary of State of the State of Nevada and will be in full force and
effect, enforceable against the Company in accordance with its terms.
c. Capitalization. As of the date hereof, the authorized capital stock of
---------------
the Company consists of 50,000,000 shares of Common Stock, of which as of the
date hereof 12,555,441 shares were issued and outstanding, and no series of
preferred stock or debentures or notes were issued and outstanding. All of such
outstanding shares have been validly issued and are fully paid and
nonassessable. Except as disclosed in Schedule 3(c), no shares of Common Stock
or preferred stock are subject to preemptive rights or any other similar rights
or any liens or encumbrances suffered or permitted by the Company. Except as
disclosed in Schedule 3(c), as of the effective date of this Agreement, (i)
there are no outstanding options, warrants, scrip, fights 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, (ii) there
are no outstanding debt securities and (iii) 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). There are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Series A Preferred Shares and the Conversion Shares as
described in this 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 in effect on the date hereof (the "Bylaws"), and the terms
of all securities convertible into or exercisable for Common Stock and the
material rights of the holders thereof in respect thereto.
94
d. Issuance of Securities.The Series A Preferred Shares are duly authorized
-----------------------
and, upon issuance in accordance with the terms hereof, shall be (i) validly
issued, fully paid and nonassessable, are free from all taxes, liens and charges
with respect to the issue thereof and are entitled to the rights and preferences
set forth in the Certificate of Designations in the Series A Preferred Shares.
The Conversion Shares issuable upon conversion of the Series A Preferred Shares
have been duly authorized and reserved for issuance. Upon conversion or exercise
in accordance with the Certificate of Designations, the Conversion Shares will
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 this Agreement by the Company and the consummation
by the Company of the transactions contemplated hereby 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 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 or
exchange on which the Common Stock is traded or listed) 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 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 or By-laws or their
organizational charter or by-laws, respectively, or 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. 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 as specifically contemplated by
this Agreement and as required under the 1933 Act and any 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 in order for it to execute, deliver or perform any of its
obligations under or contemplated by this Agreement or the Registration Rights
Agreement 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 have
been obtained or effected on or prior to the date hereof. The Company and its
subsidiaries are unaware of any facts or circumstances , which might give rise
to any of the foregoing.
f. SEC Documents: Financial Statements. The Company has 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 Securities
95
Exchange Act of 1934, as amended (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"). The Company has
delivered to the Buyer(s) or its representative true and complete copies of the
SEC Documents. As of their respective dates, 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
G. Absence of Certain Changes. Except as disclosed in Schedule 3 (g) there
-----------------------------
has been no material adverse change and no material adverse development since
September 30, 1999 in the business, properties, operations, financial condition,
results of operations or prospects 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
its subsidiaries have any knowledge or reason to believe that its creditors
intend to initiate involuntary bankruptcy proceedings.
H. Acknowledgment Regarding Buyer(s) Purchase of Series A Preferred
-----------------------------------------------------------------------
Shares.The Company acknowledges and agrees that the Buyer(s) are acting solely
in the capacity of an arm's length purchaser with respect to this Agreement and
the transactions contemplated hereby. The Company further acknowledges that the
Buyer(s) are 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 hereby and any advice given by the Buyer(s) or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to such Buyer(s) purchase
of the Series A Preferred Shares and the Conversion Shares. The Company further
represents to the Buyer(s) that the Company's decision to enter into this
Agreement has been based solely on the independent evaluation by the Company and
its representatives.
I. 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 Series A Preferred
Shares and the Conversion Shares.
J. No Integrated Offering.Neither the Company, nor any of its affiliates,
------------------------
nor any person acting on its or their behalf has, directly or indirectly, made
any offers or sales of any security or solicited any offers to buy any security,
96
under circumstances that would require registration of the Series A Preferred
Shares and the Conversion Shares under the 1933 Act or cause this offering of
Series A Preferred Shares and the Conversion Shares to be integrated with prior
offerings by the Company for purposes of the 1933 Act or any applicable
stockholder approval provisions.
4. COVENANTS.
----------
a. Best Efforts.Each party shall use its best efforts timely to satisfy
--------------
each of the conditions to be satisfied by it as provided in Sections 6 and 7 of
this Agreement.
b. Form D.The Company agrees to file a Form D with respect to the Series A
-------
Preferred Shares and the Conversion Shares as required under Regulation B and to
provide a copy thereof to the Buyer(s) promptly after such filing. The Company
shall, on or before the Closing Date, take such action as the Company shall
reasonably determine is necessary to qualify the Series A Preferred Shares and
the Conversion Shares for, or obtain exemption for the Series A Preferred Shares
and the Conversion Shares for, sale to the Buyer(s) at the Closing pursuant to
this Agreement under applicable securities or "Blue Sky" laws of the states of
the United States, and shall provide evidence of any such action so taken to the
Buyer(s) on or prior to the Closing Date.
c. Reporting Status.Until the earlier of (i) the date as of which the
------------------
Investors (as that term is defined in the Registration Rights Agreement) may
sell all of the Conversion Shares without restriction pursuant to Rule 144(k)
promulgated under the 1933 Act (or successor thereto), or (ii) the date on which
(A) the Investors shall have sold all the Conversion Shares and (B) none of the
Series A Preferred Shares are outstanding (the "Registration Period"), the
Company shall file all reports required to be flied with the SEC pursuant to the
1934 Act, and the Company shall not terminate its status as an issuer required
to file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would otherwise permit such termination.
d. Use of Proceeds.The Company will use the proceeds from the sale of the
-----------------
Series A Preferred Shares for substantially the same purposes and in
substantially the same amounts as indicated in Schedule 4(t).
e. Financial Information.The Company agrees to send the following to
-----------------------
Buyer(s) during the Registration Period: (i) within five (5) days after the
filing thereof with the SEC, a copy of its Annual Reports on Form 10-K, its
Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K and any
registration statements or amendments filed pursuant to the 1933 Act; (ii)
within one (1) day after release thereof, copies of all press releases issued by
the Company or any of its subsidiaries and (ii) copies of the same notices and
other information given to the stockholders of the Company generally,
contemporaneously with the giving thereof to the stockholders.
97
f. Reservation of Shares.The Company shall take all action necessary to at
----------------------
all times have authorized, and reserved for the purpose of issuance, such number
of Shares of Common Stock as shall from time to time be sufficient to affect the
conversion of all of the Conversion Shares and the shares representing the
underlying warrants (the "Warrant Shares") then outstanding.
g. Listings.The Company shall promptly secure the listing of the Conversion
---------
Shares upon each national securities exchange or automated quotation system, if
any, upon which shares of Common Stock are then listed (subject to official
notice of issuance) and shall maintain, so long as any other shares of Common
Stock shall be so listed, such listing of all Conversion Shares from time to
time issuable under the terms of this Agreement and the Registration Rights
Agreement. The Company shall maintain the Common Stock's authorization for
quotation in the over-the counter market. The Company shall promptly provide to
each Buyer copies of any notices it receives regarding the continued eligibility
of the Common Stock for trading in the over-the-counter market.
h. Expenses.The Company shall pay all costs and expenses incurred by such
---------
party in connection with the negotiation, investigation, preparation, execution
and delivery of this Agreement and the Registration Rights Agreement. The costs
and expenses of the May Xxxxx Group, Inc., and its counsel (counsel fees shall
not exceed $15,000) shall be paid for by the Company directly from the Escrow
Funds at Closing.
i. Authorized Shares of Common Stock, Reservation of Shares.The Company
------------------------------------------------------------
shall at all times, so long as any of the Series A Preferred Shares are
outstanding, reserve and keep available out of its authorized and unissued
Common Stock, solely for the purpose of effecting the conversion of the Series A
Preferred Shares such number of shares of Common Stock equal to or greater than
200% of the number of shares of Common Stock for which are issuable upon
conversion of all of the then outstanding Series A Preferred Shares which are
then outstanding or which could be issued at any time under this Agreement or
the Series A Preferred Shares.
j. Corporate Xxxxxxxxx.Xx long as any Series A Preferred Shares remain
---------------------
outstanding, the Company shall not directly or indirectly consummate any merger,
reorganization, restructuring, consolidation, sale of all or substantially all
of the Company's assets or any similar transaction or related transactions (each
such transaction, a "Sale of the Company").
k. Transactions With Xxxxxxxxxx.Xx long as (i) any Series A Preferred
-------------------------------
Shares are outstanding or (ii) any Buyer owns Conversion Shares with a market
value equal to or greater than $250,000, the Company shall not, and shall cause
each of its subsidiaries not to, enter into, amend, modify or supplement, or
permit any subsidiary to enter into, amend, modify or supplement any agreement,
transaction, commitment, or arrangement with any of its or any subsidiary's
officers, directors, person who were officers or directors at any time during
the previous two years, stockholders who beneficially own 5% or more of the
Common Stock, or affiliates or with any individual related by blood, marriage,
or adoption to any such individual or with any entity in which any such entity
or individual owns a 5% or more beneficial interest (each a "Related Party"),
98
except for (a) customary employment arrangements and benefit programs on
reasonable terms, (b) any agreement, transaction, commitment, or arrangement on
an arms-length basis on terms no less favorable than terms which would have been
obtainable from a person other than such Related Party, (c) any agreement
transaction, commitment, or arrangement which is approved by a majority of the
disinterested directors of the Company, for purposes hereof,, any director who
is also an officer of the Company or any subsidiary of the Company shall not be
disinterested director with respect to any such agreement, transaction,
commitment, or arrangement. "Affiliate" for purposes hereof means, with respect
to any person or entity, another person or entity that, directly or indirectly,
(i) has a 5% or more equity interest in that person or entity, (ii) has 5% or
more common ownership with that person or entity, (iii) controls that person or
entity, or (iv) share common control with that person or entity. "Control" or
"controls" for purposes hereof means that a person or entity has the power,
direct or indirect, to conduct or govern the policies of another person or
entity.
l. The Company covenants and agrees that in the event that the Company's
agency relationship with the transfer agent should be terminated for any reason
prior to a date which is two (2) years after the Closing Date, the Company shall
immediately appoint a new transfer agent and shall require that the transfer
agent execute and agree to be bound by the terms of the Irrevocable Instructions
to Transfer Agent.
5. TRANSFER AGENT INSTRUCTIONS.
------------------------------
The Company shall issue irrevocable instructions to its transfer agent to
issue certificates, registered in the name of the Buyer(s) or its respective
nominee(s), for the Conversion Shares in such amounts as specified from time to
time by the Buyer(s) to the Company upon conversion of the Series A Preferred
Shares (the "Irrevocable Transfer Agent Instructions"), except as provided in
Section 4(1) herein. Prior to registration of the Conversion Shares under the
1933 Act, all such certificates shall bear the restrictive legend specified in
Section 2(g) of this Agreement. The Company warrants that no instruction other
than the Irrevocable Transfer Agent Instructions referred to in this Section 5,
and stop transfer instructions to give effect to Section 2 hereof (in the case
of the Conversion Shares, prior to registration of such shares under the 0000
Xxx) will be given by the Company to its transfer agent and that the Series A
Preferred Shares and the Conversion 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. Nothing in
this Section 5 shall affect in any way the Buyer's obligations and agreement to
comply with all applicable securities laws upon resale of the Series A Preferred
Shares and the Conversion Shares. If the Buyer(s) provide the Company with an
opinion of counsel, reasonably satisfactory in form, and substance to the
Company, that registration of a resale by the Buyer(s) of any of the Series A
Preferred Shares and the Conversion Shares is not required under the 1933 Act,
the Company shall permit the transfer, and, in the case of the Conversion
Shares, promptly instruct its transfer agent to issue one or more certificates
99
in such name and in such denominations as specified by the Buyer(s). The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Buyer(s) by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5, that the Buyer(s) shall be
entitled, in addition to all other available remedies, to an injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
-----------------------------------------------------
The obligation of the Company hereunder to issue and sell the Series A
Preferred Shares to the Buyer(s) at the Closing is subject to the satisfaction,
at or before the Closing Date, of each of the following conditions, provided
that these conditions are for the Company's sole benefit and may be waived by
the Company at any time in its sole discretion:
a. The Buyer(s) shall have executed this Agreement and the Registration
Rights Agreement and delivered the same to the Company.
b. The Certificate of Designations shall have been filed with the Secretary
of State of the State of Nevada.
c. The Buyer(s) shall have delivered to the Company the Purchase Price for
the Series A Preferred Shares being purchased by the Buyer(s) at the Closing by
wire transfer of immediately available funds pursuant to the wire instructions
provided by the Company.
d. The representations and warranties of the Buyer(s) shall be true and
correct in all material respects as of the date when made and as of the Closing
Date as though made at that time (except for representations and warranties that
speak as of a specific date), and the Buyer(s) shall have performed, satisfied
and complied in all material respects with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Buyer(s) at or prior to the Closing Date.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
-------------------------------------------------------
The obligation of the Buyer(s) hereunder to purchase the Series A Preferred
Shares at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are
for the Buyer(s) sole benefit and may be waived by the Buyer(s) at any time in
its sole discretion:
a. The Company shall have executed this Agreement and the Registration
Rights Agreement, and delivered the same to the Buyer(s).
100
b. 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
Closing 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 in ail material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date. The Buyer(s)
shall have received a certificate, executed by the Chief Executive Officer of
the Company, dated as of the Closing Date, to the foregoing effect and as to
such other matters as may be reasonably requested by the Buyer(s) including,
without limitation an update as of the Closing Date regarding the representation
contained in Section 3(c) above.
c. The Buyer(s) shall have received the opinion of the Company's counsel
dated as of the Closing Date, in form, scope and substance reasonably
satisfactory to the Buyer(s) and in substantially the form attached hereto.
d. The Company shall have executed and delivered to the Buyer(s) the
Certificates (in such denominations as the Buyer(s) shall request) for the
Series A Preferred Shares being purchased by the Buyer(s) at the Closing.
e. The Board of Directors of the Company shall have adopted the resolutions
in substantially the form attached hereto.
f. As of the Closing Date, the Company shall as of the Closing Date have
reserved out of its authorized and unissued Common Stock, solely for the purpose
of effecting the conversion of the Series A Preferred Shares, such number of
shares of Common Stock equal to or greater than 200% of the number of shares of
Common Stock for which are issuable upon conversion of all of the Series A
Preferred Shares which could be issued at any time under this Agreement or the
Series A Preferred Shares.
g. The Irrevocable Transfer Agent Instructions, in form and substance
satisfactory to the Buyer(s), shall have been delivered to and acknowledged in
writing by the Company's transfer agent.
8. INDEMNIFICATION.
----------------
a. In consideration of the Buyer(s) execution and delivery of this
Agreement and acquiring the Series A Preferred Shares and the Conversion Shares
hereunder and in addition to all of the Company's other obligations under this
Agreement, the Company shall defend, protect, indemnify and hold harmless the
Buyer(s) and each other holder of the Series A Preferred Shares and the
Conversion Shares and all of their officers, directors, employees and agents
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "INDEMNITEES")
101
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
the Indemnitees or any of them 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 this Agreement, the Series A Preferred Shares or the Registration
Rights Agreement 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 this Agreement, the Warrants, the Certificate of
Designations, or the Registration Rights Agreement 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 this
Agreement or any other instrument, document or agreement executed pursuant
hereto by any of the Indemnities, any transaction financed or to be financed in
whole or in part, directly or indirectly, with the proceeds of the issuance of
the Series A Preferred Shares or the status of the Buyer(s) or holder of the
Series A Preferred Shares and the Conversion Shares as an investor in the
Company. 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.
b. In consideration of the Company's execution and delivery of this
Agreement and issuing the Series A Preferred Shares and the Conversion Shares
hereunder and in addition to all of the Buyer(s) other obligations under this
Agreement, the Buyer(s) shall defend, protect, indemnify and hold harmless the
Company all of their officers, directors, employees and agents (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 the Indemnitees
or any of them as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Buyer(s) in this Agreement, the Series A Preferred Shares or the Registration
Rights Agreement or any other certificate, instrument or document contemplated
hereby or thereby, (b) any breach of any covenant, agreement or obligation of
the Buyer(s) contained in this Agreement, the Warrants, the Certificate of
Designations, or the Registration Rights Agreement 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 this
Agreement or any other instrument, document or agreement executed pursuant
hereto by any of the Indemnities, any transaction financed or to be financed in
whole or in part, directly or indirectly, with the proceeds of the issuance of
the Series A Preferred Shares or the status of the Company. To the extent that
the foregoing undertaking by the Buyer(s) may be unenforceable for any reason,
the Buyer(s) shall make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities, which is permissible under applicable
law.
102
9. GOVERNING LAW: MISCELLANEOUS.
-------------------------------
a. Governing Law. This Agreement shall be governed by and interpreted in
---------------
accordance with the laws of the State of New York without regard to the
principles of conflict of laws. Accordingly, upon such breach, Buyer(s), at
their election and without limitation of its other remedies, shall be entitled
to pursue a claim for specific performance of this Agreement, and Company hereby
waives the right to assert any defense thereto that Purchaser has an adequate
remedy at law. Each of the parties consents to the jurisdiction of the federal
courts whose districts encompass any part of the City of New York or the state
courts of the State of New York a sitting in the City of New York in connection
with any dispute arising under this Agreement and hereby waives, to the maximum
extent permitted by law, any objection, including any objection based on forum
non conveniens, to bring any of such proceeding in such jurisdictions.
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. In the event any signature page is delivered by
facsimile transmission, the party using such means of delivery shall cause four
(4) additional original executed signature pages to be physically delivered to
the other party within five (5) days of the execution and delivery hereof
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, Amendments, This Agreement supersedes all other prior
-----------------------------
oral or written agreements between the Buyer(s), the Company, their affiliates
and persons acting on their behalf with respect to the matters discussed herein,
and this Agreement 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 any Buyer(s) make any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this Agreement may be
waived or amended other than by an instrument in writing signed by the party to
be charged with enforcement.
f. Notices.Any notices, consents, waivers, 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
103
personally; (ii) upon receipt, when sent by facsimile, provided a copy is mailed
by U.S. certified mail, return receipt requested; (iii) three (3) days after
being sent by U.S. certified mail, return receipt requested, or (iv) one (1) 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:
000 Xxxxxxx Xxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx Xxxxxxxx, President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With copy to Company Counsel
Xxxxx Xxxxx, Esq.
Silicone Valley Law Group
000 Xxxxx 0xx Xxxxxx
Xxx Xxxx, Xxxxxxxxxx 9122
If to the Transfer Agent:
Attn:
Telephone: ( )
Facsimile: ( )
If to the Buyer(s), to its address and facsimile number on the Schedule of
Buyers, with copies to the Buyer(s) counsel as set forth on the Schedule of
Buyers. Each party shall provide five (5) days' prior written notice to the
other party of any change in address or facsimile number.
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(s), if there are more than two
(2) Buyers the Company shall attain the written consent of those buyer(s) which
posses 2/3 of the outstanding shares. The Buyer(s) may assign their rights
hereunder without the consent of the Company, provided, however, that any such
assignment shall not release the Buyer(s) from their obligations hereunder
unless such obligations are assumed by such assignee and the Company has
consented to such assignment and assumption.
104
h. No Third Party Beneficiaries.This Agreement is intended for the benefit
-----------------------------
of the parties hereto and their respective permitted successors and assign, and
is not for the benefit of, nor may any provision hereof be enforced by, any
other person.
i. Survival.Unless this Agreement is terminated under Section 9(i), the
---------
representations and warranties of the Company and the Buyer(s) contained in
Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and 9,
the indemnification provisions set forth in Section 8, shall survive for 1 year
after the Closing. The Buyer(s) shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
j. Publicity.The Company and the Buyer(s) shall have the right to approve
----------
before issuance any press releases or any other public statements with respect
to the transactions contemplated hereby, however if a disapproval is not issued
within one business day it will be assumed that the press release is approved;
provided, however, that the Company shall be entitled, without the prior
approval of the Buyer(s), to make any press release or other public disclosure
with respect to such transactions as is required by applicable law and
regulations (although the Buyer(s) shall be consulted by the Company in
connection with any such press release or other public disclosure prior to its
release and shall be provided with a copy thereof).
k. Further Assurances.Each party shall do and perform, or cause to be done
-------------------
and performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
1. Xxxxxxxxxxx.Xx the event that the Closing shall not have occurred with
------------
respect to the Buyer(s) on or before five (5) business days from the date hereof
due to the Company's or the Buyer(s) failure to satisfy the conditions set forth
in Sections 6 and 7
above (and the non-breaching party's failure to waive such unsatisfied
condition(s)), the non-breaching party shall have the option to terminate this
Agreement with respect to such breaching party at the close of business on such
date without liability of any party to any other party- provided, however, that
if this Agreement is terminated pursuant to this Section 9(i), the Company shall
remain obligated to reimburse the Buyer(s) for the expenses described in Section
4(h) above.
m. Finder.The Company acknowledges that it has engaged The May Xxxxx Group,
-------
Inc. as a placement agent in connection with the sale of the Series A Preferred
Shares. The Company shall be responsible for the payment of any placement agent
fees relating to or arising out of the transactions contemplated hereby.
n. 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.
105
IN WITNESS WHEREOF, the Buyer and the Company have caused this Securities
Purchase Agreement to be duly executed as of the date first written above.
"COMPANY"
XXXXXXXXX.XXX
By:
Name: Xxxx Xxxxxxxx
Its: President
"BUYER(S)"
By:
Name:
Title:
By:
Name:
Title:
By:
Name:
Title:
By:
Name:
Title:
106
SCHEDULE OF BUYERS
Buyer's Name Address/Facsimile Number Number of Series A
of Buyer Preferred Shares
------------------------- ------------------------ ------------------
Xx. Xxxxxxx Xxxxxxxxxxxxx 00 Xxxxxxxxxx Xxxx 100,000
Xxxxxxxxxx, XX 00000
------------------------- ------------------------ ------------------
Xxxx Xxxxxxxx 0000 Xxxxx Xxx Xxxx, 10,000
Pocatello ID
------------------------- ------------------------ ------------------
Xxxxx Xxxxxx 497 Xxxxxx Xxxxxxx Road, 50,000
Xxxxxxx Xxxx, XX 00000
------------------------- ------------------------ ------------------
Cranshire Capital 000 Xxxxxx Xxxx, Xxx 000,000
By: Xxxxxxx Xxxxx 1901, Xxxxxxxxxx, XX
00000
------------------------- ------------------------ ------------------
Xxxxxxx Xxxxxxx 000 00xx Xxxxxx 50,000
Xxxxx 000
Xxxxxxxxxx, XX 00000
------------------------- ------------------------ ------------------
Illinois Holding Co. 0000 0xx Xxxxxx 100,000
By: Xxxxxx Xxxxxxxxx Xxxxxx, XX 00000
FEIN #00-0000000
------------------------- ------------------------ ------------------
Xxxxx Che Xxx Xxxx 00X Xxxxxxx Xxxx Xxxxx 000,000
Xxxxxx, 0000 Xxxxxxxxx
------------------------- ------------------------ ------------------
Xxx Xx Xxxx 0X Fly Dragon Terr 26-32 30,000
Tinhau Temple Road,
Hong Kong China
------------------------- ------------------------ ------------------
Xxx X. Xxx 00 Xxxx Xxxx 30,000
Upper Xxxxxx Xxxxx, XX
00000
------------------------- ------------------------ ------------------
Xxxxxx Xxxxx 000 Xxxxxx Xx 00,000
Xxx Xxxxx, XX 00000
------------------------- ------------------------ ------------------
Xxxxxx Xxxxxx 00 Xxxxxxx Xxxxx 00,000
Xxxx Xxxxxx, XX 00000
------------------------- ------------------------ ------------------
Xxxxxx Xxxxx 000 Xxxx 00xx Xxxxxx 5,000
Apt.# 17H
Xxx Xxxx, XX 00000
------------------------- ------------------------ ------------------
Xxxxxx Xxxxx 00 Xxxxxxx Xxxxx Xxxxx 15,000
Xxxxxxxxxx, XX 00000
------------------------- ------------------------ ------------------
Xxxxx X. Xxxxx 00 Xxxxxxx Xxxxx 50,000
Xxxxxx, XX 00000
------------------------- ------------------------ ------------------
Xxxxx X. Xx 0000 Xxxxxxxx Xxxxx 00,000
Xxxxxx, XX 00000
------------------------- ------------------------ ------------------
107
Qilu Guan 104-25 hunan Road 50,000
Xxxxxxx Xxxx Xxxxxx,
Xxxxx 000000
------------------------- ------------------------ ------------------
Xxxxxxxx Xx 00 Xxxx Xxxxxx Xxx 0X 20,000
X. Xxxxxxxxx, XX 00000
------------------------- ------------------------ ------------------
Xxxxxxx X. Xxxxx 30,000
------------------------- ------------------------ ------------------
108
109
110
111
112
113
