SECURITIES PURCHASE AGREEMENT
Exhibit
99.2
This
Securities Purchase Agreement (this “Agreement”)
is
dated as of ,
2005,
among Bullion River Gold Corp., a Nevada corporation (the “Company”),
and
each purchaser identified on the signature pages hereto (each, including its
successors and assigns, a “Purchaser”
and
collectively the “Purchasers”);
and
WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant
to
Section 4(2) of the Securities Act (as defined below), and Rule 506 promulgated
thereunder, the Company desires to issue and sell to each Purchaser, and each
Purchaser, severally and not jointly, desires to purchase from the Company
in
the aggregate, up to $5,000,000 of shares of Common Stock and Warrants on the
Closing Date.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration the receipt and adequacy of which
are hereby acknowledged, the Company and each Purchaser agrees as
follows:
ARTICLE
I.
DEFINITIONS
1.1
Definitions.
In addition to the terms defined elsewhere in this Agreement, for all purposes
of this Agreement, the following terms have the meanings indicated in this
Section 1.1:
“Action”
will
have the meaning ascribed to such term in Section 3.1(j).
“Affiliate”
means
any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person as such
terms are used in and construed under Rule 144. With respect to a Purchaser,
any
investment fund or managed account that is managed on a discretionary basis
by
the same investment manager as such Purchaser will be deemed to be an Affiliate
of such Purchaser.
“Closing”
means
the closing of the purchase and sale of the Common Stock and the Warrants
pursuant to Section 2.1.
“Closing
Date”
means
the Trading Day when all of the Transaction Documents have been executed and
delivered by the applicable parties thereto, and all conditions precedent to
(i)
the Purchasers’ obligations to pay the Subscription Amount and (ii) the
Company’s obligations to deliver the Securities have been satisfied or
waived.
“Closing
Price”
means
on any particular date (a) the last reported closing bid price per share of
Common Stock on such date on the Trading Market (as reported by Bloomberg L.P.
at 4:15 PM (New York time) as the last reported closing bid price for regular
session trading on such day), or (b) if there is no such price on such date,
then the closing bid price on the Trading Market on the date nearest preceding
such date (as reported by Bloomberg L.P. at 4:15 PM (New York time) as the
closing bid price for regular session trading on such day), or (c) if the
Common Stock is not then listed or quoted on the Trading Market and if prices
for the Common Stock are then reported in
the
“pink
sheets” published by the National Quotation Bureau Incorporated (or a similar
organization or agency succeeding to its functions of reporting prices), the
most recent bid price per share of the Common Stock so reported, or (d) if
the shares of Common Stock are not then publicly traded the fair market value
of
a share of Common Stock as determined by an appraiser selected in good faith
by
the Purchasers of a majority in interest of the Shares then outstanding.
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“Commission”
means
the Securities and Exchange Commission.
“Common
Stock”
means
the common shares of the Company with a par value of $0.001 per share, and
any
securities into which such common stock may hereafter be reclassified.
“Common
Stock Equivalents”
means
any securities of the Company or the Subsidiaries which would entitle the holder
thereof to acquire at any time Common Stock, including without limitation,
any
debt, preferred stock, rights, options, warrants or other instrument that is
at
any time convertible into or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock.
“Company
Counsel”
means
Xxxxxxxxxxx & Xxxxxxxx Xxxxxxxxx Xxxxxx LLP.
“Disclosure
Schedules”
means
the Disclosure Schedules of the Company delivered concurrently herewith.
“Effective
Date”
means
the date that the Registration Statement is first declared effective by the
Commission.
“Evaluation
Date”
will
have the meaning ascribed to such term in Section 3.1(r).
“Exchange
Act”
means
the Securities Exchange Act of 1934.
“Exempt
Issuance”
means
the issuance of (a) shares of Common Stock or options to employees, officers
or
directors of the Company pursuant to any stock or option plan duly adopted
by a
majority of the non-employee members of the Board of Directors of the Company
or
a majority of the members of a committee of non-employee directors established
for such purpose, (b) securities upon the exercise of or conversion of any
securities issued hereunder, convertible securities, options or warrants issued
and outstanding on the date of this Agreement, provided that such securities
have not been amended since the date of this Agreement to increase the number
of
such securities, and (c) securities issued pursuant to acquisitions or strategic
transactions, provided any such issuance will only be to a Person which is,
itself or through its subsidiaries, an operating company in a business
synergistic with the business of the Company and in which the Company receives
benefits in addition to the investment of funds, but will not include a
transaction in which the Company is issuing securities primarily for the purpose
of raising capital or to an entity whose primary business is investing in
securities.
“GAAP”
will
have the meaning ascribed to such term in Section 3.1(h).
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“Intellectual
Property Rights”
will
have the meaning ascribed to such term in Section 3.1(o).
“Legend
Removal Date”
will
have the meaning ascribed to such term in Section 4.1(c).
“Liens”
means
a
lien, charge, security interest, encumbrance, right of first refusal, preemptive
right or other restriction.
“Material
Adverse Effect”
will
have the meaning ascribed to such term in Section 3.1(b).
“Material
Permits”
will
have the meaning ascribed to such term in Section 3.1(m).
“Participation
Maximum”
will
have the meaning ascribed to such term in Section 4.13.
“Per
Share Purchase Price”
equals
$0.75,
subject
to adjustment for reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock that occur
after
the date of this Agreement.
“Person”
means
an individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any
kind.
“Pre-Notice”
will
have the meaning ascribed to such term in Section 4.13.
“Proceeding”
means an
action, claim, suit, investigation or proceeding (including, without limitation,
an investigation or partial proceeding, such as a deposition), whether commenced
or threatened.
“Purchaser
Party”
will
have the meaning ascribed to such term in Section 4.9.
“Registration
Rights Agreement”
means
the Registration Rights Agreement, dated as of the date of this Agreement,
among
the Company and each Purchaser, in the form of Exhibit A hereto.
“Registration
Statement”
means
a
registration statement meeting the requirements set forth in the Registration
Rights Agreement and covering the resale by the Purchasers of the Shares and
the
Warrant Shares.
“Required
Approvals”
will
have the meaning ascribed to such term in Section 3.1(e).
“Rule
144”
means
Rule 144 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or
regulation
hereafter adopted by the Commission having substantially the same effect as
such
Rule.
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“SEC
Reports”
will
have the meaning ascribed to such term in Section 3.1(h).
“Securities”
means
the Shares, the Warrants and the Warrant Shares.
“Securities
Act”
means
the Securities Act of 1933.
“Shares”
means
the shares of Common Stock issued or issuable to each Purchaser pursuant to
this
Agreement.
“Subscription
Amount”
means,
as to each Purchaser, the amounts set forth below such Purchaser’s signature
block on the signature page hereto, in United States dollars and in immediately
available funds.
“Subsequent
Financing”
will
have the meaning ascribed to such term in Section 4.13.
“Subsequent
Financing Notice”
will
have the meaning ascribed to such term in Section 4.13.
“Subsidiary”
means,
for purposes of Section 3.1, any subsidiary of the Company as set forth on
Schedule 3.1(a), and for all other purposes under the Transaction Documents,
any
subsidiary of the Company as set forth on Schedule 3.1(a) and any future direct
or indirect subsidiary of the Company.
“Trading
Day”
means
a
day on which the Common Stock is traded on a Trading Market.
“Trading
Market”
means
the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the American Stock Exchange, the New York
Stock Exchange, the Nasdaq National Market, the Nasdaq SmallCap Market or the
OTC Bulletin Board.
“Transaction
Documents”
means
this Agreement, the Warrants and the Registration Rights Agreement and any
other
documents or agreements executed in connection with the transactions
contemplated hereunder.
“Warrants”
means
the Common Stock Purchase Warrants, in the form of Exhibit B, delivered to
the
Purchasers at the Closing in accordance with Section 2.2(a)(iii) hereof, which
warrants will be exercisable immediately upon issuance for a term of three
years
and have an exercise price equal to $1.00,
subject
to adjustment as provided therein.
“Warrant
Shares”
means
the shares of Common Stock issuable upon exercise of the Warrants.
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ARTICLE
II.
PURCHASE
AND SALE
2.1 Closing.
On the Closing Date, each Purchaser will purchase from the Company, severally
and not jointly with the other Purchasers, and the Company will issue and
sell
to each Purchaser, (a) a number of Shares equal to such Purchaser’s Subscription
Amount divided by the Per Share Purchase Price and (b) the Warrants as
determined pursuant to Section 2.2(a)(iii). The aggregate Subscription Amounts
for the Shares sold hereunder will be up to $5,000,000. Upon satisfaction
of the
conditions set forth in Section 2.3, the Closing will occur at the offices
of
the Company or such other location as the parties will mutually
agree.
2.2 Deliveries.
(a) On
the
Closing Date, the Company will deliver or cause to be delivered to each
Purchaser the following:
(i) this
Agreement duly executed by the Company;
(ii) a
certificate evidencing a number of Shares equal to such Purchaser’s Subscription
Amount divided by the Per Share Purchase Price, registered in the name of
such
Purchaser;
(iii) a
Warrant, registered in the name of such Purchaser, pursuant to which such
Purchaser will have the right to acquire up to the number of shares of Common
Stock equal to 100% of the Shares to be issued to such Purchaser;
and
(iv) the
Registration Rights Agreement duly executed by the Company.
(b) On
the
Closing Date, each Purchaser will deliver or cause to be delivered to the
Company the following:
(i) this
Agreement duly executed by such Purchaser;
(ii) such
Purchaser’s Subscription Amount by wire transfer as per the wire instructions
provided by the Company; and
(iii) the
Registration Rights Agreement duly executed by such Purchaser.
2.3 Closing
Conditions.
(a) The
obligations of the Company hereunder in connection with the Closing are subject
to the following conditions being met:
(i) the
accuracy in all material respects when made and on the Closing Date of the
representations and warranties of the Purchasers contained herein;
5
(ii) all
obligations, covenants and agreements of the Purchasers required to be performed
at or prior to the Closing Date will have been performed;
and
(iii) the
delivery by the Purchasers of the items set forth in Section 2.2(b) of this
Agreement.
(b) The
respective obligations of the Purchasers hereunder in connection with the
Closing are subject to the following conditions being met:
(i) the
accuracy in all material respects on the Closing Date of the representations
and
warranties of the Company contained herein;
(ii) all
obligations, covenants and agreements of the Company required to be performed
at
or prior to the Closing Date will have been performed;
(iii) the
delivery by the Company of the items set forth in Section 2.2(a) of this
Agreement;
(iv) there
will have been no Material Adverse Effect with respect to the Company since
the
date hereof; and
(v) From
the
date hereof to the Closing Date, trading in the Common Stock will not have
been
suspended by the Commission (except for any suspension of trading of limited
duration agreed to by the Company, which suspension will be terminated prior
to
the Closing), and, at any time prior to the Closing Date, trading in securities
generally as reported by Bloomberg Financial Markets will not have been
suspended or limited, or minimum prices will not have been established on
securities whose trades are reported by such service, or on any Trading Market,
nor will a banking moratorium have been declared either by the United States
or
New York State authorities nor will there have occurred any material outbreak
or
escalation of hostilities or other national or international calamity of such
magnitude in its effect on, or any material adverse change in, any financial
market which, in each case, in the reasonable judgment of each Purchaser, makes
it impracticable or inadvisable to purchase the Shares at the
Closing.
ARTICLE
III.
REPRESENTATIONS
AND WARRANTIES
3.1 Representations
and Warranties of the Company. Except as set forth under the corresponding
section of the disclosure schedules attached hereto as Exhibit C (“Disclosure
Schedules”),
and
except as disclosed in any SEC Report and any other public filing made with
the
Commission, which Disclosure Schedules, Reports, and other filings will be
deemed a part hereof, the Company hereby makes the representations and
warranties set forth below to each Purchaser:
6
(a) Subsidiaries.
All of the direct and indirect subsidiaries of the Company are set forth on
Schedule 3.1(a) of the Disclosure Schedules. The Company owns, directly or
indirectly, all of the capital stock or other equity interests of each
Subsidiary free and clear of any Liens, and all the issued and outstanding
shares of capital stock of each Subsidiary are validly issued and are fully
paid, non-assessable and free of preemptive and similar rights to subscribe
for
or purchase securities.
(b) Organization
and Qualification.
Each of
the Company and the Subsidiaries is an entity duly incorporated or otherwise
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with the
requisite power and authority to own and use its properties and assets and
to
carry on its business as currently conducted. Neither the Company nor any
Subsidiary is in violation or default of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational or
charter documents. Each of the Company and the Subsidiaries is duly qualified
to
conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not
have or reasonably be expected to result in (i) a material adverse effect on
the
legality, validity or enforceability of any Transaction Documents, (ii) a
material adverse effect on the results of operations, assets, business,
prospects or financial condition of the Company and the Subsidiaries, taken
as a
whole, or (iii) a material adverse effect on the Company’s ability to perform in
any material respect on a timely basis its obligations under any Transaction
Documents (any of (i), (ii) or (iii), a “Material
Adverse Effect”)
and no
Proceeding has been instituted in any such jurisdiction revoking, limiting
or
curtailing or seeking to revoke, limit or curtail such power and authority
or
qualification.
(c) Authorization;
Enforcement.
The
Company has the requisite corporate power and authority to enter into and to
consummate the transactions contemplated by each of the Transaction Documents
and otherwise to carry out its obligations thereunder. The execution and
delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby have been duly
authorized by all necessary action on the part of the Company and no further
action is required by the Company in connection therewith other than in
connection with the Required Approvals. Each Transaction Documents has been
(or
upon delivery will have been) duly executed by the Company and, when delivered
in accordance with the terms hereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in accordance with
its
terms except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other
equitable remedies.
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(d) No
Conflicts.
The
execution, delivery and performance of the Transaction Documents by the Company,
the issuance and sale of the Shares and the consummation by the Company of
the
other transactions contemplated thereby do not and will not (i) conflict with
or
violate any provision of the Company’s or any Subsidiary’s certificate or
articles of incorporation, bylaws or other organizational or charter documents,
or (ii) conflict
with, or constitute a default (or an event that with notice or lapse of time
or
both would become a default) under, result in the creation of any Lien upon
any
of the properties or assets of the Company or any Subsidiary, or give to others
any rights of termination, amendment, acceleration or cancellation (with or
without notice, lapse of time or both) of, any agreement, credit facility,
debt
or other instrument (evidencing a Company or Subsidiary debt or otherwise)
or
other understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) subject to the Required Approvals, conflict with or result
in
a violation of any law, rule, regulation, order, judgment, injunction, decree
or
other restriction of any court or governmental authority to which the Company
or
a Subsidiary is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a Subsidiary
is bound or affected; except in the case of each of clauses (ii) and (iii),
such
as could not have or reasonably be expected to result in a Material Adverse
Effect.
(e) Filings,
Consents and Approvals.
The
Company is not required to obtain any consent, waiver, authorization or order
of, give any notice to, or make any filing or registration with, any court
or
other federal, state, local or other governmental authority or other Person
in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) filings required pursuant to Section
4.4
of this Agreement, (ii) the filing with the Commission of the Registration
Statement, (iii) application(s) to each applicable Trading Market for the
listing of the Shares and Warrant Shares for trading thereon in the time and
manner required thereby, and (iv) the filing of Form D with the Commission
and
such filings as are required to be made under applicable state securities laws
(collectively, the “Required
Approvals”).
(f) Issuance
of the Securities.
The
Shares and Warrants are duly authorized and, when issued and paid for in
accordance with the Transaction Documents, will be duly and validly issued,
fully paid and nonassessable, free and clear of all Liens imposed by the Company
other than restrictions on transfer provided for in the Transaction Documents.
The Warrant Shares, when issued in accordance with the terms of the Transaction
Documents, will be validly issued, fully paid and nonassessable, free and clear
of all Liens imposed by the Company. The Company has reserved from its duly
authorized capital stock the maximum number of shares of Common Stock issuable
pursuant to this Agreement and the Warrants.
(g) Capitalization.
The
capitalization of the Company is as described in the Company’s most recent
periodic report filed with the Commission. The Company has not issued any
capital stock since such filing other than pursuant to the exercise of employee
stock options under the Company’s stock option plans, the issuance of shares of
Common Stock to employees pursuant to the Company’s employee stock purchase plan
and pursuant to the conversion or exercise of outstanding Common Stock
Equivalents. No Person has any right of first refusal, preemptive right, right
of participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as a result of the purchase
and sale of the Securities, there are no outstanding options, warrants, script
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible
into or exchangeable for, or giving any Person any right to subscribe for or
acquire, any shares of Common Stock, or contracts, commitments, understandings
or arrangements by which the Company or any Subsidiary is or may become bound
to
issue additional shares of Common Stock, or Common Stock Equivalents. The issue
and sale of the Securities will not obligate the Company to issue shares of
Common Stock or other securities to any Person (other than the Purchasers)
and
will not result in a right of any holder of Company securities to adjust the
exercise, conversion, exchange or reset price under such securities. All of
the
outstanding shares of capital stock of the Company are validly issued, fully
paid and nonassessable, have been issued in compliance with all federal and
state securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities. No further approval or authorization of any stockholder,
the Board of Directors of the Company or others is required for the issuance
and
sale of the Shares. There are no stockholders agreements, voting agreements
or
other similar agreements with respect to the Company’s capital stock to which
the Company is a party or, to the knowledge of the Company, between or among
any
of the Company’s stockholders.
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(h) SEC
Reports; Financial Statements.
The
Company has filed all reports required to be filed by it under the Securities
Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
for the two years preceding the date hereof (or such shorter period as the
Company was required by law to file such material) (the foregoing materials,
including the exhibits thereto, being collectively referred to herein as the
“SEC
Reports”)
on a
timely basis or has received a valid extension of such time of filing and has
filed any such SEC Reports prior to the expiration of any such extension. As
of
their respective dates, the SEC Reports complied in all material respects with
the requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements have
been
prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved
(“GAAP”),
except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated subsidiaries as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
(i) Material
Changes.
Since
the date of the latest audited financial statements included within the SEC
Reports, except as specifically disclosed in the SEC Reports, (i) there has
been
no event, occurrence or development that has had or that could reasonably be
expected to result in a Material Adverse Effect, (ii) the Company has not
incurred any liabilities (contingent or otherwise) other than (A) trade payables
and accrued expenses incurred
in the ordinary course of business consistent with past practice and (B)
liabilities not required to be reflected in the Company’s financial statements
pursuant to GAAP or required to be disclosed in filings made with the
Commission, (iii) the Company has not altered its method of accounting, (iv)
the
Company has not declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any agreements
to
purchase or redeem any shares of its capital stock and (v) the Company has
not
issued any equity securities to any officer, director or Affiliate, except
pursuant to existing Company stock option plans. The Company does not have
pending before the Commission any request for confidential treatment of
information.
(j) Litigation.
There
is no action, suit, inquiry, notice of violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or affecting
the
Company, any Subsidiary or any of their respective properties before or by
any
court, arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”)
which
(i) adversely affects or challenges the legality, validity or enforceability
of
any of the Transaction Documents or the Securities or (ii) could, if there
were
an unfavorable decision, have or reasonably be expected to result in a Material
Adverse Effect. Neither the Company nor any Subsidiary, nor any director or
officer thereof, is or has been the subject of any Action involving a claim
of
violation of or liability under federal or state securities laws or a claim
of
breach of fiduciary duty. There has not been, and to the knowledge of the
Company, there is not pending or contemplated, any investigation by the
Commission involving the Company or any current or former director or officer
of
the Company. The Commission has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the Company
or any Subsidiary under the Exchange Act or the Securities Act.
9
(k) Labor
Relations.
No
material labor dispute exists or, to the knowledge of the Company, is imminent
with respect to any of the employees of the Company that could reasonably be
expected to result in a Material Adverse Effect.
(l) Compliance.
Neither
the Company nor any Subsidiary (i) is in default under or in violation of (and
no event has occurred that has not been waived that, with notice or lapse of
time or both, would result in a default by the Company or any Subsidiary under),
nor has the Company or any Subsidiary received notice of a claim that it is
in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any court,
arbitrator or governmental body, or (iii) is or has been in violation of any
statute, rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws applicable to its business
except in each case as could not have a Material Adverse Effect.
(m) Regulatory
Permits.
The
Company and the Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate federal, state, local or foreign regulatory
authorities necessary to conduct their respective businesses as described
in the SEC Reports, except where the failure to possess such permits could
not
have or reasonably be expected to result in a Material Adverse Effect
(“Material
Permits”),
and
neither the Company nor any Subsidiary has received any notice of proceedings
relating to the revocation or modification of any Material Permit.
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(n) Title
to Assets.
The
Company and the Subsidiaries have good and marketable title in fee simple to
all
real property owned by them that is material to the business of the Company
and
the Subsidiaries and good and marketable title in all personal property owned
by
them that is material to the business of the Company and the Subsidiaries,
in
each case free and clear of all Liens, except for Liens as do not materially
affect the value of such property and do not materially interfere with the
use
made and proposed to be made of such property by the Company and the
Subsidiaries and Liens for the payment of federal, state or other taxes, the
payment of which is neither delinquent nor subject to penalties. Any real
property and facilities held under lease by the Company and the Subsidiaries
are
held by them under valid, subsisting and enforceable leases of which the Company
and the Subsidiaries are in compliance.
(o) Patents
and Trademarks.
The
Company and the Subsidiaries have, or have rights to use, all patents, patent
applications, trademarks, trademark applications, service marks, trade names,
copyrights, licenses and other similar rights necessary or material for use
in
connection with their respective businesses as described in the SEC Reports
and
which the failure to so have could have a Material Adverse Effect (collectively,
the “Intellectual
Property Rights”).
Neither the Company nor any Subsidiary has received a written notice that the
Intellectual Property Rights used by the Company or any Subsidiary violates
or
infringes upon the rights of any Person. To the knowledge of the Company, all
such Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights of
others.
(p) Insurance.
The
Company and the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company and the Subsidiaries are
engaged, including, but not limited to, directors and officers insurance
coverage at least equal to the aggregate Subscription Amount. To the best of
Company’s knowledge, such insurance contracts and policies are accurate and
complete. Neither the Company nor any Subsidiary has any reason to believe
that
it will not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may
be
necessary to continue its business without a significant increase in
cost.
(q) Transactions
With Affiliates and Employees.
Except
as set forth in the SEC Reports, none of the officers or directors of the
Company and, to the knowledge of the Company, none of the employees of the
Company is presently a party to any transaction with the Company or any
Subsidiary (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or
any
such employee has a substantial interest or is an officer, director, trustee
or
partner, in each case in excess of $60,000 other than (i) for payment of salary
or consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of the Company and (iii) for other employee benefits,
including stock option agreements under any stock option plan of the
Company.
11
(r) Xxxxxxxx-Xxxxx;
Internal Accounting Controls.
The
Company is in material compliance with all provisions of the Xxxxxxxx-Xxxxx
Act
of 2002 that are applicable to it as of the Closing Date. The
Company and the Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed
in
accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management’s general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and designed such disclosure controls and procedures
to ensure that material information relating to the Company, including its
Subsidiaries, is made known to the certifying officers by others within those
entities, particularly during the period in which the Company’s most recently
filed periodic report under the Exchange Act, as the case may be, is being
prepared. The Company’s certifying officers have evaluated the effectiveness of
the Company’s controls and procedures as of the date prior to the filing date of
the most recently filed periodic report under the Exchange Act (such date,
the
“Evaluation
Date”).
The Company presented in its most recently filed periodic report under the
Exchange Act the conclusions of the certifying officers about the effectiveness
of the disclosure controls and procedures based on their evaluations as of
the
Evaluation Date. Since the Evaluation Date, there have been no significant
changes in the Company’s internal controls (as such term is defined in Item
307(b) of Regulation S-K under the Exchange Act) or, to the Company’s knowledge,
in other factors that could significantly affect the Company’s internal
controls.
(s) Certain
Fees.
No
brokerage or finder’s fees or commissions are or will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by this Agreement. The Purchasers will have no obligation with
respect to any fees or with respect to any claims made by or on behalf of other
Persons for fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by this Agreement.
(t) Private
Placement.
Assuming the accuracy of the Purchasers representations and warranties set
forth
in Section 3.2, no registration under the Securities Act is required for the
offer and sale of the Securities by the Company to the Purchasers as
contemplated hereby. The issuance and sale of the Securities hereunder does
not
contravene the rules and regulations of the Trading Market.
12
(u) Investment
Company.
The
Company is not, and is not an Affiliate of, and immediately after receipt of
payment for the Shares, will not be or be an Affiliate of, an “investment
company” within the meaning of the Investment Company Act of 1940, as amended.
The Company will conduct its business in a manner so that it will not become
subject to the Investment Company Act.
(v) Disclosure.
The
Company confirms that, neither the Company nor any other Person acting on its
behalf has provided any of the Purchasers or their agents or counsel with any
information that constitutes or might constitute material, non-public
information. The Company understands and confirms that the Purchasers will
rely
on the foregoing representations and covenants in effecting transactions in
securities of the Company. All disclosure provided to the Purchasers regarding
the Company, its business and the transactions contemplated hereby, including
the Disclosure Schedules to this Agreement, furnished by or on behalf of the
Company with respect to the representations and warranties made herein are
true
and correct with respect to such representations and warranties and do not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The Company
acknowledges and agrees that no Purchaser makes or has made any representations
or warranties with respect to the transactions contemplated hereby other than
those specifically set forth in Section 3.2 hereof.
(w) Solvency.
Based
on the financial condition of the Company as of the Closing Date after giving
effect to the receipt by the Company of the proceeds from the sale of the
Securities hereunder, (i) the Company’s fair saleable value of its assets
exceeds the amount that will be required to be paid on or in respect of the
Company’s existing debts and other liabilities (including known contingent
liabilities) as they mature; (ii) the Company’s assets do not constitute
unreasonably small capital to carry on its business for the current fiscal
year
as now conducted and as proposed to be conducted including its capital needs
taking into account the particular capital requirements of the business
conducted by the Company, and projected capital requirements and capital
availability thereof; and (iii) the current cash flow of the Company, together
with the proceeds the Company would receive, were it to liquidate all of its
assets, after taking into account all anticipated uses of the cash, would be
sufficient to pay all amounts on or in respect of its debt when such amounts
are
required to be paid. The Company does not intend to incur debts beyond its
ability to pay such debts as they mature (taking into account the timing and
amounts of cash to be payable on or in respect of its debt). The Company has
no
knowledge of any facts or circumstances that lead it to believe that it will
file for reorganization or liquidation under the bankruptcy or reorganization
laws of any jurisdiction within one year from the Closing Date. The SEC Reports
set forth as of the dates thereof 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”
will
mean (a) any liabilities for borrowed money or amounts owed in excess of $50,000
(other than trade accounts payable incurred in the ordinary course of business),
(b) all guaranties, endorsements and other contingent obligations in respect
of
Indebtedness of others, whether or not the same are or should be reflected
in
the Company’s balance sheet (or the notes thereto), except guaranties by
endorsement
of negotiable instruments for deposit or collection or similar transactions
in
the ordinary course of business; and (c) the present value of any lease
payments
in excess of $50,000 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.
13
(a)
Taxes. Except for matters that would not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company and each Subsidiary has filed all necessary federal,
state
and foreign income and franchise tax returns and has paid or accrued all
taxes
shown as due thereon, and the Company has no knowledge of a tax deficiency
which
has been asserted or threatened against the Company or any
Subsidiary.
(y) General
Solicitation.
Neither the Company nor any person acting on behalf of the Company has offered
or sold any of the Shares by any form of general solicitation or general
advertising. The Company has offered the Shares for sale only to the Purchasers
and certain other “accredited investors” within the meaning of Rule 501 under
the Securities Act.
(z) Foreign
Corrupt Practices.
Neither
the Company, nor to the knowledge of the Company, any agent or other person
acting on behalf of the Company, has (i) directly or indirectly, used any
corrupt funds for unlawful contributions, gifts, entertainment or other unlawful
expenses related to foreign or domestic political activity, (ii) made any
unlawful payment to foreign or domestic government officials or employees
or to
any foreign or domestic political parties or campaigns from corporate funds,
(iii) failed to disclose fully any contribution made by the Company (or made
by
any person acting on its behalf of which the Company is aware) which is in
violation of law, or (iv) violated in any material respect any provision
of the
Foreign Corrupt Practices Act of 1977, as amended.
(aa) Accountants.
The
Company’s accountants are set forth on Schedule
3.1(bb)
of the
Disclosure Schedules. To the Company’s knowledge, such accountants, who the
Company expects will express their opinion with respect to the financial
statements to be included in the Company’s Annual Report on Form 10-KSB for the
year ending December 31, 2005, are a registered public accounting firm as
required by the Securities Act.(bb) Acknowledgment
Regarding Purchasers’ Purchase of Shares.
The
Company acknowledges and agrees that each of the Purchasers is acting solely
in
the capacity of an arm’s length purchaser with respect to the Transaction
Documents and the transactions contemplated hereby. The Company further
acknowledges that no Purchaser is acting as a financial advisor or fiduciary
of
the Company (or in any similar capacity) with respect to this Agreement and
the
transactions contemplated hereby and any advice given by any Purchaser or any
of
their respective representatives or agents in connection with this Agreement
and
the transactions contemplated hereby is merely incidental to the Purchasers’
purchase of the Shares. The Company further represents to each Purchaser that
the Company’s decision to enter into this Agreement has been based solely on the
independent
evaluation of the transactions contemplated hereby by the Company and its
representatives.
14
(cc) Acknowledgment
of Dilution.
The
Company acknowledges that the issuance of the Securities may result in dilution
of the outstanding shares of Common Stock, which dilution may be substantial
under certain market conditions. The Company further acknowledges that its
obligations under the Transaction Documents, including without limitation its
obligation to issue the Shares and Warrant Shares pursuant to the Transaction
Documents, are unconditional and absolute and not subject to any right of set
off, counterclaim, delay or reduction, regardless of the effect of any such
dilution or any claim the Company may have against any Purchaser and regardless
of the dilutive effect that such issuance may have on the ownership of the
other
stockholders of the Company.
3.2 Representations
and Warranties of the Purchasers. Each Purchaser hereby, for itself and for
no other Purchaser, represents and warrants as of the date hereof and as of
the
Closing Date to the Company as follows:
(a) Organization;
Authority.
Such
Purchaser is an entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization with full right,
corporate or partnership power and authority to enter into and to consummate
the
transactions contemplated by the Transaction Documents and otherwise to carry
out its obligations thereunder. The execution, delivery and performance by
such
Purchaser of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate or similar action on the part of such
Purchaser. Each Transaction Documents to which it is a party has been duly
executed by such Purchaser, and when delivered by such Purchaser in accordance
with the terms hereof, will constitute the valid and legally binding obligation
of such Purchaser, enforceable against it in accordance with its terms, except
(i) as limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or
other
equitable remedies and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.
(b) Investment
Intent.
Such
Purchaser understands that the Securities are “restricted securities” and have
not been registered under the Securities Act or any applicable state securities
law and is acquiring the Securities as principal for its own account and not
with a view to or for distributing or reselling such Securities or any part
thereof, has no present intention of distributing any of such Securities and
has
no arrangement or understanding with any other persons regarding the
distribution of such Securities (this representation and warranty not limiting
such Purchaser’s right to sell the Securities pursuant to the Registration
Statement or otherwise in compliance with applicable federal and state
securities laws). Such Purchaser is acquiring the Securities hereunder in the
ordinary course of its business. Such Purchaser does not have any agreement
or
understanding, directly or indirectly, with any Person to distribute any of
the
Securities.
15
(c) Disclosure
of Information.
Purchaser carefully reviewed all filings made by the Company with the Commission
as of the date of this Agreement first written above and has received and
carefully reviewed any information Purchaser has requested from the Company
that
Purchaser considers necessary or appropriate for deciding whether to acquire
the
Securities, including, without limitation, all material risk factors relating
to
the Company. Purchaser further represents that Purchaser has had ample
opportunity to ask questions and receive answers from the Company concerning
such information and the terms and conditions of the offering of the Securities
and to obtain any additional information necessary to verify the accuracy of
the
information given to Purchaser. Purchaser is making its investment in the
Company after having reviewed, analyzed, sought professional advice regarding,
and fully understanding the risk, uncertainties, and liabilities associated
with
the Company.
(d) Purchaser
Status.
At the
time such Purchaser was offered the Securities, it was, and at the date hereof
it is, and on each date on which it exercises any Warrants, it will be either:
(i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3),
(a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional
buyer” as defined in Rule 144A(a) under the Securities Act. Such Purchaser is
not required to be registered as a broker-dealer under Section 15 of the
Exchange Act.
(e) Experience
of Such Purchaser.
Such
Purchaser, either alone or together with its representatives, has such
knowledge, sophistication and experience in business and financial matters
so as
to be capable of evaluating the merits and risks of the prospective investment
in the Securities, and has so evaluated the merits and risks of such investment.
Such Purchaser is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete loss of such
investment.
(f) General
Solicitation.
Such
Purchaser is not purchasing the Securities as a result of any advertisement,
article, notice or other communication regarding the Securities published in
any
newspaper, magazine or similar media or broadcast over television or radio
or
presented at any seminar or any other general solicitation or general
advertisement.
The
Company acknowledges and agrees that each Purchaser does not make or has not
made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section
3.2.
ARTICLE
IV.
OTHER
AGREEMENTS OF THE PARTIES
4.1 Transfer
Restrictions.
(a) The
Securities may only be disposed of in compliance with state and federal
securities laws. In connection with any transfer of Securities other than
pursuant to an effective registration statement or in compliance with Rule
144,
the Company may require the transferor thereof to provide to the Company an
opinion of counsel selected by the transferor and reasonably acceptable to
the
Company, the form and substance of which
opinion will be reasonably satisfactory to the Company, to the effect that
such
transfer does not require registration of such transferred Securities under
the
Securities Act. As a condition of transfer, any such transferee will agree
in
writing to be bound by the terms of this Agreement and will have the rights
of a
Purchaser under this Agreement and the Registration Rights
Agreement.
16
(b) The
Purchasers agree to the imprinting, so long as is required by this Section
4.1(b), of a legend on any of the Securities in the following form:
THESE
SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO
SUCH EFFECT, THE SUBSTANCE OF WHICH WILL BE REASONABLY ACCEPTABLE TO THE
COMPANY.
4.2
Furnishing of Information. As long as any Purchaser owns Securities, the
Company covenants to timely file (or obtain extensions in respect thereof and
file within the applicable grace period) all reports required to be filed by
the
Company after the date hereof pursuant to the Exchange Act. As long as any
Purchaser owns Securities, if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the Purchasers
and
make publicly available in accordance with Rule 144(c) such information as
is
required for the Purchasers to sell the Securities under Rule 144. The Company
further covenants that it will take such further action as any holder of
Securities may reasonably request, all to the extent required from time to
time
to enable such Person to sell such Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule
144.
4.3 Securities
Laws Disclosure; Publicity. The Company will, within the time limits under
pertinent securities regulations, issue a Current Report on Form 8-K, reasonably
acceptable to each Purchaser disclosing the material terms of the transactions
contemplated hereby, and will attach the Transaction Documents thereto. The
Company and each Purchaser will consult with each other in issuing any other
press releases with respect to the transactions contemplated hereby, and neither
the Company nor any Purchaser will issue any such press release or otherwise
make any such public statement without the prior consent of the Company, with
respect to any press release of any Purchaser, or without the prior consent
of
each Purchaser, with respect to any press release of the Company, which consent
will not unreasonably be withheld, except if such disclosure is required by
law,
in which case the disclosing party will promptly provide the other party with
prior notice of such public statement or
communication. Notwithstanding the foregoing, the Company will not publicly
disclose the name of any Purchaser, or include the name of any Purchaser in
any
filing with the Commission or any regulatory agency or Trading Market, without
the prior written consent of such Purchaser, except (i) as required by federal
securities law in connection with the registration statement contemplated by
the
Registration Rights Agreement and (ii) to the extent such disclosure is required
by law or Trading Market regulations, in which case the Company will provide
the
Purchasers with prior notice of such disclosure permitted under subclause (i)
or
(ii).
17
4.4 Non-Public
Information. The Company covenants and agrees that neither it nor any other
Person acting on its behalf will provide any Purchaser or its agents or counsel
with any information that the Company believes constitutes material non-public
information, unless prior thereto such Purchaser will have executed a written
agreement regarding the confidentiality and use of such information. The Company
understands and confirms that each Purchaser will be relying on the foregoing
representations in effecting transactions in securities of the
Company.
4.5 Use
of
Proceeds. Except as set forth on Schedule 4.5 of the Disclosure Schedules
attached hereto, the Company will use the net proceeds from the sale of the
Securities hereunder for working capital purposes and not for the satisfaction
of any portion of the Company’s debt (other than payment of trade payables in
the ordinary course of the Company’s business and prior practices), to redeem
any Common Stock or Common Stock Equivalents or to settle any outstanding
litigation.
4.6 Reimbursement.
If any Purchaser becomes involved in any capacity in any Proceeding by or
against any Person who is a stockholder of the Company (except as a result
of
sales, pledges, margin sales and similar transactions by such Purchaser to
or
with any current stockholder), solely as a result of such Purchaser’s
acquisition of the Securities under this Agreement, the Company will reimburse
such Purchaser for its reasonable legal and other expenses (including the cost
of any investigation preparation and travel in connection therewith) incurred
in
connection therewith, as such expenses are incurred. The reimbursement
obligations of the Company under this paragraph will be in addition to any
liability which the Company may otherwise have, will extend upon the same terms
and conditions to any Affiliates of the Purchasers who are actually named in
such action, proceeding or investigation, and partners, directors, agents,
employees and controlling persons (if any), as the case may be, of the
Purchasers and any such Affiliate, and will be binding upon and inure to the
benefit of any successors, assigns, heirs and personal representatives of the
Company, the Purchasers and any such Affiliate and any such Person. The Company
also agrees that neither the Purchasers nor any such Affiliates, partners,
directors, agents, employees or controlling persons will have any liability
to
the Company or any Person asserting claims on behalf of or in right of the
Company solely as a result of acquiring the Securities under this
Agreement.
18
4.7 Indemnification
of Purchasers. Subject to the provisions of this Section 4.7, the Company
will indemnify and hold the Purchasers and their directors, officers,
shareholders, partners, employees and agents (each, a “Purchaser
Party”)
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation that any such Purchaser Party may suffer or incur as a result
of
or relating to (a) any breach of any of the representations, warranties,
covenants or agreements made by the Company in
this
Agreement or in the other Transaction Documents or (b) any action instituted
against a Purchaser, or any of them or their respective Affiliates, by any
stockholder of the Company who is not an Affiliate of such Purchaser, with
respect to any of the transactions contemplated by the Transaction Documents
(unless such action is based upon a breach of such Purchaser’s representations,
warranties or covenants under the Transaction Documents or any agreements or
understandings such Purchaser may have with any such stockholder or any
violations by the Purchaser of state or federal securities laws or any conduct
by such Purchaser which constitutes fraud, gross negligence, willful misconduct
or malfeasance). If any action will be brought against any Purchaser Party
in
respect of which indemnity may be sought pursuant to this Agreement, such
Purchaser Party will promptly notify the Company in writing, and the Company
will have the right to assume the defense thereof with counsel of its own
choosing. Any Purchaser Party will have the right to employ separate counsel
in
any such action and participate in the defense thereof, but the fees and
expenses of such counsel will be at the expense of such Purchaser Party except
to the extent that (i) the employment thereof has been specifically authorized
by the Company in writing, (ii) the Company has failed after a reasonable period
of time to assume such defense and to employ counsel or (iii) in such action
there is, in the reasonable opinion of such separate counsel, a material
conflict on any material issue between the position of the Company and the
position of such Purchaser Party. The Company will not be liable to any
Purchaser Party under this Agreement (i) for any settlement by a Purchaser
Party
effected without the Company’s prior written consent, which will not be
unreasonably withheld or delayed; or (ii) to the extent, but only to the extent
that a loss, claim, damage or liability is attributable to any Purchaser Party’s
breach of any of the representations, warranties, covenants or agreements made
by the Purchasers in this Agreement or in the other Transaction
Documents.
4.8 Reservation
of Common Stock.
As of
the date hereof, the Company has reserved and the Company will continue to
reserve and keep available at all times, free of preemptive rights, a sufficient
number of shares of Common Stock for the purpose of enabling the Company to
issue 150% of the Shares pursuant to this Agreement and Warrant Shares pursuant
to any exercise of the Warrants.
4.9 Listing
of Common Stock.
The
Company hereby agrees to use best efforts to maintain the listing of the Common
Stock on a Trading Market, and as soon as reasonably practicable following
the
Closing (but not later than the earlier of the Effective Date and the first
anniversary of the Closing Date) to list all of the Shares and Warrant Shares
on
such Trading Market. The Company further agrees, if the Company applies to
have
the Common Stock traded on any other Trading Market, it will include in such
application all of the Shares and Warrant Shares, and will take such other
action as is necessary to cause all of the Shares and Warrant Shares to be
listed on such other Trading Market as promptly as possible. The Company will
take all action reasonably necessary to continue the listing and trading of
its
Common Stock on a Trading Market and will comply in all respects with the
Company’s reporting, filing and other obligations under the bylaws or rules of
the Trading Market.
4.10 Equal
Treatment of Purchasers. No consideration will be offered or paid to any
person to amend or consent to a waiver or modification of any provision of
any
of the Transaction Documents unless the same consideration is also offered
to
all of the parties to the Transaction Documents. For clarification purposes,
this provision constitutes a separate right granted
to each Purchaser by the Company and negotiated separately by each Purchaser,
and is intended to treat for the Company the Purchasers as a class and will
not
in any way be construed as the Purchasers acting in concert or as a group with
respect to the purchase, disposition or voting of Securities or
otherwise.
19
4.11 Per
Share Purchase Price Protection. From the date hereof until the 18 month
anniversary of the Effective Date, if in connection with a Subsequent Financing,
the Company or any Subsidiary will issue any Common Stock or Common Stock
Equivalents entitling any person or entity to acquire shares of Common Stock
at
an effective price per share less than the Per Share Purchase Price (subject
to
appropriate adjustments for reverse and forward stock splits and the like)
(the
“Discounted
Purchase Price”,
as
further defined below), then in consideration of such Purchaser’s covenants
herein, the Company will issue to such Purchaser that number of additional
shares of Common Stock (subject to appropriate adjustment for reverse and
forward stock splits and the like occurring after the Closing) equal to (a)
the
Subscription Amount paid by such Purchaser at the Closing divided by the
Discounted Purchase Price, less (b) the Shares issued to such Purchaser at
the
Closing pursuant to this Agreement and pursuant to this Section 4.15. The term
“Discounted
Purchase Price”
will
mean the amount actually paid by third parties for a share of Common Stock.
The
sale of Common Stock Equivalents will be deemed to have occurred at the time
of
the issuance of the Common Stock Equivalents and the Discounted Purchase Price
covered thereby will also include the actual exercise or conversion price
thereof at the time of the conversion or exercise (in addition to the
consideration per share of Common Stock underlying the Common Stock Equivalents
received by the Company upon such sale or issuance of the Common Stock
Equivalents). If shares are issued for a consideration other than cash, the
per
share selling price will be the fair value of such consideration as determined
in good faith by the Board of Directors of the Company. The Company may not
refuse to issue a Purchaser additional Shares hereunder based on any claim
that
such Purchaser or any one associated or affiliated with such Purchaser has
been
engaged in any violation of law, agreement or for any other reason, unless,
an
injunction from a court, on notice, restraining and or enjoining an issuance
hereunder will have been sought and obtained and the Company posts a surety
bond
for the benefit of such Purchaser in the amount of 150% of the market value
of
such Shares (based on the Closing Price of the Common Stock on the date of
the
event giving rise to the Company’s obligation hereunder), which is subject to
the injunction, which bond will remain in effect until the completion of
litigation of the dispute and the proceeds of which will be payable to the
Purchaser to the extent it obtains judgment. Nothing herein will limit a
Purchaser’s right to pursue actual damages for the Company’s failure to deliver
Shares hereunder and such Purchaser will have the right to pursue all remedies
available to it at law or in equity including, without limitation, a decree
of
specific performance and/or injunctive relief. Additionally, prior to any
issuance hereunder, a Purchaser will have the right to irrevocably defer such
issuance, in whole or in part, at the election of the Purchaser prior to such
issuance, for a continuous period of 75 days. Notwithstanding anything to the
contrary herein, this Section 4.15 will not apply to any Securities issued
pursuant to the terms and conditions of this Agreement or an Exempt
Issuance.
4.12 Delivery
of Securities After Closing. The Company will deliver, or cause to be
delivered, the respective Shares and Warrants purchased by each Purchaser to
such Purchaser within 3 Trading Days of the Closing Date.
20
4.13 Resales
by Purchaser. Each Purchaser understands and acknowledges, severally and not
jointly with any other Purchaser, that the SEC currently takes the position
that
coverage of short sales of shares of the Common Stock “against the box” prior to
the Effective Date of the Registration Statement with the Shares purchased
hereunder is a violation of Section 5 of the Securities Act, as set forth in
Item 65, Section 5 under Section A, of the Manual of Publicly Available
Telephone Interpretations, dated July 1997, compiled by the Office of Chief
Counsel, Division of Corporation Finance. Accordingly, each Purchaser hereby
agrees not to use any of the Shares to cover any short sales made prior to
the
Effective Date. Further, each Purchaser agrees to comply with any obligations
it
may have under Regulation M with respect to the resale of the
Securities.
ARTICLE
V.
MISCELLANEOUS
5.1 Termination.
This Agreement may be terminated by any Purchaser, by written notice to the
other parties, if the Closing has not been consummated on or before July 31,
2005; provided that no such termination will affect the right of any party
to
xxx for any breach by the other party (or parties).
5.2 Fees
and Expenses. Except as otherwise set forth in this Agreement, each party
will pay the fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party incident to
the
negotiation, preparation, execution, delivery and performance of this Agreement.
The Company will pay all stamp and other taxes and duties levied in connection
with the delivery of the Securities.
5.3 Entire
Agreement. The Transaction Documents, together with the exhibits and
schedules thereto, contain the entire understanding of the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and
schedules.
5.4 Notices.
Any and all notices or other communications or deliveries required or permitted
to be provided hereunder will be in writing and will be deemed given and
effective on the earliest of (a) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number set forth
on
the signature pages attached hereto prior to 6:30 p.m. (New York City time)
on a
Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
set
forth on the signature pages attached hereto on a day that is not a Trading
Day
or later than 6:30 p.m. (New York City time) on any Trading Day, (c) the second
Trading Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service, or (d) upon actual receipt by the party to whom
such
notice is required to be given. The address for such notices and communications
will be as set forth on the signature pages attached hereto.
5.5 Amendments;
Waivers. No provision of this Agreement may be waived or amended except in a
written instrument signed, in the case of an amendment, by the
and
each
Purchaser or, in the case of a waiver, by the party against whom enforcement
of
any such waiver is sought. No waiver of any default with respect to any
provision, condition or requirement of this Agreement will be deemed to be
a
continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor will any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right.
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5.6 Construction.
The headings herein are for convenience only, do not constitute a part of this
Agreement and will not be deemed to limit or affect any of the provisions
hereof. The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.
5.6 Successors
and Assigns. This Agreement will be binding upon and inure to the benefit of
the parties and their successors and permitted assigns. The Company may not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of each Purchaser. Any Purchaser may assign any or all of its
rights under this Agreement to any Person to whom such Purchaser assigns or
transfers any Securities, provided such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the provisions hereof
that
apply to the “Purchasers”.
5.7 No
Third-Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective successors and permitted assigns and is
not
for the benefit of, nor may any provision hereof be enforced by, any other
Person, except as otherwise set forth in Section 4.9.
5.8 Governing
Law. All questions concerning the construction, validity, enforcement and
interpretation of the Transaction Documents will be governed by and construed
and enforced in accordance with the internal laws of the State of California,
without regard to the principles of conflicts of law thereof. Each party agrees
that all legal proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, employees or agents) will be
commenced exclusively in the state and federal courts sitting in San Francisco.
Each party hereby irrevocably submits to the exclusive jurisdiction of the
state
and federal courts sitting in San Francisco, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, that such suit, action or proceeding
is
improper or inconvenient venue for such proceeding. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service will constitute good and sufficient service of
process and notice thereof. Nothing contained herein will be deemed to limit
in
any way any right to serve process in any manner permitted by law. The parties
hereby waive all rights to a trial by jury. If either party will commence an
action or proceeding to enforce any provisions of the Transaction Documents,
then the prevailing party in such action or proceeding will
be
reimbursed by the other party for its attorneys’ fees and other costs and
expenses incurred with the investigation, preparation and prosecution of such
action or proceeding.
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5.9 Survival.
The representations and warranties herein will survive the Closing and delivery
of the Shares and Warrant Shares for up to three years from the date
hereof.
5.10 Execution.
This Agreement may be executed in two or more counterparts, all of which when
taken together will be considered one and the same agreement and will become
effective when counterparts have been signed by each party and delivered to
the
other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission, such signature will create a valid and binding obligation of
the
party executing (or on whose behalf such signature is executed) with the same
force and effect as if such facsimile signature page were an original
thereof.
5.11 Severability.
If any provision of this Agreement is held to be invalid or unenforceable in
any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement will not in any way be affected or impaired thereby and the
parties will attempt to agree upon a valid and enforceable provision that is
a
reasonable substitute therefor, and upon so agreeing, will incorporate such
substitute provision in this Agreement.
5.12 Rescission
and Withdrawal Right. Notwithstanding anything to the contrary contained in
(and without limiting any similar provisions of) the Transaction Documents,
whenever any Purchaser exercises a right, election, demand or option under
a
Transaction Documents and the Company does not timely perform its related
obligations within the periods therein provided, then such Purchaser may rescind
or withdraw, in its sole discretion from time to time upon written notice to
the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights.
5.13 Replacement
of Securities. If any certificate or instrument evidencing any Securities is
mutilated, lost, stolen or destroyed, the Company will issue or cause to be
issued in exchange and substitution for and upon cancellation thereof, or in
lieu of and substitution therefor, a new certificate or instrument, but only
upon receipt of evidence reasonably satisfactory to the Company of such loss,
theft or destruction and customary and reasonable indemnity, if requested.
The
applicants for a new certificate or instrument under such circumstances will
also pay any reasonable third-party costs associated with the issuance of such
replacement Securities.
5.14 Remedies.
In addition to being entitled to exercise all rights provided herein or granted
by law, including recovery of damages, each of the Purchasers and the Company
will be entitled to specific performance under the Transaction Documents. The
parties agree that monetary damages may not be adequate compensation for any
loss incurred by reason of any breach of obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance
of
any such obligation the defense that a remedy at law would be
adequate.
5.15 Payment
Set Aside. To the extent that the Company makes a payment or payments to any
Purchaser pursuant to any Transaction Documents or a Purchaser enforces or
exercises
its rights thereunder, and such payment or payments or the proceeds of such
enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company,
a trustee, receiver or any other person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation
or
part thereof originally intended to be satisfied will be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
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5.16 Independent
Nature of Purchasers’ Obligations and Rights. The obligations of each
Purchaser under any Transaction Documents are several and not joint with the
obligations of any other Purchaser, and no Purchaser will be responsible in
any
way for the performance of the obligations of any other Purchaser under any
Transaction Documents. Nothing contained herein or in any Transaction Documents,
and no action taken by any Purchaser pursuant thereto, will be deemed to
constitute the Purchasers as a partnership, an association, a joint venture
or
any other kind of entity, or create a presumption that the Purchasers are in
any
way acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. Each Purchaser will
be
entitled to independently protect and enforce its rights, including without
limitation, the rights arising out of this Agreement or out of the other
Transaction Documents, and it will not be necessary for any other Purchaser
to
be joined as an additional party in any proceeding for such purpose. Each
Purchaser has been represented by its own separate legal counsel in their review
and negotiation of the Transaction Documents. The Company has elected to provide
all Purchasers with the same terms and Transaction Documents for the convenience
of the Company and not because it was required or requested to do so by the
Purchasers.
5.17 Liquidated
Damages. The Company’s obligations to pay any partial liquidated damages or
other amounts owing under the Transaction Documents is a continuing obligation
of the Company and will not terminate until all unpaid partial liquidated
damages and other amounts have been paid notwithstanding the fact that the
instrument or security pursuant to which such partial liquidated damages or
other amounts are due and payable will have been canceled.
(Signature
Page Follows)
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IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as
of
the date first indicated above.
|
|
Address
for Notice:
|
|
By:__________________________________________
Name:
Xxxxx X. Xxxx
Title:
President
|
0000
Xxxxxxxxx Xxx, Xxxxx 000
Xxxx,
XX 00000
775-324-4881
|
|
With
a copy to (which will not constitute notice):
|
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGES FOR PURCHASERS FOLLOW]
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[PURCHASER
SIGNATURE PAGES TO BLRV SECURITIES PURCHASE AGREEMENT]
IN
WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
to be duly executed by their respective authorized signatories as of the date
first indicated above.
Name
of
Purchaser:
____________________________________________________________________________
Signature
of Authorized Signatory of Purchaser:
______________________________________________________
Name
of
Authorized Signatory:
____________________________________________________________________
Title
of
Authorized Signatory:
_____________________________________________________________________
Email
Address of Purchaser:
_______________________________________________________________________
Address
for Notice of Purchaser:
Address
for Delivery of Securities for Purchaser (if not same as above):
Subscription
Amount:
Shares:
Warrant
Shares:
EIN
Number: [PROVIDE
THIS UNDER SEPARATE COVER]
[SIGNATURE
PAGES CONTINUE]
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