EXHIBIT 4.88
BRIDGE LOAN AGREEMENT
THIS BRIDGE LOAN AGREEMENT, dated as of September 18, 2006, is
entered into by and between BRILLIANT TECHNOLOGIES CORPORATION, a Delaware
corporation with headquarters located at 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
(the "Company"), and the entity named on an executed counterpart of the
signature page hereto (the "Buyer").
WITNESSETH:
WHEREAS, the Company and the Buyer are executing and
delivering this Agreement in accordance with and in reliance upon the exemption
from securities registration for offers and sales to accredited investors
afforded, INTER ALIA, by Rule 506 under Regulation D ("Regulation D") as
promulgated by the United States Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "1933 Act"), and/or Section
4(2) of the 1933 Act; and
WHEREAS, the Buyer wishes to lend funds in the amount of the
Purchase Price (as defined below) to the Company, subject to and upon the terms
and conditions of this Agreement and acceptance of this Agreement by the
Company, the repayment of which will be represented by a Promissory Note of the
Company (the "Note"), on the terms and conditions referred to herein; and
WHEREAS, in connection with the loan to be made by the Buyer,
the Company has agreed to issue the Note and the Warrant (as defined below) to
the Buyer;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. PURCHASE.
(i) Subject to the terms and conditions of this Agreement and
the other Transaction Agreements (as defined below), the Buyer hereby agrees to
loan to the Company the principal amount specified on the Buyer's signature page
of this Agreement (the "Purchase Price").
(ii) The obligation to repay the loan of the relevant Purchase
Price from the Buyer shall be evidenced by the Company's issuance of one or more
Notes to the Buyer in the principal amount of ninety-four percent (94%) of the
Purchase Price paid by the Buyer. Each Note shall be payable on the date which
is the earlier of (i) November 3, 2006, or (ii) the date on which the New
Transaction Threshold (as defined in the Note) occurs. Each Note, which shall be
shall be in the form of ANNEX I annexed hereto.
(iii) In consideration of the loan to be made by the Buyer,
the Company will issue to the Buyer the Warrant to purchase the number of shares
of Common Stock of the Company ("Common Stock") as provided in Section 4 hereof.
(iv) The loan to be made by the Buyer and the issuance of the
Note and the Warrant to the Buyer and the other transactions contemplated hereby
are sometimes referred to herein and in the other Transaction Agreements as the
purchase and sale of the Securities (as defined below), and are referred to
collectively as the "Transactions."
b. CERTAIN DEFINITIONS. As used herein, each of the following
terms has the meaning set forth below, unless the context otherwise requires:
"Affiliate" means, with respect to a specific Person referred
to in the relevant provision, another Person who or which controls or is
controlled by or is under common control with such specified Person.
"Buyer Control Person" means each director, executive officer,
promoter, and such other Persons as may be deemed in control of the Buyer
pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934 Act (as
defined below).
"Certificate of Incorporation Amendment" means an amendment to
the Company's Certificate of Incorporation to increase the authorized capital
stock of the Company in an amount sufficient such that all shares of Common
Stock subject to the Warrants can be issued upon exercise of the Warrants.
"Certificate of Incorporation Amendment Filing Date" means the
date the Company files with the Secretary of State of Delaware the Certificate
of Incorporation Amendment.
"Certificates" means the ink-signed Note and the Warrant, each
duly executed by the Company and issued on the Closing Date in the name of the
Buyer.
"Closing Date" means the date of the closing of the
Transactions, as provided herein.
"Company Control Person" means each director, executive
officer, promoter, and such other Persons as may be deemed in control of the
Company pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934 Act
(as defined below).
"Conversion Shares" shall mean the shares of Common Stock
issuable pursuant to the terms of the Note.
"Holder" means the Person holding the relevant Securities at
the relevant time.
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"Last Audited Date" means December 31, 2005.
"Material Adverse Effect" means an event or combination of
events, which individually or in the aggregate, would reasonably be expected to
(x) adversely affect the legality, validity or enforceability of the Purchased
Securities or any of the Transaction Agreements, (y) have or result in a
material adverse effect on the results of operations, assets, or financial
condition of the Company and its subsidiaries, taken as a whole, or (z)
adversely impair the Company's ability to perform fully on a timely basis its
material obligations under any of the Transaction Agreements or the transactions
contemplated thereby.
"New Common Stock" means shares of Common Stock and/or
securities convertible into, and/or other rights exercisable for, Common Stock,
which are offered or sold in a New Transaction.
"New Investor" means the third party investor, purchaser or
lender (howsoever denominated) in a New Transaction.
"New Transaction" means the offer or sale of notes, debentures
or New Common Stock by or on behalf of the Company to a New Investor in a
transaction offered or consummated after the date hereof; provided, however,
that it is specifically understood that the term "New Transaction" (1) includes,
but is not limited to, a sale of Common Stock or of a security convertible into
Common Stock or an equity or credit line transaction, but (2) does not include
(a) the issuance of Common Stock upon the exercise or conversion of options,
warrants or convertible securities outstanding on the date hereof, or in respect
of any other financing agreements as in effect on the date hereof, (b) the
issuance of Common Stock pursuant to an Employee Stock Option Plan (an "ESOP")
of the Company, such ESOP having been properly approved by the shareholders of
the Company, (c) the issuance of Common Stock to employees, directors or
consultants of the Company, (d) the issuance of Common Stock upon the exercise
of any options or warrants referred to in the preceding clauses of this
paragraph (provided the same is not amended after the date hereof (other than
the Company may extend the expiration date thereof), or (e) the issuance of
shares to a Strategic Partner.
"New Transaction Funds" shall mean all amounts received in
respect of any New Transaction.
"Person" means any living person or any entity, such as, but
not necessarily limited to, a corporation, partnership or trust.
"Principal Trading Market" means the Over the Counter Bulletin
Board or such other market on which the Common Stock is principally traded at
the relevant time, but shall not include the "pink sheets."
"Purchased Securities" means the Note and the Warrant.
"Registrable Securities" means the Warrant Shares and
Conversion Shares, unless such shares can then be sold by the Holder without
volume or other restrictions or limit.
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"Registration Rights Provisions" means the registration rights
contemplated by the terms of this Agreement, including, but not necessarily
limited to, Section 4(h) hereof, and of the other Transaction Agreements.
"Registration Statement" means an effective registration
statement covering the Registrable Securities.
"Securities" means the Note, the Warrant and the Shares.
"Shares" means the shares of Common Stock representing any of
the Warrant Shares.
"State of Incorporation" means Delaware.
"Strategic Partner" means a third party, whether or not
currently affiliated with the Company, hereof, which party (i) is engaged in a
business which is the business in which the Company or one of its subsidiaries
is engaged or a similar or related business, and (ii) either (a) subsequently
purchases equity securities of the Company (or securities convertible into
equity securities of the Company), or (b) enters into an agreement for one or
more of the following: the licensing by the Company or one of its subsidiaries
of all or any portion of its technology to such third party, the licensing by
such third party of all or any portion of its technology to the Company or one
of its subsidiaries, or any other coordination of all or a portion of their
respective business activities or operations by the Company or one of its
subsidiaries and such third party.
"Trading Day" means any day during which the Principal Trading
Market shall be open for business.
"Transfer Agent" means, at any time, the transfer agent. for
the Common Stock.
"Transaction Agreements" means this Bridge Loan Agreement, the
Note, and the Warrant, and includes all ancillary documents referred to in those
agreements.
"Warrant" means the warrant issued to the Buyer as
contemplated by Section 4 of this Agreement.
"Warrant Shares" means the shares of Common Stock issuable
upon exercise of the Warrant.
c. FORM OF PAYMENT; DELIVERY OF CERTIFICATES. On the Closing
Date, the Buyer shall pay the Purchase Price by delivering immediately available
good funds in United States Dollars to the Company no later than the date prior
to the Closing Date and the Company shall deliver the Certificates, each duly
executed on behalf of the Company and issued in the name of the Buyer, to the
Buyer.
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d. METHOD OF PAYMENT. Payment of the Purchase Price shall be
made by wire transfer of funds to an account identified by the Company to the
Buyer.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees
with, the Company as follows:
Without limiting Buyer's right to sell the Securities pursuant
to an effective registration statement or otherwise in compliance with the 1933
Act, the Buyer is purchasing the Securities for its own account for investment
only and not with a view towards the public sale or distribution thereof and not
with a view to or for sale in connection with any distribution thereof
The Buyer is (i) an "accredited investor" as that term is
defined in Rule 501 of the General Rules and Regulations under the 1933 Act by
reason of Rule 501(a)(3), (ii) experienced in making investments of the kind
described in this Agreement and the related documents, (iii) able, by reason of
the business and financial experience of its officers (if an entity) and
professional advisors (who are not affiliated with or compensated in any way by
the Company or any of its Affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement, and
the related documents, and to evaluate the merits and risks of an investment in
the Securities, and (iv) able to afford the entire loss of its investment in the
Securities.
All subsequent offers and sales of the Securities by the Buyer
shall be made pursuant to registration of the relevant Securities under the 1933
Act or pursuant to an exemption from registration.
The Buyer understands that the Securities are being offered
and sold to it in reliance on specific exemptions from the registration
requirements of the 1933 Act and state securities laws and that the Company is
relying upon the truth and accuracy of, and the Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of the Buyer to acquire the Securities.
The Buyer and its advisors, if any, have been furnished with
or have been given access to all materials relating to the business, finances
and operations of the Company and materials relating to the offer and sale of
the Securities which have been requested by the Buyer, including those set forth
on in any annex attached hereto. The Buyer and its advisors, if any, have been
afforded the opportunity to ask questions of the Company and its management and
have received complete and satisfactory answers to any such inquiries. Without
limiting the generality of the foregoing, the Buyer has also had the opportunity
to obtain and to review the Company's filings on XXXXX listed on ANNEX VI hereto
(the documents listed on such Annex VI, to the extent available on XXXXX or
otherwise provided to the Buyer as indicated on said Annex VI, collectively, the
"Company's SEC Documents").
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The Buyer understands that its investment in the Securities
involves a high degree of risk.
The Buyer hereby represents that, in connection with its
purchase of the Securities, it has not relied on any statement or representation
by the Company or any of its officers, directors and employees or any of its
attorneys or agents, except as specifically set forth herein.
The Buyer understands that no United States federal or state
agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities.
This Agreement and the other Transaction Agreements to which
the Buyer is a party, and the transactions contemplated thereby, have been duly
and validly authorized, executed and delivered on behalf of the Buyer and are
valid and binding agreements of the Buyer enforceable in accordance with their
respective terms, subject as to enforceability to general principles of equity
and to bankruptcy, insolvency, moratorium and other similar laws affecting the
enforcement of creditors' rights generally.
3. COMPANY REPRESENTATIONS, ETC. The Company represents and
warrants to the Buyer as of the date hereof and as of the Closing Date that,
except as otherwise provided in the Company's SEC Documents (which qualifies all
such representations and warranties):
a. RIGHTS OF OTHERS AFFECTING THE TRANSACTIONS. There are no
preemptive rights of any shareholder of the Company, as such, to acquire the
Note, the Warrant or the Shares. No party has a currently exercisable right of
first refusal which would be applicable to any or all of the transactions
contemplated by the Transaction Agreements.
b. STATUS. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Incorporation and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in each jurisdiction
where the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have or result in a Material Adverse Effect. The Company
has registered its stock and is obligated to file reports pursuant to Section 12
or Section 15(d) of the Securities and Exchange Act of 1934, as amended (the
"1934 Act"). The Common Stock is quoted on the Principal Trading Market. The
Company has received no notice, either oral or written, with respect to the
continued eligibility of the Common Stock for such quotation on the Principal
Trading Market, and the Company has maintained all requirements on its part for
the continuation of such quotation.
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c. AUTHORIZED SHARES.
(i) The authorized capital stock of the Company consists of (x)
800,000,000 shares of Common Stock, $0.0001 par value per share, of which
approximately 421,177,105 are outstanding as of August 2, 2006, and (y)
1,000,000 shares of Preferred Stock, $0.001 par value, of which none are
outstanding as of the date hereof.
(ii) There are no outstanding securities which are convertible into
shares of Common Stock, whether such conversion is currently exercisable or
exercisable only upon some future date or the occurrence of some event in the
future.
(iii) All issued and outstanding shares of Common Stock have been duly
authorized and validly issued and are fully paid and non-assessable. On the
Certificate of Incorporation Amendment Filing Date the Company will have
sufficient authorized and unissued shares of Common Stock as would be necessary
to effect the issuance of the Shares upon the exercise of the Warrant.
(iv) On the Certificate of Incorporation Amendment Filing Date the
Shares will be duly authorized by all necessary corporate action on the part of
the Company, and, when issued upon exercise of the Warrant, in accordance with
its terms, will have been duly and validly issued, fully paid and non-assessable
and will not subject the Holder thereof to personal liability by reason of being
such Holder.
d. TRANSACTION AGREEMENTS AND STOCK. This Agreement and each
of the other Transaction Agreements, and the transactions contemplated thereby,
have been duly and validly authorized by the Company, this Agreement has been
duly executed and delivered by the Company and this Agreement is, and the Note,
the Warrant and each of the other Transaction Agreements, when executed and
delivered by the Company, will be, valid and binding agreements of the Company
enforceable in accordance with their respective terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium, and other similar laws affecting the enforcement of creditors'
rights generally.
e. NON-CONTRAVENTION. The execution and delivery of this
Agreement and each of the other Transaction Agreements by the Company, the
issuance of the Securities, and the consummation by the Company of the other
transactions contemplated by this Agreement, the Note, the Warrant and the other
Transaction Agreements do not and will not conflict with or result in a breach
by the Company of any of the terms or provisions of, or constitute a default
under (i) the certificate of incorporation or by-laws of the Company, each as
currently in effect, (ii) any indenture, mortgage, deed of trust, or other
material agreement or instrument to which the Company is a party or by which it
or any of its properties or assets are bound, including any listing agreement
for the Common Stock except as herein .set forth, or (iii) to its knowledge, any
existing applicable law, rule, or regulation or any applicable decree, judgment,
or order of any court, United States federal or state regulatory body,
administrative agency, or other governmental body having jurisdiction over the
Company or any of its properties or assets, except such conflict, breach or
default which would not have or result in a Material Adverse Effect.
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f. APPROVALS. No authorization, approval or consent of any
court, governmental body, regulatory agency, self-regulatory organization, or
stock exchange or market or the shareholders of the Company is required to be
obtained by the Company for the issuance and sale of the Securities to the Buyer
as contemplated by this Agreement, except approval by the shareholders of the
Company holding a majority of the outstanding shares of Common Stock on the
relevant record date of the Certificate of Incorporation Amendment and such
authorizations, approvals and consents that have been obtained.
g. FILINGS. None of the Company's SEC Documents contained, at
the time they were filed, any untrue statement of a material fact or omitted to
state any material fact 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.
h. ABSENCE OF CERTAIN CHANGES. Since the Last Audited Date,
there has been no material adverse change and no Material Adverse Effect. Since
the Last Audited Date, the Company has not (i) incurred or become subject to any
material liabilities (absolute or contingent) except liabilities incurred in the
ordinary course of business consistent with past practices; (ii) discharged or
satisfied any material lien or encumbrance or paid any material obligation or
liability (absolute or contingent), other than current liabilities paid in the
ordinary course of business consistent with past practices; (iii) declared or
made any payment or distribution of cash or other property to shareholders with
respect to its capital stock, or purchased or redeemed, or made any agreements
to purchase or redeem, any shares of its capital stock; (iv) sold, assigned or
transferred any other tangible assets, or canceled any debts owed to the Company
by any third party or claims of the Company against any third party, except in
the ordinary course of business consistent with past practices; (v) waived any
rights of material value, whether or not in the ordinary course of business, or
suffered the loss of any material amount of existing business; (vi) made any
increases in employee compensation, except in the ordinary course of business
consistent with past practices; or (vii) experienced any material problems with
labor or management in connection with the terms and conditions of their
employment.
i. FUN DISCLOSURE. To the best of the Company's knowledge,
there is no fact known to the Company (other than general economic conditions
known to the public generally) that has not been disclosed in writing to the
Buyer that would reasonably be expected to have or result in a Material Adverse
Effect.
j. ABSENCE OF LITIGATION. There is no action, suit,
proceeding, inquiry or investigation before or by any court, public board or
body pending or, to the knowledge of the Company, threatened against or
affecting the Company before or by any governmental authority or nongovernmental
department, commission, board, bureau, agency or instrumentality or any other
person, wherein an unfavorable decision, ruling or finding would have a Material
Adverse Effect or which would adversely affect the validity or enforceability
of, or the authority or ability of the Company to perform its obligations under,
any of the Transaction Agreements. The Company is not aware of any valid basis
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for any such claim that (either individually or in the aggregate with all other
such events and circumstances) could reasonably be expected to have a Material
Adverse Effect. There are no outstanding or unsatisfied judgments, orders,
decrees, writs, injunctions or stipulations to which the Company is a party or
by which it or any of its properties is bound, that involve the transaction
contemplated herein or that, alone or in the aggregate, could reasonably be
expect to have a Material Adverse Effect.
k. ABSENCE OF EVENTS OF DEFAULT. Except as set forth in
Section 3(e) hereof, (i) neither the Company nor any of its subsidiaries is in
default in the performance or observance of any material obligation, agreement,
covenant or condition contained in any material indenture, mortgage, deed of
trust or other material agreement to which it is a party or by which its
property is bound, and (ii) no Event of Default (or its equivalent term), as
defined in the respective agreement to which the Company or its subsidiary is a
party, and no event which, with the giving of notice or the passage of time or
both, would become an Event of Default (or its equivalent term) (as so defined
in such agreement), has occurred and is continuing, which would have a Material
Adverse Effect.
l. ABSENCE OF CERTAIN COMPANY CONTROL PERSON ACTIONS OR
EVENTS. TO the Company's knowledge, none of the following has occurred during
the past five (5) years with respect to a Company Control Person:
(1) A petition under the federal bankruptcy laws or any state
insolvency law was filed by or against, or a receiver, fiscal agent or
similar officer was appointed by a court for the business or property
of such Company Control Person, or any partnership in which he was a
general partner at or within two years before the time of such filing,
or any corporation or business association of which he was an
executive officer at or within two years before the time of such
filing;
(2) Such Company Control Person was convicted in a criminal proceeding
or is a named subject of a pending criminal proceeding (excluding
traffic violations and other minor offenses);
(3) Such. Company Control Person was the subject of any order,
judgment or decree, not subsequently reversed, suspended or vacated,
of any court of competent jurisdiction, permanently or temporarily
enjoining him from, or otherwise limiting, the following activities:
(i) acting, as an investment advisor, underwriter, broker or
dealer in securities, or as an affiliated person, director or
employee of any investment company, bank, savings and loan
association or insurance company, as a futures commission
merchant, introducing broker, commodity trading advisor,
commodity pool operator, floor broker, any other Person regulated
by the Commodity Futures Trading Commission ("CFTC") or engaging
in or continuing any conduct or practice in connection with such
activity;
(ii) engaging in any type of business practice; or
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(iii) engaging in any activity in connection with the purchase or
sale of any security or commodity or in connection with any
violation of federal or state securities laws or federal
commodities laws;
(4) Such Company Control Person was the subject of any order, judgment
or decree, not subsequently reversed, suspended or vacated, of any
federal or state authority barring, suspending or otherwise limiting
for more than 60 days the right of such Company Control Person to
engage in any activity described in paragraph (3) of this item, or to
be associated with Persons engaged in any such activity; or
(5) Such Company Control Person was found by a court of competent
jurisdiction in a civil action or by the CFTC or SEC to have violated
any federal or state securities law, and the judgment in such civil
action or finding by the CFTC or SEC has not been subsequently
reversed, suspended, or vacated.
m. NO UNDISCLOSED LIABILITIES OR EVENTS. To the best of the
Company's knowledge, the Company has no liabilities or obligations other than
those disclosed in the Transaction Agreements or those incurred in the ordinary
course of the Company's business since the Last Audited Date, or which
individually or in the aggregate, do not or would not have a Material Adverse
Effect. No event or circumstances has occurred or exists with respect to the
Company or its properties, business, operations, condition (financial or
otherwise), or results of operations, which, under applicable law, rule or
regulation, requires public disclosure or announcement prior to the date hereof
by the Company but which has not been so publicly announced or disclosed. Except
for the Certificate of Incorporation Amendment, there are no proposals currently
under consideration or currently anticipated to be under consideration by the
Board of Directors or the executive officers of the Company which proposal would
(x) change the articles or certificate of incorporation or other charter
document or by-laws of the Company, each as currently in effect, with or without
shareholder approval, which change would reduce or otherwise adversely affect
the rights and powers of the shareholders of the Common Stock or (y) materially
or substantially change the business, assets or capital of the Company,
including its interests in subsidiaries.
n. NO INTEGRATED OFFERING. Neither the Company nor any of its
Affiliates nor any Person acting on its or their behalf has, directly or
indirectly, at any time since June 1, 2005, made any offer or sales of any
security or solicited any offers to buy any security under circumstances that
would eliminate the availability of the exemption from registration under
Regulation D in connection with the offer and sale of the Securities as
contemplated hereby.
o. DILUTION. The number of shares issuable upon exercise of
the Warrant may have a dilutive effect on the ownership interests of the other
shareholders (and Persons having the right to become shareholders) of the
Company. The Company's executive officers and directors have studied and fully
understand the nature of the Securities being sold hereby and recognize that
they have such a potential dilutive effect. The board of directors of the
Company has concluded, in its good faith business judgment, that such issuance
is in the best interests of the Company. The Company specifically acknowledges
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that its obligation to issue the Warrant Shares upon exercise of the Warrant is
binding upon the Company and enforceable regardless of the dilution such
issuance may have on the ownership interests of other shareholders of the
Company, and the Company will honor such obligations, including honoring every
Notice of Exercise (as contemplated by the Warrant), unless the Company is
subject to an injunction (which injunction was not sought by the Company)
prohibiting the Company from doing so.
p. FEES TO BROKERS, FINDERS AND OTHERS. The Company has taken
no action which would give rise to any claim by any Person for brokerage
commission, finder's fees or similar payments by Buyer relating to this
Agreement or the transactions contemplated hereby. Buyer shall have no
obligation with respect to such fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this paragraph that
may be due in connection with the transactions contemplated hereby. The Company
shall indemnify and hold harmless each of the Buyer, its employees, officers,
directors, agents, and partners, and their respective Affiliates, from and
against all claims, losses, damages, costs (including the costs of preparation
and attorney's fees) and expenses suffered in respect of any such claimed or
existing fees, as and when incurred.
q. CONFIRMATION. The Company confirms that all statements of
the Company contained herein shall survive acceptance of this Agreement by the
Buyer for a period of eighteen (18) months from the Closing Date. The Company
agrees that, if any events occur or circumstances exist prior to the Closing
Date or the release of the Purchase Price to the Company which would make any of
the Company's representations, warranties, agreements or other information set
forth herein materially untrue or materially inaccurate as of such date, the
Company shall immediately notify the Buyer (directly or through its counsel, if
any) in writing prior to such date of such fact, specifying which
representation, warranty or covenant is affected and the reasons therefor.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. TRANSFER RESTRICTIONS. The Buyer acknowledges that (1) the
Securities have not been and are not being registered under the provisions of
the 1933 Act and, except as provided in the Registration Rights Provisions or
otherwise included in an effective registration statement, the Shares have not
been and are not being registered under the 1933 Act, and may not be transferred
unless (A) subsequently registered thereunder or (B) the Buyer shall have
delivered to the Company an opinion of counsel, reasonably satisfactory in form,
scope and substance to the Company, to the effect that the Securities to be sold
or transferred may be sold or transferred pursuant to an exemption from such
registration; (2) any sale of the Securities made in reliance on Rule 144
promulgated under the 1933 Act may be made only in accordance with the terms of
said Rule and further, if said Rule is not applicable, any resale of such
Securities under circumstances in which the seller, or the Person through whom
the sale is made, may be deemed to be an underwriter, as that term is used in
the 1933 Act, may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (3) neither the
Company nor any other Person is under any obligation to register the Securities
(other than pursuant to the Registration Rights Provisions) under the 1933 Act
or to comply with the terms and conditions of any exemption thereunder.
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b. RESTRICTIVE LEGEND. The Buyer acknowledges and agrees that,
until such time as the relevant Shares have been registered under the 1933 Act,
as contemplated by the Registration Rights Provisions and sold in accordance
with an effective Registration Statement or otherwise in accordance with another
effective registration statement, the certificates and other instruments
representing any of the Securities shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of any such Securities):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR
OFFERED FOR SALE IN THE ABSENCE OF AN EPPECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
c. FILINGS. The Company undertakes and agrees to make all
necessary filings in connection with the sale of the Securities to the Buyer
under any United States laws and regulations applicable to the Company, or by
any domestic securities exchange or trading market, and to provide a copy
thereof to the Buyer promptly after such filing.
d. REPORTING STATUS. So long as the Buyer beneficially owns
any of the Securities and for at least twenty (20) Trading Days thereafter, the
Company shall file all reports required to be filed with the SEC pursuant to
Section 13 or 15(d) of the 1934 Act, shall take all reasonable action under its
control to ensure that adequate current public information with respect to the
Company, as required in accordance with Rule 144(c)(2) of the 1933 Act, is
publicly available, and shall not terminate its status as an issuer required to
file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would permit such termination. The Company will take all
reasonable action under its control to maintain the continued listing and
quotation and trading of its Common Stock (including, without limitation, all
Registrable Securities) on the Principal Trading Market or a listing on the
NASDAQ/Small Cap or National Markets and, to the extent applicable to it, will
comply in all material respects with the Company's reporting, filing and other
obligations under the by-laws or rules of the Principal Trading Market and/or
the National Association of Securities Dealers, Inc., as the case may be,
applicable to it at least through the date which is sixty (60) days after the
Warrant has been exercised in full or has expired.
e. USE OF PROCEEDS. The Company will use the proceeds received
hereunder (excluding amounts paid by the Company for legal fees (i) first, as
provided in ANNEX VII attached hereto, and (ii) then, for general corporate
purposes.
f. WARRANT. The Company agrees to issue to the Buyer on the
Closing Date a transferable warrant (the "Warrant") for the purchase of
10,000,000 shares of Common Stock. The exercise price of the Warrant will be
equal to $.07, subject to adjustment as provided in the Warrant and herein. The
Warrant shall be exercisable initially on the Commencement Date specified in the
Warrant and shall expire on the last day of the calendar month in which the
fifth anniversary of the Closing Date occurs. Except as specified above, each
Warrant shall generally be in the form annexed hereto as ANNEX IV, and shall
have the benefit of the Registration Rights provisions set forth in Section 4
(h) hereof.
12
g. INTENTIONALLY DELETED
h. PIGGY-BACK RIGHTS; RULE 144.
(i) The Holder shall have piggy-back registration rights with
respect to the Warrant Shares subject to the conditions set forth below. If the
Company participates (whether voluntarily or by reason of an obligation to a
third party) in the registration of any shares of the Company's stock (other
than a registration on Form S-8 or on Form S-4) filed after the date hereof, the
Company shall give written notice thereof to the Holder and the Holder shall
have the right, exercisable within ten (10) Trading Days after receipt of such
notice, to demand inclusion of all or a portion of the Holder's Registrable
Securities in such registration statement. If the Holder exercises such
election, the Registrable Securities so designated shall be included in the
registration statement (without any holdbacks) at no cost or expense to the
Holder (other than any commissions, if any, relating to the sale of Holder's
shares). The Holder's rights under this Section 4(h)(i) shall expire at such
time as such Holder can sell all of such Holder's remaining Registrable
Securities under Rule 144 (as defined below) without volume or other
restrictions or limit.
(ii) The Company shall prepare and file with the SEC within
five (5) business days of the Certificate of Incorporation Amendment Filing
Date, a Registration Statement registering for resale by the Holder a sufficient
number of shares of Common Stock for the Holder to sell any Registrable
Securities not previously registered, but in no event less than the number of
shares equal to the sum of (x) one hundred fifty percent (150%) of the number of
shares into which the Note would be convertible at the time of filing of such
Registration Statement (assuming for such purposes that this Note had been
issued, had been eligible to be converted, and had been converted, into
Conversion Shares in accordance with its terms, whether or not such issuance,
eligibility, accrual of interest or conversion had in fact occurred as of such
date) and (y) one hundred percent (100%) of the number of Warrant Shares which
would be issuable on exercise of the Warrants (assuming for such purposes that
all Warrants had been issued, had been eligible for exercise and had been
exercised for Warrant Shares in accordance with their terms, whether or not such
issuance, eligibility or exercise had in fact occurred as of such date). Unless
otherwise specifically agreed to in writing in advance by the Holder, the
Registration Statement shall state that, in accordance with Rule 416 and 457
under the 1933 Act, it also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon conversion of the Note or
exercise of the Warrants to prevent dilution resulting from stock splits, or
stock dividends. The Company will use its reasonable best efforts to cause such
Registration Statement to be declared effective on a date (the "Initial Required
Effective Date") which is no later than the earlier of (Y) five (5) days after
oral or written notice by the SEC that it may be declared effective or (Z)
seventy-five (75) days following the Certificate of Incorporation Amendment
Filing Date.
13
(iii) If at any time (an "Increased Registered Shares Date")
after a Registration Statement has been filed with the SEC, the number of shares
of Common Stock represented by the Registrable Shares, issued or to be issued as
contemplated by this Agreement, exceeds the aggregate number of shares of Common
Stock then registered or sought to be registered in a Registration Statement
which has not yet been declared effective, the Company shall either
(X) amend the relevant Registration Statement filed by the Company
pursuant to the preceding provisions of this Section 4(h), if such
Registration Statement has not been declared effective by the SEC at
that time, to register, in the aggregate, at least the number of shares
(the "Increased Shares Amount") equal to (A) the number of shares
theretofore issued on conversion of the Notes (including any interest
paid on conversion by the issuance of Conversion Shares) , plus (B) the
number of shares theretofore issued on exercise of the Warrants, plus
(C) the sum of:
(I) the number of shares into which the unconverted Note and all
interest thereon through the Maturity Date would be convertible
at the date of such filing (assuming for such purposes that this
Note had been issued, had been eligible to be converted, and had
been converted, into Conversion Shares in accordance with its
terms, whether or not such issuance eligibility, accrual of
interest, or conversion had in fact occurred as of such date),
and
(II) the number of Warrant Shares which would be issuable on
exercise of the unexercised Warrants (assuming for such purposes
that all such Warrants had been issued, had been eligible for
exercise and bad been exercised for Warrant Shares in accordance
with their terms, whether or not such issuance, eligibility or
exercise had in fact occurred as of such date), or
(Y) if such Registration Statement has been declared effective by the
SEC at that time, file with the SEC an additional Registration
Statement (an "Additional Registration Statement") to register the
number of shares equal to the excess of the Increased Shares Amount
over the aggregate number of shares of Common Stock already registered.
The Company will use its reasonable best efforts to cause such Registration
Statement to be declared effective on a date (each, an "Increased Required
Effective Date") which is no later than (q) with respect to a Registration
Statement under clause (X) of this subparagraph (ii), the Initial Required
Effective Date and (r) with respect to an Additional Registration Statement, the
earlier of (I) five (5) days after notice by the SEC that it may be declared
effective or (If) forty-five (45) days after the Increased Registered Shares
Date.
(iv) With a view to making available to the Holder the
benefits of Rule 144 promulgated under the 1933 Act or any other similar rule or
regulation of the SEC that may at any time permit Holder to sell securities of
the Company to the public without registration (collectively, "Rule 144"), the
Company agrees to:
14
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act; and
(c) furnish to the Holder so long as such party owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (ii) if not available on the SEC's XXXXX system, a
copy of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company and (iii) such other information
as may be reasonably requested to permit the Holder to sell such securities
pursuant to Rule 144 without registration;
(d) at the request of any Holder then holding Registrable
Securities, give the Transfer Agent instructions (supported by an opinion of
Company counsel, if required or requested by the Transfer Agent) to the effect
that, upon the Transfer Agent's receipt from such Holder of
(i) a certificate (a "Rule 144 Certificate") certifying (A) that the
Holder's holding period (as determined in accordance with the
provisions of Rule 144) for the Shares which the Holder proposes to
sell (the "Securities Being Sold") is not less than (1) year and (B)
as to such other matters as may be appropriate in accordance with Rule
144 under the Securities Act, and
(ii) an opinion of counsel acceptable to the Company (for which
purposes it is agreed that Xxxxxxx & Prager LLP shall be deemed
acceptable if not given by Company counsel) that, based on the Rule
144 Certificate, Securities Being Sold may be sold pursuant to the
provisions of Rule 144, even in the absence of an effective
registration statement,
the Transfer Agent is to effect the transfer of the Securities Being Sold and
issue to the buyer(s) or transferee(s) thereof one or more stock certificates
representing the transferred Securities Being Sold without any restrictive
legend and without recording any restrictions on the transferability of such
shares on the Transfer Agent's books and records (except to the extent any such
legend or restriction results from facts other than the identity of the relevant
Holder, as the seller or transferor thereof, or the status, including any
relevant legends or restrictions, of the shares of the Securities Being Sold
while held by the Buyer). If the Transfer Agent reasonably requires any
additional documentation at the time of the transfer, the Company shall deliver
or cause to be delivered all such reasonable additional documentation as may be
necessary to effectuate the issuance of an unlegended certificate.
(v) Notwithstanding the foregoing, if at any time or from time
to time after the date of effectiveness of the registration statement, the
Company notifies the Holder in writing that the effectiveness of the
Registration Statement is suspended for any reason, whether due to the existence
of a Potential Material Event (as defined below) or otherwise, the Holder shall
not offer or sell any Registrable Securities, or engage in any other transaction
involving or relating to the Registrable Securities, from the time of the giving
15
of notice with respect to a Potential Material Event until the Holder receives
written notice from the Company that such Potential Material Event either has
been disclosed to the public or no longer constitutes a Potential Material
Event; PROVIDED, HOWEVER, that the Company may not so suspend such right other
than during a Permitted Suspension Period. The term "Potential Material Event"
means any of the following: (i) the possession by the Company of material
information not ripe for disclosure in a registration statement, which shall be
evidenced by determinations in good faith by the Board of Directors of the
Company that disclosure of such information in the registration statement would
be detrimental to the business and affairs of the Company; or (ii) any material
engagement or activity by the Company which would, in the good faith
determination of the Board of Directors of the Company, be adversely affected by
disclosure in a registration statement at such time, which determination shall
be accompanied by a good faith determination by the Board of Directors of the
Company that the registration statement would be materially misleading absent
the inclusion of such information. The term "Permitted Suspension Period" MEANS
up to two suspension periods during any consecutive 12-month period, each of
which suspension period shall not either (i) be for more than ten (10) business
days (and forty five (45) days in the case of the requirement to file a
post-effective amendment in connection with the filing with the SEC of the
Company's audited financial statements in its annual report) or (ii) begin less
than ten (10) business days after the last day of the preceding suspension
(whether or not such last day was during or after a Permitted Suspension
Period).
i. AVAILABLE SHARES. After, the Certificate of Incorporation
Amendment Filing Date, the Company shall have at all times authorized and
reserved for issuance, free from preemptive rights, a number of shares (the
"Minimum Available Shares") at least equal to one hundred percent (100%) of the
number of shares which would be issuable upon exercise of the outstanding
Warrants held by all Holders (in each case, whether such Warrant were originally
issued to the Holder, the Buyer or to any other party). For the purposes of such
calculations, the Company should assume that the Warrant were then exercisable
without regard to any restrictions which might limit any Holder's right to
exercise the Warrant held by any Holder.
j. PUBLICITY, FILINGS, RELEASES, ETC. Each of the parties
agrees that it will not disseminate any information relating to the Transaction
Agreements or the transactions contemplated thereby, including issuing any press
releases, holding any press conferences or other forums, or filing any reports
(collectively, "Publicity"), without giving the other party reasonable advance
notice and an opportunity to comment on the contents thereof. Neither party will
include in any such Publicity any statement or statements or other material to
which the other party reasonably objects, unless in the reasonable opinion of
counsel to the party proposing such statement, such statement is legally
required to be included. In furtherance of the foregoing, the Company will
provide to the Buyer drafts of the applicable text of the first filing of a
Current Report on Form 8-K or a Quarterly or Annual Report on Form 10-Q or 10-K
intended to be made with the SEC which refers to the Transaction Agreements or
the transactions contemplated thereby as soon as practicable (but at least two
(2) Trading Days before such filing will be made) will not include in such
filing any statement or statements or other material to which the other party
reasonably objects, unless in the reasonable opinion of counsel to the party
proposing such statement, such statement is legally required to be included.
Notwithstanding the foregoing, each of the parties hereby consents to the
16
inclusion of the text of the Transaction Agreements in filings made with the SEC
as well as any descriptive text accompanying or part of such filing which is
accurate and reasonably determined by the Company's counsel to be legally
required. Notwithstanding, but subject to, the foregoing provisions of this
Section 4(i), the Company will, after the Closing Date, promptly file a Current
Report on Form 8-K or, if appropriate, a quarterly or annual report on the
appropriate form, referring to the transactions contemplated by the Transaction
Agreements.
k. STOCKHOLDERS MEETING. The Company, acting through its Board
of Directors and in accordance with applicable law and the Certificate of
Incorporation and the Bylaws of the Company, shall at its expense, duly call,
give notice of, convene and hold a special meeting of its stockholders within 60
business days following the date of the Agreement. The Company shall, at its
expense, secure the services of a proxy solicitation firm in connection with
such special meeting.
5. TRANSFER AGENT INSTRUCTIONS.
The Company warrants that, with respect to the Securities,
other than the stop transfer instructions to give effect to Section 4(a) hereof,
it will give its transfer agent no instructions inconsistent with instructions
to issue Common Stock from time to time upon exercise of the Warrant or
conversion of the Note , if applicable, in such amounts as specified from time
to time by the Company to the transfer agent, bearing the restrictive legend
specified in Section 4(b) of this Agreement prior to registration of the Shares
under the 1933 Act, registered in the name of the Buyer or its nominee and in
such denominations to be specified by the Holder in connection with each
exercise of the Warrant or conversion of the Note , if applicable,. Except as so
provided, the Shares shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement and the
other Transaction Agreements. Nothing in this Section shall affect in any way
the Buyer's obligations and agreement to comply with all applicable securities
laws upon resale of the Securities. If the Buyer provides the Company with an
opinion of counsel reasonably satisfactory to the Company that registration of a
resale by the Buyer of any of the Securities in accordance with clause (1)(B) of
Section 4(a) of this Agreement is not required under the 1933 Act, the Company
shall (except as provided in clause (2) of Section 4(a) of this Agreement)
permit the transfer of the Securities and, in the case of the Warrant Shares and
shares issuable upon conversion of the Note, promptly instruct the Company's
transfer agent to issue one or more certificates for Common Stock without legend
in such name and in such denominations as specified by the Buyer.
Subject to the provisions of this Agreement, the Company will
permit the Buyer to exercise the Warrant in the manner contemplated by the
Warrant.
17
(i) The Company understands that a delay in the issuance of
the Shares of Common Stock beyond the Delivery Date (as defined in the Warrant)
could result in economic loss to the Buyer. As compensation to the Buyer for
such loss, the Company agrees to pay late payments to the Buyer for late
issuance of Shares upon exercise in accordance with the following schedule
(where "No. Business Days Late" refers to the number of Trading Days which is
beyond two (2) Trading. Days after the Delivery Date): (2)
Late Payment For Each $10,000 of
Exercise Price of Warrant Being
No. Business Days Late Exercised
------------------------------------------------------------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 + $200 for each Business
Day Late beyond 10 days
The Company Shall pay any payments incurred under this Section in immediately
available funds upon demand as the Buyer's exclusive remedy (other than the
following provisions of this Section 5(c)) for such delay. Furthermore, in
addition to any other remedies which may be available to the Buyer, in the event
that the Company fails for any reason to effect delivery, of such shares of
Common Stock by close of business on the tenth Trading Day after the Delivery
Date, the Buyer will be entitled to revoke the relevant Notice of Exercise by
delivering a notice to such effect to the Company, whereupon the Company and the
Buyer shall each be restored to their respective positions immediately prior to
delivery of such Notice of Exercise; provided, however, that an amount equal to
any payments contemplated by this Section 5(c) which have accrued through the
date of such revocation notice shall remain due and owing to the Exercising
Holder notwithstanding such revocation.
(ii) If, by the close of business on the fifth Trading Day
after the Delivery Date, the Company fails for any reason to deliver the Shares
to be issued upon exercise of the Warrant and after such fifth Trading Day, the
Holder of the Warrant being exercised (an "Exercising Holder") purchases, in an
arm's-length open market transaction or otherwise, shares of Common Stock (the
"Covering Shares") in order to make delivery in satisfaction of a sale of Common
Stock by the Exercising Holder (the "Sold Shares"), which delivery such
Exercising Holder anticipated to make using the Shares to be issued upon such
exercise (a "Buy-In"), the Exercising Holder shall have the right, in addition
-------------------------
(2) Example: Notice of Exercise is delivered on Monday, July 10, 2006. The
Delivery Date would be Thursday, July 13 (the third Trading Day after such
delivery). If the certificate is delivered by Monday, July 17 (2 Trading Days
after the Delivery Date), no payment under this provision is due. If the
certificates are delivered on July 18, that is 1 "Business Day Late" in the
table below; if delivered on July 25, that is 6 "Business Days Late" in the
table.
18
to and not in lieu of all other amounts contemplated in other provisions of the
Transaction Agreements, including, but not limited to, the provisions of the
immediately preceding Section 5(c)(i)), the Buy-In Adjustment Amount (as defined
below). The "Buy-In Adjustment Amount" is the amount equal to the number of Sold
Shares multiplied by the excess, if any, of (x) the Exercising Holder's total
purchase price per share (including brokerage commissions, if any) for the
Covering Shares over (y) the net proceeds per share (after brokerage
commissions, if any) received by the Exercising Holder from the sale of the Sold
Shares. The Company shall pay the Buy-In Adjustment Amount to the Exercising
Holder in immediately available funds immediately upon demand by the Exercising
Holder. By way of illustration and not in limitation of the foregoing, if the
Exercising Holder purchases shares of Common Stock having a total purchase price
(including brokerage commissions) of $11,000 to cover a Buy-In with respect to
shares of Common Stock it sold for net proceeds of $10,000, the Buy-In
Adjustment Amount which Company will be required to pay to the Exercising Holder
will be $1,000.
The provisions of this paragraph apply on or after the
effective date of the Registration Statement. After such effective date, if the
Holder provides reasonable evidence to the Company and the Transfer Agent that
the Holder has sold Shares pursuant to the Registration Statement the Company
will issue such Shares without legend and without transfer restrictions on the
books of the Transfer Agent, and, at the request of the Holder, will use it best
efforts to have previously issued certificates representing such Shares
re-issued without legend and without transfer restrictions on the books of the
Transfer Agent. In lieu of delivering physical certificates representing the
Common Stock issuable upon exercise of a Warrant or at the request of the Holder
with respect to any Shares previously issued, provided the Transfer Agent is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer program, upon request of the Holder and its compliance with the
provisions contained in this paragraph, so long as the certificates therefor do
not bear a legend and the Holder thereof is not obligated to return such
certificate for the placement of a legend thereon, the Company shall use its
best efforts to cause the Transfer Agent to electronically transmit to the
Holder the Common Stock issuable upon exercise of the Warrant or in replacement
of any Shares previously issued by crediting the account of Holder's Prime
Broker with DTC through its Deposit Withdrawal Agent Commission system. In
connection therewith, it will be the Holder's obligation to obtain formal
requirements, such as medallion guaranty, if necessary.
The Company shall assume any fees or charges of the Transfer
Agent or Company counsel regarding (i) the removal of a legend or stop transfer
instructions with respect to Registrable Securities, and (ii) the issuance of
certificates or DTC registration to or in the name of the Holder or the Holder's
designee or to a transferee as contemplated by an effective Registration
Statement.
The Holder of the Warrant shall be entitled to exercise its
exercise privilege with respect to the Warrant notwithstanding the commencement
of any case under 11 ss.101 et seq. (the "Bankmptcy Code"). In the event the
Company is a debtor under the Bankruptcy Code, the Company hereby waives, to the
fullest extent permitted, any rights to relief it may have under 11 U.S.C.
ss.362 in respect of such holder's exercise privilege. The Company hereby
waives, to the fullest extent permitted, any rights to relief it may have under
11 U.S.C. ss.362 in respect of the exercise of the Warrant. The Company agrees,
without cost or expense to such Holder, to take or to consent to any and all
action necessary to effectuate relief under 11 U.S.C. ss.362.
19
The Company will authorize the Transfer Agent to give
information relating to the Company directly to the Holder or the Holder's
representatives upon the request of the Holder or any such representative, to
the extent such information relates to (i) the status of shares of Common Stock
issued or claimed to be issued to the Holder in connection with a Notice of
Exercise, or (ii) the aggregate number of outstanding shares of Common Stock of
all shareholders (as a group, and not individually) as of a current or other
specified date. At the request of the Holder, the Company will provide the
Holder with a copy of the authorization so given to the Transfer Agent.
6. CLOSING DATE.
a. The Closing Date shall occur on the date which is the first
Trading Day after each of the conditions contemplated by Sections 7 and 8
hereof shall have either been satisfied or been waived by the party in whose
favor such conditions run.
The closing of the Transactions shall occur on the Closing
Date at the offices of the Company and shall take place no later than 3:00
P.M., New York time, on such day or such other time as is mutually agreed upon
by the Company and the Buyer.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell
the Note and the Warrant to the Buyer pursuant to this Agreement on the Closing
Date is conditioned upon:
The execution and delivery of this Agreement by the Buyer;
Delivery by the Buyer to the Company of good funds as payment
in full of an amount equal to the Purchase Price in accordance with this
Agreement;
The accuracy on such Closing Date of the representations and
warranties of the Buyer contained in this Agreement, each as if made on such
date, and the performance by the Buyer on or before such date of all covenants
and agreements of the Buyer required to be performed on or before such date; and
There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained.
8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to
purchase the Note and the Warrant on the Closing Date is conditioned upon:
20
The execution and delivery of this Agreement and the other
Transaction Agreements by the Company;
Delivery by the Company to the Buyer of the Certificates in
accordance with this Agreement;
The accuracy in all material respects on the Closing Date of
the representations and warranties of the Company contained in this Agreement,
each as if made on such date, and the performance by the Company on or before
such date of all covenants and agreements of the Company required to be
performed on or before such date;
On the Closing Date, all required SEC periodic filings shall
have been filed, and the designation "E" on the Company symbol as traded on the
OTC shall have been removed;
There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained; and
From and after the date hereof to and including the Closing
Date, each of the following conditions will remain in effect: (i) the trading of
the Common Stock shall not have been suspended by the SEC or on the Principal
Trading Market; (ii) trading in securities generally on the Principal Trading
Market shall not have been suspended or limited; (iii) no minimum prices shall
been established for securities traded on the Principal Trading Market; and (iv)
there shall not have been any material adverse change in any financial market.
9. INDEMNIFICATION AND RELVIBURSEMENT.
a. (i) The Company agrees to indemnify and hold harmless the
Buyer and its officers, directors, employees, and agents, and each Buyer Control
Person from and against any losses, claims, damages, liabilities or expenses
incurred (collectively, "Damages"), joint or several, and any action in respect
thereof to which the Buyer, its partners, Affiliates, officers, directors,
employees, and duly authorized agents, and any such Buyer Control Person becomes
subject to, resulting from, arising out of or relating to any misrepresentation,
breach of warranty or nonfulfillment of or failure to perform any covenant or
agreement on the part of Company contained in this Agreement, as such Damages
are incurred, except to the extent such Damages result primarily from Buyer's
failure to perform any covenant or agreement contained in this Agreement or the
Buyer's or its officer's, director's, employee's, agent's or Buyer Control
Person's gross negligence, recklessness or bad faith in performing its
obligations under this Agreement.
(ii) The Company hereby agrees that, if the Buyer,
other than by reason of its gross negligence, illegal or willful misconduct (in
each case, as determined by a non-appealable judgment to such effect), (x)
becomes involved in any capacity in any action, proceeding or investigation
brought by any shareholder of the Company, in connection with or as a result of
the consummation of the transactions contemplated by this Agreement or the other
21
Transaction Agreements, or if the Buyer is impleaded in any such action,
proceeding or investigation by any Person, or (y) becomes involved in any
capacity in any action, proceeding or investigation brought by the SEC, any
self-regulatory organization or other body having jurisdiction, against or
involving the Company or in connection with or as a result of the consummation
of the transactions contemplated by this Agreement or the other Transaction
Agreements, or (z) is impleaded in any such action, proceeding or investigation
by any Person, then in any such case, the Company shall indemnify, defend and
hold harmless the Buyer from and against and in respect of all losses, claims,
liabilities, damages or expenses resulting from, imposed upon or incurred by the
Buyer, directly or indirectly, and reimburse such Buyer for its reasonable legal
and other expenses (including the cost of any investigation and preparation)
incurred in connection therewith, as such expenses are incurred. The
indemnification and reimbursement obligations of the Company under this
paragraph shall be in addition to any liability which the Company may otherwise
have, shall extend upon the same terms and conditions to any Affiliates of the
Buyer who are actually named in such action, proceeding or investigation, and
partners, directors, agents, employees and Buyer Control Persons (if any), as
the case may be, of the Buyer and any such Affiliate, and shall be binding upon
and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Buyer, any such Affiliate and any such
Person. The Company also agrees that neither the Buyer nor any such Affiliate,
partner, director, agent, employee or Buyer Control Person shall have any
liability to the Company or any Person asserting claims on behalf of or in right
of the Company in connection with or as a result of the consummation of this
Agreement or the other Transaction Agreements, except (1) as may be expressly
and specifically provided in or contemplated by this Agreement, (ii) as a result
of the breach of a Transaction Agreement by the Buyer or (iii) by reason of the
Buyer's actions.
b. All claims for indemnification by any Indemnified Party (as
defined below) under this Section shall be asserted and resolved as follows:
(i) In the event any claim or demand in respect of
which any Person claiming indemnification under any provision of this Section
(an "Indemnified Party") might seek indemnity under paragraph (a) of this
Section is asserted against or sought to be collected from such Indemnified
Party by a Person other than a party hereto or an Affiliate thereof (a "Third
Party Claim"), the Indemnified Party shall deliver a written notification,
enclosing a copy of all papers served, if any, and specifying the nature of and
basis for such Third Party Claim and for the Indemnified Party's claim for
indemnification that is being asserted under any provision of this Section
against any Person (the "Indemnifying Party"), together with the amount or, if
not then reasonably ascertainable, the estimated amount, determined in good
faith, of such Third Party Claim (a "Claim Notice") with reasonable promptness
to the Indemnifying Party. If the Indemnified Party fails to provide the Claim
Notice with reasonable promptness after the Indemnified Party receives notice of
such Third Party Claim, the Indemnifying Party shall not be obligated to
indemnify the Indemnified Party with respect to such Third Party Claim to the
extent that the Indemnifying Party's ability to defend has been prejudiced by
such failure of the Indemnified Party. The Indemnifying Party shall notify the
Indemnified Party as soon as practicable within the period ending thirty (30)
calendar days following receipt by the Indemnifying Party of either a Claim
Notice or an Indemnity Notice (as defined below) (the "Dispute Period") whether
the Indemnifying Party disputes its liability or the amount of its liability to
22
the Indemnified Party under this Section and whether the Indemnifying Party
desires, at its sole cost and expense, to defend the Indemnified Party against
such Third Party Claim. The following provisions shall also apply.
(x) If the Indemnifying Party notifies the Indemnified Party within the
Dispute Period that the Indemnifying Party desires to defend the
Indemnified Party with respect to the Third Party Claim pursuant to this
paragraph (b) of this Section, then the Indemnifying Party shall have the
right to defend, with counsel reasonably satisfactory to the Indemnified
Party, at the sole cost and expense of the Indemnifying Party, such Third
Party Claim by all appropriate proceedings, which proceedings shall be
vigorously and diligently prosecuted by the Indemnifying Party to a final
conclusion or will be settled at the discretion of the Indemnifying Party
(but only with the consent of the Indemnified Party in the case of any
settlement that provides for any relief other than the payment of monetary
damages or that provides for the payment of monetary damages as to which
the Indemnified Party shall not be indemnified in full pursuant to
paragraph (a) of this Section). The Indemnifying Party shall have fall
control of such defense and proceedings, including any compromise or
settlement thereof; provided, however, that the Indemnified Party may, at
the sole cost and expense of the Indemnified Party, at any time prior to
the Indemnifying Party's delivery of the notice referred to in the first
sentence of this subparagraph (x), file any motion, answer or other
pleadings or take any other action that the Indemnified Party reasonably
believes to be necessary or appropriate to protect its interests; and
provided further, that if requested by the Indemnifying Party, the
Indemnified Party will, at the sole cost and expense of the Indemnifying
Party, provide reasonable cooperation to the Indemnifying Party in
contesting any Third Party Claim that the Indemnifying Party elects to
contest. The Indemnified Party may participate in, but not control, any
defense or settlement of any Third Party Claim controlled by the
Indemnifying Party pursuant to this subparagraph (x), and except as
provided in the preceding sentence, the Indemnified Party shall bear its
own costs and expenses with respect to such participation. Notwithstanding
the foregoing, the Indemnified Party may take over the control of the
defense or settlement of a Third Party Claim at any time if it irrevocably
waives its right to indemnity under paragraph (a) of this Section with
respect to such Third Party Claim.
(y) If the Indemnifying Party fails to notify the Indemnified Party within
the Dispute Period that the Indemnifying Party desires to defend the Third
Party Claim pursuant to paragraph (b) of this Section, or if the
Indemnifying Party gives such notice but fails to prosecute vigorously and
diligently or settle the Third Party Claim, or if the Indemnifying Party
fails to give any notice whatsoever within the Dispute Period, then the
Indemnified Party shall have the right to defend, at the sole cost and
expense of the Indemnifying Party, the Third Party Claim by all appropriate
proceedings, which proceedings shall be prosecuted by the Indemnified Party
in a reasonable manner and in good faith or will be settled at the
discretion of the Indemnified Party (with the consent of the Indemnifying
Party, which consent will not be unreasonably withheld). The Indemnified
Party will have full control of such defense and proceedings, including any
compromise or settlement thereof; provided, however, that if requested by
the Indemnified Party, the Indemnifying Party will, at the sole cost and
expense of the Indemnifying Party, provide reasonable cooperation to the
23
Indemnified Party and its counsel in contesting any Third Party Claim which
the Indemnified Party is contesting. Notwithstanding the foregoing
provisions of this subparagraph (y), if the Indemnifying Party has notified
the Indemnified Party within the Dispute Period that the Indemnifying Party
disputes its liability or the amount of its liability hereunder to the
Indemnified Party with respect to such Third Party Claim and if such
dispute is resolved in favor of the Indemnifying Party in the manner
provided in subparagraph(z) below, the Indemnifying Party will not be
required to bear the costs and expenses of the Indemnified Party's defense
pursuant to this subparagraph (y) or of the Indemnifying Party's
participation therein at the Indemnified Party's request, and the
Indemnified Party shall reimburse the Indemnifying Party in full for all
reasonable costs and expenses incurred by the Indemnifying Party in
connection with such litigation. The Indemnifying Party may participate in,
but not control, any defense or settlement controlled by the Indemnified
Party pursuant to this subparagraph (y), and the Indemnifying Party shall
bear its own costs and expenses with respect to such participation.
(z) If the Indemnifying Party notifies the Indemnified Party that it does
not dispute its liability or the amount of its liability to the Indemnified
Party with respect to the Third Party Claim under paragraph (a) of this
Section or fails to notify the Indemnified Party within the Dispute Period
whether the Indemnifying Party disputes its liability or the amount of its
liability to the Indemnified Party with respect to such Third Party Claim,
the amount of Damages specified in the Claim Notice shall be conclusively
deemed a liability of the Indemnifying Party under paragraph (a) of this
Section and the Indemnifying Party shall pay the amount of such Damages to
the Indemnified Party on demand. If the Indemnifying Party has timely
disputed its liability or the amount of its liability with respect to such
claim, the Indemnifying Party and the Indemnified Party shall proceed in
good faith to negotiate a resolution of such dispute; provided, however,
that if the dispute is not resolved within thirty (30) days after the Claim
Notice, the Indemnifying Party shall be entitled to institute such legal
action as it deems appropriate.
(ii) In the event any Indemnified Party should have a claim
under paragraph (a) of this Section against the Indemnifying Party that does not
involve a Third Party Claim, the Indemnified Party shall deliver a written
notification of a claim for indemnity under paragraph (a) of this Section
specifying the nature of and basis for such claim, together with the amount or,
if not then reasonably ascertainable, the estimated amount, determined in good
faith, of such claim (an "Indemnity Notice") with reasonable promptness to the
Indemnifying Party. The failure by any Indemnified Party to give the Indemnity
Notice shall not impair such party's rights hereunder except to the extent that
the Indemnifying Party demonstrates that it has been irreparably prejudiced
thereby. If the Indemnifying Party notifies the Indemnified Party that it does
not dispute the claim or the amount of the claim described in such Indemnity
Notice or fails to notify the Indemnified Party within the Dispute Period
whether the Indemnifying Party disputes the claim or the amount of the claim
described in such Indemnity Notice, the amount of Damages specified in the
Indemnity Notice will be conclusively deemed a liability of the Indemnifying
Party under paragraph (a) of this Section and the Indemnifying Party shall pay
the amount of such Damages to the Indemnified Party on demand. If the
Indemnifying Party has timely disputed its liability or the amount of its
24
liability with respect to such claim, the Indemnifying Party and the Indemnified
Party shall proceed in good faith to negotiate a resolution of such dispute;
provided, however, that if the dispute is not resolved within thirty (30) days
after the Indemnity Notice, the Indemnifying Party shall be entitled to
institute such legal action as it deems appropriate.
The indemnity agreements contained herein shall be in addition
to (i) any cause of action or similar rights of the indemnified party against
the indemnifying party or others, and (ii) any liabilities the indemnifying
party may be subject to.
10. JURY TRIAL WAIVER. The Company and the Buyer hereby waive
a trial by jury in any action, proceeding or counterclaim brought by either of
the Parties hereto against the other in respect of any matter arising out or in
connection with the Transaction Agreements.
11. GOVERNING LAW: MISCELLANEOUS.
This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York for contracts to be wholly
performed in such state and without giving effect to the principles thereof
regarding the conflict of laws. Each of the parties consents to the exclusive
jurisdiction of the federal courts whose districts encompass any part of the
County of New York or the state courts of the State of New York sitting in the
County of New York in connection with any dispute arising under this Agreement
or any of the other Transaction Agreements and hereby waives, to the maximum
extent permitted by law, any objection, including any objection based on FORUM
NON CONVENIENS, to the bringing of any such proceeding in such jurisdictions or
to any claim that such venue of the suit, action or proceeding is improper. To
the extent determined by such court, the Company shall reimburse the Buyer for
any reasonable legal fees and disbursements incurred by the Buyer in enforcement
of or protection of any of its rights under any of the Transaction Agreements.
Nothing in this Section shall affect or limit any right to serve process in any
other manner permitted by law.
The Company and the Buyer acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement or the other Transaction Agreements were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent or
cure breaches of the provisions of this Agreement and the other Transaction
Agreements and to enforce specifically the terms and provisions hereof and
thereof, this being in addition to any other remedy to which any of them may be
entitled by law or equity.
Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof
This Agreement shall inure to the benefit of and be binding
upon the successors and assigns of each of the parties hereto.
25
All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
A facsimile transmission of this signed Agreement shall be
legal and binding on all parties hereto.
This Agreement may be signed in one or more counterparts, each
of which shall be deemed an original.
The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
This Agreement may be amended only by an instrument in writing
signed by the party to be charged with enforcement thereof.
This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
All dollar amounts referred to or contemplated by this
Agreement or any other Transaction Agreement shall be deemed to refer to US
Dollars, unless otherwise explicitly stated to the contrary.
12. NOTICES. Any notice required or permitted hereunder shall
be given in writing (unless otherwise specified herein) and shall be deemed
effectively given on the earliest of
(a) the date delivered, if delivered by personal delivery as against
written receipt therefor or by confirmed facsimile transmission,
(b) the fifth Trading Day after deposit, postage prepaid, in the
United States Postal Service by registered or certified mail, or
(c) the third Trading Day after mailing by domestic or international
express courier, with delivery costs and fees prepaid,
in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate by
ten (10) days' advance written notice similarly given to each of the other
parties hereto):
26
COMPANY: 000 Xxxxxxx Xxxxxx, #00X
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxxxxxx
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
BUYER: At the address set forth on the signature page of this Agreement.
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. THE Company's
and the Buyer's representations and warranties herein shall survive the
execution and delivery of this Agreement and the delivery of the Certificates
and the payment of the Purchase Price, and shall inure to the benefit of the
Buyer and the Company and their respective successors and assigns.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
27
IN WITNESS WEIEREOP, with respect to the Puzabase Price
specified below, this Agree:writ HAS BEEN duly executed by the Buyer and the
Company as of the date set first above written.
PURCHASE PRICE: $ 371,000.00
------------
BUYER:
------
ALPHA CAPITAL AG
Address Printed Name of Buyer
Pradafant 7 Fustertums
Vaduz, Liechtenstein By: /s/ Xxxxxx Xxxxxxxx
-------------------------------
Telecopier No. 000-000-0000 (Signature of Authorized Person)
------------
Leichtenstein
----------------------------- Xxxxxx Xxxxxxxx Director
Jurisdiction of Incorporation -----------------------------------
or Organization Printed Name and Title
COMPANY
-------
BRILLIANT TECHNOLOGIES CORPORATION
BY:
---------------------------------------
(Signature of Authorized Person)
-------------------------------------------
Printed Name and Title
28
IN WITNESS WHEREOF, with respect to the Purchase Price specified below,
this Agreement has been duly executed by the Buyer and the Company as of the
date set first above written.
PURCHASE PRICE: $ 371,000.00
-------------------
BUYER:
ALPHA CAPITAL AG
Printed Name of Buyer
Address
Xxxxxxxxx 0 Xxxxxxxxxx
Xxxxx, Liechtenstein
By:______________________________
Telecopier No.____________________ (Signature of Authorized Person)
---------------------------------
---------------------------------- Printed Name and Title
Jurisdiction of Incorporation
or Organization
COMPANY
-------
BRILLIANT TECHNOLOGIES CORPORATION
By: /s/ Xxxxx Xxxxxxxx
-----------------------------------
(Signature of Authorized Person)
Xxxxx Xxxxxxxx, President & CEO
---------------------------------------
Printed Name and Title
29
FORM OF NOTE
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE
ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
No. 06-09-01 US $371,000.00
-------- -----------
BRILLIANT TECHNOLOGIES CORPORATION
PROMISSORY NOTE DUE November 3, 2006
FOR VALUE RECEIVED, BRILLIANT TECHNOLOGIES CORPORATION, a corporation
organized and existing under the laws of the State of Delaware (the "Company"),
promises to pay to ALPHA CAPITAL AG, the registered holder hereof (the
"Holder"), the principal sum of Three Hundred Seventy-One Thousand and 00/100
Dollars (US $371,000.00) on the Maturity Date (as defined below).
TIME IS OF THE ESSENCE WITH RESPECT TO THE COMPANY'S FULFILLMENT OF ALL
OF ITS PAYMENT OBLIGATIONS HEREUNDER. The Holder shall not be required to give
the Company any notice of default of payment if any such payment is not timely
paid or otherwise satisfied. All provisions of this Note which apply in the
event of the Company's not timely fulfilling any of its payment obligations
hereunder shall apply whether or not such notice of default is given. The
Holder's giving of any notice to the Company shall not be deemed a waiver,
modification or amendment of this provision with respect to the failure referred
to in that notice or to any other failure by the Company timely to make any
other payment due hereunder.
This Note or its predecessor was originally issued on September 18,
2006 (the "Issue Date").
This Note is being issued pursuant to the terms of the Bridge Loan
Agreement, dated as of September 18, 2006 (the "Bridge Loan Agreement"), to
which the Company and the Holder (or the Holder's predecessor in interest) are
parties. Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Bridge Loan Agreement.
This Note is subject to the following additional provisions:
1. The Note will initially be issued in denominations determined by the
Company, but are exchangeable for an equal aggregate principal amount of Note of
different denominations, as requested by the Holder surrendering the same. No
service charge will be made for such registration or transfer or exchange.
30
2. No interest will accrue on this Note until the Maturity Date. If any
portion of this Note is outstanding on the Maturity Date, interest at the rate
of fourteen percent (14%) per annum or the highest rate allowed by law,
whichever is lower, shall accrue on the outstanding principal of this Note from
the Maturity Date to and including the date of payment by the Company. Such
interest shall accrue on a daily basis and shall be payable in cash. The Holder
may demand payment of all or any part of this Note, together with accrued
interest, if any, and any other amounts due hereunder, AS of the Maturity Date
or any date thereafter.
3. The Company shall be entitled to withhold from all payments of
principal of, and, if applicable, interest on, this Note any amounts required to
be withheld under the applicable provisions of the United States income tax laws
or other applicable laws at the time of such payments, and Holder shall execute
and deliver all required documentation in connection therewith.
4. This Note has been issued subject to investment representations of
the original purchaser hereof and may be transferred or exchanged only in
compliance with the Securities Act of 1933, as amended (the "Act"), and other
applicable state and foreign securities laws and the terms of the Bridge Loan
Agreement. In the event of any proposed transfer of this Note, the Company may
require, prior to issuance of a new Note in the name of such other person, that
it receive reasonable transfer documentation that is sufficient to evidence that
such proposed transfer complies with the Act and other applicable state and
foreign securities laws and the terms of the Bridge Loan Agreement. Prior to due
presentment for transfer of this Note, the Company and any agent of the Company
may treat the person in whose name this Note is duly registered on the Company's
Note Register as the owner hereof for the purpose of receiving payment as herein
provided and for all other purposes, whether or not this Note be overdue, and
neither the Company nor any such agent shall be affected by notice to the
contrary.
5. (a) The term "Maturity Date" means the earlier of (a) November 3,
2006 (the "Stated Maturity Date") or (b) the second Trading Day on which New
Transaction Funds in the aggregate amount of $1,390,000.00 ("New Transaction
Threshold") have been received by the Company (as defined in the Bridge Loan
Agreement) occurs.
(b) (i) Additionally, if an Event of Default occurs pursuant
to Section 13(a)(i), (iii) - (x) hereof and continues for a period of 5 days
after notice from the Holder to the Company of such Event of Default, the Holder
of this Note will be entitled, at its option, from and after the Certificate of
Incorporation Amendment Filing Date to convert at any time the principal amount
of this Note, provided that the principal amount is at least US$10,000 (unless
if at the time of such election to convert the aggregate principal amount of all
Notes registered to the Holder is less than Ten Thousand Dollars (US$10,000),
then the whole amount thereof), and accrued interest, into shares of Common
Stock at a conversion price (the "Conversion Price") for each share of Common
Stock equal to the lesser of (i) $0.07 and (ii) 75% of the Market Price on the
Conversion Date (as defined below), as such price may be adjusted as provided
herein (the "Variable Conversion Rate"). For purposes of this section, the
Market Price shall be the average of the lowest five (5) days closing bid prices
(not necessarily consecutive) of the Common Stock for the thirty (30) Trading
Days immediately preceding the Conversion Date, as reported by the Reporting
Service, or, in the event the Common Stock is listed on a stock exchange or
traded on NASDAQ, the Market Price shall be the closing prices on the exchange
on such dates, as reported in the Wall Street Journal.
31
(ii) Conversion of this Note, if applicable in accordance with
Section 5(b)(i), shall be effectuated by faxing a Notice of Conversion (as
defined below) to the Company as provided in this Section 5(b)(ii). The Notice
of Conversion shall be executed by the Holder of this Note and shall evidence
such Holder's intention to convert this Note in the form annexed hereto as
Exhibit A. No fractional shares of Common Stock or scrip representing fractions
of shares will be issued on conversion, but the number of shares of Common Stock
issuable shall be rounded to the nearest whole share. The date on which notice
of conversion is given (the "Conversion Date") shall be deemed to be the date on
which the Holder faxes or otherwise delivers the conversion notice ("Notice of
Conversion") to the Company so that it is received by the Company on such
specified date, and the Holder shall deliver to the Company the original Note
being converted no later than five (5) business days thereafter. Facsimile
delivery of the Notice of Conversion shall be accepted by the Company at
facsimile number 000-000-0000; Attn: Xxxxx Xxxxxxxx. Certificates representing
Common Stock upon conversion will be delivered to the Holder at the address
specified in the Notice of Conversion, via express courier, by electronic
transfer or otherwise, within three (3) business days after the Conversion Date.
The Holder shall be deemed to be the holder of the shares issuable to it in
accordance with the provisions of this Section 5(b)(ii) on the Conversion Date.
6. (a) Any payment made on account of this Note shall be applied in the
following order of priority: (i) first, to any amounts due hereunder other than
principal and accrued interest, (ii) then, to accrued interest, if any, through
and including the date of payment, and (iii) then, to principal of this Note.
(b) Subject to the provisions of Section 6(a) hereof, this
Note may be prepaid in whole or in part at the option of the Company at any time
prior to the Maturity Date.
7. All payments contemplated hereby are to be made "in cash" and shall
be made in immediately available good funds of United States of America currency
by wire transfer to an account designated in writing by the Holder to the
Company (which account may be changed by notice similarly given). For purposes
of this Note, the phrase "date of payment" means the date good funds are
received in the account designated by the notice which is then currently
effective.
8. Subject to the terms of the Bridge Loan Agreement, no provision of
this Note shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of, and, if applicable, interest on,
this Note at the time, place, and rate, and in the coin or currency, as herein
prescribed. This Note is direct obligations of the Company.
9. No recourse shall be had for the payment of the principal of, or, if
applicable, the interest on, this Note, or for any claim based hereon, or
otherwise in respect hereof, against any incorporator, shareholder, officer or
director, as such, past, present or future, of the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise, all such liability
being, by the acceptance hereof and as part of the consideration for the issue
hereof, expressly waived and released.
10. The Holder of the Note, by its acceptance hereof, agrees that this
Note is being acquired for investment and that such Holder will not offer, sell
or otherwise dispose of this Note except under circumstances which will not
result in a violation of the Act or any applicable state Blue Sky or foreign
laws or similar laws relating to the sale of securities.
32
11. Any notice required or permitted hereunder shall be given in manner
provided in the Section headed "NOTICES" in the Bridge Loan Agreement, the terms
of which are incorporated herein by reference.
12. (a) This Note shall be governed by and interpreted in accordance
with the laws of the State of New York for contracts to be wholly performed in
such state and without giving effect to the principles thereof regarding the
conflict of laws. Each of the Company and by its acceptance of this Note, the
Holder consents to the exclusive jurisdiction of the federal courts whose
districts encompass any part of the County of New York or the state courts of
the State of New York sitting in the County of New York in connection with any
dispute arising under this Note and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on FORUM NON
CONVENIENS, to the bringing of any such proceeding in such jurisdictions. To the
extent determined by such court, the Company shall reimburse the Holder for any
reasonable legal fees and disbursements incurred by the Holder in enforcement of
or protection of any of its rights under this Note.
(b) The Company and the Holder, by the acceptance of this
Note, hereby waive a trial by jury in any action, proceeding or counterclaim
brought by either of them hereto against the other in respect of any matter
arising out of or in connection with this Note.
13. (a) The following shall constitute an "Event of Default":
i. The Company shall default in the timely payment of principal
on this Note or any other amount due hereunder (without the
requirement of any further notice with respect thereto from
the Holder); or
ii. Any of the representations or warranties made by the Company
herein, in the Bridge Loan Agreement or any of the other
Transaction Agreements shall be false or misleading in any
material respect at the time made; or
iii. The Company shall fail to perform or observe, in any material
respect, any other covenant, term, provision, condition,
agreement or obligation of any Note in this series and such
failure shall continue uncured for a period of thirty (30)
days after the Company's receipt of written notice thereof
from the Holder; or
iv. The Company shall fail to perform or observe, in any material
respect, any covenant, term, provision, condition, agreement
or obligation of the Company under any of the Transaction
Agreements and such failure shall continue uncured for a
period of thirty (30) days after the Company's receipt of
written notice thereof from the Holder; or
v. The Company shall (1) admit in writing its inability to pay
its debts generally as they mature; (2) make an assignment for
the benefit of creditors or commence proceedings for its
dissolution; or (3) apply for or consent to the appointment of
a trustee, liquidator or receiver for its or for a substantial
part of its property or business; or
33
vi. A trustee, liquidator or receiver shall be appointed for the
Company or for a substantial part of its property or business
without its consent and shall not be discharged within sixty
(60) days after such appointment; or
vii. Any governmental agency or any court of competent
jurisdiction at the instance of any governmental agency shall
assume custody or control of the whole or any substantial
portion of the properties or assets of the Company and shall
not be dismissed within sixty (60) days thereafter; or
viii. Any money judgment, writ or warrant of attachment, or
similar process in excess of Five Hundred Thousand ($500,000)
Dollars in the aggregate shall be entered or filed against the
Company or any of its properties or other assets and shall
remain unpaid, unvacated, unbonded or unstayed for a period of
sixty (60) days or in any event later than five (5) days prior
to the date of any proposed sale thereunder; or
ix. Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings for relief under any
bankruptcy law or any law for the relief of debtors shall be
instituted by or against the Company and, if instituted
against the Company, shall not be dismissed within sixty (60)
days after such institution or the Company shall by any action
or answer approve of, consent to, or acquiesce in any such
proceedings or admit the material allegations of, or default
in answering a petition filed in any such proceeding, or
x. The Company shall fail to perform or observe, in any material
respect, the terms and provisions of Section 4 (k) of the
Bridge Loan Agreement and such failure shall continue uncured
for a period of five (5) days after the Company's receipt of
written notice thereof from the Holder.
(b) If an Event of Default shall have occurred and is
continuing, then, or at any time thereafter, and in each and every such case,
unless such Event of Default shall have been cured or waived in writing by the
Holder (which waiver shall not be deemed to be a waiver of any subsequent
default), at the option of the Holder and in the Holder's sole discretion, the
Holder may consider this Note immediately due and payable (and the Maturity Date
shall be accelerated accordingly), without presentment, demand, protest or
notice of any kinds, all of which are hereby expressly waived, anything herein
or in any note or other instruments contained to the contrary notwithstanding,
and the Holder may immediately enforce any and all of the Holder's rights and
remedies provided herein or any other rights or remedies afforded by law,
including, but not necessarily limited to, the equitable remedy of specific
performance and injunctive relief.
14. In the event for any reason, any payment by or act of the Company
or the Holder shall result in payment of interest which would exceed the limit
authorized by or be in violation of the law of the jurisdiction applicable to
this Note, then IPSO FACTO the obligation of the Company to pay interest or
perform such act or requirement shall be reduced to the limit authorized under
such law, so that in no event shall the Company be obligated to pay any such
interest, perform any such act or be bound by any requirement which would result
in the payment of interest in excess of the limit so authorized. In the event
any payment by or act of the Company shall result in the extraction of a rate of
interest in excess of a sum which is lawfully collectible as interest, then such
amount (to the extent of such excess not returned to the Company) shall, without
further agreement or notice between or by the Company or the Holder, be deemed
34
applied to the payment of principal, if any, hereunder immediately upon receipt
of such excess funds by the Holder, with the same force and effect as though the
Company had specifically designated such sums to be so applied to principal and
the Holder had agreed too accept such sums as an interest-free prepayment of
this Note. If any part of such excess remains after the principal has been paid
in full, whether by the provisions of the preceding sentences of this Section or
otherwise, such excess shall be deemed to be an interest-free loan from the
Company to the Holder, which loan shall be payable immediately upon demand by
the Company. The provisions of this Section shall control every other provision
of this Note.
15. (a) This Note has not been registered under the Act, and has been
issued to the Holder for investment and not with a view to distribution. Neither
this Note nor any of the Conversion Shares or any other security issued or
issuable upon conversion of this Note may be sold, transferred, pledged or
hypothecated in the absence of an effective registration statement under the Act
relating to such security or an opinion of counsel satisfactory to the Company
that registration is not required under the Act. Each certificate for the
Conversion Shares and any other security issued or issuable upon conversion of
this Note shall contain a legend on the face thereof, in form and substance
satisfactory to counsel for the Company, setting forth the restrictions on
transfer contained in this Section.
(b) Reference is made to the provisions of Section 4(h) of the
Bridge Loan Agreement, the terms of which are incorporated herein by reference.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.
Dated: September 18, 2006
BRILLIANT TECHNOLOGIES CORPORATION
By: /s/ Xxxxx Xxxxxxxx
--------------------------------
Xxxxx Xxxxxxxx
--------------------------------
(Print Name)
President & CEO
--------------------------------
(Title)
35
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Note)
The undersigned hereby irrevocably elects to convert $________________
of the principal amount of the above Note into shares of Common Stock of
BRILLIANT TECHNOLOGIES CORPORATION (the "Company") according to the conditions
hereof, as of the date written below.
Date of Conversion* _______________________________
Accrued Interest $ _____________________
Applicable Conversion Price ____________________________________________________
Signature______________________________________________________________
[Name]
Address: _______________________________________________________________________
_______________________________________________________________________
36
september
FORM OF WARRANT
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER
EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
BRILLIANT TECHNOLOGIES CORPORATION
COMMON STOCK PURCHASE WARRANT
1. ISSUANCE. In consideration of good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by BRILLIANT
TECHNOLOGIES CORPORATION, a Delaware corporation (the "Company"), ALPHA CAPITAL
AG, or registered assigns (the "Holder") is hereby granted the right to purchase
at any time, during the period (the "Exercise Period") on or after the
Commencement Date (as defined below) until 5:00 P.M., New York City time, on
September 17, 2011 (the "Expiration Date"), Ten Million Six Hundred Thousand
(10,600,000) fully paid and nonassessable shares of the Company's Common Stock,
$0.001 par value per share (the "Common Stock"), at an initial exercise price
per share (the "Exercise Price) of $.07 per share, subject to further adjustment
as set forth herein. This Warrant is being issued pursuant to the terms of that
certain Bridge Loan Agreement, dated as of September 18, 2006 (the "Agreement"),
to which the Company and Holder (or Holder's predecessor in interest) are
parties. Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Agreement. This Warrant was originally issued to the
Holder of the Holder's predecessor in interest on September 18, 2006 (the "Issue
Date").
2. EXERCISE OF WARRANTS.
2.1 GENERAL.
(a) This Warrant is exercisable in whole or in part at any
time during the Exercise Period Such exercise shall be effectuated by submitting
to the Company (either by delivery to the Company or by facsimile transmission
as provided in Section 8 hereof) a completed and duly executed Notice of
Exercise (substantially in the form attached to this Warrant Certificate) as
provided in the Notice of Exercise (or revised by notice given by the Company as
contemplated by the Section headed "NOTICES" in the Agreement). The date such
Notice of Exercise is faxed to the Company shall be the "Exercise Date,"
provided that, if such exercise represents the full exercise of the outstanding
balance of the Warrant, the. Holder of this Warrant tenders this Warrant
Certificate to the Company within five (5) Trading Days thereafter. The Notice
of Exercise shall be executed by the Holder of this Warrant and shall indicate
(i) the number of shares then being purchased pursuant to such exercise and (ii)
if applicable (as provided below), whether the exercise is a cashless exercise.
37
(b) The provisions of this Section 2.1(b) shall only be
applicable (i) on or after the first anniversary of the Issue Date, and (ii) if,
and only if, on the Exercise Date there is no effective Registration Statement
covering the resale of the Warrant Shares by the Holder (other than during a
Permitted Suspension Period). If the Notice of Exercise form elects a "cashless"
exercise, the Holder shall thereby be entitled to receive a number of shares of
Common Stock equal to (w) the excess of the Current Market Value (as defined
below) over the total cash exercise price of the portion of the Warrant then
being exercised, divided by (x) the Market Price of the Common Stock as of the
trading day immediately prior to the Exercise Date. For the purposes of this
Warrant, the terms (y) "Current Market Value" shall mean an amount equal to the
Market Price of the Common Stock as of the Trading Day immediately prior to the
Exercise Date, multiplied by the number of shares of Common Stock specified in
such Notice of Exercise Form, and (z) "Market Price of the Common Stock" shall
mean the Closing Price (as defined below) of the Common Stock.
(c) If the Notice of Exercise form elects a "cash" exercise
(or if the cashless exercise referred to in the immediately preceding paragraph
(b) is not available in accordance with its terms), the Exercise Price per share
of Common Stock for the shares then being exercised shall be payable, at the
election of the Holder, in cash or by certified or official bank check or by
wire transfer in accordance with instructions provided by the Company at the
request of the Holder.
(e) Upon the appropriate payment, if any, of the Exercise
Price for the shares of Common Stock purchased, together with the surrender of
this Warrant Certificate (if required), the Holder shall be entitled to receive
a certificate or certificates for the shares of Common Stock so purchased. The
Company shall deliver such certificates representing the Warrant Shares in
accordance with the instructions of the Holder as provided in the Notice of
Exercise (the certificates delivered in such manner, the "Warrant Share
Certificates") within three (3) Trading Days (such third Trading Day, a
"Delivery Date") of (i) with respect to a "cashless exercise," the Exercise Date
or, (ii) with respect to a "cash" exercise, the later of the Exercise Date or
the date the payment of the Exercise Price for the relevant Warrant Shares is
received by the Company.
(f) The Holder shall be deemed to be the holder of the shares
issuable to it in accordance with the provisions of this Section 2.1 on the
Exercise Date.
2.2 LIMITATION ON EXERCISE. Notwithstanding the provisions of
this Warrant, the Agreement or of the other Transaction Agreements, in no event
(except (i) as specifically provided in this Warrant as an exception to this
provision, (ii) during the forty-five (45) day period prior to the Expiration
Date, or (iii) while there is outstanding a tender offer for any or all of the
shares of the Company's Common Stock) shall the Holder be entitled to exercise
this Warrant, or shall the Company have the obligation to issue shares upon such
exercise of all or any portion of this Warrant to the extent that, after such
exercise the sum of (1) the number of shares of Common Stock beneficially owned
38
by the Holder and its affiliates (other than shares of Common Stock which may be
deemed beneficially owned through the ownership of the unexercised portion of
the Warrants or other rights to purchase Common Stock or through the ownership
of the unconverted portion of convertible securities), and (2) the number of
shares of Common Stock issuable upon the exercise of the Warrants with respect
to which the determination of this proviso is being made, would result in
beneficial ownership by the Holder and its affiliates of more than 4.99% of the
outstanding shares of Common Stock (after taking into account the shares to be
issued to the Holder upon such exercise). For purposes of the proviso to the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "1934 Act"), except as otherwise provided in clause (1) of such sentence.
The Holder, by its acceptance of this Warrant, further agrees that if the Holder
transfers or assigns any of the Warrants to a party who or which would not be
considered such an affiliate, such assignment shall be made subject to the
transferee's or assignee's specific agreement to be bound by the provisions of
this Section 2.2 as if such transferee or assignee were the original Holder
hereof.
2.3 CERTAIN DEFINITIONS. As used herein, each of the following
terms has the meaning set forth below, unless the context otherwise requires:
(a) "Commencement Date" means the Certificate of Incorporation
Amendment Filing Date
(b) "Closing Price" means the 4:00 P.M. closing bid price of
the Common Stock on the Principal Trading Market on the relevant Trading Day(s),
as reported by the Reporting Service for the relevant date.
(c) "Reporting Service" means Bloomberg LP or if that service
is not then reporting the relevant information regarding the Common Stock, a
comparable reporting service of national reputation selected by a Majority in
Interest of the Holders and reasonably acceptable to the Company.
(d) "Majority in Interest of the Holders" means, as of the
relevant date, one or more Holders whose respective outstanding principal
amounts of the Notes held by each of them, as of such date, aggregate more than
fifty percent (50%) of the aggregate outstanding principal amounts of the
outstanding Notes held by all Holders on that date.
3. RESERVATION OF SHARES. The Company hereby agrees that at all times
during the Exercise Period there shall be reserved for issuance upon exercise of
this Warrant one hundred percent (100%) of the number of shares of its Common
Stock as shall be required for issuance of the Warrant Shares for the then
unexercised portion of this Warrant. For the purposes of such calculations, the
Company should assume that the outstanding portion of this Warrants were
exercisable in full at any time, without regard to any restrictions which might
limit the Holder's right to exercise any portion of this Warrant held by the
Holder.
4. MUTILATION OR LOSS OF WARRANT. Upon receipt by the Company of
evidence satisfactory to it of the loss, theft, destruction or mutilation of
this Warrant, and (in the case of loss, theft or destruction) receipt of
reasonably satisfactory indemnification, and (in the case of mutilation) upon
surrender and cancellation of this Warrant, the Company will execute and deliver
a new Warrant of like tenor and date and any such lost, stolen, destroyed or
mutilated Warrant shall thereupon become void.
39
5. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or equity,
and the rights of the Holder are limited to those expressed in this Warrant and
are not enforceable against the Company except to the extent set forth herein.
6. PROTECTION AGAINST DILUTION AND OTHER ADJUSTMENTS.
6.1 ADJUSTMENT MECHANISM. If an adjustment of the Exercise
Price is required pursuant to this Section 6 (other than pursuant to Section
6.4), the Holder shall be entitled to purchase such number of shares of Common
Stock as will cause (i) (x) the total number of shares of Common Stock Holder is
entitled to purchase pursuant to this Warrant following such adjustment,
multiplied by (y) the adjusted Exercise Price per share, to equal the result of
(ii) (x) the dollar amount of the total number of shares of Common Stock Holder
is entitled to purchase before adjustment, multiplied by (y) the total Exercise
Price before adjustment. (1)
6.2 CAPITAL ADJUSTMENTS. In case of any stock split or reverse
stock split, stock dividend, reclassification of the Common Stock or
recapitalization, the provisions of this Section 6 shall be applied as if such
capital adjustment event had occurred immediately prior to the date of this
Warrant and the original Exercise Price had been fairly allocated to the stock
resulting from such capital adjustment; and in other respects the provisions of
this Section shall be applied in a fair, equitable and reasonable manner so as
to give effect, as nearly as may be, to the purposes hereof. A rights offering
to stockholders shall be deemed a stock dividend to the extent of the bargain
purchase element of the rights. If, for as long as this Warrant remains
outstanding, the Company enters into a merger (other than where the Company is
the surviving entity) or consolidation with another corporation or other entity
(collectively, a "Sale"), and the holders of the Common Stock are entitled to
receive stock, securities or property in respect of or in exchange for Common
Stock, then as a condition of such Sale, the Company and any such successor or
transferee will agree that this Warrant may thereafter be converted on the terms
and subject to the conditions set forth above into the kind and amount of stock,
securities or property receivable upon such merger or consolidation by a holder
of the number of shares of Common Stock into which this Warrant might have been
converted immediately before such merger or consolidation, subject to
adjustments which shall be as nearly equivalent as may be practicable.
6.3 ADJUSTMENT FOR SPIN OFF. If, for any reason, prior to the
exercise of this Warrant in full, the Company spins off or otherwise divests
---------------------
(1) Example: Assume 10,000 shares remain under Warrant at original stated
Exercise Price of US$0.07. Total exercise price (clause (y) in text) is (i)
10,000 x (ii) US$0.07, or US$700. Company effects 2:1 stock split. Exercise
Price is adjusted to US$0.035. Number of shares covered by Warrant is adjusted
to 20,000, because (applying clause (x) in text) (i) 20,000 x (ii) US$0.035
US$700.
40
itself of a part of its business or operations or disposes all or of a part of
its assets in a transaction (the "Spin Off') in which the Company does not
receive compensation for such business, operations or assets, but causes
securities of another entity (the "Spin Off Securities") to be issued to
security holders of the Company, then the Company shall cause (i) to be reserved
Spin Off Securities equal to the number thereof which would have been issued to
the Holder had all of the Holder's unexercised Warrants outstanding on the
record date (he "Record Date") for determining the amount and number of Spin Off
Securities to be issued to security holders of the Company (the "Outstanding
Warrants") been exercised as of the close of business on the Trading Day
immediately before the Record Date (the "Reserved Spin Off Shares"), and (ii) to
be issued to the Holder on the exercise of all or any of the Outstanding
Warrants, such amount of the Reserved Spin Off Shares equal to (x) the Reserved
Spin Off Shares, multiplied by (y) a fraction, of which (I) the numerator is the
amount of the Outstanding Warrants then being exercised, and (II) the
denominator is the amount of the Outstanding Warrants.
6.4 ADJUSTMENT FOR CERTAIN TRANSACTIONS. Reference is made to
the provisions of Appendix A to this Warrant, the terms of which are
incorporated herein by reference. The Exercise Price shall be adjusted as
provided in the applicable provisions of said Appendix A.
7. TRANSFER TO COMPLY WITH THE SECURITIES ACT; REGISTRATION RIGHTS.
7.1 TRANSFER. This Warrant has not been registered under the
Securities Act of 1933, as amended, (the "Act") and has been issued to the
Holder for investment and not with a view to the distribution of either the
Warrant or the Warrant Shares. Neither this Warrant nor any of the Warrant
Shares or any other security issued or issuable upon exercise of this Warrant
may be sold, transferred, pledged or hypothecated in the absence of an effective
registration statement under the Act relating to such security or an opinion of
counsel satisfactory to the Company that registration is not required under the
Act. Each certificate for the Warrant, the Warrant Shares and any other security
issued or issuable upon exercise of this Warrant shall contain a legend on the
face thereof, in form and substance satisfactory to counsel for the Company,
setting forth the restrictions on transfer contained in this Section.
7.2 REGISTRATION RIGHTS. Reference is made to the provisions
of Section 4(h) of the Agreement, the terms of which are incorporated herein by
reference.
8. NOTICES. Any notice required or permitted hereunder shall be given
in manner provided in the Section headed "NOTICES" in the Agreement, the terms
of which are incorporated herein by reference.
9. SUPPLEMENTS AND AMENDMENTS; WHOLE AGREEMENT. This Warrant may be
amended or supplemented only by an instrument in writing signed by the Company
and the Holder. This Warrant contains the full understanding of the Company and,
by its acceptance of this Note, the Holder with respect to the subject matter
hereof and thereof and there are no representations, warranties, agreements or
understandings other than expressly contained herein and therein.
41
10. GOVERNING LAW. This Warrant shall be deemed to be a contract made
under the laws of the State of New York for contracts to be wholly performed in
such state and without giving effect to the principles thereof regarding the
conflict of laws. Each of the Company and, by its acceptance of this Note, the
Holder consents to the jurisdiction of the federal courts whose districts
encompass any part of the County of New York or the state courts of the State of
New York sitting in the County of New York in connection with any dispute
arising under this Warrant and hereby waives, to the maximum extent permitted by
law, any objection, including any objection based on FORUM NON CONVENIENS, to
the bringing of any such proceeding in such jurisdictions. To the extent
determined by such court, the Company shall reimburse the Holder for any
reasonable legal fees and disbursements incurred by the Holder in enforcement of
or protection of any of its rights under any of the Transaction Agreements.
11. JURY TRIAL WAIVER. The Company and, by its acceptance of this Note,
the Holder hereby waive a trial by jury in any action, proceeding or
counterclaim brought by either of them against the other in respect of any
matter arising out or in connection with this Warrant,
12. REMEDIES. The Company stipulates that the remedies at law of the
Holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
42
13. DESCRIPTIVE HEADINGS. Descriptive headings of the several Sections
of this Warrant are inserted for convenience only and shall not control or
affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of
the 18th day of September, 2006.
BRILLIANT TECHNOLOGIES CORPORATION
By: /s/ Xxxxx Xxxxxxxx
--------------------------
Xxxxx Xxxxxxxx
------------------------------
(Print Name)
President & CEO
------------------------------
(Title)
43
APPENDIX A
TO
COMMON STOCK PURCHASE WARRANT
OF
BRILLIANT TECHNOLOGIES CORPORATION
1. Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Agreement or in the Warrant.
2. (a) The term "Lower Price Transaction" means a New Transaction offered or
consummated during the New Transaction Period (as defined below), where the
lowest fixed exercise price (but not including any such exercise price based on
a percentage of the market price of the Common Stock) of any New Transaction
Warrants (as defined below) is, or by its terms or by an existing understanding
of the Company and the New Investor, could subsequently be adjusted or revised
to be, lower than the then effective Exercise Price of the Warrants (such
Exercise Price, in each case, subject to adjustment in the same manner as the
initial Exercise Price of the Warrant is adjusted, other than as a result of the
application of this Appendix A) (and, if no minimum exercise price is set, it
shall be assumed that such minimum exercise price is $.01).
(b) The term "New Transaction Warrants" means any warrant, option or
other right (howsoever denominated) issued to the New Investor in the New
Transaction to purchase shares of Common Stock.
(c) The term "New Transaction Period" means the period commencing on
the Issue Date and continuing until the earlier of (i) the Expiration Date or
(ii) the date on which this Warrant has been fully exercised.
3. The Company covenants and agrees that, if there is a Lower Price Transaction
during the New Transaction Period, then the Exercise Price on the unexercised
portion of this Warrant shall be adjusted to equal the lowest Exercise Price
applicable to the Lower Price Transaction.
44
NOTICE OF EXERCISE OF WARRANT
TO: Brilliant Technologies Corporation VIA TELECOPIER TO:
000 Xxxxxxx Xxxxxx (000) 000-0000
New York, New York
Attn: President
The undersigned hereby irrevocably elects to exercise the right,
represented by the Warrant Certificate, dated as of _____________, 20_____, to
purchase_____________________________shares of the Common Stock, $0.001 par
value ("Common Stock"), of BRILLIANT TECHNOLOGIES CORPORATION and tenders
herewith payment in accordance with Section 2 of said Common Stock Purchase
Warrant, as follows:
___ CASH: $______________________________ = (Exercise Price x Exercise Shares)
Payment is being made by:
___ enclosed check
___ wire transfer
___ other
___ CASHLESS EXERCISE [if available pursuant to Section 2.1(b)]:
Net number of Warrant Shares to be issued to Holder : ______ *
* based on: Current Market Value - (Exercise Price x Exercise Shares)
---------------------------------------------------------
Market Price of Common Stock
where:
Market Price of Common Stock ["MP"] = $ ___________
Current Market Value [MP x Exercise Shares] = $ ___________
It is the intention of the Holder to comply with the provisions of
Section 2.2 of the Warrant regarding certain limits on the Holder's right to
exercise thereunder. Based on the analysis on the attached Worksheet Schedule,
the Holder believes this exercise complies with the provisions of said Section
2.2. Nonetheless, to the extent that, pursuant to the exercise effected hereby,
the Holder would have more shares than permitted under said Section, this notice
should be amended and revised, ab initio, to refer to the exercise which would
result in the issuance of shares consistent with such provision. Any exercise
above such amount is hereby deemed void and revoked.
As contemplated by the Warrant and the Bridge Loan Agreement, this
Notice of Conversion is being sent by facsimile to the telecopier number and
officer indicated above.
45
If this Notice of Exercise represents the full exercise of the
outstanding balance of the Warrant, the Holder either (1) has previously
surrendered the Warrant to the Company or (2) will surrender (or cause to be
surrendered) the Warrant to the Company at the address indicated above by
express courier within five (5) Trading Days after delivery or facsimile
transmission of this Notice of Exercise.
The certificates representing the Warrant Shares should be transmitted
by the Company to the Holder
via express courier, or
by electronic transfer
after receipt of this Notice of Exercise (by facsimile transmission or
otherwise) to:
___________________________________
___________________________________
___________________________________
Dated: ___________________
___________________________
[Name of Holder]
By:________________________________
46
NOTICE OF EXERCISE OF WARRANT
WORKSHEET SCHEDULE
1. Current Common Stock holdings of Holder and Affiliates _______________
2. Shares to be issued on current exercise _______________
3. Other shares to be issued on other current exercise(s)
and other current conversion(s) (2) _______________
4. Other shares eligible to be acquired within next 60
days without restriction _______________
5. Total [sum of Lines l through 4] _______________
6. Outstanding shares of Common Stock (3) _______________
7. Adjustments to Outstanding
a. Shares known to Holder as previously issued
to Holder or others but not included in Line 6 _______________
b. Shares to be issued per Line(s) 2 and 3 _______________
c. Total Adjustments [Lines 7a and 7b] _______________
8. Total Adjusted Outstanding [Lines 6 plus 7c] _______________
9. Holder's Percentage [Line 5 divided by Line 8] _______________
[Note: Line 9 not to be above 4.99%]
-----------------
(2) Includes shares issuable on conversion of convertible securities (including
assumed payment, if relevant, of interest or dividends) or exercise of other
rights, including other warrants or options
(3) Based on latest SEC filing by Company or information provided by executive
officer of Company, counsel to Company or transfer agent
47
