EXHIBIT 10.1
COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated as
of March 20, 2001 by and between 24/7 Media, Inc., a Delaware corporation (the
"Company"), and Maya Cove Holdings Inc. (the "Purchaser"), a British Virgin
Islands corporation.
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to Purchaser from
time to time as provided herein, and Purchaser shall purchase, up to $50,000,000
of Common Stock and the Warrant; and
WHEREAS, such investments will be made by the Purchaser as statutory
underwriter of a registered indirect primary offering of such Common Stock by
the Company.
NOW, THEREFORE, in consideration of the foregoing premises, and the
promises and covenants herein contained, the receipt and sufficiency of which
are hereby acknowledged by the parties hereto, the parties, intending to be
legally bound, hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF COMMON STOCK
Section 1.1. PURCHASE AND SALE OF STOCK. Subject to the terms and
conditions of this Agreement, the Company may sell and issue to the Purchaser
and the Purchaser shall be obligated to purchase from the Company, up to an
aggregate of, $50,000,000 of the Common Stock and the Warrant, subject to the
terms herein (the "Commitment Amount").
Section 1.2. 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 I of the Escrow Agreement, attached as EXHIBIT
B hereto, (the "Initial Closing") shall take place at the offices of Xxxxxxx
Xxxxxx & Green, P.C., 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (i) 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 2
REPRESENTATIONS AND WARRANTIES
Section 2.1. 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 the State of Delaware 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 to do business and is in good standing as a
foreign corporation 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.
(b) AUTHORIZATION, ENFORCEMENT. (i) The Company has the
requisite corporate power and corporate authority to enter into and
perform its obligations under the Transaction Documents and to issue the
Draw Down Shares pursuant to their respective terms, (ii) the execution
and delivery of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby
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) the Transaction Documents 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.
(c) CAPITALIZATION. The authorized capital stock of the
Company consists of 70,000,000 shares of Common Stock of which 26,322,752
shares are issued and outstanding and 10,000,000 shares of preferred
stock, $0.01 par value per share, of which none are issued and
outstanding. 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 2.1(c) hereto, no shares of
Common Stock are entitled to preemptive rights or registration rights and
there are no outstanding options, warrants,
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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
2.1(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 on SCHEDULE 2.1(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 for the
Registration Rights Agreement and except as set forth on SCHEDULE 2.1(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
2.1(c) hereto, the offer and sale of all capital stock, convertible
securities, rights, warrants, or options of the 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. The
Company has made available to the Purchaser true and correct copies of the
Company's articles or 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"). 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 Warrant 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 and the
Warrant, the Warrant 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. Except as set forth on Schedule 2.1(e), 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 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 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
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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 SEC or state securities
administrators subsequent to the Initial Closing and any registration
statement which may be filed pursuant hereto); PROVIDED, HOWEVER, 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 Exchange Act,
and, except as disclosed in the SEC Documents or on SCHEDULE 2.1(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. The
Company has delivered or made available to the Purchaser, through the
XXXXX system or otherwise, 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 or the Securities Act, as applicable, 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 under GAAP 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 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 2.1(g) hereto
sets forth each subsidiary of the Company, showing the jurisdiction of its
incorporation or
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organization and showing the percentage of the Company'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 issued and 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.
(h) NO MATERIAL ADVERSE EFFECT. Since the date of the
financial statement contained in the most recently filed Form 10-Q (or
10-QSB) or Form 10-K (or 10-KSB), whichever is most current, no Material
Adverse Effect has occurred or exists with respect to the Company, except
as disclosed in the SEC Documents or on SCHEDULE 2.1(H) hereto.
(i) NO UNDISCLOSED LIABILITIES. Except as disclosed in the SEC
Documents or on SCHEDULE 2.1(I) 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.
(j) NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since the date of
the financial statement contained in the most recently filed Form 10- Q
(or 10-QSB) or Form 10-K (or 10-KSB), whichever is most current, 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.
(k) INDEBTEDNESS. The SEC Documents or SCHEDULE 2.1(K) 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
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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.
(l) 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 2.1(1) hereto or such that
do not 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.
(m) 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 hereby or any
action taken or to be taken pursuant hereto or thereto. Except as set
forth in the SEC Documents or on SCHEDULE 2.1(M) 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.
(n) COMPLIANCE WITH LAW. 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.
(o) 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 have 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 has 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
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(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 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 2.1(o):
"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
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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.
(p) CERTAIN FEES. Except as set forth on SCHEDULE 2.1(P)
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.
(q) 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 contains 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.
(r) 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 or on SCHEDULE 2.1(R) 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.
(s) INSURANCE. Except as disclosed in the SEC Documents or on
SCHEDULE 2.1(S) hereto, the Company carries or will have the benefit of
insurance in such amounts and covering such risks as is adequate for the
conduct of its business and the value of its properties and as is
customary for companies engaging in similar businesses and similar
industries.
(t) 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.
(u) MATERIAL AGREEMENTS. Except as set forth in the SEC
Documents, or on SCHEDULE 2.1(U) 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. Except as set forth on SCHEDULE 2.1(U), 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
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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. Except as set forth in the SEC Documents,
no written or oral contract, instrument, 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.
(v) TRANSACTIONS WITH AFFILIATES. Except as set forth in the
SEC Documents or on SCHEDULE 2.1(V) 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 5% or more of the capital stock of the
Company or any subsidiary or any member of the immediate 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.
(w) SECURITIES LAWS. 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 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.
(x) 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 2.1(X)
hereto, neither the Company nor any subsidiary is in breach of 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. Except as set forth on Schedule
2.1(x), since the date of the December 31, 1999 Form 10-K (or 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.
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(y) ABSENCE OF CERTAIN DEVELOPMENTS. Except as disclosed in
SEC Documents or on SCHEDULE 2.1(Y) hereto, since the date of the
financial statement contained in the most recently filed Form 10-Q (or
10-QSB) or Form 10-K (or 10KSB), whichever is most current, 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 material losses (except for
anticipated losses consistent with prior quarters) 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;
(x) entered into any other material transaction, whether
or not in the ordinary course of business;
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(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.
(z) GOVERNMENTAL APPROVALS. Except as set forth in the SEC
Documents or on SCHEDULE 2.1(Z) hereto, and except for the filing of any
notice prior or subsequent to any Settlement Date that may be required
under applicable federal or state securities laws (which if required,
shall be filed on a timely basis), including the filing of a registration
statement or post-effective amendment pursuant to this Agreement, no
authorization, consent, approval, license, exemption of, filing or
registration with any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, is or will be
necessary for, or in connection with, the delivery of the Shares, or for
the performance by the Company of its obligations under this Agreement.
(aa) 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. The Company further represents to
the Purchaser that the Company's decision to enter into this Agreement has
been based solely on (a) the Purchaser's representations and warranties in
Section 3.2, and (b) the independent evaluation by the Company and its own
representatives and counsel.
Section 2.2. 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 the British Virgin Islands.
(b) AUTHORIZATION AND POWER. The Purchaser has the requisite
power and authority to enter into and perform the Transaction Documents
and to purchase the Shares being sold to it hereunder. The execution,
delivery and performance of the Transaction Documents by Purchaser and the
consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate action and at the Initial Closing
shall constitute valid and binding obligations of the Purchaser
enforceable against the Purchaser 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
11
enforcement of, creditors' 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 or relating hereto do not and will not (i) result in a
violation of the 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 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.
(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) 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.
12
ARTICLE 3
COVENANTS
The Company covenants with the Purchaser as follows:
Section 3.1. THE SHARES. As of the date of each applicable Draw
Down, the Company will have authorized and reserved, free of preemptive rights
and other similar contractual rights of stockholders, a sufficient number of
authorized but unissued shares of its Common Stock to cover the Draw Down Shares
to be issued in connection with such Draw Down requested under this Agreement.
The Draw Down Shares to be issued under this Agreement, when paid for and issued
in accordance with the terms hereof, shall be duly and 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. Anything in this Agreement
to the contrary notwithstanding, (i) at no time will the Company request a Draw
Down which would result in the issuance of an aggregate number of shares of
Common Stock pursuant to this Agreement which exceeds 19.9% of the number of
shares of Common Stock issued and outstanding on the Initial Closing Date
without obtaining stockholder approval of such excess issuance, or such other
amount as would require stockholder approval under rules of the Principal Market
or otherwise without obtaining stockholder approval of such excess issuance, and
(ii) 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 Exchange Act.
Section 3.2. SECURITIES COMPLIANCE. If applicable, the Company shall
notify the Principal Market, in accordance with its 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 3.3. 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 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 Exchange 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
13
comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Principal Market and shall provide
the Purchaser with copies of any correspondence to or from such Principal Market
which questions or threatens delisting of the Common Stock, within three (3)
Trading Days of the Company's receipt thereof, until the Purchaser has disposed
of all of the Shares.
Section 3.4. ESCROW ARRANGEMENT. The Company and the Purchaser shall
enter into an escrow arrangement with Xxxxxxx Xxxxxx & Green, P.C. (the "Escrow
Agent") in the form of EXHIBIT B hereto respecting payment against delivery of
the Shares.
Section 3.5. REGISTRATION RIGHTS AGREEMENT. The Company and the
Purchaser shall enter into the Registration Rights Agreement in the Form of
EXHIBIT A hereto. 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 3.6. ACCURACY OF REGISTRATION STATEMENT. On each Settlement
Date, the Registration Statement and the prospectus therein shall not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading in light of the circumstances under which they were made;
and on such Settlement Date or date of filing the Registration Statement and the
prospectus therein will not include any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
PROVIDED, HOWEVER, the Company makes no representations or warranties as to the
information contained in or omitted from the Registration Statement and the
prospectus therein in reliance upon and in conformity with the information
furnished in writing to the Company by the Purchaser specifically for inclusion
in the Registration Statement and the prospectus therein.
Section 3.7. 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 3.8. 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 3.9. OTHER AGREEMENTS. The Company shall not enter into any
agreement the terms of which such agreement would restrict or impair the ability
of the Company to perform its obligations under this Agreement.
Section 3.10. NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION;
SUSPENSION OF RIGHT TO REQUEST A DRAW DOWN. THE COMPANY WILL PROMPTLY NOTIFY THE
PURCHASER IN WRITING
14
AND OBTAIN AN ACKNOWLEDGMENT FROM 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. The Company shall
not deliver to the Purchaser any Draw Down Notice during the continuation of any
of the foregoing events. The Company shall promptly make available to the
Purchaser any such supplements or amendments to the related prospectus, at which
time, provided that the registration statement and any supplements and
amendments thereto are then effective, the Company may recommence the delivery
of Draw Down Notices.
Section 3.11. 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 3.12. LIMITATION ON FUTURE FINANCING. The Company agrees
that it will not enter into any other equity line type of financing until the
earlier of (i) eighteen (18) months from the Effective Date, or (ii) sixty (60)
days after the entire Commitment Amount has been purchased by the Purchaser.
Further, except as to any sale of securities (i) in one or more private
placements where the purchasers do not have registration rights, (ii) pursuant
to any presently existing or future employee benefit plan which plan has been or
is approved by the Company's stockholders, (iii) pursuant to any compensatory
plan for a full-time employee or key consultant, (iv) in connection with a
strategic partnership or other business transaction, the principal purpose of
which is not simply to raise money, during the Commitment Period, the Purchaser
shall have a right of first refusal, to elect to participate, in transaction
pursuant to which the Company sells its securities for cash at a discount to the
then current market. Such right of first refusal must be
15
exercised in writing within five (5) Trading Days of the Purchaser's receipt of
notice of the proposed terms of such financing.
Section 3.13. USE OF PROCEEDS. The proceeds from the sale of the
Shares will be used by the Company and its subsidiaries for general corporate
purposes.
The Purchaser covenants with the Company as follows:
Section 3.14. COMPLIANCE WITH LAW. The Purchaser agrees that its
trading activities with respect to shares of the Company's Common Stock will be
in compliance with all applicable state and federal securities laws, rules and
regulations and rules and regulations of the Principal Market on which the
Company's Common Stock is listed. Without limiting the generality of the
foregoing, the Purchaser agrees that it will, whenever required by federal
securities laws, deliver the prospectus included in the Registration Statement
to any purchaser of Shares from the Purchaser.
Section 3.15. NO SHORT SALES. The Purchaser and its affiliates shall
not engage in short sales of the Company's Common Stock (as defined in
applicable SEC and the Principal Market rules) during the term of this
Agreement.
ARTICLE 4
CONDITIONS TO INITIAL CLOSING AND DRAW DOWNS
Section 4.1. CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY
TO SELL THE SHARES. The obligation hereunder of the Company to proceed to close
this Agreement and 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
16
court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this
Agreement.
Section 4.2. 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.
(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
as of the Initial Closing Date, in the form of EXHIBIT C hereto.
(f) WARRANT. On the Initial Closing Date, the Company shall
issue to the Purchaser a warrant certificate to purchase up to 100,000
shares of Common Stock. The Warrant shall have a term from its date of
issuance of three (3) years. The exercise price of the Warrant shall be
150% of the average of the closing bid prices of the Common Stock during
the fifteen (15) Trading Days immediately 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.
17
Section 4.3. 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 4.2 hereof
(b) EFFECTIVE REGISTRATION STATEMENT. The Registration
Statement registering the Shares shall have been declared effective by the
SEC and shall remain effective on each Settlement Date.
(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 delivery 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) OPINION OF COUNSEL. The Purchaser shall have received (i)
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 and an opinion as
to the additional items specified in EXHIBIT C hereto, and (ii) any other
items set forth in the Escrow Agreement.
ARTICLE 5
DRAW DOWN TERMS
Section 5.1. 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 draw downs (each a "Draw Down") during the Commitment Period,
which Draw Downs the Purchaser shall be obligated to accept during the
Commitment Period, subject to the terms and conditions herein.
18
(b) Only one Draw Down shall be allowed in each Draw Down
Pricing Period. There shall be at least five (5) Trading Days between Draw
Down Pricing Periods. The number of shares of Common Stock purchased by
the Purchaser with respect to each Draw Down shall be determined as set
forth in Section 5.1(e) herein and settled on:
(i) as to the 1st through the 10th Trading Day after a
Draw Down Pricing Period commences, the 12th Trading Day after such
Draw Down Pricing Period commences;
(ii) as to the 11th through the 20th Trading Day after a
Draw Down Pricing Period commences, the 22nd Trading Day after such
Draw Down Pricing Period commences (such settlement periods and such
settlement dates in subsection (i) and this subsection (ii) each
referred to as a "Settlement Period" and a "Settlement Date",
respectively).
(c) In connection with each Draw Down Pricing Period, the
Company may set the Threshold Price in the Draw Down Notice.
(d) The minimum Investment Amount for any Draw Down shall be
$250,000 and the maximum Investment Amount as to each Draw Down shall be
6% of the EQY weighted average price field (as reported on Bloomberg
Financial L.P. using the BLPH function) for the Common Stock for the sixty
(60) calendar days immediately prior to the applicable Commencement Date
(defined below) multiplied by the total trading volume in respect of the
Common Stock for such period. Notwithstanding anything herein to the
contrary, in the event the minimum Investment Amount is greater than the
maximum Investment Amount, as to such Draw Down only, the minimum
Investment Amount shall equal the maximum Investment Amount, but in no
event shall the minimum Investment Amount be less than $100,000 such that
if the maximum Investment Amount is less than $100,000, then the Company
may not exercise a Draw Down at such time.
(e) The number of Shares of Common Stock to be issued on each
Settlement Date shall be a number of shares equal to the sum of the
quotients (for each trading day within the Settlement Period) of (x)
1/20th of the Investment Amount, and (y) the Purchase Price on each
Trading Day within the Settlement Period, subject to the following
adjustments:
(i) if the VWAP on a given Trading Day is less than the
Threshold Price, then that portion of the immediately pending
Investment Amount to be paid on the Settlement Date shall be reduced
by 1/20th of the Investment Amount and such Trading Day shall be
withdrawn from the Settlement Period;
(ii) if during any Trading Day during the Settlement
Period trading of the Common Stock on the Principal Market is
suspended for more than
19
three (3) hours, in the aggregate, or if any Trading Day during the
Settlement Period is shortened because of a public holiday, then
that portion of the immediately pending Investment Amount to be paid
on the Settlement Date shall be reduced by 1/20th of the Investment
Amount and such Trading Day shall be withdrawn from the Settlement
Period; and
(iii) if during any Trading Day during the Settlement
Period sales of Draw Down Shares pursuant to the Registration
Statement are suspended by the Company in accordance with Section
3(j) herein or Section 5(e) of the Registration Rights Agreement for
more than three (3) hours, in the aggregate, during the Settlement
Period, then that portion of the immediately pending Investment
Amount to be paid on the Settlement Date shall be reduced by 1/20th
of the Investment Amount and such Trading Day shall be withdrawn
from the Settlement Period.
(f) 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 in accordance with Section 8.4 as to the amount of
the Draw Down (the "Investment Amount") 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 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
Investment Amount for a given Draw Down Pricing Period so that if the
Company chooses not to exercise the maximum Investment Amount in a given
Draw Down Pricing Period the Purchaser is not obligated to and shall not
purchase more than the scheduled maximum Investment Amount in a subsequent
Draw Down Pricing Period.
(g) On 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 electronically delivering whole
shares of Common Stock to the Purchaser or its designees via DTC through
its Deposit Withdrawal Agent Commission ("DWAC") system by 1:00 p.m. EST,
the Purchaser shall wire transfer immediately available funds to the
Company's designated account on such day, less any fees as set forth in
the Escrow Agreement, which fees shall be wired as directed in the Escrow
Agreement. Upon the Company electronically delivering whole shares of
Common Stock to the Purchaser or its designees DTC account via DWAC after
1:00 p.m. EST, the Purchaser shall wire transfer next day available funds
to the Company's designated account on such day, less any fees as set
forth in the Escrow Agreement, which fees shall be wired as directed in
the Escrow Agreement. In the event that either party elects to use the
Escrow Agent, the Shares shall be credited by the Company to the DTC
account designated by the Purchaser via DWAC upon receipt by the Escrow
Agent of payment for the Draw Down Shares into the Escrow Agent's master
escrow account, all as further set forth in the Escrow Agreement. The
Escrow Agent shall be directed to pay the purchase price to the Company,
net of one thousand dollars ($1,000) per Settlement as escrow
20
expenses to the Escrow Agent and any additional fees as set forth in the
Escrow Agreement.
ARTICLE 6
TERMINATION
Section 6.1. TERM. The term of this Agreement shall begin on the
date hereof and shall end eighteen (18) months from the Effective Date or as
otherwise set forth in Section 6.2.
Section 6.2. OTHER TERMINATION.
(a) This Agreement shall terminate upon one (1) Trading Day's
notice if (i) an event resulting in a Material Adverse Effect has occurred
and has not been cured for a period of thirty (30) days after giving
notice thereof, (ii) the Common Stock is de-listed from the Principal
Market unless such de-listing is in connection with the Company's
subsequent listing of the Common Stock on the Nasdaq National Market,
Nasdaq SmallCap Market, the American Stock Exchange or the New York Stock
Exchange, or (iii) the Company files for protection from creditors under
any applicable law.
(b) The Company may terminate this Agreement upon one (1)
Trading Day's notice if the Purchaser shall fail to fund more than one
properly noticed Draw Down within five (5) Trading Days of the end of the
applicable Settlement Period.
Section 6.3. 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 6.1 or 6.2 herein, this Agreement shall become
void and of no further force and effect, except for Sections 8.1, 8.2 and 8.9,
and Article 7 herein. Nothing in this Section 6.3 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 or the Purchaser to compel specific
performance by the other party of its obligations under this Agreement.
ARTICLE 7
INDEMNIFICATION
Section 7.1. General Indemnity.
(a) 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
21
limitation, reasonable attorneys' 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.
(b) 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 material 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 7.1(b) for only that amount as does not exceed the net proceeds to
the Purchaser as a result of the sale of the Shares.
Section 7.2. INDEMNIFICATION PROCEDURE. Any party entitled to
indemnification under this Article 7 (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 7 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
(including reasonable attorneys' fees, charges and disbursements) 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 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 7 to the contrary, the indemnifying
party shall not, without the Indemnified Party's
22
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 7 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, with interest, 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 to which the indemnifying party may be subject.
ARTICLE 8
MISCELLANEOUS
Section 8.1. FEES AND EXPENSES. Each of the parties to this
Agreement shall pay its own fees and expenses related to the transactions
contemplated by this Agreement; except that, the Company shall pay, at the
Initial Closing, a non-accountable expense allowance of $35,000 for the
Purchaser's legal, administrative and due diligence costs and expenses and any
other additional fees as set forth in the Escrow Agreement. 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 if such subsequent amendment, modification or
waiver is at the request of the Company. The Company shall pay all stamp or
other similar taxes and duties levied in connection with issuance of the Shares
pursuant hereto.
Section 8.2. 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 8.3. ENTIRE AGREEMENT; AMENDMENT. The Transaction Documents
contain the entire understanding of the parties with respect to the matters
covered in the Transaction Documents. 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 and no condition to
closing any Draw Down in favor of the Purchaser may be waived by the Purchaser.
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Section 8.4. 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: 0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxxx, CEO
Tel: (000) 000-0000
Fax: (000) 000-0000
With copies to: Proskauer Rose LLP
(which shall not constitute 0000 Xxxxxxxx
xxxxxx) Xxx Xxxx, Xxx Xxxx 00000-0000
Attn: Xxxxxx Xxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
If to Purchaser: x/x Xxxxxx Xxxxxxx Xxxxxxxxxx
Xxxxxxx Xxxxx, 0xx Floor
Waterfront Drive
Road Town, Tortola
British Virgin Islands
Attn: Xxxxx Xxxx
Fax: (000) 000-0000
with copies to: Xxxxxxx Xxxxxx & Green P.C.
(which shall not constitute 000 Xxxx Xxxxxx
xxxxxx) Xxx Xxxx, XX 00000-0000
Tel: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx
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 8.5. 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
24
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 8.6. 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 8.7. SUCCESSORS AND ASSIGNS. 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 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 8.8. 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 8.9. 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. The Company and
the Purchaser agree to submit themselves to the IN PERSONAM jurisdiction of the
state and federal courts situated within the Southern District of the State of
New York with regard to any controversy arising out of or relating to this
Agreement. 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
25
action shall be awarded its costs, including reasonable attorneys' fees, from
the non-prevailing party.
Section 8.10. 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 8.11. PUBLICITY. 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, without the prior written consent of the other
party. 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, HOWEVER, 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 8.12. SEVERABILITY. The provisions of this Agreement are
severable and, in the event that The Board of Arbitration or 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 8.13. 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 8.14. 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.
ARTICLE 9
DEFINITIONS
Section 9.1. Certain Definitions.
26
(a) "COMMENCEMENT DATE" shall have the meaning assigned to
such term in Section 5.1(f) hereof.
(b) "COMMITMENT AMOUNT" shall have the meaning assigned to
such term in Section 1.1 hereof.
(c) "COMMITMENT PERIOD" shall mean the period commencing on
the Effective Date and expiring on the earliest to occur of (i) the date
on which the Purchaser shall have exercised an aggregate amount of Draw
Downs equal to the Commitment Amount, (ii) the date this Agreement is
terminated in accordance with the terms hereof, or (iii) the date
occurring eighteen (18) months from the Effective Date.
(d) "COMMON STOCK" shall mean the Company's common stock,
$0.01 par value per share.
(e) "DRAW DOWN" shall have the meaning assigned to such term
in Section 5.1(a) hereof.
(f) "DRAW DOWN NOTICE" shall have the meaning assigned to such
term in Section 5.1(f) hereof.
(g) "DRAW DOWN PRICING PERIOD" shall mean a period of twenty
(20) consecutive Trading Days beginning on the date specified in the Draw
Down Notice (as defined in Section 5.1(f) herein); PROVIDED, HOWEVER, the
Draw Down Pricing Period shall not begin before the day on which receipt
of such notice is confirmed by the Purchaser.
(h) "EFFECTIVE DATE" shall mean the date the Registration
Statement of the Company covering the Shares being subscribed for hereby
is declared effective by the SEC.
(i) "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
(j) "GAAP" shall mean the United States Generally Accepted
Accounting Principles as those conventions, rules and procedures are
determined by the Financial Accounting Standards Board and its predecessor
agencies.
(k) "INITIAL CLOSING" shall have the meaning assigned to such
term in Section 1.2 hereof.
(l) "INITIAL CLOSING DATE" shall have the meaning assigned to
such term in Section 1.2 hereof.
(m) "INVESTMENT AMOUNT" shall have the meaning assigned to
such term in Section 5.1(f) hereof.
27
(n) "MATERIAL ADVERSE EFFECT" shall mean any adverse effect on
the business, operations, properties, 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 (as defined in Section
2.1(u)).
(o) "PRINCIPAL MARKET" shall mean initially the Nasdaq
National Market and shall include the American Stock Exchange, the Nasdaq
Small-Cap Market and the New York Stock Exchange if the Company becomes
listed and trades on such market or exchange after the date hereof.
(p) "PURCHASE PRICE" shall mean, with respect to Draw Down
Shares purchased during each applicable Settlement Period, 96.5% (the
"Purchase Price Percentage") of the VWAP on the date in question; EXCEPT
THAT, for each $50,000,000 increase in the Company's average market cap
(calculated by multiplying the number of shares of Common Stock issued and
outstanding by the VWAP of the Common Stock (the "Market Cap")) above
$150,000,000 during the applicable Market Cap Period (as defined below),
the Purchase Price Percentage as to such Draw Down only shall be increased
by 0.25% until the Purchase Price Percentage equals 97%; PROVIDED,
HOWEVER, each increase in the Purchase Price Percentage shall only occur
if the corresponding increase in the Market Cap is maintained for at least
the twenty (20) consecutive Trading Days immediately prior to the
applicable Commencement Date (the "Market Cap Period"). By way of example,
if the Market Cap on any Trading Day during the Market Cap Period is
between $1 and $199,999,999, the Purchase Price Percentage shall be 96.5%.
If the Market Cap is between $200,000,000 and $249,999,999 on each day
during the entire Market Cap Period, the Purchase Price Percentage shall
be 96.75%. If the Market Cap at any time during the subsequent Market Cap
Period is less than $200,000,000, the Purchase Price Percentage shall
return to 96.5% as to the subsequent Draw Down Pricing Period.
(q) "REGISTRATION Statement" shall mean the registration
statement under the Securities Act, 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 (the
"Registration Rights Agreement).
(r) "SEC" shall mean the Securities and Exchange Commission.
(s) "SEC DOCUMENTS" shall mean the Company's latest Form 10-K
or Form 10-KSB as of the time in question, all Forms 10-Q or 10-QSB and
8-K 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.
28
(t) "SECURITIES ACT" shall mean the Securities and Exchange
Act of 1934, as amended, and the rules and regulations promulgated
thereunder.
(u) "SETTLEMENT" shall mean the delivery of the Draw Down
Shares into the Purchaser's DTC account in exchange for payment therefor.
(v) "SETTLEMENT DATE" shall have the meaning assigned to such
term in Section 5.1(b).
(w) "SETTLEMENT PERIOD" shall have the meaning assigned to
such term in Section 5.1(b).
(x) "SHARES" shall mean, collectively, the shares of Common
Stock of the Company being subscribed for hereunder (the "Draw Down
Shares") and the shares of Common Stock issuable upon exercise of the
Warrant (the "Warrant Shares").
(y) "THRESHOLD PRICE" shall mean the price per Share
designated by the Company as the lowest VWAP during any Draw Down Pricing
Period at which the Company will sell its Common Stock in accordance with
this Agreement.
(z) "TRADING DAY" shall mean any day on which the Principal
Market is open for business.
(aa) "TRANSACTION DOCUMENTS" shall mean this Agreement, the
Registration Rights Agreement and the Escrow Agreement.
(bb) "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 a.m. Eastern
Time to 4:02 p.m. Eastern Time) using the VAP function on the date in
question.
(cc) "WARRANT" shall mean the warrant issued to the Purchaser
pursuant to Section 4.2(f) hereof.
[SIGNATURE PAGE FOLLOWS]
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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 21st day of
March, 2001.
24/7 MEDIA, INC.
By: /s/ XXXXX X. MOORE_
------------------------------------
Xxxxx Xxxxx, Chief Executive Officer
MAYA COVE HOLDINGS INC.
By: /s/ XXXXX XXXX
------------------------------------
Xxxxx Xxxx, Director
30
