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Exhibit 2.1
COMMON STOCK AND WARRANTS PURCHASE AGREEMENT
BETWEEN
xXXXXXXX.XXX, INC.
AND
THE INVESTORS SIGNATORY HERETO
COMMON STOCK AND WARRANTS PURCHASE AGREEMENT dated as of March 31, 2000
(the "Agreement"), between the Investors signatory hereto (each an "Investor"
and together the "Investors"), xXxxxxxx.Xxx, Inc., a corporation organized and
existing under the laws of the State of Delaware and formerly known as Peachtree
Fiberoptics, Inc. (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Investors,
and the Investors shall purchase in the aggregate, (i) up to 2,333,334 shares of
Common Stock (as defined below) at a price of $3.00 per share (ii) Rights (as
defined below) with respect to each of such shares of Common Stock, and (iii)
Warrants (as defined below) to purchase up to 700,000 shares of such Common
Stock at 120% of the closing bid price thereof on the first Closing Date.
WHEREAS, such investments will be made in reliance upon the provisions
of Section 4(2) and/or 4(6) of the United States Securities Act and/or
Regulation D ("Regulation D") and the other rules and regulations promulgated
thereunder (the "Securities Act"), and/or upon such other exemption from the
registration requirements of the Securities Act as may be available with respect
to any or all of the investments in securities to be made hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. "CAPITAL SHARES" shall mean the Common Stock and any shares of any
other class of common stock whether now or hereafter authorized, having the
right to participate in the distribution of earnings and assets of the Company.
Section 1.2. "CAPITAL SHARES EQUIVALENTS" shall mean any securities, rights, or
obligations that are convertible into or exchangeable for or give any right to
subscribe for any Capital Shares of the Company or any Warrants, options or
other rights to subscribe for or purchase Capital Shares or any such convertible
or exchangeable securities.
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Section 1.3. "CLOSING" shall mean each closing of the purchase and sale of the
Common Stock and Warrants pursuant to Section 2.1.
Section 1.4. "CLOSING DATE" shall mean the date on which all conditions to the
applicable Closing have been satisfied (as defined in Section 2.1 (b) hereto)
and such Closing shall have occurred.
Section 1.5. "COMMON STOCK" shall mean the Company's common stock.
Section 1.6. "DAMAGES" shall mean any loss, claim, damage, judgment, penalty,
deficiency, liability, costs and expenses (including, without limitation,
reasonable attorney's fees and disbursements and reasonable costs and expenses
of expert witnesses and investigation).
Section 1.7. "EFFECTIVE DATE" shall mean the date on which the SEC first
declares effective a Registration Statement registering the resale of the
Registrable Securities as set forth in the Registration Rights Agreement.
Section 1.8. "ESCROW AGENT" shall have the meaning set forth in the Escrow
Agreement.
Section 1.9. "ESCROW AGREEMENT" shall mean the Escrow Agreement in substantially
the form of Exhibit C hereto executed and delivered contemporaneously with this
Agreement.
Section 1.10. "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
Section 1.11 "LEGEND" shall mean the legend set forth in Section 9.1.
Section 1.12. "MATERIAL ADVERSE EFFECT" shall mean any effect on the business,
operations, properties, prospects or financial condition of the Company that is
material and adverse to the Company and its subsidiaries and affiliates, taken
as a whole, and/or any condition, circumstance, or situation that would prohibit
or otherwise interfere with the ability of the Company to enter into and perform
any of its obligations under this Agreement, the Registration Rights Agreement,
the Escrow Agreement, the or the Warrants in any material respect.
Section 1.13. "OUTSTANDING" when used with reference to shares of Common Stock
or Capital Shares (collectively the "Shares"), shall mean, at any date as of
which the number of such Shares is to be determined, all issued and outstanding
Shares, and shall include all such Shares issuable in respect of outstanding
scrip or any certificates representing fractional interests in such Shares;
PROVIDED, HOWEVER, that "Outstanding" shall not mean any such Shares then
directly or indirectly owned or held by or for the account of the Company.
Section 1.14. "PERSON" shall mean an individual, a corporation, a partnership,
an association, a trust or other entity or organization, including a government
or political entity or subdivision or an agency or instrumentality thereof.
Section 1.15. "PRINCIPAL MARKET" shall mean the American Stock Exchange, the New
York Stock Exchange, the NASDAQ National or SmallCap Markets, or the OTC
Bulletin Board,
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whichever is at the time the principal trading exchange or market for the Common
Stock, based upon share volume.
Section 1.16. "PURCHASE PRICE" shall mean $3.00 per share of Common Stock,
adjusted for any splits, reverse splits or Common Stock dividends declared by
the Company after the execution hereof.
Section 1.17. "REGISTRABLE SECURITIES" shall mean the Shares and the Warrant
Shares until (i) the Registration Statement has been declared effective by the
SEC, and all Shares and Warrant Shares have been disposed of pursuant to the
Registration Statement, (ii) all Shares and Warrant Shares have been sold under
circumstances under which all of the applicable conditions of Rule 144 (or any
similar provision then in force) under the Securities Act ("Rule 144") are met,
(iii) all Shares and Warrant Shares have been otherwise transferred to holders
who may trade such shares without restriction under the Securities Act, and the
Company has delivered a new certificate or other evidence of ownership for such
securities not bearing a restrictive legend or (iv) such time as, in the opinion
of counsel to the Company, all Shares and Warrant Shares may be sold without any
time, volume or manner limitations pursuant to Rule 144(k) (or any similar
provision then in effect) under the Securities Act.
Section 1.18. "REGISTRATION RIGHTS AGREEMENT" shall mean the agreement regarding
the filing of the Registration Statement for the resale of the Registrable
Securities, entered into among the Company, the Investors and Thomson Kernaghan
& Co., Ltd., Toronto as of the first Closing Date in the form annexed hereto as
Exhibit B.
Section 1.19. "REGISTRATION STATEMENT" shall mean a registration statement on
Form S-1 (or on such other form promulgated by the SEC for which the Company
then qualifies and which counsel for the Company shall deem appropriate, and
which form shall be available for the resale by the Investors of the Registrable
Securities to be registered thereunder in accordance with the provisions of this
Agreement, the Registration Rights Agreement and in accordance with the intended
method of distribution of such securities), for the registration of the resale
by the Investor of the Registrable Securities under the Securities Act.
Section 1.20. "REGULATION D" shall have the meaning set forth in the recitals of
this Agreement.
Section 1.21. "RIGHTS" shall mean the non-transferable purchase rights pursuant
to which the Investors may under certain conditions have the right to purchase
one share of Common Stock at the Purchase Price for each share of Common Stock
purchased at a Closing Date and held for not less than six months thereafter as
set forth in Section 2.3.
Section 1.22. "SEC" shall mean the Securities and Exchange Commission.
Section 1.23. "SECTION 4(2)" AND "SECTION 4(6)" shall have the meanings set
forth in the recitals of this Agreement.
Section 1.24. "SECURITIES ACT" shall have the meaning set forth in the recitals
of this Agreement.
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Section 1.25. "SEC DOCUMENTS" shall mean the Company's Annual Report on Form
10-K or 10-KSB for the fiscal year ended December 31, 1998 and each report,
proxy statement, information statement or registration statement filed by the
Company with the SEC pursuant to the Exchange Act or the Securities Act since
the filing of such Annual Report through the date hereof.
Section 1.26. "SHARES" shall mean the shares of Common Stock purchased pursuant
to this Agreement.
Section 1.27. "TRADING DAY" shall mean any day during which the Principal Market
shall be open for business.
Section 1.28. "WARRANTS" shall mean the warrants to purchase up to 700,000
shares of the Common Stock, at 120% of the closing bid price of the Common Stock
on the Principal Market on the first Closing Date, to be issued to the Investors
hereunder substantially in the form of Exhibit A.
Section 1.29. "WARRANT SHARES" shall mean all shares of Common Stock or other
securities issued or issuable pursuant to exercise of the Warrants or which may
under certain conditions be acquired pursuant to the Rights.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK AND WARRANTS
Section 2.1. INVESTMENT.
(a) Upon the terms and subject to the conditions set forth herein, the
Company agrees to sell, and the Investors, severally and not jointly, agree to
purchase the Shares together with the Warrants at the Purchase Price on each
Closing Date as follows:
(i) FIRST CLOSING. Upon satisfaction by the Company of
the Closing conditions set forth in Section 2.1(b),
the Investors with first Closing Date purchase
commitments (as listed on the signature pages hereto)
shall deliver to the Escrow Agent immediately
available funds in the amounts set forth next to
their signatures hereto and the Company shall deliver
the Common Stock certificates representing the Shares
so purchased and the Warrants to the Escrow Agent, to
be held by the Escrow Agent pursuant to the Escrow
Agreement, in the form of Exhibit C hereto.
(ii) SECOND CLOSING. Within five (5) Trading Days of
written notice from the Company to the Investors that
the Registration Statement has been declared
effective, the Investors shall deliver to the Escrow
Agent immediately available funds in the amounts set
forth next to their signatures hereto and the Company
shall deliver the Common Stock certificates
representing the remaining Shares to the Escrow
Agent, to be held by the Escrow Agent pursuant to the
Escrow Agreement.
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(iii) EACH CLOSING. Upon satisfaction of the conditions set
forth in Section 2.1(b), each Closing ("Closing")
shall occur at the offices of the Escrow Agent at
which the Escrow Agent (x) shall release the Shares
purchased and the Warrants to the appropriate
Investor and (y) shall release the Purchase Price
(after all fees have been paid as set forth in the
Escrow Agreement), pursuant to the terms of the
Escrow Agreement.
(b) Each Closing is subject to the satisfaction or waiver by the party
sought to be benefited thereby of the following conditions:
(i) acceptance and execution by the Company and by the
Investors, of this Agreement and all Exhibits hereto;
(ii) delivery into escrow by each Investor of immediately
available funds in the amount of the Purchase Price
of the Common Stock and the Warrants being purchased
by such Investor, as applicable to each Closing, as
more fully set forth in the Escrow Agreement;
(iii) all representations and warranties of the Investors
contained herein shall remain true and correct as of
the Closing Date (as a condition to the Company's
obligations);
(iv) all representations and warranties of the Company
contained herein shall remain true and correct as of
the Closing Date (as a condition to the Investors'
obligations);
(v) the Company shall have obtained all permits and
qualifications required by any state for the offer
and sale of the Common Stock and Warrants, or shall
have the availability of exemptions therefrom;
(vi) the sale and issuance of the Common Stock and the
Warrants hereunder, and the proposed issuance by the
Company to the Investors of the Common Stock
underlying the Common Stock and the Warrants upon the
conversion or exercise thereof shall be legally
permitted by all laws and regulations to which the
Investors and the Company are subject and there shall
be no ruling, judgment or writ of any court
prohibiting the transactions contemplated by this
Agreement;
(vii) delivery of the original fully executed Common Stock
certificates and Warrants certificates to the Escrow
Agent;
(viii) delivery to the Escrow Agent of an opinion of counsel
to the Company, in the form of Exhibit D hereto;
(ix) delivery to the Escrow Agent of the Irrevocable
Instructions to Transfer Agent in the form attached
hereto as Exhibit E; and
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(x) delivery to the Escrow Agent of the Registration
Rights Agreement (as to the first Closing).
Section 2.2. LIQUIDATED DAMAGES. The parties hereto acknowledge and agree that
the sums payable pursuant to the Registration Rights Agreement shall constitute
liquidated damages and not penalties. The parties further acknowledge that (a)
the amount of loss or damages likely to be incurred is incapable or is difficult
to precisely estimate, (b) the amounts specified in such Sections bear a
reasonable proportion and are not plainly or grossly disproportionate to the
probable loss likely to be incurred by the Investors in connection with the
failure by the Company to timely cause the registration of the Registrable
Securities and (c) the parties are sophisticated business parties and have been
represented by sophisticated and able legal and financial counsel and negotiated
this Agreement at arm's length.
Section 2.3. EXERCISE OF RIGHTS. Each Investor shall have the right, exercisable
at any time not earlier than the date six months after the applicable Closing
and not later than the date one year after the applicable Closing, to purchase
one additional share of Common Stock for each Share purchased at the applicable
Closing and still held by Investor on such six-month anniversary date. The
Purchase Price shall be the price for such additional Shares. Such additional
Shares shall be Registrable Securities. Each Investor may exercise such Rights
by written notice to the Company within the applicable period together with a
tender of the Purchase Price by bank or certified check or wire transfer of
funds and, unless the related Shares purchased at the applicable Closing were
and remain registered directly in the name of such Investor as reflected in the
records of the Transfer Agent, together with evidence reasonably satisfactory to
the Company that the Investor is still the holder of such Shares. The Rights
shall be non-transferable and non-negotiable but the right to receive shares
issued upon exercise by the Investor of the Rights may assigned by the Investor,
with prior written notice to the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
Each Investor, severally and not jointly, represents and warrants to the Company
that:
Section 3.1. INTENT. The Investor is entering into this Agreement for its own
account for investment and not with a view to or for sale in connection with any
distribution of the Shares, the Warrants, or Warrant Shares or any part thereof.
The Investor has no present arrangement (whether or not legally binding) at any
time to sell the Shares, the Warrants, or Warrant Shares to or through any
person or entity; provided, however, that by making the representations herein,
the Investor does not agree to hold such securities for any minimum or other
specific term and reserves the right to dispose of the Shares and Warrant Shares
at any time in accordance with federal and state securities laws applicable to
such disposition.
Section 3.2. SOPHISTICATED INVESTOR. The Investor is a sophisticated investor
(as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited investor
(as defined in Rule 501 of Regulation D), and Investor has such knowledge and
experience in business and financial matters that it has the capacity to protect
its own interests in connection with the transactions
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contemplated by this Agreement and is capable of evaluating the merits and risks
of an investment in the Common Stock, the Rights and the Warrants. The Investor
acknowledges that an investment in the Common Stock, the Rights or the Warrants
is speculative and involves a high degree of risk.
Section 3.3. AUTHORITY. This Agreement and each agreement attached as an Exhibit
hereto which is required to be executed by Investor has been duly authorized and
validly executed and delivered by the Investor and is a valid and binding
agreement of the Investor enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
Section 3.4. NOT AN AFFILIATE. The Investor is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of the Securities Act) of the
Company.
Section 3.5. ABSENCE OF CONFLICTS. The execution and delivery of this Agreement
and each agreement which is attached as an Exhibit hereto and executed by the
Investor in connection herewith, and the consummation of the transactions
contemplated hereby and thereby, and compliance with the requirements hereof and
thereof by the Investor, will not violate any law, rule, regulation, order,
writ, judgment, injunction, decree or award binding on Investor or (a) violate
any provision of any indenture, instrument or agreement to which Investor is a
party or is subject, or by which Investor or any of its assets is bound; (b)
conflict with or constitute a material default thereunder; (c) result in the
creation or imposition of any lien pursuant to the terms of any such indenture,
instrument or agreement, or constitute a breach of any fiduciary duty owed by
Investor to any third party; or (d) require the approval of any third-party
(which has not been obtained) pursuant to any material contract, agreement,
instrument, relationship or legal obligation to which Investor is subject or to
which any of its assets, operations or management may be subject.
Section 3.6. DISCLOSURE; ACCESS TO INFORMATION. The Investor has received all
documents, records, books and other publicly available information pertaining to
Investor's investment in the Company that have been requested by the Investor.
The Company is subject to the periodic reporting requirements of the Exchange
Act, and the Investor has reviewed copies of all SEC Documents deemed relevant
by Investor. The Investor and its advisors have been furnished or have otherwise
obtained all information necessary to enable the Investor to evaluate the merits
and risks of an investment in the Company and, after a review of this
information, have had access to and have obtained such additional information as
they requested or required.
Section 3.7. MANNER OF SALE. At no time was Investor presented with or solicited
by or through any leaflet, public promotional meeting, published or publicly
available advertisement or any other form of general solicitation or advertising
relating to the Common Stock, the Rights or the Warrants.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investors that, except as
set forth in the SEC Documents:
Section 4.1. ORGANIZATION OF THE COMPANY. The Company is a corporation duly
incorporated and existing in good standing under the laws of the State of
Delaware and has all requisite corporate authority to own its properties and to
carry on its business as now being conducted. The Company does not have any
subsidiaries and does not own more that fifty percent (50%) of or control any
other business entity except as set forth in the SEC Documents. The Company is
duly qualified and is in good standing as a foreign corporation to do business
in every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, other than those in which the
failure so to qualify would not have a Material Adverse Effect.
Section 4.2. AUTHORITY. (i) The Company has the requisite corporate power and
corporate authority to enter into and perform its obligations under this
Agreement, the Registration Rights Agreement, the Escrow Agreement, and the
Warrants and to issue the Shares, the Warrants and the Warrant Shares pursuant
to their respective terms, (ii) the execution, issuance and delivery of this
Agreement, the Registration Rights Agreement, the Escrow Agreement, the Common
Stock certificates and the Warrants by the Company and the consummation by it of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action and no further consent or authorization of the Company or its
Board of Directors or stockholders is required, and (iii) this Agreement, the
Registration Rights Agreement, the Escrow Agreement, the Common Stock
certificates representing the Shares, and the Warrants have been duly executed
and delivered by the Company and at each Closing shall constitute valid and
binding obligations of the Company enforceable against the Company in accordance
with their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable principles
of general application. The Company has duly and validly authorized and reserved
for issuance shares of Common Stock sufficient in number for the exercise of the
Warrants.
Section 4.3. CAPITALIZATION. The authorized capital stock of the Company
consists of 25,000,000 shares of Common Stock, par value $0.01 per share, of
which 9,109,400 shares are issued and outstanding as of March 17, 2000 and
2,500,000 shares of "blank check" preferred stock, none of which is outstanding
as of the date of this Agreement. There are no outstanding Capital Shares
Equivalents nor any agreements or understandings pursuant to which any Capital
Shares Equivalents may become outstanding except in each case for outstanding
options and warrants as set forth in the SEC Documents. The Company is not a
party to any agreement granting registration or anti-dilution rights to any
person with respect to any of its equity or debt securities. All of the
outstanding shares of Common Stock of the Company have been duly and validly
authorized and issued and are fully paid and non-assessable.
Section 4.4. COMMON STOCK. The Company has registered its Common Stock pursuant
to Section 12(b) or (g) of the Exchange Act and is in full compliance with all
reporting
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requirements of the Exchange Act, and the Company is in compliance with all
requirements for the continued listing or quotation of its Common Stock, and
such Common Stock is currently listed or quoted on, the Principal Market. As of
the date hereof, the Principal Market is the OTC Bulletin Board and the Company
has not received any notice regarding, and to its knowledge there is no threat,
of the termination or discontinuance of the eligibility of the Common Stock for
such listing.
Section 4.5. SEC DOCUMENTS. The Company has made available to the Investors true
and complete copies of the SEC Documents. The Company has not provided to the
Investors any information that, according to applicable law, rule or regulation,
should have been disclosed publicly prior to the date hereof by the Company, but
which has not been so disclosed. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the Exchange Act, and
rules and regulations of the SEC promulgated thereunder and the SEC Documents
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the SEC
Documents complied in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC or other
applicable rules and regulations with respect thereto at the time of such
inclusion. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they 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 operations and cash
flows for the periods then ended (subject, in the case of unaudited interim
statements, to normal year-end audit adjustments). Neither the Company nor any
of its subsidiaries has any material indebtedness, obligations or liabilities of
any kind (whether accrued, absolute, contingent or otherwise, and whether due or
to become due) that would have been required to be reflected in, reserved
against or otherwise described in the financial statements or in the notes
thereto in accordance with GAAP, which was not fully reflected in, reserved
against or otherwise described in the financial statements or the notes thereto
included in the SEC Documents or was not incurred in the ordinary course of
business consistent with the Company's past practices since the last date of
such financial statements.
Section 4.6. EXEMPTION FROM REGISTRATION; VALID ISSUANCES. Subject to the
accuracy of the Investors' representations in Article III, the sale of the
Shares, the Warrants and the Warrant Shares will not require registration under
the Securities Act and/or any applicable state securities law. When issued and
paid for in accordance with the Warrants, the Warrant Shares will be duly and
validly issued, fully paid, and non-assessable. Neither the sales of the Shares,
the Warrants or the Warrant Shares pursuant to, nor the Company's performance of
its obligations under, this Agreement, the Registration Rights Agreement, the
Escrow Agreement or the Warrants will (i) result in the creation or imposition
by the Company of any liens, charges, claims or other encumbrances upon the
Shares, the Warrants or the Warrant Shares or, except as contemplated herein,
any of the assets of the Company, or (ii) entitle the holders of Outstanding
Capital Shares to preemptive or other rights to subscribe for or acquire the
Capital Shares or other securities of the Company. The Shares, the Warrants and
the Warrant Shares shall not subject the Investors to personal liability to the
Company or its creditors by reason of the possession thereof.
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Section 4.7. NO GENERAL SOLICITATION OR ADVERTISING IN REGARD TO THIS
TRANSACTION. Neither the Company nor any of its affiliates nor, to the knowledge
of the Company, any person acting on its or their behalf (i) has conducted or
will conduct any general solicitation (as that term is used in Rule 502(c) of
Regulation D) or general advertising with respect to the sale of the Shares or
the Warrants, or (ii) made any offers or sales of any security or solicited any
offers to buy any security under any circumstances that would require
registration of the Shares, the Warrants or the Warrant Shares under the
Securities Act.
Section 4.8. NO CONFLICTS. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby, including without limitation the issuance of the Shares,
the Warrants and the Warrant Shares, do not and will not (i) result in a
violation of the Company's Certificate of Incorporation or By-Laws or (ii)
conflict with, or constitute a material 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 of, any material
agreement, indenture or instrument, or any "lock-up" or similar provision of any
underwriting or similar agreement to which the Company is a party, or (iii)
result in a violation of any federal, state or local law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or by which any material property or
asset of the Company is bound or affected, nor is the Company otherwise in
violation of, conflict with or default under any of the foregoing (except in
each case for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not have, individually or in the
aggregate, a Material Adverse Effect). The business of the Company is not being
conducted in violation of any law, ordinance or regulation of any governmental
entity, except for possible violations that either singly or in the aggregate
would not have a Material Adverse Effect. The Company is not required under any
Federal, state or local law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement or issue and sell the Shares or the Warrants in
accordance with the terms hereof (other than any SEC or state securities filings
that may be required to be made by the Company subsequent to Closing, any
registration statement that may be filed pursuant hereto); provided that, for
purposes of the representation made in this sentence, the Company is assuming
and relying upon the accuracy of the relevant representations and agreements of
the Investors herein.
Section 4.9. NO MATERIAL ADVERSE CHANGE. Since September 30, 1999, no Material
Adverse Effect has occurred or exists with respect to the Company, except as
disclosed in the SEC Documents.
Section 4.10. NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since September 30, 1999,
no event or circumstance has occurred or exists with respect to the Company or
its businesses, properties, prospects, operations or financial condition, that,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the SEC Documents.
Section 4.11. NO INTEGRATED OFFERING. Other than pursuant to an effective
registration statement under the Securities Act, or pursuant to the issuance or
exercise of employee stock options, or pursuant to its discussion with the
Investors in connection with the transactions contemplated
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hereby, the Company has not issued, offered or sold its Common Stock, or any
securities convertible into or exchangeable or exercisable for Common Stock
within the six-month period next preceding the date hereof, and the Company
shall not permit any of its directors, officers or affiliates directly or
indirectly to take, any action (including, without limitation, any offering or
sale to any Person of the Shares or Warrants), so as to make unavailable the
exemption from Securities Act registration being relied upon by the Company for
the offer and sale to Investors of the Shares or the Warrants (and the Warrant
Shares) as contemplated by this Agreement.
Section 4.12. LITIGATION AND OTHER PROCEEDINGS. Except as disclosed in the SEC
Documents, there are no lawsuits or proceedings pending or, to the knowledge of
the Company, threatened, against the Company or any subsidiary, nor has the
Company received any written or oral notice of any such action, suit, proceeding
or investigation, which could reasonably be expected to have a Material Adverse
Effect. Except as set forth in the SEC Documents, no judgment, order, writ,
injunction or decree or award has been issued by or, to the knowledge of the
Company, requested of any court, arbitrator or governmental agency which could
result in a Material Adverse Effect.
Section 4.13. NO MISLEADING OR UNTRUE COMMUNICATION. The Company and, to the
knowledge of the executive officers of the Company, without any independent
inquiry, any person representing the Company, or any other person selling or
offering to sell the Shares or the Warrants in the sale contemplated by this
Agreement, have not made, at any time, any oral communication in connection with
the offer or sale of the same which contained any untrue statement of a material
fact.
Section 4.14. MATERIAL NON-PUBLIC INFORMATION. The Company has not disclosed to
the Investors any material non-public information that (i) if disclosed, would
reasonably be expected to have a material effect on the price of the Common
Stock or (ii) according to applicable law, rule or regulation, should have been
disclosed publicly by the Company prior to the date hereof but which has not
been so disclosed.
Section 4.15. INSURANCE. The Company and each subsidiary maintains property and
casualty, general liability, workers' compensation, environmental hazard,
personal injury and other similar types of insurance with financially sound and
reputable insurers that is adequate, consistent with industry standards and the
Company's historical claims experience. The Company has not received notice
from, and has no knowledge of any threat by, any insurer (that has issued any
insurance policy to the Company) that such insurer intends to deny coverage
under or cancel, discontinue or not renew any insurance policy presently in
force.
Section 4.16. TAX MATTERS.
(a) The Company and each subsidiary has filed all Tax Returns which it
is required to file under applicable laws; all such Tax Returns are true and
accurate and has been prepared in compliance with all applicable laws; the
Company has paid all Taxes due and owing by it or any subsidiary (whether or not
such Taxes are required to be shown on a Tax Return) and have withheld and paid
over to the appropriate taxing authorities all Taxes which it is required to
withhold from amounts paid or owing to any employee, stockholder, creditor or
other third parties; and since June 30, 1999, the charges, accruals and reserves
for Taxes with respect to the Company (including any provisions for deferred
income taxes) reflected on the books of the
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Company are adequate to cover any Tax liabilities of the Company if its current
tax year were treated as ending on the date hereof.
(b) No claim has been made by a taxing authority in a jurisdiction
where the Company does not file tax returns that the Company or any subsidiary
is or may be subject to taxation by that jurisdiction. There are no foreign,
federal, state or local tax audits or administrative or judicial proceedings
pending or being conducted with respect to the Company or any subsidiary; no
information related to Tax matters has been requested by any foreign, federal,
state or local taxing authority; and, except as disclosed above, no written
notice indicating an intent to open an audit or other review has been received
by the Company or any subsidiary from any foreign, federal, state or local
taxing authority. There are no material unresolved questions or claims
concerning the Company's Tax liability. The Company (A) has not executed or
entered into a closing agreement pursuant to ss. 7121 of the Internal Revenue
Code or any predecessor provision thereof or any similar provision of state,
local or foreign law; or (B) has not agreed to or is required to make any
adjustments pursuant to ss. 481(a) of the Internal Revenue Code or any similar
provision of state, local or foreign law by reason of a change in accounting
method initiated by the Company or any of its subsidiaries or has any knowledge
that the IRS has proposed any such adjustment or change in accounting method, or
has any application pending with any taxing authority requesting permission for
any changes in accounting methods that relate to the business or operations of
the Company. The Company has not been a United States real property holding
corporation within the meaning of ss. 897(c)(2) of the Internal Revenue Code
during the applicable period specified in ss. 897(c)(1)(A)(ii) of the Internal
Revenue Code.
(c) The Company has not made an election under ss. 341(f) of the
Internal Revenue Code. The Company is not liable for the Taxes of another person
that is not a subsidiary of the Company under (A) Treas. Reg. ss. 1.1502-6 (or
comparable provisions of state, local or foreign law), (B) as a transferee or
successor, (C) by contract or indemnity or (D) otherwise. The Company is not a
party to any tax sharing agreement. The Company has not made any payments, is
obligated to make payments or is a party to an agreement that could obligate it
to make any payments that would not be deductible under ss. 280G of the Internal
Revenue Code.
(d) For purposes of this Section 4.16:
"IRS" means the United States Internal Revenue Service.
"TAX" or "TAXES" means federal, state, county, local, foreign,
or other income, gross receipts, ad valorem, franchise,
profits, sales or use, transfer, registration, excise,
utility, environmental, communications, real or personal
property, capital stock, license, payroll, wage or other
withholding, employment, social security, severance, stamp,
occupation, alternative or add-on minimum, estimated and other
taxes of any kind whatsoever (including, without limitation,
deficiencies, penalties, additions to tax, and interest
attributable thereto) whether disputed or not.
"TAX RETURN" means any return, information report or filing
with respect to Taxes, including any schedules attached
thereto and including any amendment thereof.
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Section 4.17. PROPERTY. Neither the Company nor any of its subsidiaries owns any
real property. Each of the Company and its subsidiaries has good and marketable
title to all personal property owned by it, free and clear of all liens,
encumbrances and defects except such as would not have a Material Adverse
Effect; and to the Company's knowledge any real property, mineral or water
rights, and buildings held under lease by the Company as tenant are held by it
under valid, subsisting and enforceable leases with such exceptions as would not
have a Material Adverse Effect.
Section 4.18. INTELLECTUAL PROPERTY. Each of the Company and its subsidiaries
owns or possesses adequate and enforceable rights to use all patents, patent
applications, trademarks, trademark applications, trade names, service marks,
copyrights, copyright applications, licenses, know-how (including trade secrets
and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures) and other similar rights and proprietary
knowledge (collectively, "Intangibles") necessary for the conduct of its
business as now being conducted. To the Company's knowledge, except as disclosed
in the SEC Documents neither the Company nor any of its subsidiaries is
infringing upon or in conflict with any right of any other person with respect
to any Intangibles. Except as disclosed in the SEC Documents, no adverse claims
have been asserted by any person to the ownership or use of any Intangibles and
the Company has no knowledge of any basis for such claim.
Section 4.19. REGULATORY COMPLIANCE. The Company has all necessary permits and
licenses and has made all filings to such regulatory bodies to conduct its
business as it is now being conducted, and is not in violation of any thereof,
except in each case for such matters as would not have a Material Adverse
Effect.
Section 4.20. INTERNAL CONTROLS AND PROCEDURES. The Company maintains books and
records and internal accounting controls which provide reasonable assurance that
(i) all transactions to which the Company or any subsidiary is a party or by
which its properties are bound are executed with management's authorization;
(ii) the recorded accounting of the Company's consolidated assets is compared
with existing assets at regular intervals; (iii) access to the Company's
consolidated assets is permitted only in accordance with management's
authorization; and (iv) all transactions to which the Company or any subsidiary
is a party or by which its properties are bound are recorded as necessary to
permit preparation of the financial statements of the Company in accordance with
U.S. generally accepted accounting principles.
Section 4.21. PAYMENTS AND CONTRIBUTIONS. Neither the Company, any subsidiary,
nor any of its directors, officers or, to its knowledge, other employees has (i)
used any Company funds for any unlawful contribution, endorsement, gift,
entertainment or other unlawful expense relating to political activity; (ii)
made any direct or indirect unlawful payment of Company funds to any foreign or
domestic government official or employee; (iii) violated or is in violation of
any provision of the Foreign Corrupt Practices Act of 1977, as amended; or (iv)
made any bribe, rebate, payoff, influence payment, kickback or other similar
payment to any person with respect to Company matters.
Section 4.22. NO MISREPRESENTATION. The representations and warranties of the
Company contained in this Agreement, any schedule, annex or exhibit hereto and
any agreement, instrument or certificate furnished by the Company to the
Investors pursuant to this Agreement,
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do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
ARTICLE V
COVENANTS OF THE INVESTORS
Each Investor, severally and not jointly, covenants with the Company
that:
Section 5.1. COMPLIANCE WITH LAW. The Investor's trading activities with respect
to shares of the Company's Common Stock will be in compliance with all
applicable state and federal securities laws, rules and regulations, the rules
and regulations of the Principal Market on which the Company's Common Stock is
listed, and the provisions of each agreement or instrument entered into by or
issued to such Investor in connection with the transactions contemplated by this
Agreement.
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1. REGISTRATION RIGHTS. The Company shall cause the Registration
Rights Agreement to remain in full force and effect and the Company shall comply
in all material respects with the terms thereof and shall use best efforts to
timely prepare and file the Registration Statement.
Section 6.2. RESERVATION OF COMMON STOCK. 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, shares of Common Stock for the purpose of
enabling the Company to issue the Shares at the second Closing and the Warrant
Shares pursuant to any exercise of the Warrants. The number of shares so
reserved from time to time, as theretofore increased or reduced as hereinafter
provided, may be reduced by the number of shares actually delivered pursuant to
any exercise of the Warrants and the number of shares so reserved shall be
increased or decreased to reflect potential increases or decreases in the Common
Stock that the Company may thereafter be obligated to issue by reason of
adjustments to the Warrants.
Section 6.3. LISTING OF COMMON STOCK. The Company hereby agrees to maintain the
listing of the Common Stock on a Principal Market, and as soon as reasonably
practicable following the Closing to list the Shares and the Warrant Shares on
the Principal Market. The Company further agrees, if the Company applies to have
the Common Stock traded on any other Principal Market, it will include in such
application the Shares and the Warrant Shares, and will take such other action
as is necessary or desirable in the opinion of the Investors to cause the Shares
and Warrant Shares to be listed on such other Principal Market as promptly as
possible. The Company will take all action to continue the listing and trading
of its Common Stock on a Principal Market (including, without limitation,
maintaining sufficient net tangible assets) and will comply in all respects with
the Company's reporting, filing and other obligations under the bylaws or rules
of
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the Principal Market and shall provide Investors with copies of any
correspondence to or from such Principal Market which questions or threatens
delisting of the Common Stock, within three (3) Trading Days of the Company's
receipt thereof, until the Investors have disposed of all of their Registrable
Securities.
Section 6.4. EXCHANGE ACT REGISTRATION. The Company will cause its Common Stock
to continue to be registered under Section 12(b) or (g) of the Exchange Act,
will use its best efforts to comply in all respects with its reporting and
filing obligations under the Exchange Act, and will not take any action or file
any document (whether or not permitted by the Exchange Act or the rules
thereunder) to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under said Act until the Investors have
disposed of all of their Registrable Securities.
Section 6.5. LEGENDS. The certificates evidencing the Registrable Securities
shall be free of legends, except as set forth in Article IX.
Section 6.6. CORPORATE EXISTENCE; CONFLICTING AGREEMENTS. The Company will take
all steps necessary to preserve and continue the corporate existence of the
Company. The Company shall not enter into any agreement, the terms of which
agreement would restrict or impair the right or ability of the Company to
perform any of its obligations under this Agreement or any of the other
agreements attached as exhibits hereto.
Section 6.7. CONSOLIDATION; MERGER. The Company shall not, at any time after the
date hereof, effect any merger or consolidation of the Company with or into, or
a transfer of all or substantially all of the assets of the Company to, another
entity (a "Consolidation Event") unless the resulting successor or acquiring
entity (if not the Company) assumes by written instrument or by operation of law
the obligation to deliver to the Investors such shares of stock and/or
securities as the Investors are entitled to receive pursuant to this Agreement
and the Warrants.
Section 6.8. ISSUANCE OF COMMON STOCK AND WARRANT SHARES. The sale of the Shares
and the Warrants and the issuance of the Warrant Shares pursuant to exercise of
the Warrants shall be made in accordance with the provisions and requirements of
Section 4(2), 4(6) or Regulation D and any applicable state securities law. The
Company shall make any necessary SEC and "blue sky" filings required to be made
by the Company in connection with the sale of the Securities to the Investors as
required by all applicable laws, and shall provide a copy thereof to the
Investors promptly after such filing.
Section 6.9. RIGHT OF FIRST REFUSAL. For a period of six months from the date of
this Agreement, the Investors shall have a right to purchase on a pro-rata basis
in proportion to their original Common Stock purchased pursuant to this
Agreement all future equity or equity-linked securities offered by the Company
in any subsequent private offerings (each an "Additional Offering"). The
Investors shall have 72 hours to return a written commitment electing to
participate in an Additional Offering on the same terms and conditions as are
applicable in such Additional Offering (or will otherwise be deemed to elect not
to so participate and the Company shall be free to continue with such Additional
Offering without further notice to the Investors). This Section shall not be
applicable to any sales (i) pursuant to any presently existing employee benefit
plan or future employee compensation/incentive plan, (ii) pursuant to any
compensatory
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plan for a full-time employee or key consultant, (iii) pursuant to
the transactions described in the Information Statement and the share exchange
agreement described therein, or (iv) with the prior approval of a majority in
interest of the Investors, which will not be unreasonably withheld, in
connection with a strategic partnership or other business transaction, the
principal purpose of which is not simply to raise money.
ARTICLE VII
SURVIVAL; INDEMNIFICATION
Section 7.1. SURVIVAL. The representations, warranties and covenants made by
each of the Company and each Investor in this Agreement, the annexes, schedules
and exhibits hereto and in each instrument, agreement and certificate entered
into and delivered by them pursuant to this Agreement, shall survive the Closing
and the consummation of the transactions contemplated hereby for a period of
three years from the date hereof. In the event of a breach or violation of any
of such representations, warranties or covenants, the party to whom such
representations, warranties or covenants have been made shall have all rights
and remedies for such breach or violation available to it under the provisions
of this Agreement, irrespective of any investigation made by or on behalf of
such party on or prior to the Closing Date.
Section 7.2. INDEMNITY.
(a) The Company hereby agrees to indemnify and hold harmless the
Investors, their respective Affiliates and their respective officers, directors,
partners and members (collectively, the "Investor Indemnitees"), from and
against any and all Damages, and agrees to reimburse the Investor Indemnitees
for all reasonable out-of-pocket expenses (including the reasonable fees and
expenses of legal counsel), in each case promptly as incurred by the Investor
Indemnitees and to the extent arising out of or in connection with:
(i) any misrepresentation, omission of fact or breach of any
of the Company's representations or warranties contained in this
Agreement, the annexes, schedules or exhibits hereto or any instrument,
agreement or certificate entered into or delivered by the Company
pursuant to this Agreement; or
(ii) any failure by the Company to perform in any material
respect any of its covenants, agreements, undertakings or obligations
set forth in this Agreement, the annexes, schedules or exhibits hereto
or any instrument, agreement or certificate entered into or delivered
by the Company pursuant to this Agreement; or
(iii) any action instituted against the Investors, or any of
them, by any stockholder of the Company who is not an Affiliate of an
Investor, with respect to any of the transactions contemplated by this
Agreement.
(b) Each Investor, severally and not jointly, hereby agrees to
indemnify and hold harmless the Company, its Affiliates and their respective
officers, directors, partners and members (collectively, the "Company
Indemnitees"), from and against any and all Damages, and
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agrees to reimburse the Company Indemnitees for reasonable all out-of-pocket
expenses (including the reasonable fees and expenses of legal counsel), in each
case promptly as incurred by the Company Indemnitees and to the extent arising
out of or in connection with (i) any misrepresentation, omission of fact, or
breach of any of the Investor's representations or warranties contained in this
Agreement, the annexes, schedules or exhibits hereto or any instrument,
agreement or certificate entered into or delivered by the Investor pursuant to
this Agreement or (ii) any failure by the Investor to perform in any material
respect any of its covenants, agreements, undertakings or obligations set forth
in this Agreement, the annexes, schedules or exhibits hereto or any instrument,
agreement or certificate entered into or delivered by the Investor pursuant to
this Agreement
Section 7.3. NOTICE. Promptly after receipt by either party hereto seeking
indemnification pursuant to Section 7.2 (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party from whom indemnification pursuant to Section
7.2 is being sought (the "Indemnifying Party") of the commencement thereof; but
the omission to so notify the Indemnifying Party shall not relieve it from any
liability that it otherwise may have to the Indemnified Party, except to the
extent that the Indemnifying Party is actually prejudiced by such omission or
delay. In connection with any Claim as to which both the Indemnifying Party and
the Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of any
Claim by the Indemnifying Party, the Indemnified Party shall have the right to
employ separate legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
and expenses of such separate legal counsel to the Indemnified Party if (and
only if): (x) the Indemnifying Party shall have agreed to pay such fees,
out-of-pocket costs and expenses, (y) the Indemnified Party reasonably shall
have concluded that representation of the Indemnified Party and the Indemnifying
Party by the same legal counsel would not be appropriate due to actual or, as
reasonably determined by legal counsel to the Indemnified Party, potentially
differing interests between such parties in the conduct of the defense of such
Claim, or if there may be legal defenses available to the Indemnified Party that
are in addition to or disparate from those available to the Indemnifying Party,
or (z) the Indemnifying Party shall have failed to employ legal counsel
reasonably satisfactory to the Indemnified Party within a reasonable period of
time after notice of the commencement of such Claim. If the Indemnified Party
employs separate legal counsel in circumstances other than as described in
clauses (x), (y) or (z) above, the fees, costs and expenses of such legal
counsel shall be borne exclusively by the Indemnified Party. Except as provided
above, the Indemnifying Party shall not, in connection with any Claim in the
same jurisdiction, be liable for the fees and expenses of more than one firm of
legal counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnifying Party shall not, without the prior written consent of
the Indemnified Party (which consent shall not unreasonably be withheld), settle
or compromise any Claim or consent to the entry of any judgment that does not
include an unconditional release of the Indemnified Party from all liabilities
with respect to such Claim or judgment.
Section 7.4. DIRECT CLAIMS. In the event one party hereunder should have a claim
for indemnification that does not involve a claim or demand being asserted by a
third party, the
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Indemnified Party promptly shall deliver notice of such claim to the
Indemnifying Party. If the Indemnified Party disputes the claim, such dispute
shall be resolved by mutual agreement of the Indemnified Party and the
Indemnifying Party or by binding arbitration conducted in accordance with the
procedures and rules of the American Arbitration Association as set forth in
Article X. Judgment upon any award rendered by any arbitrators may be entered in
any court having competent jurisdiction thereof.
ARTICLE VIII
DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION.
Section 8.1. DUE DILIGENCE REVIEW. Subject to Section 8.2, the Company shall
make available for inspection and review by the Investors, advisors to and
representatives of the Investors (who may or may not be affiliated with the
Investors and who are reasonably acceptable to the Company), any underwriter
participating in any disposition of the Registrable Securities on behalf of the
Investors pursuant to the Registration Statement, any such registration
statement or amendment or supplement thereto or any blue sky, Nasdaq or other
filing, all SEC Documents and other filings with the SEC, and all other publicly
available corporate documents and properties of the Company as may be reasonably
necessary for the purpose of such review, and cause the Company's officers,
directors and employees to supply all such publicly available information
reasonably requested by the Investors or any such representative, advisor or
underwriter in connection with such Registration Statement (including, without
limitation, in response to all questions and other inquiries reasonably made or
submitted by any of them), prior to and from time to time after the filing and
effectiveness of the Registration Statement for the sole purpose of enabling the
Investors and such representatives, advisors and underwriters and their
respective accountants and attorneys to conduct initial and ongoing due
diligence with respect to the Company and the accuracy of the Registration
Statement.
Section 8.2. NON-DISCLOSURE OF NON-PUBLIC INFORMATION.
(a) The Company shall not disclose material non-public information to
the Investors, advisors to or representatives of the Investors unless prior to
disclosure of such information the Company identifies such information as being
non-public information and provides the Investors, such advisors and
representatives with the opportunity to accept or refuse to accept such
non-public information for review. The Company may, as a condition to disclosing
any non-public information hereunder, require the Investors' advisors and
representatives to enter into a confidentiality agreement in form and content
reasonably satisfactory to the Company and the Investors.
(b) Nothing herein shall require the Company to disclose material
non-public information to the Investors or their advisors or representatives,
and the Company represents that it does not disseminate material non-public
information to any investors who purchase stock in the Company in a public
offering, to money managers or to securities analysts, provided, however, that
notwithstanding anything herein to the contrary, the Company will, as
hereinabove provided, promptly notify the advisors and representatives of the
Investors and, if any, underwriters, of any event or the existence of any
circumstance (without any obligation to disclose the specific event
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or circumstance) of which it becomes aware, constituting material non-public
information (whether or not requested of the Company specifically or generally
during the course of due diligence by such persons or entities), which, if not
disclosed in the prospectus included in the Registration Statement would cause
such prospectus to include a material misstatement or to omit a material fact
required to be stated therein in order to make the statements, therein in light
of the circumstances in which they were made, not misleading. Nothing contained
in this Section 8.2 shall be construed to mean that such persons or entities
(other than Investors that have not given written consent prior to disclosure of
such information as set forth in Section 8.2(a)) may not obtain non-public
information in the course of conducting due diligence in accordance with the
terms of this Agreement and nothing herein shall prevent any such persons or
entities from notifying the Company of their opinion that based on such due
diligence by such persons or entities, that the Registration Statement contains
an untrue statement of a material fact or omits a material fact required to be
stated in the Registration Statement or necessary to make the statements
contained therein, in light of the circumstances in which they were made, not
misleading.
ARTICLE IX
LEGENDS; TRANSFER AGENT INSTRUCTIONS
Section 9.1. LEGENDS. Unless otherwise provided below, each certificate
representing Registrable Securities will bear the following legend or equivalent
(the "Legend"):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER
APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, OR OTHERWISE DISPOSED
OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO A TRANSACTION THAT IS EXEMPT FROM SUCH REGISTRATION.
Section 9.2. TRANSFER AGENT INSTRUCTIONS. Upon the execution and delivery
hereof, the Company is issuing to the transfer agent for its Common Stock (and
to any substitute or replacement transfer agent for its Common Stock upon the
Company's appointment of any such substitute or replacement transfer agent)
instructions substantially in the form of Exhibit E hereto. Such instructions
shall be irrevocable by the Company from and after the date hereof or from and
after the issuance thereof to any such substitute or replacement transfer agent,
as the case may be.
Section 9.3. NO OTHER LEGEND OR STOCK TRANSFER RESTRICTIONS. No legend other
than the one specified in Section 9.1 has been or shall be placed on the share
certificates representing the
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Registrable Securities and no instructions or "stop transfer orders," "stock
transfer restrictions," or other restrictions have been or shall be given to the
Company's transfer agent with respect thereto other than as expressly set forth
in this Article IX.
Section 9.4. INVESTORS' COMPLIANCE. Nothing in this Article shall affect in any
way each Investor's obligations to comply with all applicable securities laws
upon resale of the Common Stock.
ARTICLE X
CHOICE OF LAW; ARBITRATION
Section 10.1. GOVERNING LAW/ARBITRATION. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made in New York by persons domiciled in New York City and without
regard to its principles of conflicts of laws. Any dispute under this Agreement
shall be submitted to arbitration under the American Arbitration Association
(the "AAA") in New York City, New York, and shall be finally and conclusively
determined by the decision of a board of arbitration consisting of three (3)
members (hereinafter referred to as the "Board of Arbitration") selected
according to the rules governing the AAA. The Board of Arbitration shall meet on
consecutive business days in New York City, New York, and shall reach and render
a decision in writing (concurred in by a majority of the members of the Board of
Arbitration) with respect to the amount, if any, which the losing party is
required to pay to the other party in respect of a claim filed. In connection
with rendering its decisions, the Board of Arbitration shall adopt and follow
the laws of the State of New York unless the matter at issue is the corporation
law of the company's state of incorporation, in which event the corporation law
of such jurisdiction shall govern such issue. To the extent practical, decisions
of the Board of Arbitration shall be rendered no more than thirty (30) calendar
days following commencement of proceedings with respect thereto. The Board of
Arbitration shall cause its written decision to be delivered to all parties
involved in the dispute. Any decision made by the Board of Arbitration (either
prior to or after the expiration of such thirty (30) calendar day period) shall
be final, binding and conclusive on the parties to the dispute, and entitled to
be enforced to the fullest extent permitted by law and entered in any court of
competent jurisdiction. The Board of Arbitration shall be authorized and is
hereby directed to enter a default judgment against any party failing to
participate in any proceeding hereunder within the time periods set forth in the
AAA rules. The non-prevailing party to any arbitration (as determined by the
Board of Arbitration) shall pay the expenses of the prevailing party, including
reasonable attorney's fees, in connection with such arbitration. Any party shall
be entitled to obtain injunctive relief from a court in any case where such
relief is available.
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ARTICLE XI
ASSIGNMENT
Section 11.1. ASSIGNMENT. Neither this Agreement nor any rights of the Investors
or the Company hereunder may be assigned by either party to any other person.
Notwithstanding the foregoing, (a) the provisions of this Agreement shall inure
to the benefit of, and be enforceable by, any permitted transferee of any of the
Shares or Warrants purchased or acquired by any Investor hereunder with respect
to the Shares or Warrants held by such person, and (b) upon the prior written
consent of the Company, which consent shall not unreasonably be withheld or
delayed, each Investor's interest in this Agreement may be assigned at any time,
in whole or in part, to any other person or entity (including any Affiliate of
the Investor) who agrees to make the representations and warranties contained in
Article III and who agrees to be bound by the terms of this Agreement and the
agreements and instruments executed pursuant to this Agreement
ARTICLE XII
NOTICES
Section 12.1. NOTICES. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) hand delivered, (ii) deposited
in the mail, registered or certified, return receipt requested, postage prepaid,
(iii) delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by facsimile, addressed as set forth below or to such other address
as such party shall have specified most recently by written notice. Any notice
or other communication required or permitted to be given hereunder shall be
deemed effective (a) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the first business day
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following the date of sending by reputable courier service, fully prepaid,
addressed to such address, or (c) upon actual receipt of such mailing, if
mailed. The addresses for such communications shall be:
If to the Company: xXxxxxxx.xxx, Inc.
0000 XXX Xxxxxxxxx, Xxxxx 000
Xxxx Xxxxx Xxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
with a copy to (shall not constitute Xxxxxx X. Xxxxxxx, P.A.
notice): Steel Xxxxxx & Xxxxx LLP
000 Xxxxx Xxxxxxxx Xxxxxxxxx
Xxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
if to the Investors: As set forth on the signature pages
hereto
with a copy to: Xxxxxx X. Xxxxx, Esq.
(shall not constitute notice) Xxxxxxx Xxxxxx & Green, P.C.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Xxxx X. Xxxx
0000 Xxxx Xxx Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 12.1 by giving written notice of such changed
address or facsimile number to the other party hereto as provided in this
Section 12.1.
ARTICLE XIII
MISCELLANEOUS
Section 13.1. COUNTERPARTS, FACSIMILES AND AMENDMENTS. This Agreement may be
executed in multiple counterparts, each of which may be executed by less than
all of the parties and shall be deemed to be an original instrument which shall
be enforceable against the parties actually executing such counterparts and all
of which together shall constitute one and the same instrument. Except as
otherwise stated herein, in lieu of the original documents, a facsimile
transmission or copy of the original documents shall be as effective and
enforceable as the original. This Agreement may be amended only by a writing
executed by all parties.
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Section 13.2. ENTIRE AGREEMENT. This Agreement, the agreements attached as
Exhibits hereto, which include, but are not limited to the Warrants, the Escrow
Agreement, and the Registration Rights Agreement, set forth the entire agreement
and understanding of the parties relating to the subject matter hereof and
supersedes all prior and contemporaneous agreements, negotiations and
understandings between the parties, both oral and written relating to the
subject matter hereof. The terms and conditions of all Exhibits to this
Agreement are incorporated herein by this reference and shall constitute part of
this Agreement as is fully set forth herein.
Section 13.3. SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that such severability shall be ineffective if
it materially changes the economic benefit of this Agreement to any party.
Section 13.4. HEADINGS. The headings used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
Section 13.5. NUMBER AND GENDER. There may be one or more Investors parties to
this Agreement, which Investors may be natural persons or entities. All
references to plural Investors shall apply equally to a single Investor if there
is only one Investor, and all references to an Investor as "it" shall apply
equally to a natural person.
Section 13.6. REPLACEMENT OF CERTIFICATES. Upon (i) receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of a certificate representing the Shares or Warrants or any Warrant
Shares and (ii) in the case of any such loss, theft or destruction of such
certificate, upon delivery of an indemnity agreement or security reasonably
satisfactory in form to the Company (which shall not include the positing of any
bond) or (iii) in the case of any such mutilation, on surrender and cancellation
of such certificate, the Company at its expense will execute and deliver, in
lieu thereof, a new certificate of like tenor.
Section 13.7. FEES AND EXPENSES. Each of the Company and the Investors agrees to
pay its own expenses incident to the performance of its obligations hereunder,
except that the Company shall pay the fees, expenses and disbursements of
Xxxxxxx Xxxxxx & Green, P.C., counsel to the Investors, in the amount set forth
in the Escrow Agreement, and the reasonable legal fees and expenses of Thomson
Kernaghan & Co., Ltd., Toronto (the "Placement Agent"), in an amount not to
exceed $15,000. At the first Closing, the Placement Agent shall also be issued
warrants to purchase shares of Common Stock in an amount equal to the product of
10% of the aggregate purchase price of the Shares set forth opposite the name of
each Investor listed on the signature page hereof who was introduced to the
Company by the Placement Agent divided by the closing bid price of the Common
Stock on the first Closing Date. The exercise price of such warrants shall be
100% of the closing bid price of the Common Stock on the first Closing Date.
Section 13.8. BROKERAGE. Each of the parties hereto represents that it has had
no dealings in connection with this transaction with any finder or broker who
will demand payment of any fee or commission from the other party except for
Union Atlantic LC Capital Markets, whose fee shall be paid by the Company. The
Company on the one hand, and the Investors, on the other hand, agree to
indemnify the other against and hold the other harmless from any and all
liabilities to any person claiming brokerage commissions or finder's fees on
account of services purported
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to have been rendered on behalf of the indemnifying party in connection with
this Agreement or the transactions contemplated hereby.
Section 13.9. PUBLICITY. The Company agrees that it will not issue any press
release or other public announcement of the transactions contemplated by this
Agreement without the prior consent of the Investors, which shall not be
unreasonably withheld nor delayed by more than two (2) Trading Days from their
receipt of such proposed release. No release shall name the Investors without
their express consent.
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IN WITNESS WHEREOF, the parties hereto have caused this Purchase
Agreement to be executed by the undersigned, thereunto duly authorized, as of
the date first set forth above.
xXXXXXXX.XXX, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------------
Address: c/o Ultra Finanz AG AMRO International, S.A.
Xxxxxxxxxxxxxxxxxx 0
Xxxxxx, XX-0000
Xxxxxxxxxxx
Fax: 000-000-000-0000 By: /s/ signature illegible
First Closing Commitment: -------------------------------------
$500,001
Second Closing Commitment:
$500,001
Investor's Warrant:
100,000 shares
Address: c/o Thomson Kernaghan CALP II Limited Partnership, a Bermuda
& Co. Limited limited partnership
000 Xxx Xxxxxx, Xxxxx Xxxxx
Xxxxxxx, Xxxxxxx X0X 0X0
Xxxxxx
Attention: Xxxxxxxx XxXxxxxx By: VMH Investment Management Ltd., a
Bahamas company, general partner
By: /s/ Xxxxxxxx XxXxxxxx
First Closing Commitment: ------------------------------------
$1,749,999
Second Closing Commitment:
$1,749,999
Investor's Warrant:
350,000 shares
Address: Xxxxxxx Trust Reg
Xxxxxxxxxxx 000
0000 Xxxxxxxxxx
Vaduz/Liechtenstein
First Closing Commitment: By: /s/ Xxxxxx Xxxxx
$175,000 ------------------------------------
Second Closing Commitment: Print Name:
$175,000 ----------------------------
Investor's Warrant: Title:
35,000 shares ---------------------------------
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Address: Balmore SA
Trident Xxxxxxxx
P.O. Box 146
Roadtown, Tortola, BVI
First Closing Commitment: By: /s/ Francois Morax
$175,000 ----------------------------------------
Second Closing Commitment: Print Name: Francois Morax
$175,000 --------------------------------
Investor's Warrant: Title: Director
35,000 shares -------------------------------------
Address: Xxxxxx X. Xxxxxx, Manager of Xxxxxx
900 X. Xxxxxx Court Management LLC, General Partner of
Xxxxxxx, XX 00000 Xxxxxx Investments, LLLP
First Closing Commitment:
$125,000 By: /s/ Xxxxxx X. Xxxxxx
Second Closing Commitment: ----------------------------------------
$125,000 Manager of Xxxxxx Management LLC,
Investor's Warrant: General Partner of Xxxxxx
25,000 shares Investments, LLLP
Address: c/o Xxxx Xxxx worldVentures Fund I, LLC
0000 Xxxxxxxxxxx Xx. XX
Xxxxxxxxxx XX 00000
First Closing Commitment: By: /s/ Xxxxxxx X. Xxxx
$125,000 ----------------------------------------
Second Closing Commitment: Print Name: Xxxxxxx X. Xxxx
$125,000 --------------------------------
Investor's Warrant: Title: President of the Managing Member
25,000 shares -------------------------------------
Address: RBB Bank Aktiengesellschaft
Burgring 16
0000 Xxxx, Xxxxxxx
Attn: Xxxxxxx Xxxxxxx
First Closing Commitment: By: /s/ Xxxxxxx Xxxxxxx
$650,000 ----------------------------------------
Second Closing Commitment: Print Name: Xxxxxxx Xxxxxxx
$650,000 --------------------------------
Investor's Warrant: Title: Managing Director of US equity
130,000 shares -------------------------------------
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