Exhibit 10.2 Common Stock Purchase Agreement
Dated as of May 3, 2000
by and between
and
ACQUA WELLINGTON
NORTH AMERICAN EQUITIES FUND, LTD.
TABLE OF CONTENTS
Page
ARTICLE I Definitions...................................................1
Section 1.1 Definitions...................................................1
ARTICLE II Purchase and Sale of Common Stock.............................2
Section 2.1 Purchase and Sale of Stock....................................2
Section 2.2 The Shares....................................................3
Section 2.3 Purchase Price and Closing....................................3
ARTICLE III Representations and Warranties................................3
Section 3.1 Representation and Warranties of the Company..................3
Section 3.2 Representation and Warranties of the Purchaser...............10
ARTICLE IV Covenants....................................................11
Section 4.1 Securities...................................................11
Section 4.2 Registration and Listing.....................................11
Section 4.3 Registration Statement.......................................12
Section 4.4 Compliance with Laws.........................................12
Section 4.5 Keeping of Records and Books of Account......................12
Section 4.6 Reporting Requirements.......................................12
Section 4.7 Other Agreements.............................................12
Section 4.8 Effective Registration Statement.............................13
Section 4.9 No Stop Orders...............................................13
Section 4.10 Amendments to the Registration Statement.....................13
Section 4.11 Prospectus Delivery..........................................13
ARTICLE V Conditions to Closing and Draw Downs.........................14
Section 5.1 Conditions Precedent to the Obligation of the Company to Sell
the Shares ..................................................14
Section 5.2 Conditions Precedent to the Obligation of the Purchaser to
Close .......................................................15
Section 5.3 Conditions Precedent to the Obligation of the Purchaser to
Accept a Draw Down and Purchase the Shares...................15
ARTICLE VI Draw Down Terms; Call Option.................................16
Section 6.1 Drawn Down Terms.............................................16
Section 6.2 Purchaser's Call Option......................................19
ARTICLE VII Termination..................................................19
Section 7.1 Termination by Mutual Consent................................19
Section 7.2 Other Termination............................................19
Section 7.3 Effect of Termination........................................19
ARTICLE VIII Indemnification..............................................20
Section 8.1 General Indemnity............................................20
Section 8.2 Indemnification Procedures...................................21
ARTICLE IX Miscellaneous................................................22
Section 9.1 Fees and Expenses............................................22
Section 9.2 Specific Enforcement, Consent to Jurisdiction................22
Section 9.3 Entire Agreement; Amendment..................................23
Section 9.4 Notices......................................................23
Section 9.5 Waivers......................................................24
Section 9.6 Headings.....................................................24
Section 9.7 Successors and Assigns.......................................24
Section 9.8 Governing Law................................................24
Section 9.9 Survival.....................................................24
Section 9.10 Counterparts.................................................25
Section 9.11 Publicity....................................................25
Section 9.12 Severability.................................................25
Section 9.13 Further Assurances...........................................25
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of May 3, 2000 by
and between Earthshell Corporation, a Delaware corporation (the "Company") and Acqua
Wellington North American Equities Fund, Ltd., a company organized under the laws of the
Commonwealth of The Bahamas (the "Purchaser").
The parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.1Definitions.
(a)“Call Option” shall have the meaning assigned to such term in Section 6.2(a) hereof.
(b)“Commission” shall have the meaning assigned to such term in Section 2.3 hereof.
(c)“Commission Documents” shall have the meaning assigned to such term in Section 3.1(f) hereof.
(d) “Commission Filings” means the
Company’s Form 10-K for the fiscal year ended December 31, 1999,
Registration Statement on Form S-1 No. 333-33752, and all other filings made by
the Company after the date hereof pursuant to the Securities Exchange Act of
1934.
(e) “Draw Down Amount” means the actual amount
of a Draw Down up to $2,500,000, or such other amount mutually agreed upon by
the Purchaser and the Company.
(f) “Draw Down Discount Price” means 95% of the
VWAP of the Common Stock on any trading day during the Draw Down Pricing Period.
(g) “Draw Down Notice” shall have the meaning assigned to such term in Section 6.1(j) hereof.
(h) “Draw Down Pricing Period” shall mean a
period of twenty (20) consecutive trading days following a Draw Down Notice, or
such other period mutually agreed upon by the Purchaser and the Company.
(i) “Effective Date” shall mean the date the
Registration Statement of the Company covering the Shares being subscribed for
hereby is declared effective.
(j) “Material Adverse Effect” shall mean any
effect on the business, results of operations, prospects, assets or financial
condition of the Company that is material and adverse to the Company and its
subsidiaries, taken as a whole and/or any condition, circumstance, or situation
that would prohibit the Company from entering into and performing any of its
obligations under this Agreement in any material respect.
(k) “Prospectus” as used in this Agreement
means the prospectus in the form included in the Registration Statement, or, if
the prospectus included in the Registration Statement omits information in
reliance on Rule 430A under the Securities Act of 1933, as amended, and the
rules and regulations of the Commission thereunder (collectively, the
“Securities Act”), and such information is included in a prospectus
filed with the Commission pursuant to Rule 424(b) under the Securities Act, the
term “Prospectus” as used in this Agreement means the prospectus in
the form included in the Registration Statement as supplemented by the addition
of the Rule 430A information contained in the prospectus filed with the
Commission pursuant to Rule 424(b).
(l) “Registration Statement” shall mean the
registration statement on Form S-3, Commission File 333-33752 under the
Securities Act, filed with the Securities and Exchange Commission for the
registration of the Shares, as such Registration Statement may be amended from
time to time.
(m) “Settlement Date” shall have the meaning assigned to such term in Section 6.1(d) hereof.
(n) “Shares” shall mean the shares of Common Stock of the Company being purchased
hereunder.
(o) “Threshold Price” is the lowest VWAP at
which the Company will sell Shares during each Draw Down Pricing Period.
(p) “VWAP” shall mean the daily volume weighted average price (based on a trading day
from 9:30 a.m. to 4:00 p.m., eastern time) of the Company on NASDAQ (or any successor
thereto) as reported by Bloomberg Financial LP using the AQR function.
(q) “Weekly Period” shall have the meaning assigned to such term in Section 6.1(c) hereof.
ARTICLE II
Purchase and Sale of Common Stock
Section 2.1 Purchase and Sale of Stock. Subject to
the terms and conditions of this Agreement, the Company shall issue and sell to
the Purchaser and the Purchaser shall purchase from the Company up to
$60,000,000 of the Company’s common stock, $.01 par value per share (the
“Common Stock”), based on Draw Downs of up to $2,500,000 per Draw Down
and Call Options of up to $2,500,000 per Draw Down Pricing Period. In no event
shall the amount of Common Stock purchased by the Purchaser exceed $2,500,000
per Draw Down unless otherwise mutually agreed upon by the Purchaser and the
Company.
Section 2.2 The Shares. The Company has authorized
and has reserved and covenants to continue to reserve, subject to
Section 4.4(b) hereof, free of preemptive rights and other similar
contractual rights of stockholders, a sufficient number of its authorized but
unissued shares of its Common Stock to cover the Shares to be issued in
connection with all Draw Downs.
Section 2.3 Purchase Price and Closing. The
Company agrees to issue and sell to the Purchaser and, in consideration of and
in express reliance upon the representations, warranties, covenants, terms and
conditions of this Agreement, the Purchaser, agrees to purchase that number of
the Shares to be issued in connection with each Draw Down. The closing of the
execution and delivery of this Agreement shall take place at the offices of
Xxxxxx Xxxxxx LLP, The Chrysler Building, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, XX
00000 (the “Closing”) at 10:00 a.m. E.S.T. on (i) May 3, 2000, or
(ii) such other time and place or on such date as the Purchaser and the
Company may agree upon (the “Closing Date”). Each party shall deliver
all documents, instruments and writings required to be delivered by such party
pursuant to this Agreement at or prior to the Closing.
ARTICLE III
Representations and Warranties
Section 3.1 Representation and Warranties of the
Company. The Company hereby makes the following representations and
warranties to the Purchaser:
(a) Organization, Good Standing and Power. The Company is
a corporation duly incorporated, validly existing and in good standing under the
laws of Delaware and has the requisite corporate power to own, lease and operate
its properties and assets and to conduct its business as it is now being
conducted. The Company is duly qualified as a foreign corporation to do business
and is in good standing in every jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification necessary
except for any jurisdiction in which the failure to be so qualified will not
have a Material Adverse Effect.
(b) Authorization; Enforcement. The Company has the
requisite corporate power and authority to enter into and perform this Agreement
and to issue and sell the Shares in accordance with the terms hereof. The
execution, delivery and performance of this Agreement by the Company and the
consummation by it of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action, and, except as
contemplated by Section 4.4(b), no further consent or authorization of the
Company or its Board of Directors or stockholders is required. This Agreement
has been duly executed and delivered by the Company. This Agreement constitutes,
or shall constitute when executed and delivered, a valid and binding obligation
of the Company enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation, conservatorship,
receivership or similar laws relating to, or affecting generally the enforcement
of, creditor’s rights and remedies or by other equitable principles of
general application.
(c) Capitalization. The authorized capital stock of the
Company and the shares thereof issued and outstanding as of the date hereof are
set forth in the Registration Statement or in the Company’s most recent
Form 10-K (the “Form 10-K”). All of the outstanding shares of the
Company’s Common Stock have been duly and validly authorized, and are fully
paid and non-assessable. Except as set forth in this Agreement or as set forth
in the Registration Statement, the Commission Documents or the Commission
Filings, as of the date hereof, no shares of Common Stock are entitled to
preemptive rights or registration rights and there are no outstanding options,
warrants, scrip, rights to subscribe to, call or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company. Furthermore, except as set forth in this
Agreement, the Registration Statement, the Commission Documents or the
Commission Filings, as of the date hereof, there are no contracts, commitments,
understandings, or arrangements by which the Company is or may become bound to
issue additional shares of the capital stock of the Company or options,
securities or rights convertible into shares of capital stock of the Company.
Except for customary transfer restrictions contained in agreements entered into
by the Company in order to sell restricted securities or as described in the
Registration Statement, the Commission Documents or the Commission Filings, as
of the date hereof, the Company is not a party to any agreement granting
registration rights to any person with respect to any of its equity or debt
securities. Except as set forth in the Registration Statement, the Commission
Documents or the Commission Filings, as of the date hereof, the Company is not a
party to, and it has no knowledge of, any agreement restricting the voting or
transfer of any shares of the capital stock of the Company. Except as set forth
in the Registration Statement, the Commission Documents or the Commission
Filings, the offer and sale of all capital stock, convertible securities,
rights, warrants, or options of the Company issued prior to the Closing complied
with all applicable federal and state securities laws, and no stockholder has a
right of rescission or damages with respect thereto which would have a Material
Adverse Effect. The Company has furnished or made available to the Purchaser
true and correct copies of the Company’s Certificate of Incorporation as in
effect on the date hereof (the “Charter”), and the Company’s
Bylaws as in effect on the date hereof (the “Bylaws”).
(d) Issuance of Shares. The Shares to be issued under
this Agreement have been duly authorized by all necessary corporate action and,
when paid for and issued in accordance with the terms hereof, the Shares shall
be validly issued and outstanding, fully paid and non-assessable, and the
Purchaser shall be entitled to all rights accorded to a holder of Common Stock.
(e) No Conflicts. The execution, delivery and performance of this Agreement by the
Company and the consummation by the Company of the transactions contemplated herein do not
(i) violate any provision of the Company’s Charter or
Bylaws, (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, mortgage, deed of trust, indenture, note, bond, license,
lease agreement, instrument or obligation to which the Company is a party, (iii)
create or impose a lien, charge or encumbrance on any property of the Company
under any agreement or any commitment to which the Company is a party or by
which the Company is bound or by which any of its respective properties or
assets are bound, or (iv) result in a violation of any federal, state, local or
foreign statute, rule, regulation, order, judgment or decree (including federal
and state securities laws and regulations) applicable to the Company or any of
its subsidiaries or by which any property or asset of the Company or any of its
subsidiaries are bound or affected, except, in all cases, for such conflicts,
defaults, terminations, amendments, acceleration, cancellations and violations
as would not, individually or in the aggregate, have a Material Adverse Effect.
The Company is not required under federal, state or local law, rule or
regulation to obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement, or
issue and sell the Shares in accordance with the terms hereof (other than any
filings which may be required to be made by the Company with the Commission, or
Nasdaq subsequent to the Closing, and, any registration statement which may be
filed pursuant hereto); provided that, for purpose of the representation made in
this sentence, the Company is assuming and relying upon the accuracy of the
relevant representations and agreements of the Purchaser herein.
(f) Commission Documents, Financial Statements. The
Common Stock of the Company is registered pursuant to Section 12(b) or 12(g) of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
and, except as disclosed in the Registration Statement, or the Commission
Documents or the Commission Filings or on Schedule 3.1(f) attached
hereto, as of the date hereof, the Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the Commission pursuant to the reporting requirements of the Exchange Act,
including material filed pursuant to Section 13(a) or 15(d) of the Exchange Act
(all of the foregoing including filings incorporated by reference therein being
referred to herein as the “Commission Documents”). The Company has
delivered or made available to the Purchaser true and complete copies of the
Commission Documents filed with the Commission since December 31, 1999 and prior
to the Closing Date. The Company has not provided to the Purchaser any
information which, according to applicable law, rule or regulation, should have
been disclosed publicly by the Company but which has not been so disclosed,
other than with respect to the transactions contemplated by this Agreement. The
Form 10-K for the year ended December 31, 1999 complied in all material respects
with the requirements of the Exchange Act and the rules and regulations of the
Commission promulgated thereunder and other federal, state and local laws, rules
and regulations applicable to such documents, and the said Form 10-K 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 Commission
Documents comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission or other
applicable rules and regulations with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles
(“GAAP”) applied on a consistent basis during the periods involved
(except (i) as may be otherwise indicated in such financial statements or the
notes thereto or (ii) in the case of unaudited interim statements, to the extent
they may not include footnotes or may be condensed or summary statements), and
fairly present in all material respects the financial position of the Company
and its subsidiaries as of the dates thereof and the results of operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
(g) Subsidiaries. The Company has no subsidiaries.
(h) No Material Adverse Change. Since December 31, 1999, the Company has not experienced
or suffered any Material Adverse Effect.
(i) No Undisclosed Liabilities. Except as disclosed in
the Commission Documents or the Commission Filings, the Company has no
liabilities, obligations, claims or losses (whether liquidated or unliquidated,
secured or unsecured, absolute, accrued, contingent or otherwise) that would be
required to be disclosed on a balance sheet of the Company or any subsidiary
(including the notes thereto) in conformity with GAAP not disclosed in the
Commission Documents, other than those incurred in the ordinary course of the
Company’s businesses since December 31, 1999 and which, individually or in
the aggregate, do not or would not have a Material Adverse Effect.
(j) No Undisclosed Events or Circumstances. No event or
circumstance has occurred or exists with respect to the Company or its
subsidiaries or their respective businesses, properties, prospects, operations
or financial condition, which, under applicable law, rule or regulation,
requires public disclosure or announcement by the Company but which has not been
so publicly announced or disclosed and which, individually or in the aggregate,
do not or would not have a Material Adverse Effect.
(k) Indebtedness. The Commission Filings set forth as of
December 31, 1999 all outstanding secured and unsecured Indebtedness of the
Company, or for which the Company has commitments. For the purposes of this
Agreement, “Indebtedness” shall mean (a) any liabilities for borrowed
money or amounts owed in excess of $100,000 (other than trade accounts payable
incurred in the ordinary course of business), (b) all guaranties, endorsements
and other contingent obligations in respect of Indebtedness of others, whether
or not the same are or should be reflected in the Company’s balance sheet
(or the notes thereto), except guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business; and (c) the present value of any lease payments in excess of
$100,000 due under leases required to be capitalized in accordance with GAAP.
The Company is not in default with respect to any Indebtedness.
(l) Title to Assets. The Company has good and marketable
title to all of its real and personal property reflected in the Commission
Documents, free of any mortgages, pledges, charges, liens, security interests or
other encumbrances, except for those indicated in the Commission Documents and
the Commission Filings or such that could not reasonably be expected to cause a
Material Adverse Effect. All said leases of the Company and each of its
subsidiaries are valid and subsisting and in full force and effect in all
material respects.
(m) Actions Pending. There is no action, suit, claim,
investigation or proceeding pending or, to the knowledge of the Company,
threatened against the Company which questions the validity of this Agreement or
the transactions contemplated hereby or any action taken or to be taken pursuant
hereto or thereto. Except as set forth in the Commission Documents or the
Commission Filings, there is no action, suit, claim, investigation or proceeding
pending or, to the knowledge of the Company, threatened, against or involving
the Company, or any of its properties or assets which, if adversely determined,
is reasonably likely to result in a Material Adverse Effect.
(n) Compliance with Law. The business of the Company has
been and is presently being conducted in accordance with all applicable federal,
state and local governmental laws, rules, regulations and ordinances, except as
set forth in the Commission Documents or the Commission Filings or such that do
not cause a Material Adverse Effect. The Company has all franchises, permits,
licenses, consents and other governmental or regulatory authorizations and
approvals necessary for the conduct of its business as now being conducted
unless the failure to possess such franchises, permits, licenses, consents and
other governmental or regulatory authorizations and approvals, individually or
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
(o) Certain Fees. No brokers, finders or financial advisory fees or commissions will be
payable by the Company with respect to the transactions contemplated by this Agreement.
(p) Disclosure. To the best of the Company’s
knowledge, neither this Agreement or the Schedules hereto nor any other
documents, certificates or instruments furnished to the Purchaser by or on
behalf of the Company in connection with the transactions contemplated by this
Agreement contain any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements made herein or therein,
in the light of the circumstances under which they were made herein or therein,
not misleading.
(q) Operation of Business. The Company owns or possesses
all patents, trademarks, service marks, trade names, copyrights, licenses and
authorizations as set forth or referred to in the Commission Documents or the
Commission Filings and all rights with respect to the foregoing, which are
necessary for the conduct of its business as now conducted without any conflict
with the rights of others, except to the extent set forth in the Commission
Documents or that a Material Adverse Effect could not reasonably be expected to
result from such conflict.
(r) Environmental Compliance. Except as disclosed in the
Commission Filings, the Company has obtained all material approvals,
authorization, certificates, consents, licenses, orders and permits or other
similar authorizations of all governmental authorities, or from any other
person, that are required under any Environmental Laws. “Environmental
Laws” shall mean all applicable laws relating to the protection of the
environment including, without limitation, all requirements pertaining to
reporting, licensing, permitting, controlling, investigating or remediating
emissions, discharges, releases or threatened releases of hazardous substances,
chemical substances, pollutants, contaminants or toxic substances, materials or
wastes, whether solid, liquid or gaseous in nature, into the air, surface water,
groundwater or land, or relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances,
material or wastes, whether solid, liquid or gaseous in nature. Except for such
instances as would not individually or in the aggregate have a Material Adverse
Effect, to the best of the Company’s knowledge, there are no past or
present events, conditions, circumstances, incidents, actions or omissions
relating to or in any way affecting the Company that violate or could reasonably
be expected to violate any Environmental Law after the Closing or that could
reasonably be expected to give rise to any environmental liability, or otherwise
form the basis of any claim, action, demand, suit, proceeding, hearing, study or
investigation (i) under any Environmental Law, or (ii) based on or related to
the manufacture, processing, distribution, use, treatment, storage (including
without limitation underground storage tanks), disposal, transport or handling,
or the emission, discharge, release or threatened release of any hazardous
substance.
(s) Material Agreements. Except as set forth in the
Commission Documents, the Company is not a party to any written or oral
contract, instrument, agreement, commitment, obligation, plan or arrangement, a
copy of which would be required to be filed with the Commission as an exhibit to
a registration statement on Form S-3 or applicable form (collectively,
“Material Agreements”) if the Company was registering securities under
the Securities Act. The Company has in all material respects performed all the
obligations required to be performed to date under the foregoing agreements, has
received no notice of default and, to the best of the Company’s knowledge
is not in default under any Material Agreement now in effect, the result of
which could reasonably be expected to cause a Material Adverse Effect.
(t) Transactions with Affiliates. Except as set forth in
the Commission Documents or the Commission Filings, there are no loans, leases,
agreements, contracts, royalty agreements, management contracts or arrangements
or other continuing transactions exceeding $100,000 between (a) the Company, or
any of its customers (excluding agreements related to the purchase or lease of
the Company’s products) or suppliers on the one hand, and (b) on the other
hand, any officer, employee, consultant or director of the Company, or any
person who would be covered by Item 404(a) of Regulation S-K or any corporation
or other entity controlled by such officer, employee, consultant, director or
person.
(u) Securities Act of 1933. The Company has complied in
all material respects with all applicable federal and state securities laws in
connection with the offer, issuance and sale of the Shares hereunder.
(i) Each Prospectus included as part of the Registration
Statement as originally filed or as part of any amendment or supplement thereto,
or filed pursuant to Rule 424 under the Securities Act, complied when so filed
in all material respects with the provisions of the Securities Act. The
Commission has not issued any order preventing or suspending the use of any
Prospectus.
(ii) The Company meets the requirements for the use of Form S-3
under the Securities Act. The Registration Statement in the form in which it
became effective and also in such form as it may be when any post-effective
amendment thereto became effective and the Prospectus and any supplement or
amendment thereto when filed with the Commission under Rule 424(b) under the
Securities Act, complied in all material respects with the provisions of the
Securities Act and did not at any such times contain an 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 the case of the Prospectus, in the
light of the circumstances under which they made) not misleading, except that
this representation and warranty does not apply to statements in or omissions
from the Registration Statement or the Prospectus made in reliance upon and in
conformity with information relating to the Purchaser furnished to the Company
in writing by or on behalf of the Purchaser through you expressly for use
therein.
(iii) The Company has not distributed and, prior to the
completion of the distribution of the Shares, will not distribute any offering
material in connection with the offering and sale of the Shares other than the
Registration Statement, the Prospectus or other materials, if any, permitted by
the Securities Act.
(v) Employees. As of the date hereof, the Company has no
collective bargaining arrangements or agreements covering any of its employees,
except as set forth in the Commission Documents or the Commission Filings. As of
the date hereof, except as set forth in the Commission Documents or the
Commission Filings, the Company has no employment contract, agreement regarding
proprietary information, noncompetition agreement, nonsolicitation agreement,
confidentiality agreement, or any other similar contract or restrictive
covenant, relating to the right of any officer, employee or consultant to be
employed or engaged by the Company. As of the date hereof, since December 31,
1999, except as disclosed in the Registration Statement, the Commission
Documents or the Commission Filings, no officer, consultant or key employee of
the Company whose termination, either individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect, has terminated or, to
the knowledge of the Company, has any present intention of terminating his or
her employment or engagement with the Company.
(w) Use of Proceeds. The proceeds from the sale of the Shares will be used by the
Company for general corporate purposes.
(x) Public Utility Holding Company Act and Investment Company
Act Status. The Company is not a “holding company” or a
“public utility company” as such terms are defined in the Public
Utility Holding Company Act of 1935, as amended. The Company is not, and as a
result of and immediately upon Closing will not be, an “investment
company” or a company “controlled” by an “investment
company,” within the meaning of the Investment Company Act of 1940, as
amended.
(y) ERISA. No liability to the Pension Benefit Guaranty
Corporation has been incurred with respect to any Plan by the Company which is
or would have a Material Adverse Effect. The execution and delivery of this
Agreement and the issue and sale of the Shares will not involve any transaction
which is subject to the prohibitions of Section 406 of ERISA or in connection
with which a tax could be imposed pursuant to Section 4975 of the Internal
Revenue Code of 1986, as amended, provided that, if any of the Purchaser, or any
person or entity that owns a beneficial interest in any of the Purchaser, is an
“employee pension benefit plan” (within the meaning of Section 3(2) of
ERISA) with respect to which the Company is a “party in interest”
(within the meaning of Section 3(14) of ERISA), the requirements of Sections
407(d)(5) and 408(e) of ERISA, if applicable, are met. As used in this Section
3.1(y), the term “Plan” shall mean an “employee pension benefit
plan” (as defined in Section 3 of ERISA) which is or has been established
or maintained, or to which contributions are or have been made, by the Company
or by any trade or business, whether or not incorporated, which, together with
the Company, is under common control, as described in Section 414(b) or (c) of
the Code.
(z) Acknowledgment Regarding Purchaser’s Purchase of
Shares. The Company acknowledges and agrees that the Purchaser is acting
solely in the capacity of arm’s length purchaser with respect to this
Agreement and the transactions contemplated hereunder. The Company further
acknowledges that the Purchaser is not acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to this
Agreement and the transactions contemplated hereunder and any advice given by
the Purchaser or any of its representatives or agents in connection with this
Agreement and the transactions contemplated hereunder is merely incidental to
the Purchaser’s purchase of the Shares.
Section 3.2 Representation and Warranties of the
Purchaser. The Purchaser hereby makes the following representations and
warranties to the Company:
(a) Organization and Standing of the Purchaser. The
Purchaser is a limited liability company duly organized, validly existing and in
good standing under the laws of the Commonwealth of the Bahamas.
(b) Authorization and Power. The Purchaser has the
requisite corporate power and authority to enter into and perform this Agreement
and to purchase the Shares in accordance with the terms hereof. The execution,
delivery and performance of this Agreement by Purchaser 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
Purchaser, its Board of Directors or stockholders is required. This Agreement
constitutes, or shall constitute when executed and delivered, a valid and
binding obligation of the Purchaser enforceable against the Purchaser in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership, or similar laws relating to, or affecting
generally the enforcement of, creditor’s rights and remedies or by other
equitable principles of general application.
(c) No Conflicts. The execution, delivery and performance
of this Agreement and the consummation by the Purchaser of the transactions
contemplated hereby and thereby or relating hereto do not and will not (i)
result in a violation of such Purchaser’s charter documents or bylaws or
(ii) conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of any material
agreement, mortgage, deed of trust, indenture, note, bond, license, lease
agreement, instrument or obligation to which the Purchaser is a party,
(iii) create or impose or lien, charge or encumbrance on any property of
the Purchaser under any agreement or any commitment to which the Purchaser is
party or by which the Purchaser is on or by which any of its respective
properties or assets are bound or (iv) result in a violation of any law,
rule, or regulation, or any order, judgment or decree of any court or
governmental agency applicable to the Purchaser or its properties, except for
such conflicts, defaults and violations as would not, individually or in the
aggregate, prohibit or otherwise interfere with the ability of the Purchaser to
enter into and perform its obligations under this Agreement in any material
respect. The Purchaser is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its obligations
under this Agreement or to purchase the Shares in accordance with the terms
hereof, provided that for purposes of the representation made in this sentence,
the Purchaser is assuming and relying upon the accuracy of the relevant
representations and agreements of the Company herein.
(d) Information. The Purchaser and its advisors, if any,
have been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Shares which have been requested by the Purchaser. The Purchaser and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company. The Purchaser has sought such accounting, legal and tax advice as it
has considered necessary to make an informed investment decision with respect to
its acquisition of the Shares. Purchaser understands that it (and not the
Company) shall be responsible for its own tax liabilities that may arise as a
result of this investment or the transactions contemplated by this Agreement.
(e) No Shorting. The Purchaser has the right to sell
shares of the Company’s Common Stock equal in number to the number of the
Shares to be purchased pursuant to this Agreement during the Draw Down Pricing
Period. The Purchaser covenants, however, that prior to and during the term of
the Draw Down Pricing Period, neither the Purchaser nor any of its affiliates
nor any entity managed by the Purchaser will ever be in a net short position
with respect to shares of the Common Stock of the Company in any accounts
directly or indirectly managed by the Purchaser or any affiliate of the
Purchaser or any entity managed by the Purchaser. The Purchaser shall not sell
shares of the Company’s Common Stock in block lots or through any
derivative transactions.
ARTICLE IV
Covenants
The Company covenants with the Purchaser as follows, which covenants are for the
benefit of the Purchaser and its permitted assignees (as defined herein).
Section 4.1 Securities. The Company shall notify
the Commission and NASD, if applicable, in accordance with their rules and
regulations, of the transactions contemplated by this Agreement, and shall take
all other necessary action and proceedings as may be required and permitted by
applicable law, rule and regulation, for the legal and valid issuance of the
Shares to the Purchaser or subsequent holders.
Section 4.2 Registration and Listing. The Company
will take all action necessary to cause its Common Stock to continue to be
registered under Sections 12(b) or 12(g) of the Exchange Act, will comply in all
respects with its reporting and filing obligations under the Exchange Act, and
will not take any action or file any document (whether or not permitted by the
Securities Act or the rules promulgated thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing obligations
under the Exchange Act or Securities Act, except as permitted herein. The
Company will take all action necessary to continue the listing or trading of its
Common Stock and the listing of the Shares purchased by Purchaser hereunder on
the NASDAQ or any relevant market or system, if applicable, and will comply in
all respects with the Company’s reporting, filing and other obligations
under the bylaws or rules of the NASD or any relevant market or system.
Section 4.3 Registration Statement. Before the
Purchaser shall be obligated to accept a Draw Down request from the Company, the
Company shall have caused a sufficient number of shares of Common Stock to be
registered to cover the Shares to be issued in connection with this Agreement.
Section 4.4 Compliance with Laws.
(a) The Company shall comply with all applicable laws, rules,
regulations and orders, noncompliance with which could have a Material Adverse
Effect.
(b) The Company will not be obligated to issue and the Purchaser
will not be obligated to purchase any shares of the Company’s Common Stock
which would result in the issuance under this Agreement of more than nineteen
and nine-tenths percent (19.9%) of the issued and outstanding shares of the
Company’s Common Stock.
Section 4.5 Keeping of Records and Books of
Account. The Company shall keep adequate records and books of account, in
which complete entries will be made in accordance with GAAP consistently
applied, reflecting all financial transactions of the Company and its
subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
Section 4.6 Reporting Requirements. Upon request,
the Company shall furnish the following to the Purchaser so long as such
Purchaser shall be obligated hereunder to purchase Shares:
(a) Quarterly Reports filed with the Commission on Form 10-Q as
soon as available, and in any event within 45 days after the end of each of the
first three fiscal quarters of the Company; and
(b) Annual Reports filed with the Commission on Form 10-K as
soon as available, and in any event within 90 days after the end of each fiscal
year of the Company.
Section 4.7 Other Agreements. The Company is
restricted from entering in any other financing agreement (including, without
limitation, the issuance of Common Stock or securities convertible into Common
Stock) (“Other Financing”) without the prior consent of the Purchaser
or without terminating its agreement with the Purchaser, except that the Company
may (i) enter into a loan, credit or lease facility with a bank or financing
institution, (ii) establish an employee stock option plan and/or (iii) issue
shares of Common Stock in connection with the Company’s current option
plans or stock purchase plans, currently outstanding warrants or options,
acquisition of products, licenses or other assets and strategic partnership or
joint ventures (the primary purpose of which is not to raise equity) (a
“Permitted Transaction”). If the Purchaser consents to the Company
entering into an Other Financing, the Purchaser shall have the option, which
option shall be exercised within ten (10) calendar days of its consent, to
purchase all or a portion of the Other Financing on the same, absolute terms and
conditions contemplated therein. If the Purchaser does not exercise its purchase
option, the Company shall have the right to close the Other Financing on the
scheduled closing date with a third party; provided that all of the terms
and conditions of such closing are the same as those provided to the Purchaser.
Section 4.8 Effective Registration Statement. If,
at the time this Agreement is executed and delivered, it is necessary for the
Registration Statement or a post-effective amendment thereto to be declared
effective before the offering of the Shares may commence, the Company will
endeavor to cause the Registration Statement or such post-effective amendment to
become effective as soon as reasonably practicable and will advise the Purchaser
promptly and, if requested by the Purchaser, will confirm such advice in
writing, when it receives notice that the Registration Statement or such
post-effective amendment has become effective.
Section 4.9 No Stop Orders. The Company will
advise the Purchaser promptly and, if requested by the Purchaser, will confirm
such advice in writing: (i) of its receipt of notice of any request by the
Commission for amendment of or a supplement to the Registration Statement, any
Prospectus or for additional information; (ii) of its receipt of notice of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the suspension of qualification of the Shares for
offering or sale in any jurisdiction or the initiation of any proceeding for
such purpose; and (iii) of its becoming aware of the happening of any event,
which makes any statement of a material fact made in the Registration Statement
or the Prospectus (as then amended or supplemented) untrue or which requires the
making of any additions to or changes in the Registration Statement or the
Prospectus (as then amended or supplemented) in order to state a material fact
required by the Securities Act or the regulations thereunder to be stated
therein or necessary in order to make the statements therein not misleading, or
of the necessity to amend or supplement the Prospectus (as then amended or
supplemented) to comply with the Securities Act or any other law. If at any time
the Commission shall issue any stop order suspending the effectiveness of the
Registration Statement, the Company will make commercially reasonable efforts to
obtain the withdrawal of such order at the earliest possible time.
Section 4.10 Amendments to the Registration
Statement. The Company will not (i) file any amendment to the Registration
Statement or make any amendment or supplement to the Prospectus of which the
Purchaser shall not previously have been advised or to which the Purchaser shall
reasonably object after being so advised or (ii) so long as, in the reasonable
opinion of counsel for the Purchaser, a Prospectus is required to be delivered
in connection with sales by any Purchaser or dealer, file any information,
documents or reports pursuant to the Exchange Act without delivering a copy of
such information, documents or reports to the Purchaser, promptly following such
filing.
Section 4.11 Prospectus Delivery. The Company
shall file a prospectus supplement to its Registration Statement on the first
business day immediately following the end of each Weekly Period, and will
deliver to the Purchaser, without charge, in such quantities as reasonably
requested by the Purchaser, copies of each form of Prospectus and prospectus
supplement on each Settlement Date. The Company consents to the use of the
Prospectus (and of any amendment or supplement thereto) in accordance with the
provisions of the Securities Act and with the securities or Blue Sky laws of the
jurisdictions in which the Shares may be sold by the Purchaser, in connection
with the offering and sale of the Shares and for such period of time thereafter
as the Prospectus is required by the Securities Act to be delivered in
connection with sales of the Shares. If during such period of time any event
shall occur that in the judgment of the Company or in the opinion of counsel for
the Purchaser is required to be set forth in the Prospectus (as then amended or
supplemented) or should be set forth therein in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or if it is necessary to supplement or amend the Prospectus to
comply with the Securities Act or any other law, the Company will forthwith
prepare and, subject to the provisions of Section 4.10 above, file with the
Commission an appropriate supplement or amendment thereto, and will
expeditiously furnish to the Purchaser a reasonable number of copies thereof.
ARTICLE V
Conditions to Closing, Draw Downs and Call Options
Section 5.1 Conditions Precedent to the Obligation of
the Company to Sell the Shares. The obligation hereunder of the Company to
issue and sell the Shares to the Purchaser is subject to the satisfaction or
waiver, at or before each Draw Down, of each of the conditions set forth below.
These conditions are for the Company’s sole benefit and may be waived by
the Company at any time in its sole discretion.
(a) Accuracy of the Purchaser’s Representations and
Warranties. The representations and warranties of the Purchaser shall be
true and correct in all material respects as of the date when made and as of
each Draw Down request as though made at that time, except for representations
and warranties that are expressly made as of a particular date.
(b) Effective Registration Statement. The Registration
Statement registering the Shares shall have been declared effective by the
Commission and shall have been amended or supplemented, as required, to disclose
the sale of the Shares prior to each Settlement Date, as applicable.
(c) Performance by the Purchaser. The Purchaser shall
have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the Purchaser at or prior to each Settlement Date.
(d) No Injunction. No statute, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement.
(e) No Suspension, Etc. Trading in the Company’s
Common Stock shall not have been suspended by the Commission or the NASD (except
for any suspension of trading of limited duration agreed to by the Company,
which suspension shall be terminated prior to Closing), and, at any time prior
to each Draw Down request, trading in securities generally as reported on NASDAQ
shall not have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by the American Stock
Exchange, or on the New York Stock Exchange, nor shall a banking moratorium have
been declared either by the United States or New York State authorities, nor
shall there have occurred any material outbreak or escalation of hostilities or
other national or international calamity or crisis of such magnitude in its
effect on, or any material adverse change in any financial market which, in each
case, in the judgment of the Company, makes it impracticable or inadvisable to
issue the Shares.
(f) No Proceedings or Litigation. No action, suit or
proceeding before any arbitrator or any governmental authority shall have been
commenced, and no investigation by any governmental authority shall have been
threatened, against the Company, or any of the officers, directors or affiliates
of the Company seeking to restrain, prevent or change the transactions
contemplated by this Agreement, or seeking damages in connection with such
transactions.
Section 5.2 Conditions Precedent to the Obligation of
the Purchaser to Close. The obligation hereunder of the Purchaser to enter
this Agreement is subject to the satisfaction or waiver, at or before the
Closing, of each of the conditions set forth below. These conditions are for the
Purchaser’s sole benefit and may be waived by the Purchaser at any time in
its sole discretion.
(a) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing.
(b) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement.
(c) No Proceedings or Litigation. No action, suit or
proceeding before any arbitrator or any governmental authority shall have been
commenced, and no investigation by any governmental authority shall have been
threatened, against the Company, or any of the officers, directors or affiliates
of the Company seeking to restrain, prevent or change the transactions
contemplated by this Agreement, or seeking damages in connection with such
transactions.
(d) Opinion of Counsel, Etc. At the Closing, the
Purchaser shall have received an opinion of counsel to the Company, dated the
date of Closing, in the form of Exhibit A hereto, and such other certificates
and documents as the Purchaser or its counsel shall reasonably require incident
to the Closing.
Section 5.3 Conditions Precedent to the Obligation of
the Purchaser to Accept a Draw Down or Call Option and Purchase the Shares.
The obligation hereunder of the Purchaser to accept a Draw Down request and to
acquire and pay for the Shares is subject to the satisfaction or waiver, at or
before each Draw Down or Call Option request (the “Draw Down Exercise
Date”), of each of the conditions set forth below. The conditions are for
the Purchaser’s sole benefit and may be waived by the Purchaser at any time
in its sole discretion.
(a) Accuracy of the Company’s Representations and
Warranties. Each of the representations and warranties of the Company shall
be true and correct in all material respects as of the date when made and as of
the Draw Down Exercise Date as though made at that time, except for
representations and warranties that speak as of a particular date.
(b) Effective Registration Statement. The Registration
Statement registering the Shares shall have been declared effective by the
Commission and shall have been amended or supplemented, as required, to disclose
the sale of the Shares prior to the Closing Date or each Settlement Date, as
applicable.
(c) No Suspension. Trading in the Company’s Common
Stock shall not have been suspended by the Commission or the NASD (except for
any suspension of trading of limited duration agreed to by the Company, which
suspension shall be terminated prior to each Draw Down request), and, at any
time prior to such request, trading in securities generally as reported by the
American Stock Exchange shall not have been suspended or limited, or minimum
prices shall not have been established on securities whose trades are reported
by the American Stock Exchange.
(d) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Draw Down Exercise Date and
the Settlement Date and shall have delivered the Compliance Certificate
substantially in the form attached hereto as Exhibit B.
(e) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement.
(f) No Proceedings or Litigation. No action, suit or
proceeding before any arbitrator or any governmental authority shall have been
commenced, and no investigation by any governmental authority shall have been
threatened, against the Company, or any of the officers, directors or affiliates
of the Company seeking to restrain, prevent or change the transactions
contemplated by this Agreement, or seeking damages in connection with such
transactions.
(g) Material Adverse Effec. No Material Adverse Effect shall have occurred.
ARTICLE VI
Draw Down Terms; Call Option
Section 6.1 Draw Down Terms. Subject to the satisfaction of the conditions set forth in
this Agreement, the parties agree as follows:
(a) The Company, may, in its sole discretion, issue a Draw Down
Notice with respect to a draw down (a “Draw Down”) of up to
$2,500,000 during each Draw Down Pricing Period; provided, that the Company may,
in its sole discretion, issue a Draw Down Notice with respect to any Draw Down
Amount at any Threshold Price or any Draw Down Discount Price pursuant to terms
mutually agreed upon by the Purchaser and the Company, which Draw Down the
Purchaser will be obligated to accept. Prior to issuing any Draw Down Notice,
the Company shall have Shares registered under the Registration Statement which
are valued at an amount equal to or in excess of $2,500,000.
(b) The number of Shares to be issued in connection with each
Draw Down shall be equal to the sum of the quotients (for each trading day of
the Draw Down Pricing Period for which the VWAP equals or exceeds the Threshold
Price) of (x) 1/20th (or such other fraction based on the length of the Draw
Down Pricing Period) of the Draw Down Amount divided by (y) the applicable Draw
Down Discount Price.
(c) Only one Draw Down shall be allowed in each Draw Down
Pricing Period. Each Draw Down Pricing Period shall be divided into four (4)
weekly periods, each consisting of five (5) trading days (each a “Weekly
Period”), unless otherwise mutually agreed upon by the Purchaser and
the Company
(d) The number of Shares purchased by the Purchaser with respect
to each Draw Down shall be determined on a daily basis during each Draw Down
Pricing Period and settled on the second business day following the end of a
Weekly Period (the “Settlement Date”).
(e) There shall be a minimum of five (5) trading days between
Draw Downs, unless otherwise mutually agreed upon between the Purchaser and the
Company.
(f) There shall be a maximum of twelve (12) monthly Draw Downs during the term of this
Agreement.
(g) At the end of each Draw Down Pricing Period, the
Purchaser’s total Draw Down commitment shall be reduced by $2,500,000
regardless of the Draw Down Amount requested by the Company.
(h) Each Draw Down will expire on the last trading day of each Draw Down Pricing Period.
(i) If the VWAP on a given trading day is less than the
Threshold Price, then the total amount of the Draw Down for the relevant Draw
Down Pricing Period will be reduced by 1/20th (or such other fraction based on
the length of the Draw Down Pricing Period). Notwithstanding anything in the
foregoing to the contrary, for each trading day during the Weekly Period that
the VWAP is less than the Threshold Price, the Purchaser may elect in its sole
discretion to purchase Shares at 95% of the Threshold Price at the end of the
Draw Down Pricing Period. At no time shall the Threshold Price be set below
$3.00 unless mutually agreed upon by the Company and the Purchaser. If trading
in the Company’s Common Stock is suspended for any reason for more than
three (3) hours in any trading day, at the Purchaser’s option, the price of
the Common Stock shall be deemed to be below the Threshold Price for that
trading day and the Draw Down for the relevant Draw Down Pricing Period shall be
reduced by 1/20th (or such other fraction based on the length of the Draw Down
Pricing Period).
(j) The Company must inform the Purchaser via facsimile
transmission as to the Draw Down Amount the Company wishes to exercise before
commencement of trading on the first trading day of the Draw Down Pricing Period
(the “Draw Down Notice”), substantially in the form attached
hereto as Exhibit C. In addition to the Draw Down Amount, the Company shall set
the Threshold Price with each Draw Down Notice and shall designate the first
trading day of the Draw Down Pricing Period. At no time shall the Purchaser be
required to purchase more than $2,500,000 of the Company’s Common Stock for
a given Draw Down Pricing Period so that if the Company chooses not to exercise
the Draw Down in a given Draw Down Pricing Period the Purchaser is not obligated
to purchase more than $2,500,000 in a subsequent Draw Down Pricing Period.
(k) On each Settlement Date, the Company shall deliver the
Shares purchased by the Purchaser to the Purchaser or to The Depositary Trust
Company (“DTC”) on the Purchaser’s behalf via DWAC during
the Draw Down Pricing Period, and upon receipt of the Shares, the Purchaser
shall cause payment therefor to be made to the account designated by the Company
by wire transfer of immediately available funds provided that the Shares are
received no later than 1:00 p.m., eastern time or next day available funds if
the Shares are received thereafter.
(l) If during any Draw Down Pricing Period, the Company shall
issue any shares of Common Stock (other than shares of Common Stock issued to
corporate partners or in connection with a joint venture), the Purchaser may in
its sole discretion (i) purchase the Draw Down Amount of shares of Common Stock
at the price at which the Company issued shares of Common Stock during such Draw
Down Pricing Period, (ii) purchase the Draw Down Amount of shares of Common
Stock at the applicable Draw Down Discount Price, or (iii) elect not to purchase
any Shares during such Draw Down Pricing Period. The Purchaser shall notify the
Company of its election on the business day preceding the Settlement Date.
(m) If on the Settlement Date, the Company fails to deliver the
Shares to be purchased by the Purchaser, and such failure continues for ten (10)
trading days, the Company shall pay, in cash or restricted shares of Common
Stock, at the option of the Purchaser, as liquidated damages and not as a
penalty to the Purchaser an amount equal to two percent (2%) of the Draw Down
Amount for the initial thirty (30) days and each additional thirty (30) day
period thereafter until such failure has been cured, which shall be pro rated
for such periods less than thirty (30) days (the “Periodic Amount”).
Cash payments to be made pursuant to this clause (l) shall be due and payable
immediately upon demand in immediately available cash funds. Certificates
evidencing the restricted shares of Common Stock shall be delivered immediately
upon demand. The parties agree that the Periodic Amount represents a reasonable
estimate on the part of the parties, as of the date of this Agreement, of the
amount of damages that may be incurred by the Purchaser if the Company fails to
deliver the Shares on the Settlement Date. If the Purchaser elects to receive
shares of Common Stock instead of cash, the Purchaser shall have the right to
demand registration once within twelve (12) months of the date of issuance of
such shares of Common Stock and piggyback registration rights if the Company
files a separate registration statement.
Section 6.2 Purchaser's Call Option.
(a) The Purchaser shall have the right to exercise multiple call
options of up to $2,500,000 (a “Call Option”) during each Draw
Down Pricing Period; provided, that no Call Option exceed $1,125,000 on
any trading day during a Draw Down Pricing Period unless otherwise mutually
agreed upon by the Purchaser and the Company. For each trading day during a Draw
Down Pricing Period, the Purchaser may exercise a Call Option by providing
notice to the Company of the exercise of the Call Option (the “Call Option
Notice”). The total amount of Call Options exercised by the Purchaser shall
not exceed $30,000,000 in the aggregate.
(b) The number of shares of Common Stock to be issued in
connection with each Call Option shall equal the quotient of the Call Option
Amount and 95% of the greater of (i) the VWAP for the Common Stock on the day
the Purchaser issues its Call Option Notice and (ii) the Threshold Price.
(c) Each Call Option exercised shall be settled on a weekly basis on the applicable
Settlement Date.
(d) The Threshold Price designated by the Company in its Draw
Down Notice shall apply to each Call Option.
(e) For each Call Option that the Purchaser exercises pursuant
to this Section, the Purchaser must issue via facsimile a Call Option Notice to
the Company no later than 5:00 p.m. (California time) on the day such Call
Option is exercised. If the Purchaser does not exercise a Call Option by 5:00
p.m. (California time) on the last day of the applicable Draw Down Pricing
Period, the Purchaser’s Call Options with respect to that Draw Down Pricing
Period shall terminate.
ARTICLE VII
Termination
Section 7.1 Termination by Mutual Consent. The
term of this Agreement shall be fifteen (15) months from the Effective Date.
This Agreement may be terminated at any time by mutual consent of the parties.
Section 7.2 Other Termination. The Purchaser may
terminate this Agreement upon (x) one (1) day’s notice if the Company
issues convertible debentures or enters an equity financing facility as set
forth in Section 4.7 without the Purchaser’s prior written consent, or
(y) one (1) day’s notice if an event resulting in a Material Adverse Effect
has occurred.
Section 7.3 Effect of Termination. In the event of
termination by the Company or the Purchaser, written notice thereof shall
forthwith be given to the other party and the transactions contemplated by this
Agreement shall be terminated without further action by either party. If this
Agreement is terminated as provided in Section 7.1 or 7.2 herein, this Agreement
shall become void and of no further force and effect, except as provided in
Section 9.9. Nothing in this Section 7.3 shall be deemed to release the Company
or the Purchaser from any liability for any breach under this Agreement, or to
impair the rights of the Company and the Purchaser to compel specific
performance by the other party of its obligations under this Agreement.
ARTICLE VIII
Indemnification
Section 8.1 General Indemnity.
(a) Indemnification by the Company. The Company will
indemnify and hold harmless the Purchaser and each person, if any, who controls
the Purchaser within the meaning of Section 15 of the Securities Act or Section
20(a) of the Exchange Act from and against any losses, claims, damages,
liabilities and expenses (including reasonable costs of defense and
investigation and all attorney’s fees) to which the Purchaser and each
person, if any, who controls the Purchaser may become subject, under the
Securities Act or otherwise, insofar as such losses, claims, damages,
liabilities and expenses (or actions in respect thereof) arise out of or are
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained, or incorporated by reference, in the Registration Statement
relating to Common Stock being sold to the Purchaser (including the any
prospectus supplement filed in connection with the transactions contemplated
hereunder (the “Prospectus Supplement”) which are a part of it), or
any amendment or supplement to it, or (ii) the omission or alleged omission to
state in that Registration Statement or any document incorporated by reference
in the Registration Statement, a material fact required to be stated therein or
necessary to make the statements therein not misleading.
The Company will reimburse the Purchaser and each such controlling person promptly
upon demand for any legal or other costs or expenses reasonably incurred by or the
controlling person in investigating, defending against, or preparing to defend against any
such claim, action, suit or proceeding, except that the Company will not be liable to the
extent a claim or action which results in a loss, claim, damage, liability or expense arises
out of, or is based upon, an untrue statement, alleged untrue statement, omission or alleged
omission, included in any Prospectus or Prospectus Supplement or any amendment or supplement
to the Prospectus or Prospectus Supplement in reliance upon, and in conformity with, written
information furnished by the Purchase to the Company for inclusion in the Prospectus or
Prospectus Supplement.
(b) Indemnification by the Purchaser. The Purchaser will
indemnify and hold harmless the Company, each of its directors and officers, and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act or Section 20(a) of the Exchange Act from and against any
expenses (including reasonable costs of defense and investigation and all
attorneys fees) to which the Company and each director, officer and person, if
any, who controls the Company may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages, liabilities and expenses (or
actions in respect thereof) arise out of or are based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained in any
Prospectus or Prospectus Supplement or any amendment or supplement to it or (ii)
the omission or alleged omission to state in any Prospectus or Prospectus
Supplement or any amendment or supplement to it a material fact required to be
stated therein or necessary to make the statements therein not misleading, to
the extent, but only to the extent, the untrue statement, alleged untrue
statement, omission or alleged omission was made in reliance upon, and in
conformity with, written information furnished by the Purchaser to the Company
for inclusion in the Prospectus or Prospectus Supplement or an amendment or
supplement to it, and the Purchaser will reimburse the Company and each such
director, officer or controlling person promptly upon demand for any legal or
other costs or expenses reasonably incurred by the Company or the other person
in investigating, defending against, or preparing to defend against any such
claim, action, suit or proceeding.
Section 8.2 Indemnification Procedures. Promptly
after a person receives notice of a claim or the commencement of an action for
which the person intends to seek indemnification under paragraph (a) or (b) of
Section 8.1, the person will notify the indemnifying party in writing of the
claim or commencement of the action, suit or proceeding, but failure to notify
the indemnifying party will not relieve the indemnifying party from liability
under paragraph (a) or (b) of Section 8.1, except to the extent it has been
materially prejudiced by the failure to give notice. The indemnifying party will
be entitled to participate in the defense of any claim, action, suit or
proceeding as to which indemnification is being sought, and if the indemnifying
party acknowledges in writing the obligation to indemnify the party against whom
the claim or action is brought, the indemnifying party may (but will not be
required to) assume the defense against the claim, action, suit or proceeding
with counsel satisfactory to it. After an indemnifying party notifies an
indemnified party that the indemnifying party wishes to assume the defense of a
claim, action, suit or proceeding the indemnifying party will not be liable for
any legal or other expenses incurred by the indemnified party in connection with
the defense against the claim, action, suit or proceeding except that if, in the
opinion of counsel to the indemnifying party, one or more of the indemnified
parties should be separately represented in connection with a claim, action,
suit or proceeding the indemnifying party will pay the reasonable fees and
expenses of one separate counsel for the indemnified parties. Each indemnified
party, as a condition to receiving indemnification as provided in Paragraph (a)
or (b) or Section 8.1, will cooperate in all reasonable respects with the
indemnifying party in the defense of any action or claim as to which
indemnification is sought. No indemnifying party will be liable for any
settlement of any action effected without its prior written consent. No
indemnifying party will, without the prior written consent of the indemnified
party, effect any settlement of a pending or threatened action with respect
which an indemnified party is, or is informed that it may be, made a party and
for which it would be entitled to indemnification, unless the settlement
includes an unconditional release of the indemnified party from all liability
and claims which are the subject matter of the pending or threatened action.
If for any reason the indemnification provided for in this Agreement is not available
to, or is not sufficient to hold harmless, an indemnified party in respect of any loss or
liability referred to in paragraph (a) or (b) of Section 8.1, each indemnifying party will,
in lieu of indemnifying the indemnified party, contribute to the amount paid or payable by
the indemnified party, contribute to the amount paid or payable by the indemnified party as
a result of the loss or liability, (i) in the proportion which is appropriate to reflect the
relative benefits received by the indemnifying party on the one hand and by the indemnified
party on the other from the sale of stock which is the subject of the claim, action, suit or
proceeding which resulted in the loss or liability or (ii) if that allocation is not
permitted by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits of the sale of stock, but also the relative fault of the indemnifying
party and the indemnified party with respect to the statements or omissions which are the
subject of the claim, action, suit or proceeding that resulted in the loss or liability, as
well as any other relevant equitable considerations.
ARTICLE IX
Miscellaneous
Section 9.1 Fees and Expenses.
(a) The Company shall pay all reasonable fees and expenses
related to the transactions contemplated by this Agreement; provided,
that the Company shall pay, at the Closing, all reasonable attorneys fees and
expenses, inclusive of disbursements and out-of-pocket expenses, incurred by the
Purchaser up to $50,000 in connection with the preparation, negotiation,
execution and delivery of this Agreement. In addition, the Company shall pay all
reasonable fees and expenses incurred by the Purchaser in connection with any
amendments, modifications or waivers of this Agreement or incurred in connection
with the enforcement of this Agreement, including, without limitation, all
reasonable attorneys fees and expenses. The Company shall pay all stamp or other
similar taxes and duties levied in connection with issuance of the Shares
pursuant hereto.
(b) If on the seventh (7) month anniversary of this Agreement,
the Company has not requested Draw Downs in an aggregate amount of $10,000,000,
the Company shall pay the Purchaser a fee of either (x) an amount equal to
$300,000, in cash, or (ii) issue warrants to purchase 300,000 Shares at an
exercise price of 110% of the VWAP of the Common Stock on the date of execution
of this Agreement. If the Company elects to pay the fee in shares of Common
Stock instead of cash, the Purchaser shall have the right to demand registration
once within twelve (12) months of the date of issuance of such warrants and
piggyback registration rights if the Company files a separate registration
statement.
Section 9.2 Specific Enforcement, Consent to Jurisdiction.
(a) The Company and the Purchaser acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof or
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.
(b) Each of the Company and the Purchaser (i) hereby irrevocably
submits to the jurisdiction of the United States District Court and other courts
of the United States sitting in the State of Delaware for the purposes of any
suit, action or proceeding arising out of or relating to this Agreement and (ii)
hereby waives, and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper. Each of the Company and
the Purchaser consents to process being served in any such suit, action or
proceeding by mailing a copy thereof 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 in this
Section shall affect or limit any right to serve process in any other manner
permitted by law.
Section 9.3 Entire Agreement; Amendment. This
Agreement contains the entire understanding of the parties with respect to the
matters covered hereby and, except as specifically set forth herein, neither the
Company nor the Purchaser makes any representations, warranty, covenant or
undertaking with respect to such matters. No provision of this Agreement may be
waived or amended other than by a written instrument signed by the party against
whom enforcement of any such amendment or waiver is sought.
Section 9.4 Notices. Any notice, demand, request,
waiver or other communication required or permitted to be given hereunder shall
be in writing and shall be effective (a) upon hand delivery, by telex (with
correct answer back received), telecopy or facsimile at the address or number
designated below (if delivered on a business day during normal business hours
where such notice is to be received), or the first business day following such
delivery (if delivered other than on a business day during normal business hours
where such notice is to be received) or (b) on the second business day following
the date of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be:
If to the Company: Earthshell Corporation
000 Xxxxxxxxx
Xxxxx Xxxxxxx, XX 00000
Tel. No.: (000) 000-0000
Fax No.: (000) 000-0000
Attention: Chairman of the Board
With copies to: Xxxxxx, Xxxx and Xxxxxxxx
0000 Xxxxxxx Xxxx Xxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Tel. No: (000) 000-0000
Fax No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxxx
If to the Purchaser: Acqua Wellington North American
Equities Fund, Ltd.
c/o MeesPierson Fund Services (Bahamas) Ltd.
Xxxxxxxx Xxxxxxxx Centre
East Bay Street, P. O. Box SS-6238
Nassau, Bahamas
Tel. No: (000) 000-0000
Fax No.: (000) 000-0000
Attention: Xxxxxxx X.X. Xxxxx Xxxxxx
With copies to: Xxxxxx Xxxxxx LLP
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Tel. No: (000) 000-0000
Fax No: (000)000-0000
Attention: Xxxxxxxxxxx X. Xxxxxxx
Any party hereto may from time to time change its address for notices by giving at
least ten (10) days written notice of such changed address to the other party hereto.
Section 9.5 Waivers. No waiver by either party of
any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provisions, condition or requirement hereof, nor shall any delay or
omission of any party to exercise any right hereunder in any manner impair the
exercise of any such right accruing to it thereafter.
Section 9.6 Headings. The article, section and
subsection headings in this Agreement are for convenience only and shall not
constitute a part of this Agreement for any other purpose and shall not be
deemed to limit or affect any of the provisions hereof.
Section 9.7 Successors and Assigns. The Purchaser
may not assign this Agreement to any person without the prior consent of the
Company, which consent will not be unreasonably withheld. This Agreement shall
be binding upon and inure to the benefit of the parties and their successors and
assigns. The parties hereto may not amend this Agreement or any rights or
obligations hereunder without the prior written consent of the Company and each
Purchaser to be affected by the amendment. After Closing, the assignment by a
party to this Agreement of any rights hereunder shall not affect the obligations
of such party under this Agreement.
Section 9.8 Governing Law. This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
New York, without giving effect to the choice of law provisions.
Section 9.9 Survival. The representations and
warranties of the Company and the Purchaser contained in Article III and the
covenants contained in Article IV shall survive the execution and delivery
hereof and the Closing until the termination of this Agreement, and the
agreements and covenants set forth in Article VIII of this Agreement shall
survive the execution and delivery hereof and the Closing hereunder.
Section 9.10 Counterparts. This Agreement may be
executed in any number of counterparts, all of which taken together shall
constitute one and the same instrument and shall become effective when
counterparts have been signed by each party and delivered to the other parties
hereto, it being understood that all parties need not sign the same counterpart.
In the event any signature is delivered by facsimile transmission, the party
using such means of delivery shall cause four additional executed signature
pages to be physically delivered to the other parties within five days of the
execution and delivery hereof.
Section 9.11 Publicity. Prior to the Closing,
neither the Company nor the Purchaser shall issue any press release or otherwise
make any public statement or announcement with respect to this Agreement or the
transactions contemplated hereby or the existence of this Agreement. In the
event the Company is required by law, based upon an opinion of the
Company’s counsel, that the Company must issue a press release or otherwise
make a public statement or announcement with respect to this Agreement prior to
the Closing, the Company shall consult with the Purchaser on the form and
substance of such press release. After the Closing, the Company may issue a
press release or otherwise make a public statement or announcement with respect
to this Agreement or the transactions contemplated hereby or the existence of
this Agreement; provided, that prior to issuing any such press release,
making any such public statement or announcement, the Company obtains the prior
consent of the Purchaser, which consent shall not be unreasonably withheld or
delayed.
Section 9.12 Severability. The provisions of this
Agreement are severable and, in the event that any court of competent
jurisdiction shall determine that any one or more of the provisions or part of
the provisions contained in this Agreement shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement, and this Agreement shall be reformed and construed as if such
invalid or illegal or unenforceable provision, or part of such provision, had
never been contained herein, so that such provisions would be valid, legal and
enforceable to the maximum extent possible.
Section 9.13 Further Assurances. From and after
the date of this Agreement, upon the request of the Purchaser or the Company,
each of the Company and the Purchaser shall execute and deliver such instrument,
documents and other writings as may be reasonably necessary or desirable to
confirm and carry out and to effectuate fully the intent and purposes of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed
by their respective authorized officer as of the date first above written.
EARTHSHELL CORPORATION
By: /s/ Xxxxx Xxxxxxx
Name: Xxxxx Xxxxxxx
Title: Chief Financial Officer
ACQUA WELLINGTON NORTH AMERICAN EQUITIES
FUND, LTD.
By: /s/ Xxxxxxx X. X. Xxxxx Xxxxxx
Name: Xxxxxxx X. X. Xxxxx Xxxxxx
Title: Director
EXHIBIT A TO THE
OPINION OF COUNSEL
_______________________________________________________________________________________
EXHIBIT B
COMPLIANCE CERTIFICATE
In connection with the issuance of shares of common stock of Earthshell
Corporation (the "Company") pursuant to the Draw Xxxx Notice, dated ___________ delivered by
the Company to Acqua Wellington North American Equities Fund, Ltd. (the "Purchaser")
pursuant to Article VI of the Common Stock Purchase Agreement dated May __, 2000, by and
between the Company and the Purchaser (the "Agreement"), the undersigned hereby certifies as
follows:
1. The undersigned is the duly elected Chief [Executive/Financial] Officer of
the Company.
2. The representations and warranties of the Company set forth in Section 3.1
of the Agreement are true and correct in all material respects as though made on and as of
the date hereof, except for representations and warranties that speak as of a particular
date.
3. The Company has performed in all material respects all covenants and
agreements to be performed by the Company on or prior to the Draw Down Exercise Date and the
Settlement Date related to the Draw Down Notice and has complied in all material respects
with all obligations and conditions contained in Section 5.3 of the Agreement.
The terms used herein but not defined herein shall have the meanings specified
in the Agreement.
The undersigned has executed this Certificate this ________ day of _________,
2000.
By:________________________________________________
Name:______________________________________________
Title:_____________________________________________
____________________________________________________________________________________________
EXHIBIT C
FORM OF
DRAW DOWN NOTICE
Reference is made to the Common Stock Purchase Agreement dated as of May __, 2000
(the "Purchase Agreement ") between Earthshell Corporation, a Delaware corporation (the
"Company") and Acqua Wellington North American Equities Fund, Ltd. Capitalized terms used
and not otherwise defined herein shall have the meanings given such terms in the Purchase
Agreement.
In accordance with and pursuant to Section 6.1 of the Purchase Agreement, the Company
hereby issues this Draw Down Notice to exercise a Draw Down request for the Draw Down Amount
indicated below.
Draw Down Amount: ___________________________________________
Call Option Amount: _________________________________________
Draw Down Pricing Period start date: ________________________
Draw Down Pricing Period end date: __________________________
Settlement Date: ____________________________________________
Threshold Price: ____________________________________________
Minimum Threshold Price: ____________________________________
____________________________________________________________________________________________
The Company hereby certifies that the conditions set forth in Section 5.3 of the
Purchase Agreement have been satisfied as of the date hereof.
Dated:_______________________
________________________________
By:______________________________
Name:
Title:
Address:
Facsimile No.:
Wire Instructions:__________________
Contact Name:_______________________
___________________________________________________________________________________________
DISCLOSURE SCHEDULES
RELATING TO THE COMMON STOCK
PURCHASE AGREEMENT, DATED AS MAY 3, 2000 OF BETWEEN EARTHSHELL CORPORATION AND
ACQUA WELLINGTON NORTH AMERICAN EQUITIES FUND, LTD.
ALL SECTION AND SUBSECTION NUMBERS AND LETTERS RELATE AND COINCIDE TO SUCH NUMBERS
AND LETTERS AS SET FORTH IN THE COMMON STOCK PURCHASE AGREEMENT (THE "AGREEMENT"). ANY
TERMS REQUIRING DEFINITION HEREIN ARE DEFINED IN THE AGREEMENT.
ALL REPRESENTATIONS AND WARRANTIES SET FORTH IN THE AGREEMENT ARE MODIFIED IN THEIR
ENTIRETY BY THESE DISCLOSURE SCHEDULES. THE DISCLOSURES CONTAINED IN THESE DISCLOSURE
SCHEDULES SHALL BE READ IN THEIR ENTIRETY, AND ALL THE DISCLOSURES SHALL BE READ TOGETHER.
____________________________________________________________________________________________
