EXHIBIT 99.4
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of
August 28, 2003, among Crystallex International Corporation, a Canadian
corporation (the "Company"), and the purchasers identified on the signature
pages hereto (each a "Purchaser" and collectively the "Purchasers"); and
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act (as defined below),
and Rule 506 promulgated thereunder, the Company desires to issue and sell to
the Purchasers, and each Purchaser, severally and not jointly, desires to
purchase from the Company in the aggregate (i) Special Warrants, which upon the
AMEX Event (as defined below) shall be deemed exercised for up to 4,545,455
Common Shares, and (ii) Purchase Warrants to purchase up to 2,272,727 (as
appropriately adjusted in accordance with the terms of the Purchase Warrants)
Common Shares.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agrees
as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions.
In addition to the terms defined elsewhere in this Agreement, for all purposes
of this Agreement, the following terms have the meanings indicated in this
Section 1.1:
"Action" shall have the meaning ascribed to such term in
Section 3.1(j).
"Affiliate" means any Person that, directly or indirectly
through one or more intermediaries, controls or is controlled by or is
under common control with a Person as such terms are used in and
construed under Rule 144. With respect to a Purchaser, any investment
fund or managed account that is managed on a discretionary basis by the
same investment manager as such Purchaser will be deemed to be an
Affiliate of such Purchaser.
"AMEX Event" means the receipt by the Company of the approval
of the American Stock Exchange for the listing and issuance of the
Warrant Shares.
"Business Day" means any day except Saturday, Sunday and any
day which shall be a federal legal holiday or a day on which banking
institutions in the State of New York are authorized or required by law
or other governmental action to close.
"Canadian Trading Market" means the Toronto Stock Exchange.
"Closing" means the closing of the purchase and sale of the
Warrants pursuant to Section 2.1(a).
"Closing Date" means the date of the Closing, which shall be
the date hereof.
"Closing Price" means on any particular date (a) the last
reported closing bid price per Common Shares on such date on the U.S.
Trading Market (as reported by Bloomberg L.P. at 4:15 PM (New York
time) as the last reported closing bid price for regular session
trading on such day), or (b) if there is no such price on such date,
then the closing bid price on the U.S. Trading Market on the date
nearest preceding such date (as reported by Bloomberg L.P. at 4:15 PM
(New York time) as the closing bid price for regular session trading on
such day), or (c) if there is no such price on such date, then the
closing bid price on the Canadian Trading Market on the date nearest
preceding such date (as reported by Bloomberg L.P. at 4:15 PM (New York
time) as the closing bid price for regular session trading on such day)
(d) if the Common Shares are not then listed or quoted on either
Trading Market and if prices for the Common Shares are then reported in
the "pink sheets" published by the National Quotation Bureau
Incorporated (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent bid price per share of
the Common Shares so reported, or (e) if the Common
Shares are not then publicly traded the fair market value of a Common
Share as determined by an appraiser selected in good faith by the
Purchasers of a majority in interest of the Warrant Shares then
outstanding.
"Commission" means the Securities and Exchange Commission.
"Common Shares" means the common shares of the Company, no par
value per share, and any securities into which such common shares may
hereafter be reclassified.
"Common Share Equivalents" means any securities of the Company
or the Subsidiaries which would entitle the holder thereof to acquire
at any time Common Shares, including without limitation, any debt,
preferred stock, rights, options, warrants or other instrument that is
at any time convertible into or exchangeable for, or otherwise entitles
the holder thereof to receive, Common Shares.
"Company Canadian Counsel" means XxXxxxxx Xxxxx LLP.
"Company U.S. Counsel" means Xxxxxx & King, P.C.
"Disclosure Schedules" means the Disclosure Schedules
concurrently delivered herewith.
"Effective Date" means the date that the Registration
Statement is first declared effective by the Commission.
"Escrow Agreement" means the Escrow Agreement, dated as of the
date of this Agreement, among the Company, each Purchaser, and Goodmans
LLP as Escrow Agent, in the form of Exhibit E hereto;
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Intellectual Property Rights" shall have the meaning ascribed
to such term in Section 3.1(o).
"Liens" means a lien, charge, security interest, encumbrance,
right of first refusal or other restriction.
"Material Adverse Effect" shall have the meaning ascribed to
such term in Section 3.1(b).
"Material Permits" shall have the meaning ascribed to such
term in Section 3.1(m).
"Per Share Purchase Price" equals $2.20, subject to adjustment
for reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Shares that
occur after the date of this Agreement.
"Person" means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture,
limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.
"Purchase Warrant Shares" means the Common Shares issuable
upon exercise of the Purchase Warrants.
"Purchase Warrants" means the Common Share Purchase Warrants,
in the form of Exhibit C, issuable to the Purchasers at Closing, which
purchase warrants shall be exercisable immediately upon the AMEX Event
and have an exercise price equal to $2.75 and a term of exercise of 3
years commencing immediately upon the AMEX Event.
"Registration Statement" means a registration statement
meeting the requirements set forth in the Registration Rights Agreement
and covering the resale by the Purchasers of the Warrant Shares.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of this Agreement, among the Company
and each Purchaser, in the form of Exhibit B hereto.
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"Rule 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time
to time, or any similar rule or regulation hereafter adopted by the
Commission having substantially the same effect as such Rule.
"SEC Reports" shall have the meaning ascribed to such term in
Section 3.1(h).
"Securities" means the Warrants and the Warrant Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Special Warrant Shares" means the Common Shares issuable upon
exercise of the Special Warrants.
"Special Warrants" means the Special Warrants, in the form of
Exhibit D, issuable to the Purchasers at the Closing, which special
warrants shall be deemed exercised immediately upon the AMEX Event.
"Subscription Amount" means, as to each Purchaser, the amounts
set forth below such Purchaser's signature block on the signature page
hereto, in United States dollars and in immediately available funds.
"Subsidiary" shall have the meaning ascribed to such term in
Section 3.1(a).
"Trading Day" means (i) a day on which the Common Shares are
traded on a Trading Market, or (ii) if the Common Shares are not listed
on a Trading Market, a day on which the Common Shares are traded on the
over-the-counter market, as reported by the OTC Bulletin Board, or
(iii) if the Common Shares are not quoted on the OTC Bulletin Board, a
day on which the Common Shares are quoted in the over-the-counter
market as reported by the National Quotation Bureau Incorporated (or
any similar organization or agency succeeding to its functions of
reporting prices); provided, that in the event that the Common Shares
are not listed or quoted as set forth in (i), (ii) and (iii) hereof,
then Trading Day shall mean a Business Day.
"Trading Markets" means the U.S. Trading Market and the
Canadian Trading Market.
"Transaction Documents" means this Agreement, the Registration
Rights Agreement, the Escrow Agreement, the Special Warrant , the
Purchase Warrant and any other documents or agreements executed in
connection with the transactions contemplated hereunder.
"U.S. Trading Market" means the following markets or exchanges
on which the Common Shares are listed or quoted for trading on the date
in question: the American Stock Exchange, the New York Stock Exchange,
the Nasdaq National Market or the Nasdaq SmallCap Market.
"Warrant Shares" means the Purchase Warrant Shares and the
Special Warrant Shares.
"Warrants" means the Purchase Warrants and the Special
Warrants.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing. At the Closing, the Purchasers shall purchase, severally
and not jointly, and the Company shall issue and sell, in the aggregate, (i)
Special Warrants, which upon the AMEX Event shall be deemed exercised for up to
4,545,455 Common Shares, and (ii) Purchase Warrants to purchase up to 2,272,727
(as appropriately adjusted in accordance with the terms of the Purchase
Warrants) Common Shares. Each Purchaser shall purchase from the Company, and the
Company shall issue and sell to each Purchaser, a Special Warrant which may be
deemed exercised for a number of Special Warrant Shares equal to such
Purchaser's Subscription Amount divided by the Per Share Purchase Price,
together with the Purchase Warrants, on the Closing Date. Upon satisfaction of
the conditions set forth in Section 2.2, the Closing shall
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occur at the offices of Xxxxxxx Xxxx & Xxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000, or such other location as the parties shall mutually agree.
2.2 Closing Conditions.
(a) At the Closing the Company shall deliver or cause to be
delivered to each Purchaser (unless otherwise indicated below):
(i) this Agreement duly executed by the Company;
(ii) within 3 Trading Days of the Closing Date, a
Special Warrant, registered in the name of such Purchaser,
which may be deemed exercised for a number of Special Warrant
Shares equal to such Purchaser's Subscription Amount divided
by the Per Share Purchase Price;
(iii) within 3 Trading Days of the Closing Date, a
Purchase Warrant, registered in the name of such Purchaser,
pursuant to which such Purchaser shall have the right to
acquire up to the number of Warrant Shares equal to 50% of the
Special Warrant Shares issuable to such Purchaser pursuant to
the Special Warrant delivered to such Purchaser at such
Closing;
(iv) the Registration Rights Agreement duly executed
by the Company;
(v) the Escrow Agreement duly executed by the
Company; and
(vi) a legal opinion of Company Canadian Counsel,
substantially in the form of Exhibit A-1 attached hereto.
(vii) a legal opinion of Company U.S. Counsel,
substantially in the form of Exhibit A-2 attached hereto.
(b) At the Closing each Purchaser shall deliver or cause to be
delivered to the Company the following:
(i) this Agreement duly executed by such Purchaser;
(ii) 62% of such Purchaser's Subscription Amount as
to such Closing by wire transfer to the account of the
Company;
(iii) 38% of such Purchaser's Subscription Amount as
to such Closing by wire transfer to the escrow account set
forth in the Escrow Agreement;
(iv) the Registration Rights Agreement duly executed
by such Purchaser; and
(v) the Escrow Agreement duly executed by such
Purchaser.
(c) All representations and warranties of the other party
contained herein shall remain true and correct as of the Closing Date.
(d) As of the Closing Date, there shall have been no Material
Adverse Effect with respect to the Company since the date hereof.
(e) From the date hereof to the Closing Date, trading in the
Common Shares shall not have been suspended by the Commission or any of
the securities regulatory authorities in Canada (except for any
suspension of trading of limited duration agreed to by the Company,
which suspension shall be terminated prior to the Closing), and, at any
time prior to the Closing Date, trading in securities generally as
reported by Bloomberg Financial Markets shall not have been suspended
or limited, or minimum prices shall not have been established on
securities whose trades are reported by such service, or on any Trading
Market, nor shall a banking moratorium have been declared either by the
United States or New York State authorities.
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ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company.
Except as set forth under the corresponding section of the Disclosure Schedules,
the Company hereby makes the following representations and warranties as of the
date hereof to each Purchaser:
(a) Subsidiaries. The Company has no direct or indirect
subsidiaries other than as set forth in Schedule 3.1(a) hereof. Except
as provided in Schedule 3.1(a), the Company owns, directly or
indirectly, all of the capital stock of its Subsidiaries free and clear
of any lien, charge, security interest, encumbrance, right of first
refusal or other restriction (collectively, "Liens"), and all the
issued and outstanding shares of capital stock of each Subsidiary are
validly issued and are fully paid, non-assessable and free of
preemptive and similar rights. The Company has the unrestricted right
to vote, and (subject to limitations imposed by applicable law) to
receive dividends and distributions on, all capital securities of each
Subsidiary as owned by the Company. Notwithstanding the foregoing, the
shares of those Subsidiaries set forth on Schedule 3.1(a) denominated
with an asterisk have been pledged to Standard Bank (London) Limited in
support of the Company's loans and related obligations to such bank.
(b) Organization and Qualification. Each of the Company and
the Subsidiaries is an entity duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with
the requisite corporate power and authority to own and use its
properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation of
any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents.
Each of the Company and the Subsidiaries is duly qualified to conduct
business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary,
except where the failure to be so qualified or in good standing, as the
case may be, would not have or reasonably be expected to result in (i)
a material adverse effect on the legality, validity or enforceability
of any Transaction Document, (ii) a material adverse effect on the
results of operations, assets, business or financial condition of the
Company and the Subsidiaries, taken as a whole, or (iii) a material
adverse effect on the Company's ability to perform in any material
respect on a timely basis its obligations under any Transaction
Document (any of (i), (ii) or (iii), a "Material Adverse Effect").
(c) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and
otherwise to carry out its obligations thereunder. The execution and
delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby have been
duly authorized by all necessary action on the part of the Company and
no further action is required by the Company in connection therewith.
Each Transaction Document has been (or upon delivery will have been)
duly executed by the Company and, when delivered in accordance with the
terms hereof, will constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms
except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights generally and (ii) as
limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies, and (iii) with respect
to the indemnification provisions set forth in the Registration Rights
Agreement, as limited by public policy.
(d) No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the
Company of the transactions contemplated thereby do not and will not
(i) conflict with or violate any provision of the Company's or any
Subsidiary's certificate or articles of incorporation, bylaws or other
organizational or charter documents, or (ii) conflict with, or
constitute a default (or an event that 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 (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt
or other
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instrument (evidencing a Company or Subsidiary debt or otherwise) or
other understanding to which the Company or any Subsidiary is a party
or by which any property or asset of the Company or any Subsidiary is
bound or affected, or (iii) result in a violation of any United States
or Canadian law, rule, regulation, order, judgment, injunction, decree
or other restriction of any court or governmental authority to which
the Company or a Subsidiary is subject (including United States and
Canadian federal, Canadian provincial and United States state
securities laws and regulations), or by which any property or asset of
the Company or a Subsidiary is bound or affected; except in the case of
each of clauses (ii) and (iii), such as would not have or reasonably be
expected to result in a Material Adverse Effect.
(e) Filings, Consents and Approvals. The Company is not
required to obtain any consent, waiver, authorization or order of, give
any notice to, or make any filing or registration with, any court or
other federal, state, provincial, local or other governmental authority
or other Person in connection with the execution, delivery and
performance by the Company of the Transaction Documents, other than (a)
the filing with the Commission of the Registration Statement, the
application(s) to each Trading Market for the listing of the Warrant
Shares for trading thereon in the time and manner required thereby, and
applicable Blue Sky filings, and (b) such as have already been obtained
or such exemptive or other filings as are required to be made under
applicable securities laws.
(f) Issuance of the Securities. The Securities are duly
authorized and, when issued and paid for in accordance with the
Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens. The Company has reserved
from its duly authorized capital stock the maximum number of shares of
Common Shares issuable pursuant to this Agreement and the Warrants.
(g) Capitalization. The capitalization of the Company is as
described in the Company's Annual Report on Form 20-F filed with the
Commission on August 7, 2003 (the "August 2003 Form 20-F"), except for
the recent issuance of 4,339,581 Common Shares to Riverview Group, LLC,
the recent allotment for issuance of 1,700,000 Common Shares under the
terms of a convertible debenture and warrants issued to GCA Strategic
Fund Limited and minor increases thereto made in the ordinary course of
the Company's business which are not, individually or in the aggregate,
material. The Company has not completed any material issuance of
capital stock since such filing other than pursuant to the exercise of
employee stock options under the Company's stock option plans and
pursuant to the conversion or exercise of Common Share Equivalents
outstanding on the date hereof. No Person has any right of first
refusal, preemptive right, right of participation, or any similar right
to participate in the transactions contemplated by the Transaction
Documents. Except as a result of the purchase and sale of the
Securities, except for employee stock options under the Company's stock
option plans, and except as set forth on Schedule 3.1(g) hereto, there
are no outstanding options, warrants, script rights to subscribe to,
calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exchangeable for,
or giving any Person any right to subscribe for or acquire, any Common
Shares, or contracts, commitments, understandings or arrangements by
which the Company or any Subsidiary is or may become bound to issue
additional Common Shares, or securities or rights convertible or
exchangeable into Common Shares. The issue and sale of the Securities
will not obligate the Company to issue Common Shares or other
securities to any Person (other than the Purchasers) and will not
result in a right of any holder of Company securities to adjust the
exercise, conversion, exchange or reset price under such securities.
(h) SEC Reports; Financial Statements. The Company has filed
all reports required to be filed by it under the Securities Act and the
Exchange Act and applicable securities laws in each of the provinces of
Canada, including pursuant to Section 13(a) or 15(d) of the Exchange
Act, for the two years preceding the date hereof (or such shorter
period as the Company was required by law to file such material) (the
foregoing materials, including the exhibits thereto, being collectively
referred to herein as the "SEC Reports" and, together with the
Disclosure Schedules to this Agreement, the "Disclosure Materials"),
and, except for the late filing of the August 2003 Form 20-F, has made
such filings on a timely basis or has received a valid extension of
such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. As of their
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respective dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act and
applicable securities laws in each of the provinces of Canada and the
rules and regulations of the Commission promulgated thereunder, as
applicable and applicable securities laws in each of the provinces of
Canada, and none of the SEC Reports, when filed, contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading. The Company has made publicly available in
accordance with Rule 144(c) such information as is required to allow
the Purchasers to sell (provided that each of such sales would be made
in compliance with the other provisions of Rule 144): (x) currently
pursuant to Rule 144 any shares of Common Stock held by the Purchasers
and acquired prior to the date of this Agreement and (y) the Warrant
Shares in accordance with Rule 144. Except as set forth on Schedule
3.1(h), the financial statements of the Company included in the SEC
Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing. Such financial
statements have been prepared in accordance with Canadian generally
accepted accounting principles applied on a consistent basis during the
periods involved (and reconciled to United States generally accepted
accounting principles applied on a consistent basis during the periods
involved) ("GAAP"), except as may be otherwise specified in such
financial statements or the notes thereto and except that unaudited
financial statements may not contain all footnotes required by GAAP,
and fairly present in all material respects the financial position of
the Company and its consolidated subsidiaries as of and for the dates
thereof and the results of operations and cash flows for the periods
then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
(i) Material Changes. Since the date of the August 2003 Form
20-F, except as disclosed in the SEC Reports, (i) there has been no
event, occurrence or development that has had or that could reasonably
be expected to result in a Material Adverse Effect, (ii) the Company
has not incurred any liabilities (contingent or otherwise) other than
(A) trade payables and accrued expenses incurred in the ordinary course
of business consistent with past practice and (B) liabilities not
required to be reflected in the Company's financial statements pursuant
to GAAP or required to be disclosed in filings made with the
Commission, (iii) the Company has not altered its method of accounting,
(iv) the Company has not declared or made any dividend or distribution
of cash or other property to its stockholders or purchased, redeemed or
made any agreements to purchase or redeem any shares of its capital
stock and (v) the Company has not issued any equity securities to any
officer, director or Affiliate, except pursuant to existing Company
stock option plans and the Company's director remuneration policy. The
Company does not have pending before the Commission any request for
confidential treatment of information.
(j) Litigation. Except as disclosed in the SEC Reports, there
is no action, suit, inquiry, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened
by a Person (believed by the Company to be credible) against or
affecting the Company, any Subsidiary or any of their respective
properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county,
local or foreign) (collectively, an "Action") which (i) adversely
affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the Securities or (ii) could, if there
were an unfavorable decision, have or reasonably be expected to result
in a Material Adverse Effect. Neither the Company nor any Subsidiary,
nor any director or officer thereof, is or has been the subject of any
Action involving a claim of violation of or liability under federal or
state securities laws or a claim of breach of fiduciary duty. Except as
set forth on Schedule 3.1(j), there has not been, and to the knowledge
of the Company, there is not pending or contemplated, any investigation
by the Commission involving the Company or any current or former
director or officer of the Company. The Commission has not issued any
stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the
Exchange Act or the Securities Act.
(k) Labor Relations. No material labor dispute exists or, to
the knowledge of the Company, is imminent with respect to any of the
employees of the Company which could reasonably be expected to result
in a Material Adverse Effect.
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(l) Compliance. Except (x) as disclosed in the SEC Reports or
in press releases issued by a Trading Exchange, (y) as set forth on
Schedule 3.1(l), and (z) for the late filing of the August 2003 Form
20-F, neither the Company nor any Subsidiary (i) is in default under or
in violation of (and no event has occurred that has not been waived
that, with notice or lapse of time or both, would result in a default
by the Company or any Subsidiary under), nor has the Company or any
Subsidiary received notice of a claim that it is in default under or
that it is in violation of, any indenture, loan or credit agreement or
any other agreement or instrument to which it is a party or by which it
or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any
court, arbitrator or governmental body, or (iii) is or has been in
violation of any statute, rule or regulation of any governmental
authority, including without limitation all foreign, federal, state and
local laws applicable to its business, except in the case of clauses
(i), (ii) and (iii) as would not have or reasonably be expected to
result in a Material Adverse Effect.
(m) Regulatory Permits. The Company and the Subsidiaries
possess all certificates, authorizations and permits issued by the
appropriate federal, state, local or foreign regulatory authorities
necessary to conduct their respective businesses as described in the
SEC Reports, except where the failure to possess such permits would not
have or reasonably be expected to result in a Material Adverse Effect
("Material Permits"), and neither the Company nor any Subsidiary has
received any notice of proceedings relating to the revocation or
modification of any Material Permit.
(n) Title to Assets. Except as disclosed in the August 2003
Form 20-F, the Company and the Subsidiaries have good and marketable
title in fee simple to all real property owned by them that is material
to the business of the Company and the Subsidiaries, taken as a whole,
and good and marketable title in all personal property owned by them
that is material to the business of the Company and the Subsidiaries,
taken as a whole, in each case free and clear of all Liens, except for
Liens as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such
property by the Company and the Subsidiaries and Liens for the payment
of federal, state or other taxes, the payment of which is neither
delinquent nor subject to penalties. Any real property and facilities
held under lease by the Company and the Subsidiaries are held by them
under valid, subsisting and enforceable leases with which the Company
and the Subsidiaries are in material compliance.
(o) Patents and Trademarks. To the knowledge of the Company
and each Subsidiary, the Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and
other similar rights that are necessary or material for use in
connection with their respective businesses as described in the SEC
Reports and which the failure to so have could have or reasonably be
expected to result in a Material Adverse Effect (collectively, the
"Intellectual Property Rights"). Neither the Company nor any Subsidiary
has received a written notice that the Intellectual Property Rights
used by the Company or any Subsidiary violates or infringes upon the
rights of any Person. To the knowledge of the Company, all such
Intellectual Property Rights are enforceable.
(p) Insurance. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the
businesses in which the Company and the Subsidiaries are engaged.
Neither the Company nor any 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 without a
significant increase in cost.
(q) Transactions With Affiliates and Employees. Except as set
forth in the SEC Reports, none of the officers or directors of the
Company and, to the knowledge of the Company, none of the employees of
the Company is presently a party to any transaction with the Company or
any Subsidiary (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 entity in which any officer, director,
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or any such employee has a substantial interest or is an officer,
director, trustee or partner, in each case in excess of $60,000 other
than (a) for payment of salary or consulting fees for services
rendered, (b) reimbursement for expenses incurred on behalf of the
Company and (c) for other employee benefits, including stock option
agreements under any stock option plan of the Company.
(r) Internal Accounting Controls. The Company and each of its
subsidiaries maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only
in accordance with management's general or specific authorization, and
(iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-14 and
15d-14) for the Company and designed such disclosure controls and
procedures to ensure that material information relating to the Company,
including its subsidiaries, is made known to the certifying officers by
others within those entities, particularly during the period in which
the Company's Form 20-F is being prepared. The Company's certifying
officers have evaluated the effectiveness of the Company's controls and
procedures as of a date within 90 days prior to the filing date of the
most recently filed Form 20-F (such date, the "Evaluation Date"). The
Company presented in its most recently filed Form 20-F the conclusions
of the certifying officers about the effectiveness of the disclosure
controls and procedures based on their evaluations as of the Evaluation
Date. Since the Evaluation Date, there have been no significant changes
in the Company's internal controls (as such term is defined in Item
307(b) of Regulation S-K under the Exchange Act) or, to the Company's
knowledge, in other factors that could significantly affect the
Company's internal controls.
(s) Certain Fees. Except for a commission payable by the
Company to Alpine Capital Partners Inc. equal to 5% of the net proceeds
from the sale of the Securities hereunder, no brokerage or finder's
fees or commissions are or will be payable by the Company to any
broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the
transactions contemplated by this Agreement. The Purchasers shall have
no obligation with respect to any fees or with respect to any claims
made by or on behalf of other Persons for fees of a type contemplated
in this Section that may be due under any agreement or arrangement
entered into by the Company in connection with the transactions
contemplated by this Agreement.
(t) Private Placement. Assuming the accuracy of the
Purchasers' representations and warranties set forth in Section 3.2, no
registration under the Securities Act, nor any consent, filing,
approval, authorization or order from or with any securities regulatory
authority in any of the provinces of Canada, is required for the offer
and sale of the Securities by the Company to the Purchasers as
contemplated hereby. The issuance and sale of the Securities hereunder
does not contravene the rules and regulations of the Trading Markets.
(u) Investment Company. The Company is not, and is not an
Affiliate of, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(v) Registration Rights. Except as described in Section 3(g)
above, no Person has any right to cause the Company to effect the
registration under the Securities Act of any securities of the Company
unless such a registration statement has been filed with the Commission
on or prior to the date hereof (regardless of whether such registration
statement has been declared effective by the Commission).
(w) Listing and Maintenance Requirements. Except as disclosed
in the SEC Reports or in press releases issued by a Trading Exchange,
the Company has not, in the 12 months preceding the date hereof,
received notice from any Trading Market on which the Common Shares are
or have been listed or quoted to the effect that the Company is not in
compliance with the listing or maintenance requirements of such Trading
Market.
9
The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing
and maintenance requirements.
(x) Application of Takeover Protections. The Company and its
Board of Directors have taken 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 Company's
Certificate of Incorporation (or similar charter documents) or the laws
of its state of incorporation that is or could become applicable to the
Purchasers as a result of the Purchasers and the Company fulfilling
their obligations or exercising their rights under the Transaction
Documents, including without limitation the Company's issuance of the
Securities and the Purchasers' ownership of the Securities.
(y) Disclosure. The Company confirms that, neither the Company
nor any other Person acting on its behalf has provided any of the
Purchasers or their agents or counsel with any information that
constitutes or might constitute material, non-public information. The
Company understands and confirms that the Purchasers will rely on the
foregoing representations and covenants in effecting transactions in
securities of the Company. All disclosure provided to the Purchasers
regarding the Company, its business and the transactions contemplated
hereby, including the Disclosure Schedules to this Agreement, furnished
by or on behalf of the Company are true and correct and do not contain
any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
(z) 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, under circumstances that
would cause this offering of the Securities to be integrated with prior
offerings by the Company for purposes of the Securities Act in a manner
that would require registration under the Securities Act of the sale of
the Warrants or the Warrant Shares to the Purchaser, or any applicable
shareholder approval provisions, including, without limitation, under
the rules and regulations of any exchange or automated quotation system
on which any of the securities of the Company are listed or designated.
(aa) Solvency. Based on the financial condition of the Company
as of the Closing Date, (i) the Company's fair saleable value of its
assets exceeds the amount that will be required to be paid on or in
respect of the Company's existing debts and other liabilities
(including known contingent liabilities) as they mature; (ii) the
Company's assets do not constitute unreasonably small capital to carry
on its business for the current fiscal year as now conducted and as
proposed to be conducted including its capital needs taking into
account the particular capital requirements of the business conducted
by the Company, and projected capital requirements and capital
availability thereof, and including the anticipated proceeds of the
sale of the Securities; and (iii) the current cash flow of the Company,
together with the proceeds the Company would receive, were it to
liquidate all of its assets, after taking into account all anticipated
uses of the cash, would be sufficient to pay all amounts on or in
respect of its debt when such amounts are required to be paid. The
Company does not intend to incur debts beyond its ability to pay such
debts as they mature (taking into account the timing and amounts of
cash to be payable on or in respect of its debt).
(bb) Acknowledgment Regarding Purchaser's Purchase of
Securities. The Company acknowledges and agrees that, in relation to
the Company, each Purchaser 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 no Purchaser is 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. The Company further represents to each Purchaser 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.
(cc) No Undisclosed Events, Liabilities, Developments or
Circumstances. No event, liability, development or circumstance has
occurred or exists, or is contemplated to occur, with respect to the
Company or any Subsidiary or their respective business,
10
properties, prospects, operations or financial condition, that would be
required to be disclosed by the Company under applicable securities
laws on a registration statement on Form F-1 filed with the SEC
relating to an issuance and sale by the Company of its Common Shares
and which has not been publicly announced.
(dd) Tax Status. The Company and each Subsidiary (i) has made
or filed all federal, provincial and state income and all other tax
returns, reports and declarations required by any jurisdiction to which
it is subject, (ii) 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 (iii) 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 reasonable basis for any such claim.
(ee) Xxxxxxxx-Xxxxx Act. The Company is in compliance with any
and all applicable requirements of the Xxxxxxxx-Xxxxx Act of 2002 that
are effective as of the date hereof, and any and all applicable rules
and regulations promulgated by the SEC thereunder that are effective as
of the date hereof, except where such noncompliance would not have a
Material Adverse Effect.
3.2 Representations and Warranties of the Purchasers.
Each Purchaser hereby, for itself and for no other Purchaser, represents and
warrants as of the date hereof and as of the Closing Date to the Company as
follows:
(a) Organization; Authority. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with full right, corporate or
partnership power and authority to enter into and to consummate the
transactions contemplated by the Transaction Documents and otherwise to
carry out its obligations thereunder. The execution, delivery and
performance by such Purchaser of the transactions contemplated by this
Agreement has been duly authorized by all necessary corporate or
similar action on the part of such Purchaser. Each Transaction Document
to which it is a party has been duly executed by such Purchaser, and
when delivered by such Purchaser in accordance with the terms hereof,
will constitute the valid and legally binding obligation of such
Purchaser, enforceable against it in accordance with its terms.
(b) Investment Intent. Such Purchaser understands that the
Securities are "restricted securities" and have not been registered
under the Securities Act or any applicable state securities law and is
acquiring the Securities as principal for its own account for
investment purposes only and not with a view to or for distributing or
reselling such Securities or any part thereof, has no present intention
of distributing any of such Securities and has no arrangement or
understanding with any other persons regarding the distribution of such
Securities (this representation and warranty not limiting such
Purchaser's right to sell the Securities pursuant to the Registration
Statement or otherwise in compliance with applicable federal and state
securities laws). Such Purchaser is acquiring the Securities hereunder
in the ordinary course of its business. Such Purchaser does not have
any agreement or understanding, directly or indirectly, with any Person
to distribute any of the Securities.
(c) Purchaser Status. At the time such Purchaser was offered
the Securities, it was, and at the date hereof it is an "accredited
investor" as defined in Rule 501(a)(3) under the Securities Act and
within the meaning of Ontario Securities Commission Rule 45-501. Such
Purchaser is not required to be registered as a broker-dealer under
Section 15 of the Exchange Act.
(d) Transfer Restrictions. Such Purchaser understands that, as
set forth in Article IV hereof, the transfer of the Securities is
restricted under the Securities Act and other applicable securities
laws. Such Purchaser also acknowledges that the Warrants cannot be
exercised unless such exercise is made pursuant to either an effective
registration statement under the Securities Act and applicable state
securities laws or an applicable exemption from registration.
11
(e) Information. Such Purchaser and its advisors, if any, have
been furnished with all materials relating to the business, finances,
prospects and operations of the Company and each Subsidiary and
materials relating to the offer and sale of the Securities which have
been requested by such Purchaser. Such Purchaser and its 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 Purchaser or its advisors, if any, or
its representatives shall modify, amend or affect such Purchaser's
right to rely on the Company's representations and warranties contained
herein.
The Company acknowledges and agrees that each Purchaser does not make
or has not made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in this
Section 3.2.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer and Exercise Restrictions.
(a) The Securities may only be disposed of in compliance with
provincial, state and federal securities laws and the rules of any
Trading Market. In connection with any transfer of Securities other
than pursuant to an effective registration statement, to the Company,
to an Affiliate of a Purchaser or in connection with a pledge as
contemplated in Section 4.1(b), the Company may require the transferor
thereof to provide to the Company an opinion of counsel selected by the
transferor, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not
require registration of such transferred Securities under the
Securities Act. As a condition of transfer, any such transferee shall
agree in writing to be bound by the terms of this Agreement and shall
have the rights of a Purchaser under this Agreement and the
Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is
required by this Section 4.1(b), of a legend on any of the Securities
in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE
REASONABLY ACCEPTABLE TO THE COMPANY.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE
SECURITIES ISSUABLE UPON THE EXERCISE THEREOF MAY BE SUBJECT
TO A HOLD PERIOD AND RESALE RESTRICTIONS UNDER APPLICABLE
CANADIAN SECURITIES LEGISLATION. UNLESS PERMITTED UNDER
APPLICABLE CANADIAN SECURITIES LEGISLATION, THE HOLDER OF THE
SECURITIES SHALL NOT TRADE THE SECURITIES BEFORE DECEMBER 29,
2003.
The Warrants shall contain the following additional legend:
THIS WARRANT MAY NOT BE EXERCISED UNLESS SUCH EXERCISE IS
REGISTERED UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS OR IS EXEMPT FROM REGISTRATION THEREUNDER.
The Company acknowledges and agrees that a Purchaser may from
time to time pledge pursuant to a bona fide margin agreement with a
registered broker-dealer or grant
12
a security interest in some or all of the Securities to a financial
institution that is an "accredited investor" as defined in Rule 501(a)
under the Securities Act and, if required under the terms of such
arrangement, such Purchaser may transfer pledged or secured Securities
to the pledgees or secured parties; provided that, notwithstanding the
foregoing, such pledge and/or transfer is made in compliance with an
exemption from registration under the Securities Act and the Purchaser
provides the Company with an opinion of legal counsel of the pledgee,
secured party or pledgor in connection therewith that such pledge
and/or transfer is made in compliance with the Securities Act and
applicable state securities laws. Upon satisfaction of the foregoing
and at the appropriate Purchaser's expense, the Company will execute
and deliver such reasonable documentation as a pledgee or secured party
of Securities may reasonably request in connection with a pledge or
transfer of the Securities, including the preparation and filing of any
required prospectus supplement under Rule 424(b)(3) under the
Securities Act or other applicable provision of the Securities Act to
amend appropriately the list of Selling Stockholders thereunder.
(c) Certificates evidencing the Warrant Shares shall not
contain any legend (including the legend set forth in Section 4.1(b)),
(i) while a registration statement (including the Registration
Statement) covering the resale of such security is effective under the
Securities Act, or (ii) following any sale of such Warrant Shares
pursuant to Rule 144, or (iii) if such Warrant Shares are eligible for
sale under Rule 144(k), or (iv) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the
Commission). The Company shall cause its counsel to issue a legal
opinion to the Company's transfer agent promptly after the Effective
Date if required by the Company's transfer agent to effect the removal
of the legend hereunder. If all or any portion of a Warrant is
exercised at a time when there is an effective registration statement
to cover the resale of the Warrant Shares, such Warrant Shares shall be
issued free of all legends. The Company agrees that following the
Effective Date or at such time as such legend is no longer required
under this Section 4.1(c), it will, no later than three Trading Days
following the delivery the "Delivery Date") by a Purchaser to the
Company or the Company's transfer agent of a certificate representing
Warrant Shares, issued with a restrictive legend, deliver or cause to
be delivered to such Purchaser a certificate representing such
Securities that is free from all restrictive and other legends. The
Company may not make any notation on its records or give instructions
to any transfer agent of the Company that enlarge the restrictions on
transfer set forth in this Section.
(d) In addition to such Purchaser's other available remedies,
the Company shall pay to a Purchaser, in cash, as liquidated damages
and not as a penalty, for each $1,000 of Warrant Shares (based on the
Closing Price of the Common Shares on the Delivery Date) subject to
Section 4.1(c), $10 per Trading Day (increasing to $20 per Trading Day
five (5) Trading Days after such damages have begun to accrue) for each
Trading Day beginning with the sixth Trading Day following the Delivery
Date until such certificate is delivered; provided, however, that a
Trading Day shall not be deemed to count as a Trading Day hereunder if
the Common Stock is scheduled to trade on either Trading Market for
less than 4.5 hours or any day that the Common Stock is suspended from
trading during the final hour of trading on either Trading Market (or
if either Trading Market does not designate in advance the closing time
of trading on such exchange or market, then during the hour ending at
4:00:00 p.m., New York time). Nothing herein shall limit such
Purchaser's right to pursue actual damages for the Company's failure to
deliver certificates representing any Securities as required by the
Transaction Documents, and such Purchaser shall have the right to
pursue all remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or injunctive
relief.
(e) The Purchaser agrees that, as a condition of the Company
issuing the Purchase Warrant Shares upon the exercise of the Purchase
Warrants, the Purchaser will execute and deliver to the Company the
Notice of Exercise attached to such Purchase Warrant and that such
Notice of Exercise shall be true and correct as of the date of
execution.
(f) Each Purchaser severally and not jointly agrees that the
removal of the restrictive legend from certificates representing
Securities as set forth in this Section 4.1 is predicated upon the
Company's reliance that the Purchaser will sell any Securities
13
pursuant to either the registration requirements of the Securities Act,
including any applicable prospectus delivery requirements, or an
exemption therefrom.
4.2 Furnishing of Information
(a) As long as any Purchaser owns Securities, the Company
covenants to timely file (or obtain extensions in respect thereof and
file within the applicable grace period) all reports required to be
filed by the Company after the date hereof pursuant to the Exchange
Act. Upon the request of any such holder of Securities, the Company
shall deliver to such holder a written certification of a duly
authorized officer as to whether it has complied with the preceding
sentence. As long as any Purchaser owns Securities, if the Company is
not required to file reports pursuant to the Exchange Act, it will
prepare and furnish to the Purchasers and make publicly available in
accordance with Rule 144(c) such information as is required for the
Purchasers to sell the Securities under Rule 144. The Company further
covenants that it will take such further action as any holder of
Securities may reasonably request, all to the extent required from time
to time to enable such Person to sell such Securities without
registration under the Securities Act within the limitation of the
exemptions provided by Rule 144.
(b) The Company acknowledges that the Purchasers currently own
4,339,581 Common Shares (the "Previously Issued Shares"), and the
Company covenants to take such further action as any holder of the
Previously Issued Shares may reasonably request, all to the extent
required from time to time to enable such Person to sell, from and
after September 25, 2003, all of such Previously Issued Shares, without
registration under the Securities Act within the limitation of the
exemptions provided by Rule 144. The Company is unaware of any reason
why the exemptions provided by Rule 144 would not be available to the
Purchasers in order to enable the Purchasers to sell such Previously
Issued Shares pursuant to Rule 144 as of such date.
4.3 Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers or, in any manner
that would be materially adverse to the Purchasers, that would be integrated
with the offer or sale of the Securities for purposes of the rules and
regulations of any Trading Market.
4.4 Participation in Future Financing. From the date hereof until 12
months following the Effective Date, the Company will use its reasonable best
efforts to permit the Purchasers to participate in subsequent financings of
Common Shares or Common Share Equivalents, which financings are not (in the
Purchasers' reasonable determination) strategic in nature (each such
non-strategic subsequent financing being a "Subsequent Financing"). Prior to
consummating any Subsequent Financing, the Company shall deliver to each of the
Purchasers hereunder a written notice at least 5 Trading Days prior to the
closing of such Subsequent Financing (the "Subsequent Financing Notice") of its
intention to effect such Subsequent Financing, which Subsequent Financing Notice
shall describe in reasonable detail the proposed terms of such Subsequent
Financing, the amount of proceeds intended to be raised thereunder, the Person
with whom such Subsequent Financing is proposed to be effected, and attached to
which shall be a term sheet or similar document relating thereto. If such
Purchaser shall not have notified the Company by 6:30 p.m. (New York City time)
on the fifth (5th) Trading Day after its receipt of the Subsequent Financing
Notice of its willingness to provide (or to cause its designee to provide),
subject to completion of mutually acceptable documentation, all or part of such
financing to the Company on the same terms set forth in the Subsequent Financing
Notice, the Company may effect the remaining portion of such Subsequent
Financing on the terms and to the Persons set forth in the Subsequent Financing
Notice; provided that the Company must provide the Purchasers with a second
Subsequent Financing Notice, and the Purchasers will again have the right of
first refusal set forth above in this Section 4.4, if the Subsequent Financing
subject to the initial Subsequent Financing Notice is not consummated for any
reason on the terms set forth in such Subsequent Financing Notice within 60
Trading Days after the date of the initial Subsequent Financing Notice with the
Person identified in the Subsequent Financing Notice. In the event the Company
receives responses to Subsequent Financing Notices from Purchasers seeking to
purchase more than the financing sought by the Company in the Subsequent
Financing such Purchasers shall have the right to purchase their Pro Rata
Portion (as defined
14
below) of the Common Shares or Common Share Equivalents to be issued in such
Subsequent Financing. "Pro Rata Portion" is the ratio of (x) such Purchaser's
Subscription Amount and (y) the aggregate sum of all of the Subscription
Amounts. If any Purchaser no longer holds any Warrant Shares, then the Pro Rata
Portions shall be re-allocated among the remaining Purchasers. Notwithstanding
anything to the contrary herein, this Section 4.4 shall not apply to the
following: (a) the granting of options to employees, officers and directors of
the Company pursuant to any stock option plan duly adopted by a majority of the
non-employee members of the Board of Directors of the Company or a majority of
the members of a committee of non-employee directors established for such
purpose, or (b) the exercise of any security issued by the Company in connection
with the offer and sale of the Company's securities pursuant to this Agreement,
or (c) the exercise of or conversion of any convertible securities, options or
warrants issued and outstanding on the date hereof, provided such securities
have not been amended since the date hereof, (d) acquisitions or strategic
investments, the primary purpose of which is not to raise capital, or (e) any
other non-financial investment, the primary purpose of which is not to raise
capital.
4.5 Securities Laws Disclosure; Publicity. The Company shall, by
September 4, 2003, furnish a Report of Foreign Issuer on Form 6-K with the
Commission, attaching the material Transaction Documents, and a material change
report in the prescribed form with the applicable securities regulatory
authorities in Canada, in each case reasonably acceptable to each Purchaser
disclosing the transactions contemplated hereby and make such other filings and
notices in the manner and time required by the Commission. The Company and each
Purchaser shall consult with each other in issuing any press releases with
respect to the transactions contemplated hereby, and neither the Company nor any
Purchaser shall issue any such press release or otherwise make any such public
statement without the prior consent of the Company, with respect to any press
release of any Purchaser, or without the prior consent of each Purchaser, with
respect to any press release of the Company, which consent shall not
unreasonably be withheld, except if such disclosure is required by law, in which
case the disclosing party shall promptly provide the other party with prior
notice of such public statement or communication. Notwithstanding the foregoing,
the Company shall not publicly disclose the name of any Purchaser, or include
the name of any Purchaser in any filing with the Commission or any regulatory
agency or Trading Market, without the prior written consent of such Purchaser,
except (i) as required by federal securities law in connection with the
registration statement contemplated by the Registration Rights Agreement and
(ii) to the extent such disclosure is required by law or Trading Market
regulations, in which case the Company shall provide the Purchasers with prior
notice of such disclosure permitted under subclause (i) or (ii).
4.6 Shareholders Rights Plan. No claim will be made or enforced by the
Company or any other Person that any Purchaser is an "Acquiring Person" under
any shareholders rights plan or similar plan or arrangement in effect or
hereafter adopted by the Company, or that any Purchaser could be deemed to
trigger the provisions of any such plan or arrangement, by virtue of receiving
Securities under the Transaction Documents or under any other agreement between
the Company and the Purchasers.
4.7 Non-Public Information. The Company covenants and agrees that
neither it nor any of its Affiliates nor any other Person acting on its behalf
will provide any Purchaser or its agents or counsel with any information that
the Company believes constitutes material non-public information, unless prior
thereto such Purchaser shall have executed a written agreement regarding the
confidentiality and use of such information. The Company understands and
confirms that each Purchaser shall be relying on the foregoing representations
in effecting transactions in securities of the Company. In the event of a breach
of the foregoing covenant by the Company, any Subsidiary, or its each of
respective officers, directors, employees and agents, in addition to any other
remedy provided herein or in the Transaction Documents, a Purchaser shall,
provided such Purchaser shall have in good faith been intending to sell any
Securities within a reasonable period of time after the date of such demand,
have the right to demand that the Company make a public disclosure, and if the
Company fails to do so within two Business Days after such demand, the Purchaser
may make a public disclosure, in the form of a press release, public
advertisement or otherwise, of such material nonpublic information without the
prior approval by the Company, each Subsidiary, or each of its respective
officers, directors, employees or agents. No Purchaser shall have any liability
to the Company, any Subsidiary, or any of its or their respective officers,
directors, employees, shareholders or agents for any such disclosure unless such
Purchaser acts with gross negligence or willful misconduct.
15
4.8 Use of Proceeds. The Company shall use the net proceeds from the
sale of the Securities hereunder for working capital purposes and not for the
satisfaction of any portion of the Company's debt (other than payment of trade
payables in the ordinary course of the Company's business and prior practices),
to redeem any Company equity or equity-equivalent securities or to settle any
outstanding litigation.
4.9 Reimbursement. If any Purchaser becomes involved in any capacity in
any Proceeding by or against any Person who is a stockholder of the Company
(except as a result of sales, pledges, margin sales and similar transactions by
such Purchaser to or with any current stockholder and except by a Person who is,
directly or indirectly, also an investor in such Purchaser), solely as a result
of such Purchaser's acquisition of the Securities under this Agreement, the
Company will reimburse such Purchaser for its reasonable legal and other
expenses (including the cost of any investigation preparation and travel in
connection therewith) incurred in connection therewith, as such expenses are
incurred. The reimbursement obligations of the Company under this paragraph
shall be in addition to any liability which the Company may otherwise have,
shall extend upon the same terms and conditions to any Affiliates of the
Purchasers who are actually named in such action, proceeding or investigation,
and partners, directors, agents, employees and controlling persons (if any), as
the case may be, of the Purchasers and any such Affiliate, and shall be binding
upon and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such Affiliate and any
such Person. The Company also agrees that neither the Purchasers nor any such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company solely as a result of acquiring the Securities under
this Agreement.
4.10 Indemnification. The Company will indemnify and hold the
Purchasers and their directors, officers, shareholders, partners, employees and
agents (each, a "Purchaser Party") harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and reasonable
attorneys' fees and costs of investigation that any such Purchaser Party may
suffer or incur as a result of or relating to (a) any misrepresentation, breach
or inaccuracy, or any allegation by a third party that, if true, would
constitute a breach or inaccuracy, of any of the representations, warranties,
covenants or agreements made by the Company in this Agreement or in the other
Transaction Documents; or (b) any cause of action, suit or claim brought or made
against such Purchaser Party and arising solely out of or solely resulting from
the execution, delivery, performance or enforcement of this Agreement or any of
the other Transaction Documents and without causation by any other activity,
obligation, condition or liability pertaining to such Purchaser (except as to
such of the foregoing in clause (b) arising from a Person who is, directly or
indirectly, an investor in the Purchaser in such Person's capacity as such an
investor). The Company will reimburse such Purchaser for its reasonable legal
and other expenses (including the cost of any investigation, preparation and
travel in connection therewith) incurred in connection therewith, as such
expenses are incurred. Each Purchaser, severally but not jointly, will indemnify
and hold the Company harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys' fees and
costs of investigation that the Company may suffer or incur as a result of or
relating to any misrepresentation, breach or inaccuracy, or an allegation by a
third party that, if true, would constitute a breach or inaccuracy, of any
representations, warranties or covenants or agreements made by such Purchaser in
this Agreement or in the other Transaction Documents.
4.11 Reservation of Common Shares. As of the date hereof, the Company
has reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of Common Shares for the
purpose of enabling the Company to issue Warrant Shares pursuant to the
Warrants.
4.12 Listing of Common Shares; Certain Canadian Filings.
(a) The Company hereby agrees to use best efforts to obtain
and maintain the listing of the Common Shares on the Trading Markets,
and as soon as reasonably practicable following the Closing (but not
later than the earlier of the Effective Date and the first anniversary
of the Closing Date) to list the applicable Warrant Shares on the
Trading Markets. The Company further agrees, if the Company applies to
have the Common Shares traded on any other Trading Market, it will
include in such application the Warrant Shares, and will take such
other action as
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is reasonably necessary or desirable in the opinion of the Purchasers
to cause the Warrant Shares to be listed on such other Trading Market
as promptly as possible. The Company will take all action reasonably
necessary to continue the listing and trading of its Common Shares on
the Trading Markets and to maintain its status as a reporting issuer
which is not in default of applicable securities legislation in Canada
and will comply in all respects with the Company's reporting, filing
and other obligations under the bylaws or rules of the Trading Markets.
(b) If required by applicable Canadian securities legislation
or the Canadian Trading Market rules, the Purchaser will execute and
deliver and file or assist the Company in filing such reports,
undertakings and other documents relating to the Warrants and the
Warrant Shares as may be required by any securities commission, stock
exchange or other regulatory authority.
(c) The Company hereby covenants and agrees to file a
prospectus in Canada:
(i) to qualify the exercise of the Special Warrants
in accordance with the terms thereof; and
(ii) to qualify the issuance of the Purchase Warrant
Shares issuable on exercise of the Purchase Warrants if such
Purchase Warrant Shares are not otherwise freely tradeable on
the Canadian Trading Market at the time of exercise and the
Purchaser advises the Company that it wishes to exercise the
Purchase Warrants for Purchase Warrant Shares under a
prospectus.
The Company and the Purchaser will co-operate with respect to the
timing of the exercise of the Special Warrants and the Purchase Warrants and the
clearance of the prospectus.
ARTICLE V.
MISCELLANEOUS
5.1 Fees and Expenses. Each party shall pay the fees and expenses of
its advisers, counsel, accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement. The Company shall pay all
stamp and other taxes and duties levied in connection with the sale of the
Securities.
5.2 Entire Agreement. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
5.4 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified on the signature pages attached hereto prior to 6:30 p.m. (New York
City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number on the signature pages attached hereto on a day that is not a
Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day, (c)
the second Trading Day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service, or (d) upon actual receipt by the party to
whom such notice is required to be given. The address for such notices and
communications shall be as set forth on the signature pages attached hereto.
5.5 Amendments; Waivers. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by the Company and each Purchaser or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No such amendment shall
be effective to the extent that it applies to less than all of the holders of
the Shares then outstanding. No consideration shall be offered or paid to any
Person to amend or consent to a waiver or modification of any provision of any
of the Transaction Documents unless the same consideration also is offered to
all of the parties to the Transaction Documents, holders of Warrant Shares or
holders of the Warrants, as the case may be. The Company has not, directly or
indirectly, made any agreements with any Purchasers relating to the terms or
conditions of the transactions contemplated by the Transaction Documents except
as set forth in the Transaction Documents. No waiver of any default with
17
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right.
5.6 Construction; Currency. The headings herein are for convenience
only, do not constitute a part of this Agreement and shall not be deemed to
limit or affect any of the provisions hereof. 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. Unless otherwise indicated, all dollar amounts referred to in this
Agreement are in United States Dollars.
5.7 Successors and Assigns.
This Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of each Purchaser. Any Purchaser may assign any or all of its rights
under this Agreement to any Person to whom such Purchaser assigns or transfers
any Securities, provided such transferee agrees in writing to be bound, with
respect to the transferred Securities, by the provisions hereof that apply to
the "Purchasers".
5.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Sections 4.9 and 4.10.
5.9 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the
City of New York. Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
New York for the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein (including with
respect to the enforcement of any of the Transaction Documents), 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 improper. Each party hereto
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by delivering a copy thereof
via overnight delivery (with evidence of delivery) to such party at the address
in effect for 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 hereto (including its
affiliates, agents, officers, directors and employees) hereby irrevocably
waives, to the fullest extent permitted by applicable law, any and all right to
trial by jury in any legal proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby. If either party shall
commence an action or proceeding to enforce any provisions of a Transaction
Document, then the prevailing party in such action or proceeding shall be
reimbursed by the other party for its attorneys fees and other costs and
expenses incurred with the investigation, preparation and prosecution of such
action or proceeding.
5.10 Survival. The representations, warranties, agreements and
covenants contained herein shall survive the Closing and delivery of the
Warrants and of the Warrant Shares upon exercise of the Warrants.
5.11 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together 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, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding
18
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
5.12 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
5.13 Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
5.14 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
5.15 Payment Set Aside. To the extent that the Company makes a payment
or payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall, to the
extent permissible under applicable law, be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.
5.16 Independent Nature of Purchasers' Obligations and Rights.
The obligations of each Purchaser under any Transaction Document are several and
not joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation, the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser has been represented by its own separate legal counsel
in their review and negotiation of the Transaction Documents. For reasons of
administrative convenience only, Purchasers and their respective counsel have
chosen to communicate with the Company through Xxxxxxx Xxxx & Xxxxx LLP, which
does not represent the Purchasers in this transaction but only Riverview. The
Company has elected to provide all Purchasers with the same terms and
Transaction Documents for the convenience of the Company and not because it was
required or requested to do so by the Purchasers.
(Signature Page Follows)
19
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
CRYSTALLEX INTERNATIONAL CORPORATION Address for Notice:
------------------
000 Xxxxxxxx Xxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx
X0X 0X0
Attention: Xxx Xxxx
Facsimile: (000) 000-0000
By: /s/ Xxxx X. Xxxxxxxxxxx
--------------------------
Name: Xxxx X. Xxxxxxxxxxx
Title: President & CEO
With copy to (which shall not constitute notice):
[SIGNATURE PAGE CONTINUES]
20
[PURCHASER'S SIGNATURE PAGE]
RIVERVIEW GROUP, LLC Address for Notice:
------------------
C/o Millennium Partners, L.P.
By: /s/ Xxxxx Xxxxxx 000 0xx Xxxxxx
------------------------------ 8th Floor
Name: Xxxxx Xxxxxx Xxx Xxxx, Xxx Xxxx 00000
Title: Chief Operating Officer Fax: (000) 000-0000
Subscription Amount: $10,000,000
-------------------
With a copy to:
--------------
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Attn:: Xxxxxxx Xxxxx, Esq.
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