EXHIBIT 10.3
COMMON STOCK PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is
made as of May 7, 2002 (the "Effective Date"), by and among
Water Star, Inc., a Nevada corporation with its principal place
of business at 0000 Xxxxxx Xxx Xxx, Xxx Xxxxx, XX 00000 (the
"Company") and the Brighton Opportunity Fund a California limited
partnership with its principal place of business at 000 X. Xxxxx
Xx., Xxxxx 000, Xxxxxxx Xxxxx, XX 00000 (the "Purchaser").
AGREEMENT
In consideration. of the mutual covenants contained in this
Agreement, and for other good and valuable consideration, the
receipt of which is hereby acknowledged, the Company and the
Purchaser hereby agree as follows:
SECTION 1. AUTHORIZATION OF SALE OF THE SHARES. Subject
to the terms and conditions of this Agreement, the Company has,
or before the Closing (as defined below) will have, authorized
the sale and issuance of Four Hundred Fifty Thousand (450,000)
shares of its common stock ("Shares") to the Purchaser.
SECTION 2. AGREEMENT TO SELL AND PURCHASE THE SHARES.
2.1. At the Closing (as defined in Section 3.1 hereof),
the Company shall sell, and the Purchaser shall purchase the
Shares for an aggregate purchase price of Four Hundred and Fifty
Thousand Dollars ($450,000). The Shares shall be delivered in
two blocks as follows:
1. Four Hundred Fifty Thousand (450,000) Shares
issued by the Company dated May 7, 2002, legended to restrict
transfer pursuant to Rule 144, a copy of the certificate for
which is attached hereto as Exhibit A, showing the front and back
of the share certificate: subject to an "Adjustment Price" set
forth in Paragraph 4.17, and "Adjustment Shares" set forth in
Paragraph 4.18 ; and
2. One Hundred Fifty Thousand (150,000) Shares Rule
144, with evidence of transfer to the securities account in the
name of Purchaser as specified in Exhibit B hereto prior to
Closing ("Collateral Shares"). The Collateral Shares are
delivered as collateral for the performance of the Registration
provisions set forth in Paragraphs 8.1 and 8.2 by the Company and
said Collateral Shares shall be returned to the Company upon the
completion of the Registration of the 450,000 purchased shares,
as set forth in Paragraph 8.2.
3. The Restricted Shares and the Collateral Shares
shall be referred to hereinafter in the aggregate as the
"Shares".
SECTION 3. CLOSING AND DELIVERY.
3.1. Closing. The closing of the purchase and sale of
the Shares pursuant to this Agreement (the "Closing") shall be
held as soon as practicable after the execution of this Agreement
at the offices of Jacaques Chen, Esq., 0000 Xxxxxxx Xxxx Xxxx,
Xxxxx 0000, Xxx Xxxxxxx, XX 00000, or on such other date and
place as may be agreed to by the Company and the Purchaser. The
Company shall give at least one (1) business day prior written
notice to the Purchaser, in a manner provided for in Section 9.4
hereof, of the date, time and location of the Closing. At or
prior to the Closing, the Purchaser shall execute any related
agreements or other documents required to be executed hereunder,
dated as of the date of the Closing (the "Closing Date").
3.2. Delivery of the Shares at the Closing. At or
prior to the Closing, the Company shall deliver to the Purchaser
the Shares.
SECTION 4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF
THE COMPANY.
4.1. Organization and Standing. Each of the Company
and its subsidiaries has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has full corporate power and
authority to own or lease its properties and conduct its business
as presently conducted.
4.2. Corporate Power; Authorization. The Company has
all requisite corporate power, and has taken all requisite
corporate action, to execute and deliver this Agreement, sell and
issue the Shares and carry out and perform all of its obligations
under this Agreement. This Agreement constitutes the legal,
valid and binding obligation of the Company, enforceable in
accordance with its terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization, arrangement, moratorium
and other laws of general applicability relating to or affecting
creditors' rights, (b) as limited by equitable principles
generally, whether such enforceability is considered in a
proceeding in equity or at law, and (c) as rights to indemnity or
contribution hereunder may be limited by federal or state
securities laws or principles of public policy. Except as would.
not individually or in the aggregate have a material adverse
effect on, or result in a material adverse change in, the
business, properties, operations, condition (financial or
other) or results of operations of the Company and its
subsidiaries, taken as a whole, or render this Agreement, or any
portion hereof, invalid or unenforceable or impair in any
material respect the ability of the Company to perform fully its
obligations hereunder (any of the foregoing shall be referred to
herein as a "Material Adverse Effect"), the execution and
delivery of this Agreement does not, and the performance of this
Agreement and the compliance with the provisions hereof and the
issuance, sale and delivery of the Shares by the Company will not
conflict with, or result in a breach or violation of the terms,
conditions or provisions of, or constitute a default under, or
result in the creation or imposition of any lien pursuant to the
terms of (i) the Certificate of Incorporation or Bylaws of the
Company, (ii) any statute, law, rule or regulation applicable to
the Company, (iii) any state or federal order, judgment or decree
applicable to the Company, or (iv) any indenture, mortgage, lease
or other agreement or instrument to which the Company or any of
its properties is subject.
4.3. Issuance and Delivery of the Shares. The Shares
have been duly authorized and, when issued and paid for in
compliance with the provisions of this Agreement, will be validly
issued, fully paid and nonassessable. The issuance and delivery
of the Shares is not subject to preemptive, co-sale, right of
first refusal or any other similar rights of the shareholders of
the Company or its subsidiaries or any liens or encumbrances. No
holder of any of the Company's securities has been granted any
registration rights other than the registration rights set forth
herein.
4.4. Disclosure Documents; Financial Statements.
(a) Each statement or report included as part of the
periodic reports filed by the Company with the Securities and
Exchange Commission ("SEC") pursuant to Sections 13, 14(a) and
(d) of the Securities Exchange Act of 1934 (the "Exchange Act")
is true and complete in all respects. The Company has filed in a
timely manner all documents ("Disclosure Documents") that the
Company was required to file with the SEC under Sections 13,
14(a) and 15(d) of the Exchange Act during the twelve (12) months
preceding the date of this Agreement. The Company satisfies the
requirements for the use of Form S-3 under the Securities Act of
1933, as amended (the "Securities Act") with respect to any
registration of the Shares for resale by the holders thereof.
(b) As of their respective filing dates (or, if
amended, when amended), the Disclosure Documents complied in all
material respects with the requirements of the Exchange Act and
the information contained therein as of the date thereof did not
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make
the statements therein in light of the circumstances under which
they were made not misleading, except to the extent that
information contained in any such document has been revised or
superseded by a later filed SEC document. The Disclosure
Documents, did not contain any untrue statement of fact or omit
to state facts required to be stated therein or necessary to make
the statements made therein, in light of the circumstances under
which they were made, not misleading.
(c) The financial statements of the Company and its
subsidiaries included or incorporated by reference in the
Disclosure Documents comply in all respects with applicable
accounting requirements and with the published rules and
regulations of the SEC with respect thereto, The Financial
Statements have been prepared in accordance with generally
accepted accounting principles consistently applied ("GAAP") and
fairly present the financial position of the Company and its
subsidiaries at the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in
the case of the unaudited statements having been prepared in
accordance with GAAP for interim financial information including
normal recurring adjustments). Since the date of the Financial
Statements, there has been no material commitment of the Company
or any of its subsidiaries which is not reflected in the
Financial Statements except commitments made in the ordinary
course of business.
4.5. Intellectual Property. Each of the Company and
its subsidiaries owns or, to the Company's knowledge, possesses
adequate rights to use all material patents, patent rights,
inventions, trade secrets and know-how described or referred to
in the Offering Memorandum as owned or used by it or that are
necessary for the conduct of its lousiness as presently conducted
and as described in the Disclosure Documents. Each of the
Company and its subsidiaries has not received any notice of, nor
has any knowledge of, any infringement of or conflict with
asserted rights of others with respect to any patent, patent
right, invention, trade secret or know how that, individually or
in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would have a Material Adverse Effect.
4.6. Capitalization. As of May 7, 2002 (the "Share
Date"), the Company had authorized 150,000,000 shares of common
stock (the "Common Stock") of which 7,793,501 shares were issued
and outstanding. There have been no changes in the outstanding
capital stock of the Company since the Share Date except for,
grants of options pursuant to option plans described in the
Disclosure Documents and to the extent that certain outstanding
options, convertible securities and warrants may have been
exercised. The certificates evidencing the Shares are in due and
proper legal form in and have been duly authorized for issuance
by the Company. All of the issued and outstanding securities of
the Company have been duly authorized and validly issued, are
fully paid and nonassessable, have been issued in compliance with
Federal, state and other applicable laws and were issued without
violation of any preemptive, co-sale or other right. Except as
otherwise disclosed in the Disclosure Documents, there are no
outstanding options, warrant, agreement or other right calling
for the issuance or redemption of, and there is no commitment,
plan or arrangement to issue or redeem, any securities of the
Company. The Company owns, beneficially and of record, all of
the securities of each of its subsidiaries. Neither the Company
nor any of its subsidiaries has any binding agreement with
respect to the acquisition or purchase of the securities of or
owned by any person or entity or the acquisition of the business,
assets or liabilities of any person or entity, and neither the
Company nor any of its subsidiaries has any agreement or
understanding with respect to the disposition or sale of their
business, assets or property other than in the ordinary course of
their bushiness.
4.7. Litigation. Except as disclosed in the Disclosure
Documents, there is no pending or, to the Company's knowledge,
threatened action, suit or other proceeding to which the Company
or its subsidiaries is a party or to which its property or assets
are subject which would have a Material Adverse Effect; and no
labor disturbance by the employees of the Company or any
subsidiary exists or is imminent which would have a Material
Adverse Effect.
4.8. No Defaults. Neither the Company nor any of its
subsidiaries is in violation or default of any provision of its
certificate of incorporation or bylaws, or any organizational
documents, or is in breach with respect to any provision of any
agreement, judgment, decree, order, mortgage, deed of trust,
lease, franchise, license, indenture, permit or other instrument
to which it is a party or by which it or any of its properties
are bound which violation, default or breach would have a
Material Adverse Effect; and there does not exist any state of
facts which constitutes ail event of default on the part of the
Company or any such subsidiary as defined in such documents or
which, with notice or lapse of time or both, would constitute
such an event of default.
4.9. Governmental Consents. No consent, approval,
order or authorization of, or registration, qualification,
designation, declaration or filing with, any federal, state, or
local governmental authority on the part of the Company is
required in connection with the consummation of the transactions
contemplated by this Agreement ("Consents") except for (a) such
Consents which are not material, (b) compliance with the
securities and blue sky laws in the states and other
jurisdictions in which Shares are offered and/or sold, which
compliance will be effected in accordance with such laws, and (c)
the filing and effectiveness of a Registration Statement and any
amendments thereto with the SEC as contemplated by Section 8.1
hereof. The Company and its subsidiaries are conducting business
in compliance with all applicable laws, rules and regulations of
the jurisdictions in which it is conducting business, including
but not limited to, all applicable local, state and federal
environmental laws and regulations, except where the failure to
so comply would not have a Material Adverse Effect.
4.10. Taxes. Each of the Company and its subsidiaries
have filed all necessary federal, state and foreign income and
franchise tax returns and have paid or accrued all taxes shown as
due thereon except for such taxes as are being contested in good
faith, and the Company has no knowledge of any tax deficiency
winch has been or might be asserted or threatened against the
Company or its subsidiaries which would have a Material Adverse
Effect.
4.11. Insurance. The Company and its subsidiaries
maintain property, general liability, directors and officers and
errors and omissions insurance policies of the types and in the
amounts generally deemed adequate for its business covering all
risks customarily insured against, all of which insurance is in
full force and effect.
4.12. Investment Company. The Company is not an
"investment company" within the meaning of the investment Company
Act of 1940, as amended.
4.13. Listing; Maintenance of Listing. The Common Stock
is traded on The Nasdaq Over the Counter Bulletin Board (the
"Bulletin Board"). For so long as the Company is obligated to
keep in effect the Registration Statement provided under Section
8 hereof, the Company shall use commercially reasonable efforts
to maintain its authorization to trade on the Bulletin Board or a
national securities exchange, as defined in the Exchange Act.
4.14. No Registration. Assuming the accuracy of the
representations and warranties made by, and compliance with the
covenants of, the Purchaser in Section 5 hereof, no registration
of the shares under the Securities Act is required in connection
with the sale of the shares to the Purchaser as contemplated by
this Agreement.
4.15. Subsidiaries. All of the issued and outstanding
securities of each of the Company's subsidiaries have been duly
authorized and validly issued, are fully paid and nonassessable,
have been issued in compliance with Federal, state and other
applicable laws and were issued without violation of any
preemptive, co-sale or other right.
4.16. Material Adverse Effect. There has not been,
since the date of the latest Disclosure Document any change or
any development involving or which may reasonably be expected to
involve a change in the condition (financial or other), business,
operations, properties, or results of operations of the Company
or its subsidiaries that could reasonably be expected to have a
Material Adverse Effect.
4.17 "Adjustment Price" shall mean if the price is ten percent
(10%) or below the average share price paid from the closing
date, at the time on which the SEC has declared effective a
Registration Statement registering resale of Registrable
Securities as set forth in Section 7.2(a) and (ii) the date on
which such Registrable Securities first become eligible for
resale pursuant to Rule 144 of the Securities Act.
4.18 "Adjustment Shares" if the Adjustment Price shall fall more
than ten percent(10%) below the Purchase Price in respect of
shares purchased by Investor on the Closing Date, then the
Investor shall be issued Adjustment Shares equal to the
difference between the number of shares purchased on the Closing
Date and the amount that would have been purchased if the
Purchase Price had been the Adjustment Price. The Adjustment
Shares shall be issued to Investor within 12 Trading Days of the
Effective Date.
SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF
THE PURCHASER.
5.1. The Purchaser represents and warrants to and
covenants with the Company that:
(a) Purchaser is knowledgeable, sophisticated and
experienced in making, and is qualified to make, decisions with
respect to investments in shares presenting an investment
decision like that involved in the purchase of the Shares,
including investments in securities issued by the Company.
Purchaser has had the opportunity to meet with representatives of
the Company in order to ask questions regarding the Company and
the terms of this Agreement, and Purchaser has requested,
received, reviewed and considered all information Purchaser deems
relevant in making an informed decision to purchase the Shares.
(b) Purchaser is purchasing the Shares in the ordinary
course of its business for its own account and with no present
intention of distributing the Shares or any arrangement or
understanding with any other persons regarding the distribution
of the Shares.
(c) Purchaser shall not, directly or indirectly,
offer, sell, pledge, transfer or otherwise dispose of (or solicit
any offers to buy, purchase or otherwise acquire or take a pledge
of) any of the securities purchased hereunder except in
compliance with the Securities Act, applicable blue sky laws, and
the rules and regulations promulgated thereunder.
(d) Purchaser has, in connection with its decision to
purchase the Shares, relied with respect to the Company and its
affairs solely upon the Disclosure Documents and the
representations and warranties of the Company contained herein.
(e) Purchaser is an "accredited investor" within the
meaning of Rule 501 (a) (1), (2) or (3) of Regulation D
promulgated under the Securities Act.
(f) Purchaser has full right, power, authority and
capacity to enter into this Agreement and to consummate the
transactions contemplated hereby and has taken all necessary
action to authorize the execution, delivery and performance of
this Agreement. Upon the execution and delivery of this
Agreement by Purchaser, this Agreement shall constitute a valid
and binding obligation of Purchaser, enforceable in accordance
with its terms.
5.2. Purchaser is able to bear the economic risk of
holding the Shares for an indefinite period, including the loss
of Purchaser's entire investment. The Shares were not offered
,or sold to Purchaser by any form of general solicitation or
advertising, provided that the Purchaser and the Company are
aware that the Purchaser may elect to sell any or all of the
Shares as soon as possible after the Closing.
5.3. Purchaser understands that each of the
representations and warranties of Purchaser may be relied upon by
the Company in connection with the preparation and filing of the
Registration Statement (as defined in Section 8.1 below).
5.4. Purchaser understands that: the Restricted
Shares: shall not be transferable in the absence of a
registration under the Securities Act or an exemption therefrom
or in the absence of compliance with any term of this Agreement;
the Company shall provide stop transfer instructions to its
transfer agent with respect to the Restricted Shares in order to
enforce the restrictions contained in this Section 5.4 and to
confirm that Purchaser has complied with its obligations
contained in Section 8.2 hereof, and (c) to the extent not
covered by an effective registration statement under the
Securities Act, each certificate representing Restricted Shares
shall be in the name of Purchaser and shall bear substantially
the following legend (in addition to any legend required under
applicable securities laws):
"THE SECURITIES REPRESENTED BY THIS, CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR QUALIFIED UNDER
THE CALIFORNIA CORPORATE SECURITIES LAW OF 1968, AS
AMENDED, OR REGISTERED OR QUALIFIED UNDER THE
SECURITIES LAWS OF ANY OTHER JURISDICTION, AND MAY ONLY
BE SOLD, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSE) OF
BY AN INVESTOR IF SUBSEQUENTLY REGISTERED UNDER THE
SECURITIES ACT AND REGISTERED OR QUALIFIED UNDER ANY
APPLICABLE STATE SECURITIES LAWS, UNLESS THE COMPANY
DETERMINES THAT EXEMPTIONS FROM SUCH REGISTRATION AND
QUALIFICATION REQUIREMENTS ARE AVAILABLE."
SECTION 6. CONDITIONS TO COMPANY'S OBLIGATIONS AT THE
CLOSING. The Company's obligations to complete the sale and
issuance of the Shares and to deliver Shares to the Purchaser
shall be subject to the following Conditions (to the extent not
waived by the Company)
6.1. Representations and Warranties Correct. The
representations and Warranties made by the Purchaser in Section 5
hereof shall be true and correct when made, and shall be true and
correct on the Closing Date and the obligations of the Purchaser
which are to be performed or complied with on or prior to the
Closing Date, have been so performed or complied with
This Agreement may be terminated by the Company if the
Closing has not transpired by the third day after the Effective
Date for reasons other than a breach of this Agreement by the
Company.
SECTION 7. CONDITIONS TO PURCHASER'S OBLIGATIONS AT THE
CLOSING. The Purchaser's obligation to accept delivery of the
Shares and to pay for the Shares shall be subject to the
following conditions (to the extent not waived by the Purchaser):
7.1. Representations and Warranties Correct. The
representations and warranties made, by the Company in Section 4
hereof shall be true and correct when made and as of the Closing
Date and the obligations of the Company which are to be performed
or complied with on or prior to the Closing Date have been so
performed or complied with, and the Purchaser shall have received
a certificate signed by the chief executive officer and chief
financial officer of the Company, or such other officers of the
Company, as agreed upon by the parties hereto, that each of such
representations and warranties, as appropriate, is true and
correct in all material respects on and as of the Closing Date
with the same effect as though such representations and
warranties had been made or given on and as of the Closing Date,
and that the Company has performed and complied with all of its
obligations under this Agreement which are to be performed or
complied with on or prior to the Closing Date.
7.2. Legal Opinions. The Purchaser shall have received
an opinion letter from Xxxxxxx & Xxxxxxxx, Esq., counsel to the
Company, without qualification, stating that the Restricted
Shares have been duly and validly issued by the Company to the
Purchaser; (ii) the Agreement constitutes a valid binding and
enforceable agreement against Purchaser in accordance with its
terms (iii) the Company is eligible to file a registration
statement for registration of the Restricted Shares in the manner
provided in Paragraph 8 hereof and there are no SEC restrictions
or policies, to the best of the knowledge of the attorney, with
respect to the Company's ability to effectuate the registration
statement and achieve SEC registration as soon as practicable;
(iv) that the Collateral Shares, upon transfer to the account of
Purchaser are saleable by the Purchaser in open market
transactions pursuant Rule 144 should the Company fail to
Register the Restricted shares within 120 days of the Closing
Date without restriction and that the attorney covenants to issue
appropriate instructions to the transfer agent, if necessary, to
authorize transfer of the Restricted Shares or the Collateral
Shares immediately upon the written request of the Purchaser.
7.3. Material Adverse Effect. There shall not have
been, since the date of this Agreement, a change in the business,
properties, operations, condition (financial or other) or results
of operations of the Company or its subsidiaries, that could
reasonably be expected to have a Material Adverse Effect.
This Agreement may be terminated by the Purchaser if the
Closing has not transpired by the third day after the Effective
Date for reasons other than a breach of this Agreement by the
Purchaser.
SECTION 8. REGISTRATION OF THE RESTRICTED SHARES;
COMPLIANCE WITH THE SECURITIES ACT.
8.1. Registration Procedures and Expenses. The Company
is obligated to do the following:
(a) As soon as practicable following the Effective
Date and in any event no later than five (5) business days
following the Effective Date, the Company shall prepare and file
with the SEC one or more registration statements in order to
register with the SEC the continuous resale by the Purchaser,
from time to time, of the Shares through the Bulletin Board or
the facilities of any national securities exchange on which
Common Stock is then traded, or in privately-negotiated
transactions (a "Registration Statement"). The Company shall use
its reasonable best efforts to cause such Registration Statement
to be declared effective as soon thereafter as reasonably
possible.
(b) The Company shall prepare and file with the SEC
(i) such amendments and supplements to the Registration Statement
and the prospectus used in connection therewith, and (ii) such
other filings required by the SEC, in each case as may be
necessary to keep the Registration Statement continuously
effective and not misleading until the earlier of (A) the
second anniversary date of the Closing, or (B) such
date as all of the Restricted Shares have been resold.
(c) In order to facilitate the public sale or other
disposition of all or any of the Restricted Shares by the
Purchaser, the Company shall furnish to the Purchaser with
respect to the Shares registered under the Registration Statement
such number of copies of prospectuses, prospectus supplements and
preliminary prospectuses as such Purchaser reasonably requests in
conformity with the requirements of the Securities Act.
(d) The Company shall file any documents reasonably
required of the Company for normal blue sky clearance in states
specified in writing by the Purchaser; provided, however, that
the Company shall not be required to qualify to do business or
consent to service of process in any jurisdiction in which it is
not now so qualified or has not so consented.
(e) The Company shall bear all expenses in connection
with the procedures in paragraphs (a) through (d) of this Section
8. 1.
(f) With a view to making available to the Purchaser
the benefits of Rule 144 promulgated under the Securities Act
("Rule 144") and any other rule or regulation of the SEC that may
at any time permit the Purchaser to sell Restricted Shares to the
public without registration or pursuant to registration, the
Company covenants and agrees to: (i) make and keep public
information available, and those terms arc understood and defined
in Rule 144, until the earlier of (A) the second anniversary of
the Closing Date or (B) such date as all of the Shares shall have
been resold; (ii) file with the SEC in a timely manner all
reports and other documents required of the Company under the
Exchange Act; and (iii) furnish to the Purchaser upon request, as
long as the Purchaser owns any Restricted Shares, (A) a written
statement by the Company that it has complied with the reporting
requirements of the Exchange Act, and (B) such other information
as may be reasonably requested in order to avail the Purchaser of
any rule or regulation of the SEC that permits the selling of any
such Shares without registration under the Securities Act.
(g) The Purchaser acknowledges that there may
occasionally be times when the Company determiners the use of the
prospectus forming a part of the Registration Statement (the
"Prospectus") should be suspended until such time as an amendment
or supplement to the Registration statement or the Prospectus has
been filed by the Company and any such amendment to the
Registration Statement is declared effective by the SEC, or until
such time as the Company has filed an appropriate report with the
SEC pursuant to the Exchange Act. The Purchaser hereby covenants
that it will not sell any Shares pursuant to the Prospectus
during the period commencing at the time at which the Company
gives the Purchaser written notice of the suspension of the use
or the Prospectus and ending at the time the Company gives the
Purchaser written notice that the Purchaser may thereafter effect
sales pursuant to the Prospectus. The Company may, upon written
notice to the Purchaser, suspend the use of the Prospectus for
two 30-day periods in any 365-day period based on the reasonable
determination of the Company's Board of Directors that there is a
significant business purpose for such determination, such as
pending corporate developments, public filings with the SEC or
similar events. The Company shall in no event be required to
disclose the business purpose for which it has suspended the use
of the Prospectus if the Company determines in its good faith
judgment that the business purpose should remain confidential.
The Company shall use its reasonable best efforts to minimize the
length of the suspension period.
8.2. Return of Shares. In the event that the
Registration Statement is declared effective by the SEC on or
before ninety days (120) from the Closing Date in a manner which
enables the Purchaser to immediately resale all of the Shares,
Purchaser will transfer to the Company a share certificate for
One Hundred Fifty Thousand Collateral Shares (150,000). In the
event that the Registration Statement is not declared effective
by the SEC after ninty days (120) from the Closing Date, the
Collateral shares will be forfeited by the Company and
surrendered to the purchaser fully paid and unencumbered.
8.3. Indemnification. As used in this Section 8.3 the
following terms shall have the following respective meanings:
(g) "Registration Statement" shall mean the
Registration Statement referred to in Section 8.1 hereof,
including any exhibit and amendment thereto, and any preliminary
or final prospectus, and any supplement thereto; and
(h) "Untrue Statement" shall include any untrue
statement or alleged untrue statement, or any omission or alleged
omission to state in the Registration Statement a 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.
The Company agrees to indemnify and hold harmless the
Purchaser, in respect of the Shares purchased pursuant to this
Agreement, from and against any losses, claims, damages or
liabilities to which such Purchaser may become subject (under the
Securities Act or otherwise) insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect
thereof) arise out of, or are based upon any Untrue Statement, or
arise out of any failure by the Company to fulfill any
undertaking included in the Registration Statement and the
Company shall reimburse as incurred such Purchaser for any
reasonable legal or other expenses reasonably incurred in
investigating, defending or preparing to defend any such action,
proceeding or claim; provided, however, that the Company shall
not be liable to such Purchaser in any such case to the extent
that such loss, claim, damage or liability arises out of, or is
based upon, an Untrue Statement made in such Registration
Statement in reliance upon and in conformity with written
information furnished to, the Company by or on behalf of such
Purchaser specifically for use in preparation of the Registration
Statement.
The Purchaser agrees to indemnify and hold harmless the
Company (and each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act, each officer of
the Company who signs the Registration Statement and each
director of the Company) from and against any losses, claims,
damages or liabilities to which the Company (or any such officer,
director or controlling person) may become subject (under the
Securities Act or otherwise), insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect
thereof) arise out of, or are based upon, any Untrue Statement
contained in the Registration Statement if such Untrue Statement
was made in reliance upon and in conformity with written
information furnished by or on behalf of such Purchaser
specifically for use in preparation of the Registration
Statement, and such Purchaser shall reimburse as incurred the
Company (or such officer, director or controlling person), as the
case may be, for any legal or other expenses reasonably incurred
in investigating, defending or preparing to defend any such
action, proceeding or claim; provided, however, that in no event
shall any indemnity by a Purchaser under this Section 8.3 exceed
the gross proceeds received by such Purchaser from the sale of
Shares covered by such Registration Statement.
Promptly after receipt by any indemnified person of a notice
of a claim or the beginning of any action in respect of which
indemnity is to be sought against an indemnifying person pursuant
to this Section 8.3, such indemnified person shall notify the
indemnifying person in writing of such claim or of the
commencement of such action, and, subject to the provisions
hereinafter stated, in case any such action shall be brought
against an indemnified person and such indemnifying person shall
have been notified thereof, such indemnifying person shall be
entitled to participate theorem, and, to the extent it shall
wish, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified person. After notice from the
indemnifying person to such indemnified person of its election to
assume the defense thereof, such indemnifying person shall not be
liable to such indemnified person for ally legal expenses
subsequently incurred by such indemnified person in connection
with the defense thereof; provided, however, that if there exists
or shall exist a conflict of interest that would make it
inappropriate, in the opinion of counsel to the indemnified
person, for the same counsel to represent both the indemnified
person and such indemnifying person or any affiliate or associate
thereof, the indemnified person shall be entitled to retain its
own counsel at the expense of such indemnifying person; provided,
however, that no indemnifying person shall be responsible for
the fees and expenses or more than one separate counsel for each
indemnified party, it being understood that the Company shall not
be responsible for the fees and expenses of more than one counsel
for the Purchaser and the Other Purchasers as a group, unless
the Purchaser and any Other Purchasers can not be represented by
the same counsel because of a conflict of interest.
8.4. Termination of Conditions and Obligations. The
conditions precedent imposed by Section 5.4 hereof or this
Section 8 upon the transferability of the Shares shall cease and
or terminate as to any particular number of the Shares when such
Shares shall have been otherwise disposed of in accordance with
the intended method of disposition set forth in the Registration
Statement covering such Shares or at such time as an opinion of
counsel satisfactory to the Company shall have been rendered to
the effect that such conditions are not necessary in order to
comply with the Securities Act.
SECTION 9. MISCELLANEOUS.
9.1. Waivers and Amendments. Neither this Agreement
nor any provision hereof may be changed, waived, discharged,
terminated, modified or amended except upon the written consent
of the Company and Purchaser.
9.2. Headings. The headings of the various sections of
this Agreement have been inserted for convenience of reference
only and shall not be deemed to be part of this Agreement.
9.3. Severability. In case any provision contained in
this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be
affected or impaired thereby.
9.4. Notices. All notices, requests, consents and
other communications hereunder shall be in writing, shall be sent
by confirmed facsimile or mailed by first-class registered or
certified airmail, or nationally recognized overnight express
courier, postage prepaid, and shall be deemed given when sent in
the case of facsimile transmission, or when so received in the
case of mail or courier, and addressed as follows:
(a) if to the Purchaser, to:
Brighton Opportunity Fund
000 X. Xxxxx Xx., Xxxxx000
Xxxxxxx Xxxxx, XX 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Attention: Tisno Onggara
with a copy so mailed to:
Jeffer, Mangels, Xxxxxx & Xxxxxxx LLP
2121 Avenue of the Stars, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Attention: Xxxxx Encil, Esq
or to such other person at such other place as the Company shall
designate to the Purchaser in writing; and
(b) if to the Company, at the address as set forth in
the Disclosure Document.
9.5. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of
California as applied to contracts entered into and performed
entirely in California by California residents, without regard to
conflicts of law principles.
9.6. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall constitute an
original, but all of which, when taken together, shall constitute
but one instrument, and shall become effective when one or more
counterparts have been signed by each party hereto and delivered
to the other parties.
9.7. Survival of Representations, Warranties and
Agreements, Definition of "Knowledge". Notwithstanding any
investigation made by any party to this Agreement, all covenants,
agreements, representations and warranties made by the Company
and the Purchaser herein and in the certificates for the
securities delivered pursuant hereto shall survive the execution
of this Agreement, the delivery to the Purchaser of the Shares
and the payment therefor; provided, however, all representations
and warranties of the Company shall survive for a period of two
years after the Closing Date. Any claim of a breach of
representation or warranty made prior to the end of the
applicable survival period which has not been finally resolved
before the expiration of such period shall survive and remain a
basis for such claim until finally resolved.
9.8. Successors and Assigns. Except as otherwise
expressly provided herein the provisions hereof shall inure to
the benefit of, and be binding upon, the successors, assigns,
heirs, executors and administrators of the parties hereto.
Neither the terms "successors" nor "assigns" as used herein shall
include any entity or person who purchases Shares from the
Purchaser after the Closing Date.
9.9. Entire Agreement. This Agreement and other
documents delivered pursuant hereto, including the exhibits and
appendices, constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof
and thereof.
9.10. Payment of Fees and Expenses. Each of the Company
and the Purchaser shall bear its own expenses with legal fees
incurred on its behalf with respect to this Agreement and the
transactions contemplated hereby provided, however, that the
Company shall bear the costs described in Section 8. If any
action at law or in equity is necessary to enforce or interpret
the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorney's fees, costs and necessary
disbursements in addition to any other relief to which such party
may be entitled.
9.11. Confidentiality. Purchaser acknowledges and
agrees that any information or data it has acquired from the
Company, not otherwise properly in the public domain, was
received in confidence. Purchaser agrees not to divulge,
communicate or disclose, except as may be required by law or for
the performance of this Agreement, or use to the detriment of the
Company or for the benefit of any other person or persons, or
misuse in any way, any confidential information of the Company.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly Authorized representatives
as of the day and year first above written.
the "Company"
Water Star, Inc
By: /s/ X. X. Xxxxxxx
"PURCHASER"
Brighton Opportunity Fund, L.P., a
California
limited partnership
By: Brighton Advisors, a California limited
liability company, its General Partner
By: /s/
Tisno Onggara, General Partner
Address: 000 X. Xxxxx Xx., Xxxxx 000
Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
By:__________________________________
__________________, Esq., as to
Paragraph 7.2 only
Address:
