COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is
dated as of July __, 2000 by and between IVES HEALTH COMPANY, INC., an Oklahoma
corporation (the "Company"), and [PURCHASER] (the "Purchaser").
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Certain Definitions.
(a) "Average Daily Price" shall be the price based on the VWAP
of the Company on the Principal Market.
(b) "Draw Down" shall have the meaning assigned to such term
in Section 6.1(a) hereof.
(c) "Draw Down Pricing Period" shall mean a period of twenty
(20) consecutive Trading Days beginning on the date specified in the Draw Down
Notice; provided, however, the Draw Down Pricing Period shall not begin before
the day on which receipt of such notice is confirmed by the Purchaser.
(d) "Effective Date" shall mean the date the Registration
Statement of the Company covering the Shares being subscribed for hereby is
declared effective.
(e) "Initial Draw Down" shall have the meaning assigned to
such term in Section 6.1(c) hereof.
(f) "Material Adverse Effect" shall mean any adverse 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 materially interfere with the ability of the
Company to perform any of its material obligations under this Agreement or the
Registration Rights Agreement or to perform its obligations under any other
material agreement.
(g) "Material Change in Ownership" shall mean that the
officers and directors of the Company shall own less than 70% of the outstanding
common stock of the Company.
(h) "Material Change in Price" shall mean a change of 25% in
the Average Daily Price between the highest closing price and the lowest closing
price at which the
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Company's common stock was reported by Bloomberg Financial during any Draw Down
Pricing Period.
(i) "Material Change in Trading Volume" shall mean a change of
25% in the daily volume between the highest daily trading volume and the lowest
daily trading volume as reported by Bloomberg Financial during any Draw Down
Pricing Period.
(j) "Principal Market" shall mean initially the OTC Bulletin
Board and shall include the American Stock Exchange, Nasdaq National Market, the
Nasdaq SmallCap Market or the New York Stock Exchange if the Company is listed
and trades on such market or exchange.
(k) "Purchase Price" shall mean with respect to Shares
(excluding Shares issued upon the exercise of Warrants), seventy percent (70%)
of the Average Daily Price on the date in question.
(l) "Registration Statement" shall mean the registration
statement under the Securities Act of 1933, as amended, to be filed with the
Securities and Exchange Commission for the registration of the Shares pursuant
to the Registration Rights Agreement attached hereto as Exhibit A.
(m) "SEC Documents" shall mean the Company's latest Form 10K
or 10-KSB as of the time in question, all Forms 10Q or 10-QSB and 8K filed
thereafter, and the Proxy Statement for its latest fiscal year as of the time in
question until such time as the Company no longer has an obligation to maintain
the effectiveness of a Registration Statement as set forth in the Registration
Rights Agreement.
(n) "Shares" shall mean, collectively, the shares of Common
Stock of the Company being subscribed for hereunder and those shares of Common
Stock issuable to the Purchaser upon exercise of the Warrants.
(o) "Threshold Price" is the lowest Average Daily Price during
any Draw Down Pricing Period at which the Company will sell its Common Stock
with respect to this Agreement.
(p) "Trading Day" shall mean any day on which the Principal
Market is open for business.
(q) "VWAP" shall mean the daily volume weighted average price
of the Company's Common Stock on the Principal Market as reported by Bloomberg
Financial L.P. (based on a trading day from 9:30 am EST to 4:00 pm EST) using
the VAP function.
(r) "Warrants" shall mean the Initial Warrants, the Draw Down
Warrants and the Purchaser Warrants as those terms are defined in Section 5.2(f)
hereof.
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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 may issue and sell to the
Purchaser and the Purchaser shall purchase from the Company up to Two Million
Four Hundred Thousand Dollars ($2,400,000) of the Company's Common Stock (the
"Commitment Amount"), $0.001 par value per share (the "Common Stock") and the
Warrants, based on Draw Downs of up to Two Hundred Thousand Dollars ($200,000)
per Draw Down (as defined below), except for the Initial Draw Down which may be
up to Four Hundred Thousand Dollars ($400,000).
Section 2.2. The Shares. The Company has authorized and has
reserved and covenants to continue to reserve, 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 requested under this Agreement.
Anything in this Agreement to the contrary notwithstanding, the Company may not
make a Draw Down to the extent that, after such purchase by the Purchaser, the
sum of the number of shares of Common Stock beneficially owned by the Purchaser
and its affiliates would result in beneficial ownership by the Purchaser and its
affiliates of more than 9.9% of the then outstanding shares of Common Stock. For
purposes of the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities and Exchange Act
of 1934, as amended.
Section 2.3. Purchase Price and Initial 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 delivery of
executed documents under this Agreement and the other agreements referred to
herein and the payment of the fees set forth in Article II of the Escrow
Agreement (the "Initial Closing") shall take place at the offices of Xxxxx &
Xxxxxxx LLP, 0 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 within fifteen (15)
days from the date hereof, or (ii) such other time and place or on such date as
the Purchaser and the Company may agree upon (the "Initial 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 Initial
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:
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(a) Organization, Good Standing and Power. The Company is a
corporation duly incorporated validly existing and in good standing under the
laws of the State of Oklahoma and has all requisite corporate authority to own,
lease and operate its properties and assets and to carry on its business as now
being conducted. The Company does not have any subsidiaries and does not own
more than 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 on the Company's financial condition.
(b) Authorization, Enforcement. (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 to issue the Draw Down Shares pursuant to their respective terms,
(ii) the execution, issuance and delivery of this Agreement, the Registration
Rights Agreement and the Escrow Agreement 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 and the Escrow Agreement have been
duly executed and delivered by the Company and at the Initial 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, reorganization, moratorium,
liquidation, conservatorship, receivership 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 issuance of the Draw Down Shares.
(c) Capitalization. The authorized capital stock of the
Company consists of 50,000,000 shares of Common Stock of which 15,552,687 shares
are issued and outstanding and no shares of preferred stock. 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 the SEC
Documents. Except as set forth in this Agreement and the Registration Rights
Agreement and as set forth in the SEC Documents, or on Schedule 3.1(c) hereto,
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, calls 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 and as set forth in
the SEC Documents or on Schedule 3.1(c), 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 as set forth in Schedule 3.1(c), 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 Schedule 3.1(c), 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 SEC Documents or on Schedule 3.1(c) hereto, the offer and sale
of all capital stock, convertible securities, rights, warrants, or options of
the
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Company issued prior to the Initial 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 on the
Company's financial condition or operating results. The Company has made
available to the Purchaser true and correct copies of the Company's Certificate
of Incorporation as in effect on the date hereof (the "COI"), and the Company's
Bylaws as in effect on the date hereof (the "Bylaws"). The Company has not
received any notice from the Principal Market questioning or threatening the
continued inclusion of the Common Stock on such market.
(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 or 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 and will not (i) violate any provision
of the Company's COI 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 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 other foreign statute, rule, regulation, order, judgment or
decree (including any federal or 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, termination, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect. The business of the Company and its
subsidiaries is not being conducted in violation of any laws, ordinances or
regulations of any governmental entity, except for possible violations which
singularly or in the aggregate do not and will 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 in accordance with the terms hereof (other than any
filings which may be required to be made by the Company with the Securities and
Exchange Commission (the "SEC") or state securities administrators subsequent to
the Initial 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) SEC Documents, Financial Statements. The Common Stock of
the Company is registered pursuant to Section 12(g) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and, except as disclosed in the
SEC Documents or on Schedule
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3.1(f) hereto, the Company has timely filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC pursuant
to the reporting requirements of the 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 "SEC Documents"). The Company has delivered or made available to the
Purchaser true and complete copies of the SEC Documents filed with the SEC since
December 31, 1998. 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. As of
their respective filing dates, the SEC Documents complied in all material
respects with the requirements of the Exchange Act and the rules and regulations
of the SEC promulgated thereunder applicable to such documents, and, as of their
respective filing dates, none of the SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents comply as to form 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. 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 SEC Documents or Schedule 3.1(g) hereto
sets forth each subsidiary of the Company, showing the jurisdiction of its
incorporation or organization and showing the percentage of each person's
ownership of the outstanding stock or other interests of such subsidiary. For
the purposes of this Agreement, "subsidiary" shall mean any corporation or other
entity of which at least a majority of the securities or other ownership
interests having ordinary voting power (absolutely or contingently) for the
election of directors or other persons performing similar functions are at the
time owned directly or indirectly by the Company and/or any of its other
subsidiaries. All of the outstanding shares of capital stock of each subsidiary
have been duly authorized and validly issued, and are fully paid and
non-assessable. There are no outstanding preemptive, conversion or other rights,
options, warrants or agreements granted or issued by or binding upon any
subsidiary for the purchase or acquisition of any shares of capital stock of any
subsidiary or any other securities convertible into, exchangeable for or
evidencing the rights to subscribe for any shares of such capital stock. Neither
the Company nor any subsidiary is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of the
capital stock of any subsidiary or any convertible securities, rights, warrants
or options of the type described in the preceding sentence. Neither the Company
nor any subsidiary is a party to, nor has any knowledge of, any agreement
restricting the voting or transfer of any shares of the capital stock of any
subsidiary.
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(h) No Material Adverse Effect. Since April 3, 2000 no
Material Adverse Effect has occurred or exists with respect to the Company,
except as disclosed in the SEC Documents or on Schedule 3.1(h) hereof.
(i) No Material Change in Ownership. Since April 3, 2000 no
Material Change in Ownership has occurred.
(j) No Undisclosed Liabilities. Except as disclosed in the SEC
Documents or on Schedule 3.1(j) hereto, neither the Company nor any of its
subsidiaries has any 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
which are not disclosed in the SEC Documents, other than those incurred in the
ordinary course of the Company's or its subsidiaries respective businesses since
such date and which, individually or in the aggregate, do not or would not have
a Material Adverse Effect on the Company or its subsidiaries.
(k) No Undisclosed Events or Circumstances. Since April 3,
2000 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.
(l) Indebtedness. The SEC Documents or Schedule 3.1(l) hereto
sets forth as of the date hereof all outstanding secured and unsecured
Indebtedness of the Company or any subsidiary, or for which the Company or any
subsidiary has commitments. For the purposes of this Agreement, "Indebtedness"
shall mean (a) any liabilities for borrowed money or amounts owed in excess of
$250,000 (other than trade accounts payable incurred in the ordinary course of
business), (b) all guaranties, endorsements and 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 $250,000 due under leases required to
be capitalized in accordance with GAAP. Neither the Company nor any subsidiary
is in default with respect to any Indebtedness.
(m) Title to Assets. Each of the Company and the subsidiaries
has good and marketable title to all of its real and personal property reflected
in the SEC Documents, free of any mortgages, pledges, charges, liens, security
interests or other encumbrances, except for those indicated in the SEC Documents
or on Schedule 3.1(m) hereto or such that do not cause a Material Adverse Effect
on the Company's financial condition or operating results. All said leases of
the Company and each of its subsidiaries are valid and subsisting and in full
force and effect.
(n) Actions Pending. There is no action, suit, claim,
investigation or proceeding pending or, to the knowledge of the Company,
threatened against the Company or any subsidiary which questions the validity of
this Agreement or the transactions contemplated
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hereby or any action taken or to be taken pursuant hereto or thereto. Except as
set forth in the SEC Documents or on Schedule 3.1(n) hereto, there is no action,
suit, claim, investigation or proceeding pending or, to the knowledge of the
Company, threatened, against or involving the Company, any subsidiary or any of
their respective properties or assets. There are no outstanding orders,
judgments, injunctions, awards or decrees of any court, arbitrator or
governmental or regulatory body against the Company or any subsidiary.
(o) Compliance with Law. The business of the Company and the
subsidiaries 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 SEC Documents or on Schedule 3.1(o)
hereto or such that do not cause a Material Adverse Effect. The Company and each
of its subsidiaries have all franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals necessary for the
conduct of their respective businesses as now being conducted by them 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.
(p) Taxes. 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 December 31, 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 Company are
adequate to cover any Tax liabilities of the Company if its current tax year
were treated as ending on the date hereof.
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; and (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
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the Internal Revenue Code during the applicable period specified in 'SS'
897(c)(1)(A)(ii) of the Internal Revenue Code.
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
not obligated to make payments nor is it 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.
For purposes of this Section 3.1(p):
"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.
(q) Certain Fees. Except as set forth on Schedule 3.1(q)
hereto, no brokers, finders or financial advisory fees or commissions will be
payable by the Company or any subsidiary with respect to the transactions
contemplated by this Agreement.
(r) 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 or any subsidiary 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.
(s) Operation of Business. The Company and each of the
subsidiaries owns or possesses all patents, trademarks, service marks, trade
names, copyrights, licenses and authorizations as set forth in the SEC Documents
and on Schedule 3.1(s) hereto, 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.
(t) Regulatory Compliance. The Company has all necessary
licenses, registrations and permits to conduct its business as now being
conducted in all states where the Company conducts its business.
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(u) Books and Records. The records and documents of the
Company and its subsidiaries accurately reflect in all material respects the
information relating to the business of the Company and the subsidiaries, the
location and collection of their assets, and the nature of all transactions
giving rise to the obligations or accounts receivable of the Company or any
subsidiary.
(v) Material Agreements. Except as set forth in the SEC
Documents, or on Schedule 3.1(v) hereto, neither the Company nor any subsidiary
is 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 SEC as an exhibit to a registration statement on Form S-1 or other
applicable form (collectively, "Material Agreements") if the Company or any
subsidiary were registering securities under the Securities Act of 1933, as
amended (the "Securities Act"). Except as set forth in Schedule 3.1(v), the
Company and each of its subsidiaries has in all material respects performed all
the obligations required to be performed by them to date under the foregoing
agreements, have received no notice of default and, to the best of the Company's
knowledge are not in default under any Material Agreement now in effect, the
result of which could cause a Material Adverse Effect. No written or oral
contract, instruments, agreement, commitment, obligation, plan or arrangement of
the Company or of any subsidiary limits or shall limit the payment of dividends
on the Company's Common Stock.
(w) Transactions with Affiliates. Except as set forth in the
SEC Documents or on Schedule 3.1(w) hereto, there are no loans, leases,
agreements, contracts, royalty agreements, management contracts or arrangements
or other continuing transactions exceeding $100,000 between (a) the Company, any
subsidiary or any of their respective customers or suppliers on the one hand,
and (b) on the other hand, any officer, employee, consultant or director of the
Company, or any of its subsidiaries, or any person owning any capital stock of
the Company or any subsidiary or any member of the immediately family of such
officer, employee, consultant, director or stockholder or any corporation or
other entity controlled by such officer, employee, consultant, director or
stockholder, or a member of the immediate family of such officer, employee,
consultant, director or stockholder.
(x) Securities Act of 1933. The Company has complied and will
comply with all applicable federal and state securities laws in connection with
the offer, issuance and sale of the Shares hereunder. Neither the Company nor
anyone acting on its behalf, directly or indirectly, has or will sell, offer to
sell or solicit offers to buy the Shares or similar securities to, or solicit
offers with respect thereto from, or enter into any preliminary conversations or
negotiations relating thereto with, any person (other than the Purchaser), so as
to bring the issuance and sale of the Shares and/or Warrants under the
registration provisions of the Securities Act and applicable state securities
laws. Neither the Company nor any of its affiliates, nor any person acting on
its or their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D under the Securities Act) in
connection with the offer or sale of the Shares.
(y) Employees. Neither the Company nor any subsidiary has any
collective bargaining arrangements or agreements covering any of its employees,
except as set forth in the SEC Documents or on Schedule 3(y) hereto. Except as
set forth in the SEC Documents or on Schedule 3(y) hereto, neither the Company
nor any subsidiary is in breach of
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any 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 or
such subsidiary. Since the date of the December 31, 1999, Form 10-KSB, no
officer, consultant or key employee of the Company or any subsidiary whose
termination, either individually or in the aggregate, could 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 or any subsidiary.
(z) Absence of Certain Developments. Except as provided in SEC
Documents or in Schedule 3.1(z) hereto, since April 3, 2000, neither the Company
nor any subsidiary has:
(i) issued any stock, bonds or other corporate securities or
any rights, options or warrants with respect thereto;
(ii) borrowed any amount or incurred or become subject to any
liabilities (absolute or contingent) except current liabilities incurred in the
ordinary course of business which are comparable in nature and amount to the
current liabilities incurred in the ordinary course of business during the
comparable portion of its prior fiscal year, as adjusted to reflect the current
nature and volume of the Company's or such subsidiary's business;
(iii) discharged or satisfied any lien or encumbrance or paid
any obligation or liability (absolute or contingent), other than current
liabilities paid in the ordinary course of business;
(iv) declared or made any payment or distribution of cash or
other property to stockholders with respect to its stock, or purchased or
redeemed, or made any agreements so to purchase or redeem, any shares of its
capital stock;
(v) sold, assigned or transferred any other tangible assets,
or canceled any debts or claims, except in the ordinary course of business;
(vi) sold, assigned or transferred any patent rights,
trademarks, trade names, copyrights, trade secrets or other intangible assets or
intellectual property rights, or disclosed any proprietary confidential
information to any person except to customers in the ordinary course of business
or to the Purchaser or its representatives;
(vii) suffered any substantial losses or waived any rights of
material value, whether or not in the ordinary course of business, or suffered
the loss of any material amount of prospective business;
(viii) made any changes in employee compensation except in the
ordinary course of business and consistent with past practices;
(ix) made capital expenditures or commitments therefor that
aggregate in excess of $500,000;
11
(x) entered into any other material transaction, whether or
not in the ordinary course of business;
(xi) suffered any material damage, destruction or casualty
loss, whether or not covered by insurance;
(xii) experienced any material problems with labor or
management in connection with the terms and conditions of their employment; or
(xiii) effected any two or more events of the foregoing kind
which in the aggregate would be material to the Company or its subsidiaries.
(aa) Use of Proceeds. The proceeds from the sale of
the Shares will be used by the Company and its subsidiaries for general
corporate purposes.
(bb) Acknowledgment Regarding Purchaser's Purchase of
Shares. Company acknowledges and agrees that 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. The Company further represents to the Purchaser that the Company's
decision to enter into this Agreement has been based solely on the independent
evaluation by the Company and its own representatives and counsel.
Section 3.2. Representations 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 corporation duly incorporated, validly existing and in good standing under
the laws of_______________________________________.
(b) Authorization and Power. The Purchaser has the requisite
power and authority to enter into and perform this Agreement and to purchase the
Shares being sold to it hereunder. 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.
(c) No Conflicts. The execution, delivery and performance of
this Agreement and the consummation by the Purchaser of the transactions
contemplated hereby 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 agreement, indenture or
instrument to which the Purchaser is a party, or 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
12
properties (except for such conflicts, defaults and violations as would not,
individually or in the aggregate, have a Material Adverse Effect on Purchaser).
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) Financial Risks. The Purchaser acknowledges that it is
able to bear the financial risks associated with an investment in the Shares and
that it has been given full access to such records of the Company and the
subsidiaries and to the officers of the Company and the subsidiaries as it has
deemed necessary or appropriate to conduct its due diligence investigation. The
Purchaser is capable of evaluating the risks and merits of an investment in the
Shares by virtue of its experience as an investor and its knowledge, experience,
and sophistication in financial and business matters and the Purchaser is
capable of bearing the entire loss of its investment in the Shares.
(e) Accredited Investor. The Purchaser is an "accredited
investor" as defined in Regulation D promulgated under the Securities Act.
(f) Compliance With Law. The Purchaser's trading and
distribution activities with respect to the Shares will be in compliance with
all applicable state and federal securities laws, rules and regulations and the
rules and regulations of the Principal Market.
(g) General. The Purchaser understands that the Company is
relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of the Purchaser set forth herein
in order to determine the suitability of the Purchaser to acquire the Shares.
ARTICLE IV
COVENANTS
The Company covenants with the Purchaser as follows:
Section 4.1. Securities Compliance.
If applicable, the Company shall notify the NASD, 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 and the Warrants to the Purchaser or subsequent
holders.
Section 4.2. Registration and Listing. The Company will cause
its Common Stock to continue to be registered under Sections 12(b) or 12(g) of
the Exchange Act, will
13
comply in all respects with its reporting and filing obligations under the
Exchange Act, will comply with all requirements related to any registration
statement filed pursuant to this Agreement, 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 on the
Principal Market and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the NASD and the
Principal Market.
Section 4.3. Registration Statement. The Company shall cause
to be filed the Registration Statement, which Registration Statement shall
provide for the resale of the Shares by the Purchaser to the public in
accordance with this Agreement. The Company shall cause such Registration
Statement to be declared effective by the SEC as expeditiously as practicable.
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 such
Draw Down.
Section 4.4. Escrow Arrangement. The Company and the Purchaser
shall enter into an escrow arrangement with Xxxxx & Xxxxxxx LLP (the "Escrow
Agent") in the Form of Exhibit B hereto respecting payment against delivery of
the Shares.
Section 4.5. Compliance with Laws. The Company shall comply,
and cause each subsidiary to comply, with all applicable laws, rules,
regulations and orders, noncompliance with which could have a Material Adverse
Effect.
Section 4.6. Keeping of Records and Books of Account. The
Company shall keep and cause each subsidiary to 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 4.7. Amendments. The Company shall not amend or waive
any provision of the COI or Bylaws of the Company in any way that would
adversely affect the dividend rights or voting rights of the holders of the
Shares.
Section 4.8 Lock-up Agreements. Except as set forth in Exhibit
___, the directors, officers, and 5% shareholders of the Company (the "Locked-up
Shareholders") shall not directly or indirectly register, issue, offer, sell,
offer to sell, contract to sell, hypothecate, pledge or otherwise dispose of any
shares of common stock of the Company or any securities convertible into or
exercisable or exchangeable for shares of such common stock, until the later of:
(i) ninety (90) days from the date of this Agreement; or (ii) the effective date
of the Registration Statement. The Locked-up Shareholders shall authorize and
instruct the Company to cause, its transfer agent, to place appropriate stock
transfer restrictions on the Locked-up Shareholders' shares reflecting the
foregoing terms.
14
Section 4.9. Other Agreements. The Company shall not enter
into any agreement the terms of which such agreement would restrict or impair
the ability to perform of the Company or any subsidiary under this Agreement.
Section 4.10. Notice of Certain Events Affecting Registration;
Suspension of Right to Request a Draw Down. The Company will immediately notify
the Purchaser upon the occurrence of any of the following events in respect of
the Registration Statement or related prospectus in respect of the Shares: (i)
receipt of any request for additional information from the SEC or any other
federal or state governmental authority during the period of effectiveness of
the Registration Statement the response to which would require any amendments or
supplements to the Registration Statement or related prospectus; (ii) the
issuance by the SEC or any other federal or state governmental authority of any
stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose; (iii) receipt of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Shares for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; (iv) the happening
of any event that makes any statement made in the Registration Statement or
related prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or that requires the making
of any changes in the Registration Statement, related prospectus or documents so
that, in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (v) the Company's
reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate; and the Company will promptly make available to
the Purchaser any such supplement or amendment to the related prospectus. The
Company shall not deliver to the Purchaser any Draw Down Notice during the
continuation of any of the foregoing events.
Section 4.11. 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 Purchaser such shares of
stock and/or securities as the Purchaser is entitled to receive pursuant to this
Agreement.
Section 4.12. Limitation on Future Financing. The Company
agrees that, except as set forth below, it will not enter into any sale of its
securities for cash for less than the greater of: (i) the current market price;
or (ii) the Draw Down Purchase Price, until the later of (i) 12 months from the
effective date of the Registration Statement or (ii) sixty (60) days after the
entire $2,400,000 of Shares (excluding the Shares underlying the Warrants) has
been purchased by Purchaser. The foregoing shall not prevent or limit the
Company from engaging in any sale of securities (i) in a registered public
offering by the Company which is underwritten by one or more established
investment banks, (ii) in one or more private placements where the purchasers do
not have registration rights, (iii) pursuant to any presently existing or future
employee benefit plan which plan has been or is approved by the Company's
stockholders, (iv) pursuant to any
15
compensatory plan for a full-time employee or key consultant, (v) in connection
with a strategic partnership or other business transaction, the principal
purpose of which is not simply to raise money or (vi) to which Purchaser gives
its written approval. Further, the Purchaser shall have a right of first
refusal, to elect to participate, in such subsequent transaction in the case of
(ii) and (vi) above. Such right of first refusal must be exercised in writing
within seven (7) Trading Days of the Purchaser's receipt of notice of the
proposed terms of such financing.
Section 4.13. Limitation on Corporate Actions. Except as
otherwise agreed the Company shall not pay a dividend in shares of its Common
Shares, subdivide (split) its outstanding shares of Common Stock, combine
(reverse split) its outstanding shares of Common Stock, issue by
reclassification of its shares of Common Stock any shares or other securities of
the Company, or distribute to holders of its Common Stock any securities of the
Company or of another entity for a period of twelve (12) months from the
effective date of the Registration Statement.
ARTICLE V
CONDITIONS TO INITIAL CLOSING AND DRAW DOWNS
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 the Initial Closing and as of each Settlement Date, 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 the
Initial Closing and as of each Settlement Date as though made at that time,
except for representations and warranties that speak as of a particular date.
(b) Performance by the Purchaser. The Purchaser shall have
performed, satisfied and complied in all material respects with all material
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the Purchaser at or prior to the Initial Closing
and as of each Settlement Date.
(c) 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.
Section 5.2. Conditions Precedent to the Obligation of the
Purchaser to Close. The obligation hereunder of the Purchaser to perform its
obligations under this Agreement and to purchase the Shares is subject to the
satisfaction or waiver, at or before the Initial 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.
16
(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 Initial
Closing as though made at that time (except for representations and warranties
that speak as of a particular date).
(b) Performance by the Company. The Company shall have
performed, satisfied and complied in all 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 Initial Closing.
(c) 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.
(d) 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 Purchaser or the Company or any subsidiary, or any of
the officers, directors or affiliates of the Company or any subsidiary seeking
to restrain, prevent or change the transactions contemplated by this Agreement,
or seeking damages in connection with such transactions.
(e) Opinion of Counsel, Etc. At the Initial Closing, the
Purchaser shall have received an opinion of counsel to the Company, dated the
date of the Initial Closing, in the form of Exhibit C hereto, and such other
certificates as the Purchaser deems necessary.
(f) Warrants. In lieu of a minimum Draw Down commitment by the
Company, the Purchaser shall receive at the Initial Closing, a warrant
certificate to purchase up to a number of shares of Common Stock equal to
$1,200,000 divided by the VWAP on the Trading Day immediately prior to the
Initial Closing Date (the "Warrant"). The Warrant shall have a term from its
date of issuance of three (3) years. The exercise price of the Warrant shall be
70% of the VWAP on the Trading Day prior to the Initial Closing Date. The Common
Stock underlying the Warrant will be registered in the Registration Statement
referred to in Section 4.3 hereof. The Warrant shall be in the form of Exhibit E
hereto.
Section 5.3. Conditions Precedent to the Obligation of the
Purchaser to Accept a Draw Down 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, at or before each Settlement
Date, of each of the conditions set forth below.
(a) Satisfaction of Conditions to Initial Closing. The Company
shall have satisfied, or the Purchaser shall have waived at the Initial Closing,
the conditions set forth in Section 5.2 hereof.
(b) Effective Registration Statement. The Registration
Statement registering the Shares shall have been declared effective by the SEC
on or before October 31, 2000 and shall remain effective on each Settlement
Date.
17
(c) No Suspension. Trading in the Company's Common Stock shall
not have been suspended by the SEC or the Principal Market (except for any
suspension of trading of limited duration agreed to by the Company, which
suspension shall be terminated prior to the delivery of each Draw Down Notice),
and, at any time prior to such Draw Down Notice, trading in securities generally
as reported on the Principal Market shall not have been suspended or limited, or
minimum prices shall not have been established on securities whose trades are
reported on the Principal Market unless the general suspension or limitation
shall have been terminated prior to the deliver of such Draw Down Notice.
(d) Material Adverse Effect. No Material Adverse Effect and no
Consolidation Event where the successor entity has not agreed to perform the
Company's obligations shall have occurred.
(e) Material Change in Ownership. No Material Change in
Ownership shall have occurred.
(f) Material Change in Price. No Material Change in Price
shall have occurred.
(g) Material Change in Trading Volume. No Material Change in
Trading Volume shall have occurred.
(h) Opinion of Counsel. The Purchaser shall have received a
"down-to-date" letter from the Company's counsel, confirming that there is no
change from the counsel's previously delivered opinion, or else specifying with
particularity the reason for any change.
(i) Future Financing. The Company shall have not completed any
financing prohibited by Section 4.11 unless, prior to the Company delivering a
Draw Down Notice after any such financing, the Company pays the Purchaser the
sum of $200,000 as liquidated damages.
(j) Minimum Average Trading Volume. The average daily dollar
volume for the twenty (20) consecutive trading days immediately prior to the
Initial Draw Down is equal to or greater than $60,000.
ARTICLE VI
DRAW DOWN TERMS
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 and
exercise a draw down (a "Draw Down") during each Draw Down Pricing Period, which
Draw Down the Purchaser will be obligated to accept for a period of 11 months
commencing immediately after the Effective Date.
18
(b) Only one Draw Down shall be allowed in each Draw Down
Pricing Period. The price per share paid by the Purchaser shall be based on the
Average Daily Price on each separate Trading Day during the Draw Down Pricing
Period. The number of shares of Common Stock 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, (i) as to the 1st through the 11th Trading
Days after a Draw Down Pricing Period commences (the "First Settlement Period"),
on the 13th Trading Day after a Draw Down Pricing Period commences and (ii) as
to the 12th through the 20nd Trading Days after a Draw Down Pricing Period
commences (the "Second Settlement Period"), the 22th Trading Day after a Draw
Down Pricing Period. (each, a "Settlement Date" and the First and Second
Settlement Periods collectively referred to as "Settlement Periods"). In
connection with each Draw Down Pricing Period, the Company may set the Threshold
Price, but in no event shall the Threshold Price be set below $.75 without
express written consent of Purchaser. If the Average Daily Price on any day
within the Draw Down Pricing Period is less than the Threshold Price, the
Company shall not sell and the Purchaser shall not be obligated to purchase the
Shares otherwise to be purchased for such day.
(c) The minimum Draw Down shall be $100,000 and the maximum
Draw Down shall be $200,000; provided, however, the maximum dollar amount of
each Draw Down during any Draw Down Pricing Period shall be limited pursuant to
the following formula: Average Stock Price: Average of the Average Daily Prices
for the 45 Trading Days prior to the Draw Down Notice date. Average Trading
Volume: Average daily trading volume for the 45 Trading Days prior to the Draw
Down Notice date. Maximum dollar amount of each Draw Down: 20% of (Average Stock
Price x (Average Trading Volume x 20)); provided, further, however, subject to
the foregoing the maximum dollar amount of the Initial Draw Down shall be
$400,000 (the "Initial Draw Down").
(d) The number of Shares of Common Stock to be issued in
connection with each Draw Down shall be a number of shares equal to the sum of
the quotients (for each trading day within the Draw Down Pricing Period) of (x)
1/20th of the Draw Down amount and (y) the Purchase Price on each Trading Day
within the Draw Down Pricing Period, subject to the following adjustments:
(i) If the Average Daily Price on a given Trading Day is less
than the Threshold Price, then the Draw Down will be reduced by 1/20th and that
day shall be withdrawn from the Draw Down Pricing Period; and
(ii) If trading of the Common Stock on the Principal Market is
suspended for more than three (3) hours, in the aggregate, on any Trading Day
during the Draw Down Pricing Period, then the Draw Down shall be reduced by
1/20th and that day shall be withdrawn from the Draw Down Pricing Period.
(e) The Company must inform the Purchaser by delivering a draw
down notice, in the form of Exhibit D hereto (the "Draw Down Notice"), via
facsimile transmission as to the amount of the Draw Down the Company wishes to
exercise before the first day of the Draw Down Pricing Period (the "Commencement
Date"). If the Commencement Date is to be the date of the Draw Down Notice, the
Draw Down Notice must be delivered to and receipt
19
confirmed by the Purchaser at least one hour before trading commences on such
date. At no time shall the Purchaser be required to purchase more than the
maximum Draw Down amount for a given Draw Down Pricing Period so that if the
Company chooses not to exercise the maximum permitted Draw Down in a given Draw
Down Pricing Period the Purchaser is not obligated to and shall not purchase
more than the scheduled maximum amount in a subsequent Draw Down Pricing Period.
(f) On or before each Settlement Date, the Shares purchased by
the Purchaser shall be delivered to The Depository Trust Company ("DTC") on the
Purchaser's behalf. Upon the Company delivering whole shares of Common Stock to
the Purchaser or its designees via DWAC by 1:00 pm EST, the Purchaser shall wire
transfer immediately available funds to the Company's designated account on the
such day. Upon the Company delivering whole shares of Common Stock to the
Purchaser or its designees via DWAC after 1:00 pm EST, the Purchaser shall wire
transfer next day available funds to the Company's designated account on such
day. In the event the Purchaser elects to use the Escrow Agent, the Shares shall
be credited by the Company to the DTC account designated by the Purchaser upon
receipt by the Escrow Agent of payment for the Draw Down into the Escrow Agent's
trust account as provided in the Escrow Agreement. The Escrow Agent shall be
directed to pay the purchase price to the Company, net of One Thousand Five
Hundred Dollars ($1,500) as escrow expenses to the Escrow Agent and any
brokerage or placement agent or finder's fees as set forth in the Escrow
Agreement. The delivery of the Shares into the Purchaser's DTC account in
exchange for payment therefor shall be referred to herein as "Settlement".
ARTICLE VII
TERMINATION
Section 7.1. Termination. The term of this Agreement shall be
twelve (12) months from the Effective Date. The Company may terminate this
Agreement (i) upon one (1) Trading Day's notice if the Purchaser shall fail to
fund more than one properly noticed Draw Down within three (3) Trading Days of
the date payment for such Draw Down is due.
Section 7.2. 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 herein, this Agreement shall
become void and of no further force and effect, except for Sections 9.1 and 9.2,
and Article VIII herein. Nothing in this Section 7.2 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.
20
ARTICLE VIII
INDEMNIFICATION
Section 8.1. General Indemnity. The Company agrees to
indemnify and hold harmless the Purchaser (and its directors, officers,
affiliates, agents, successors and assigns) from and against any and all losses,
liabilities, deficiencies, costs, damages and expenses (including, without
limitation, reasonable attorney's fees, charges and disbursements) incurred by
the Purchaser as a result of any inaccuracy in or breach of the representations,
warranties or covenants made by the Company herein. The Purchaser agrees to
indemnify and hold harmless the Company and its directors, officers, affiliates,
agents, successors and assigns from and against any and all losses, liabilities,
deficiencies, costs, damages and expenses (including, without limitation,
reasonable attorneys fees, charges and disbursements) incurred by the Company as
result of any inaccuracy in or breach of the representations, warranties or
covenants made by the Purchaser herein. Notwithstanding anything to the contrary
herein, the Purchaser shall be liable under this Section 8.1 for only that
amount as does not exceed the net proceeds to such Purchaser as a result of the
sale of Shares pursuant to the Registration Statement.
Section 8.2. Indemnification Procedure. Any party entitled to
indemnification under this Article VIII (an "indemnified party") will give
written notice to the indemnifying party of any matters giving rise to a claim
for indemnification; provided, that the failure of any party entitled to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Article VIII except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any action, proceeding or claim is brought against an
indemnified party in respect of which indemnification is sought hereunder, the
indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of counsel to the indemnified party a conflict of interest
between it and the indemnifying party may exist with respect of such action,
proceeding or claim, to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party. In the event that the indemnifying party
advises an indemnified party that it will contest such a claim for
indemnification hereunder, or fails, within thirty (30) days of receipt of any
indemnification notice to notify, in writing, such person of its election to
defend, settle or compromise, at its sole cost and expense, any action,
proceeding or claim (or discontinues its defense at any time after it commences
such defense), then the indemnified party may, at its option, defend, settle or
otherwise compromise or pay such action or claim. In any event, unless and until
the indemnifying party elects in writing to assume and does so assume the
defense of any such claim, proceeding or action, the indemnified party's costs
and expenses arising out of the defense, settlement or compromise of any such
action, claim or proceeding shall be losses subject to indemnification
hereunder. The indemnified party shall cooperate fully with the indemnifying
party in connection with any settlement negotiations or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the indemnified party which
relates to such action or claim. The indemnifying party shall keep the
indemnified party fully apprised at all times as to the status of the defense or
any settlement negotiations with respect thereto. If the indemnifying party
elects to defend any such action or claim, then the indemnified party shall be
entitled to participate in
21
such defense with counsel of its choice at its sole cost and expense. The
indemnifying party shall not be liable for any settlement of any action, claim
or proceeding effected without its prior written consent. Notwithstanding
anything in this Article VIII to the contrary, the indemnifying party shall not,
without the indemnified party's prior written consent, settle or compromise any
claim or consent to entry of any judgment in respect thereof which imposes any
future obligation on the indemnified party or which does not include, as an
unconditional term thereof, the giving by the claimant or the plaintiff to the
indemnified party of a release from all liability in respect of such claim. The
indemnification required by this Article VIII shall be made by periodic payments
of the amount thereof during the course of investigation or defense, as and when
bills are received or expense, loss, damage or liability is incurred, within ten
(10) Trading Days of written notice thereof to the indemnifying party so long as
the indemnified party irrevocably agrees to refund such moneys if it is
ultimately determined by a court of competent jurisdiction that such party was
not entitled to indemnification. The indemnity agreements contained herein shall
be in addition to (a) any cause of action or similar rights of the indemnified
party against the indemnifying party or others, and (b) any liabilities the
indemnifying party may be subject to.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Fees and Expenses. The Company shall pay all fees
and expenses related to the transactions contemplated by this Agreement;
provided, that the Company shall pay, at the Initial Closing, all attorneys and
escrow fees and expenses (inclusive of disbursements and out-of-pocket expenses)
incurred by the Purchaser of up to $35,000 in connection with the preparation,
negotiation, execution and delivery of this Agreement and the transactions
contemplated hereunder. In addition, the Company shall pay all reasonable fees
and expenses incurred by the Purchaser in connection with any subsequent
amendments, modifications or waivers of this Agreement, the Escrow Agreement or
the Registration Rights Agreement or incurred in connection with the enforcement
of this Agreement, the Escrow Agreement and the Registration Rights 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.
Section 9.2. Specific Enforcement. 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.
Section 9.3. Entire Agreement; Amendment. This Agreement,
together with the Registration Rights Agreement and the Escrow 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
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amended other than by a written instrument signed by the party against whom
enforcement of any such amendment or waiver is sought and no condition to
closing any Draw Down in favor of the Purchaser may be waived by the Purchaser.
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 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: 000 Xxxxx X.X. Xxxxx Xxxx.
Xxxxxxxxx, Xxxxxxxx 00000
With copies to:
notice):
Attention:
Telephone:
Facsimile:
If to Purchaser: ___________________________
___________________________
with copies to: Xxxxx & Schloss LLP
0 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx
Any party hereto may from time to time change its address for
notices by giving written notice of such changed address to the other party
hereto in accordance herewith.
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.
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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. This Agreement shall be
binding upon and inure to the benefit of the parties and their successors and
assigns. After the Initial 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. No Third Party Beneficiaries. This Agreement is
intended for the benefit of the parties hereto and their respective permitted
successors and assigns and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.
Section 9.9. Governing Law/Arbitration. 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. Any dispute
under this Agreement or any Exhibit attached hereto 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 as 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. 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. The Board of Arbitration shall
be authorized and is directed to enter a default judgment against any party
refusing to participate in the arbitration proceeding within thirty days of any
deadline for such participation. 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 prevailing party shall be awarded
its costs, including attorneys' fees, from the non-prevailing party as part of
the arbitration award. Any party shall have the right to seek injunctive relief
from any court of competent jurisdiction in any case where such relief is
available. The prevailing party in such injunctive action shall be awarded its
costs, including attorney's fees, from the non-prevailing party.
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. Execution may be
made by delivery by facsimile.
Section 9.11. Publicity. Except as required by applicable law
or regulation, prior to the Initial 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
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transactions contemplated hereby or the existence of this Agreement. After the
Initial 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, unless
required by law, 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 or officials of any regulatory
agency 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, so long as
such construction does not materially adversely effect the economic rights of
either party hereto.
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 instruments, 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.
Section 9.14. Effectiveness of Agreement. This Agreement shall
become effective only upon satisfaction of the conditions precedent to the
Initial Closing set forth in Article I of the Escrow Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorize officer as of this
__ day of July, 2000.
IVES HEALTH COMPANY, INC.
By:____________________________________
M. Xxxxx Xxxx, President
[PURCHASER]
By:____________________________________
______________, Authorized Signatory
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