Exhibit 99.1
COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of
May 25, 2001 by and between Open Market, Inc., a Delaware corporation (the
"Company"), and Theddingworth International Limited (the "Purchaser"), a British
Virgin Islands corporation.
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to Purchaser from
time to time as provided herein, and Purchaser shall purchase, up to $40,000,000
of Common Stock and a Warrant; and
WHEREAS, such investments will be made by the Purchaser as statutory
underwriter of a registered indirect primary offering of such Common Stock by
the Company.
NOW, THEREFORE, in consideration of the foregoing premises, and the
promises and covenants herein contained, the receipt and sufficiency of which
are hereby acknowledged by the parties hereto, the parties, intending to be
legally bound, hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF COMMON STOCK
Section 1.1. PURCHASE AND SALE OF STOCK. Subject to the terms and
conditions of this Agreement, the Company may sell and issue to the Purchaser
and the Purchaser shall be obligated to purchase from the Company, up to an
aggregate of, $40,000,000 of Common Stock (the "Commitment Amount") and the
Warrant, subject to the terms herein.
Section 1.2. PURCHASE PRICE AND INITIAL CLOSING. The Company agrees to
issue and sell to the Purchaser and, in consideration of and in express reliance
upon the representations, warranties, covenants, terms and conditions of this
Agreement, the Purchaser agrees to purchase that number of the Shares to be
issued in connection with each Draw Down. The delivery of executed documents
under this Agreement and the other agreements referred to herein and the payment
of the fees set forth in Article I of the Escrow Agreement, attached as EXHIBIT
B hereto (the "Initial Closing"), shall take place at the offices of Xxxxxxx
Xxxxxx & Green, P.C., 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (i) upon the
date hereof, or (ii) such other time and place or on such date as the Purchaser
and the Company may agree upon (the "Initial Closing Date"). Each party shall
deliver all documents, instruments and writings required to be delivered by such
party pursuant to this Agreement at or prior to the Initial Closing.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
Section 2.1. REPRESENTATION AND WARRANTIES OF THE COMPANY. Except as set
forth in the SEC Documents or on the Disclosure Schedule prepared by the Company
and attached hereto, or as contemplated by this Agreement, the Company hereby
makes the following representations and warranties to the Purchaser:
(a) ORGANIZATION, GOOD STANDING AND POWER. The Company is a
corporation duly incorporated, validly existing and in good standing
under the laws of the State of Delaware and has all requisite corporate
authority to own, lease and operate its properties and assets and to
carry on its business as now being conducted. The Company does not have
any significant subsidiaries (as defined in Regulation S-X) except as set
forth in the SEC Documents. The Company is duly qualified to do business
and is in good standing as a foreign corporation in every jurisdiction in
which the nature of the business conducted or property owned by it makes
such qualification necessary, other than those in which the failure so to
qualify would not be reasonably likely to have a Material Adverse Effect.
(b) AUTHORIZATION, ENFORCEMENT. (i) The Company has the requisite
corporate power and corporate authority to enter into and perform its
obligations under the Transaction Documents pursuant to their respective
terms and to issue the Shares, (ii) the execution and delivery of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of the Company and no further
consent or authorization of the Company or its Board of Directors or
stockholders is required, and (iii) the Transaction Documents have been
duly executed and delivered by the Company and shall, assuming due
authorization, execution and delivery thereof by the Purchaser, and at
the Initial Closing constitute valid and binding obligations of the
Company enforceable against the Company in accordance with their terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation, conservatorship,
receivership or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable
principles of general application.
(c) CAPITALIZATION. The authorized capital stock of the Company
consists of (i) 300,000,000 shares of Common Stock, of which 46,940,863
shares are issues and outstanding; and (ii) 2,000,000 shares of Preferred
Stock, $.10 par value per share, of which 100,000 shares have been
designated Series A Junior Participating Preferred Stock, none of which
are issued and outstanding, and 5,000 have been designated Series E 6%
Cumulative Convertible Preferred Stock, all of which are issued and
outstanding. All of the outstanding shares of the Company's Common Stock
have been duly and validly authorized and are fully paid and
non-assessable. No shares of Common Stock are entitled to preemptive
rights or registration rights and there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any
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character whatsoever issued by the Company relating to, or securities or
rights convertible into, any shares of capital stock of the Company.
There are no contracts, commitments, understandings, or arrangements by
which the Company is or may become bound to issue additional shares of
the capital stock of the Company or options, securities or rights
convertible into shares of capital stock of the Company. The Company is
not a party to any agreement granting registration rights to any person
with respect to any of its equity or debt securities. The Company is not
a party to, and it has no knowledge of, any agreement restricting the
voting or transfer of any shares of the capital stock of the Company. The
Company has made available to the Purchaser true and correct copies of
the Company's certificate of incorporation as in effect on the date
hereof (the "Charter"), and the Company's bylaws as in effect on the date
hereof (the "Bylaws"). The Company has not received any notice from the
Principal Market questioning or threatening the continued inclusion of
the Common Stock on such market.
(d) ISSUANCE OF SHARES. The Warrant Shares to be issued under this
Agreement have been duly authorized by all necessary corporate action
and, when paid for and issued in accordance with the terms hereof and the
Warrant, the Warrant Shares shall be validly issued and outstanding,
fully paid and non-assessable, and the Purchaser shall be entitled to all
rights accorded to a holder of Common Stock.
(e) NO CONFLICTS. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the
transactions contemplated herein do not and will not (i) violate any
provision of the Company's Charter or Bylaws, (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
mortgage, deed of trust, indenture, note, bond, license, lease agreement,
instrument or obligation to which the Company is a party, (iii) create or
impose a lien, charge or encumbrance on any property of the Company under
any agreement or any commitment to which the Company is a party or by
which the Company is bound or by which any of its respective properties
or assets are bound, or (iv) assuming that Purchaser's representations
and warranties contained in Article 2.2 are true and correct, result in a
violation of any federal, state, local or other foreign statute, rule,
regulation, order, judgment or decree (including any federal or state
securities laws and regulations) applicable to the Company or any of its
subsidiaries or by which any property or asset of the Company or any of
its subsidiaries are bound or affected, except, in all cases, for such
conflicts, defaults, termination, amendments, accelerations,
cancellations and violations as would not, individually or in the
aggregate, be reasonably likely to have a Material Adverse Effect. The
business of the Company and its subsidiaries is not being conducted in
violation of any laws, ordinances or regulations of any governmental
entity, except for possible violations which singularly or in the
aggregate are not be reasonably likely to have a Material Adverse Effect.
The Company is not required under any federal, state or local law, rule
or regulation to obtain any consent, authorization or order of, or make
any filing or registration with, any court or governmental agency in
order for it to execute, deliver or perform any of its obligations under
this Agreement, or issue and sell the Shares in accordance with the terms
hereof (other than any filings which may be required to be made by the
Company with the SEC or
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state securities administrators subsequent to the Initial Closing and any
registration statement which may be filed pursuant hereto); PROVIDED,
HOWEVER, that for purpose of the representation made in this sentence,
the Company is assuming and relying upon the accuracy of the relevant
representations, warranties and agreements of the Purchaser herein.
(f) SEC DOCUMENTS, FINANCIAL STATEMENTS. The Common Stock of the
Company is registered pursuant to Section 12(g) of the Exchange Act, and
the Company has timely filed all reports, schedules, forms, statements
and other documents required to be filed by it with the SEC pursuant to
the reporting requirements of the Exchange Act, including material filed
pursuant to Section 13(a) or 15(d) of the Exchange Act. The Company has
delivered or made available to the Purchaser, through the XXXXX system or
otherwise, true and complete copies of the SEC Documents filed with the
SEC since December 31, 1998. The Company has not provided to the
Purchaser any information which, according to applicable law, rule or
regulation, should have been disclosed publicly by the Company but which
has not been so disclosed, other than with respect to the transactions
contemplated by this Agreement. As of their respective filing dates, the
SEC Documents complied in all material respects with the requirements of
the Exchange Act or the Securities Act, as applicable, and the rules and
regulations of the SEC promulgated thereunder applicable to such
documents, and, as of their respective filing dates, none of the SEC
Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company
included in the SEC Documents comply as to form in all material respects
with applicable accounting requirements under GAAP and the published
rules and regulations of the SEC or other applicable rules and
regulations with respect thereto. Such financial statements have been
prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto or (ii) in the case of
unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements), and fairly present
in all material respects the financial position of the Company and its
subsidiaries as of the dates thereof and the results of operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
(g) SUBSIDIARIES. The SEC Documents or Schedule 3.1(g) hereto sets
forth each of the significant subsidiaries of the Company, showing the
jurisdiction of its incorporation or organization and showing the
percentage of the Company's ownership of the outstanding stock or other
interests of such significant subsidiary. All of the issued and
outstanding shares of capital stock of each significant subsidiary have
been duly authorized and validly issued, and are fully paid and
non-assessable. There are no outstanding preemptive, conversion or other
rights, options, warrants or agreements granted or issued by or binding
upon any significant subsidiary for the purchase or acquisition of any
shares of capital stock of any significant subsidiary or any other
securities convertible into, exchangeable for or evidencing the rights to
subscribe for any shares of such capital stock. Neither the Company nor
any of its significant subsidiaries is subject to any obligation
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(contingent or otherwise) to repurchase or otherwise acquire or retire
any shares of the capital stock of any of its subsidiaries or any
convertible securities, rights, warrants or options of the type described
in the preceding sentence.
(h) NO MATERIAL ADVERSE EFFECT. Since the date of the financial
statements contained in the most recently filed Form 10-Q or Form 10-K,
whichever is most current, no Material Adverse Effect has occurred or
exists with respect to the Company.
(i) NO UNDISCLOSED LIABILITIES. Neither the Company nor any of its
subsidiaries has any liabilities, obligations, claims or losses (whether
liquidated or unliquidated, secured or unsecured, absolute, accrued,
contingent or otherwise) that would be required to be disclosed on a
balance sheet of the Company (including the notes thereto) in conformity
with GAAP which are not disclosed in the SEC Documents, other than those
incurred in the ordinary course of the Company's or its subsidiaries'
respective businesses since such date and which, individually or, in the
aggregate, are not reasonably likely to have a Material Adverse Effect.
(j) NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since the date of the
financial statements contained in the most recently filed Form 10-Q or
Form 10-K, whichever is most current, no event or circumstance has
occurred or exists with respect to the Company or its businesses,
properties, operations or financial condition, that, under applicable
law, rule or regulation, requires public disclosure or announcement prior
to the date hereof by the Company but which has not been so publicly
announced or disclosed in the SEC Documents, except those that would not
be reasonably likely to have a Material Adverse Effect.
(k) TITLE TO ASSETS. Each of the Company and its subsidiaries has
good title to all of its real and personal property reflected in the SEC
Documents, free of any mortgages, pledges, charges, liens, security
interests or other encumbrances, except for those that are not reasonably
likely to cause a Material Adverse Effect.
(l) ACTIONS PENDING. There is no action, suit, claim, investigation
or proceeding pending or, to the knowledge of the Company, threatened
against the Company or any of its subsidiaries which questions the
validity of this Agreement or the transactions contemplated hereby or any
action taken or to be taken pursuant hereto or thereto. There is no
action, suit, claim, investigation or proceeding pending or, to the
knowledge of the Company, threatened, against or involving the Company,
any of its subsidiaries or any of their respective properties or assets
except as would not be reasonably likely to have a Material Adverse
Effect. There are no outstanding orders, judgments, injunctions, awards
or decrees of any court, arbitrator or governmental or regulatory body
against the Company or any of its subsidiaries, except as would not be
reasonably likely to have a Material Adverse Effect.
(m) COMPLIANCE WITH LAW. The Company and each of its significant
subsidiaries have all franchises, permits, licenses, consents and other
governmental or
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regulatory authorizations and approvals necessary for the conduct of
their respective businesses as now being conducted by them unless the
failure to possess such franchises, permits, licenses, consents and other
governmental or regulatory authorizations and approvals, individually or
in the aggregate, would not be reasonably likely to have a Material
Adverse Effect.
(n) TAXES. The Company has timely filed all material Tax Returns and
notices. The Company has no knowledge, or any reasonable grounds to know,
of any Tax deficiencies of any nature whatsoever which would, in the
aggregate, be reasonably likely to result in a Material Adverse Effect.
For purposes of this Section 3.1(n):
"TAX" or "TAXES" means federal, state, county, local,
foreign, or other income, gross receipts, ad valorem, franchise,
profits, sales or use, transfer, registration, excise, utility,
environmental, communications, real or personal property, capital
stock, license, payroll, wage or other withholding, employment,
social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever
(including, without limitation, deficiencies, penalties, additions
to tax, and interest attributable thereto) whether disputed or not.
"TAX RETURN" means any return, information report or filing
with respect to Taxes, including any schedules attached thereto and
including any amendment thereof.
(o) CERTAIN FEES. No brokers, finders or financial advisory fees or
commissions will be payable by the Company or any of its subsidiaries
with respect to the transactions contemplated by this Agreement.
(p) OPERATION OF BUSINESS. To the knowledge of the Company, the
Company and each of the significant subsidiaries owns or has the right to
use all patents, trademarks, service marks, trade names, copyrights,
licenses and authorizations which are necessary for the conduct of its
business as now conducted without any conflict with the rights of other,
except as would not be reasonably likely to have a Material Adverse
Effect.
(q) INSURANCE. The Company carries or will have the benefit of
insurance in such amounts and covering such risks as is adequate for the
conduct of its business and the value of its properties and as is
customary for companies engaging in similar businesses and similar
industries.
(r) MATERIAL AGREEMENTS. Except for agreements listed as exhibits to
our SEC Documents, neither the Company nor any of its subsidiaries is a
party to any written or oral contract, instrument, agreement, commitment,
obligation, plan or arrangement, a copy of which would be required to be
filed with the SEC as an exhibit to
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a registration statement on Form S-1 or other applicable form
(collectively, "Material Agreements") if the Company were registering
securities under the Securities Act. The Company and each of its
subsidiaries has in all material respects performed all material
obligations required to be performed by them to date under the foregoing
agreements, have received no notice of default and, to the best of the
Company's knowledge are not in default under any Material Agreement now
in effect, except, in each case, as would not be reasonably likely to
have a Material Adverse Effect. No written or oral contract, instrument,
agreement, commitment, obligation, plan or arrangement of the Company or
of any of its subsidiaries limits the payment of dividends on the Common
Stock.
(s) SECURITIES LAWS. Based in part on and assuming the accuracy of
the representations and warranties of the Purchaser in Article 2.2, the
Company has complied and will comply with all applicable federal and
state securities laws in connection with the offer, issuance and sale of
the Shares hereunder. Neither the Company nor anyone acting on its
behalf, directly or indirectly, has or will sell, offer to sell or
solicit offers to buy the Shares or similar securities to, or solicit
offers with respect thereto from, or enter into any preliminary
conversations or negotiations relating thereto with, any person (other
than the Purchaser), so as to bring the issuance and sale of the Shares
to the Purchaser under the registration provisions of the Securities Act
and applicable state securities laws. Neither the Company nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in
any form of general solicitation or general advertising (within the
meaning of Regulation D under the Securities Act) in connection with the
offer or sale of the Shares to the Purchaser.
(t) GOVERNMENTAL APPROVALS. Except for the filing of any notice
prior or subsequent to any Settlement Date required under applicable
federal or state securities laws (which shall be filed on a timely
basis), including the filing of a registration statement, supplemental
prospectus or post-effective amendment pursuant to this Agreement, and
assuming the accuracy of Purchaser's representations in Article 2.2, no
authorization, consent, approval, license, exemption of, filing or
registration with any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, is or will
be necessary for, or in connection with, the delivery of the Shares, or
for the performance by the Company of its obligations under this
Agreement.
(aa) USE OF PROCEEDS. The proceeds from the sale of the Shares will
be used by the Company and its subsidiaries for general corporate
purposes.
(bb) ACKNOWLEDGMENT REGARDING PURCHASER'S PURCHASE OF SHARES.
Company acknowledges that the Purchaser is not acting as a financial
advisor or fiduciary of the Company (or in any similar capacity) with
respect to this Agreement and the transactions contemplated hereunder and
any advice given by the Purchaser or any of its representatives or agents
in connection with this Agreement and the transactions contemplated
hereunder is merely incidental to the Purchaser's purchase of the Shares.
The Company further represents to the Purchaser that the Company's
decision to enter into this Agreement has been based solely on the
independent evaluation by the Company and its own representatives and
counsel.
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Section 2.2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The
Purchaser hereby makes the following representations and warranties to the
Company:
(a) ORGANIZATION AND STANDING OF THE PURCHASER. The Purchaser is a
corporation duly incorporated, validly existing and in good standing
under the laws of the British Virgin Islands.
(b) AUTHORIZATION AND POWER. The Purchaser has the requisite power
and authority to enter into and perform the Transaction Documents and to
purchase the Shares being sold to it hereunder. The execution, delivery
and performance of the Transaction Documents by Purchaser and the
consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate action and at the Initial Closing
shall constitute valid and binding obligations of the Purchaser
enforceable against the Purchaser in accordance with their terms, except
as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation, conservatorship,
receivership or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable
principles of general application
(c) NO CONFLICTS. The execution, delivery and performance of this
Agreement and the consummation by the Purchaser of the transactions
contemplated hereby or relating hereto do not and will not (i) result in
a violation of the Purchaser's charter documents or bylaws, or (ii)
conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of any
agreement, indenture or instrument to which the Purchaser is a party, or
result in a violation of any law, rule, or regulation, or any order,
judgment or decree of any court or governmental agency applicable to the
Purchaser or its properties (except for such conflicts, defaults and
violations as would not, individually or in the aggregate, have a
Material Adverse Effect on Purchaser). The Purchaser is not required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement
or to purchase the Shares in accordance with the terms hereof.
(d) FINANCIAL RISKS. The Purchaser acknowledges that it is able to
bear the financial risks associated with an investment in the Shares and
that it has been given full access to such records of the Company and the
subsidiaries and to the officers of the Company and the subsidiaries as
it has deemed necessary or appropriate to conduct its due diligence
investigation. The Purchaser is capable of evaluating the risks and
merits of an investment in the Shares by virtue of its experience as an
investor and its knowledge, experience, and sophistication in financial
and business matters and the Purchaser is capable of bearing the entire
loss of its investment in the Shares.
(e) ACCREDITED INVESTOR. The Purchaser is an "accredited investor"
as defined in Regulation D promulgated under the Securities Act.
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(f) GENERAL. The Purchaser understands that the Company is relying
upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of the Purchaser set forth
herein in order to determine the suitability of the Purchaser to acquire
the Shares.
(g) On and as of the date hereof and the Initial Closing, Purchaser
beneficially owns no shares of the Company's capital stock.
ARTICLE 3
COVENANTS
The Company covenants with the Purchaser as follows:
Section 3.1. THE SHARES. As of the date of each applicable Draw Down, the
Company will have authorized and reserved, free of preemptive rights and other
similar contractual rights of stockholders, a sufficient number of authorized
but unissued shares of its Common Stock to cover the Draw Down Shares to be
issued in connection with such Draw Down requested under this Agreement. The
Draw Down Shares to be issued under this Agreement, when paid for and issued in
accordance with the terms hereof, shall be duly and validly issued and
outstanding, fully paid and non-assessable, and the Purchaser shall be entitled
to all rights accorded to a holder of Common Stock. Anything in this Agreement
to the contrary notwithstanding, (i) at no time will the Company request a Draw
Down which would result in the issuance of an aggregate number of shares of
Common Stock pursuant to this Agreement which exceeds 19.9% of the number of
shares of Common Stock issued and outstanding on the Initial Closing Date
without obtaining stockholder approval of such excess issuance, or such other
amount as would require stockholder approval under rules of the Principal Market
or otherwise without obtaining stockholder approval of such excess issuance, and
(ii) the Company may not make a Draw Down to the extent that, after such
purchase by the Purchaser, the sum of the number of shares of Common Stock
beneficially owned by the Purchaser and its affiliates would result in
beneficial ownership by the Purchaser and its affiliates of more than 9.9% of
the then outstanding shares of Common Stock. For purposes of the immediately
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Exchange Act.
Section 3.2. SECURITIES COMPLIANCE. If applicable, the Company shall
notify the Principal Market, in accordance with its rules and regulations, of
the transactions contemplated by this Agreement, and shall take all other
necessary action and proceedings as may be required and permitted by applicable
law, rule and regulation, for the legal and valid issuance of the Shares and the
Warrant to the Purchaser or subsequent holders.
Section 3.3. REGISTRATION AND LISTING. The Company will cause its Common
Stock to continue to be registered under Sections 12(b) or 12(g) of the Exchange
Act, will comply in all respects with its reporting and filing obligations under
the Exchange Act, will comply with all requirements related to any registration
statement filed pursuant to this
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Agreement, and will not take any action or file any document (whether or not
permitted by the Securities Act or the Exchange Act or the rules promulgated
thereunder) to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under the Exchange Act or Securities Act,
except as permitted herein. The Company will take all action necessary to
continue the listing or trading of its Common Stock on the Principal Market and
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Principal Market and shall provide
the Purchaser with copies of any correspondence to or from such Principal Market
which questions or threatens delisting of the Common Stock, within three (3)
Trading Days of the Company's receipt thereof, until the Purchaser has disposed
of all of the Shares.
Section 3.4. ESCROW ARRANGEMENT. The Company and the Purchaser shall
enter into an escrow arrangement with Xxxxxxx Xxxxxx & Green, P.C. (the "Escrow
Agent") in the form of EXHIBIT B hereto respecting payment against delivery of
the Shares.
Section 3.5. REGISTRATION RIGHTS AGREEMENT. The Company and the Purchaser
shall enter into the Registration Rights Agreement in the Form of EXHIBIT A
hereto. Before the Purchaser shall be obligated to accept a Draw Down request
from the Company, the Company shall have caused a sufficient number of shares of
Common Stock to be registered under the Securities Act to cover the Shares to be
issued in connection with such Draw Down.
Section 3.6. ACCURACY OF REGISTRATION STATEMENT.On each Settlement Date,
the Registration Statement and the prospectus therein shall not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein not
misleading in light of the circumstances under which they were made; and on such
Settlement Date or date of filing the Registration Statement and the prospectus
therein will not include any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; PROVIDED,
HOWEVER, the Company makes no representations or warranties as to the
information contained in or omitted from the Registration Statement and the
prospectus therein in reliance upon and in conformity with the information
furnished in writing to the Company by the Purchaser specifically for inclusion
in the Registration Statement and the prospectus therein.
Section 3.7. COMPLIANCE WITH LAWS. The Company shall comply, and cause
each subsidiary to comply, with all applicable laws, rules, regulations and
orders, noncompliance with which could have a Material Adverse Effect.
Section 3.8. KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The Company shall
keep and cause each subsidiary to keep adequate records and books of account, in
which complete entries will be made in accordance with GAAP consistently
applied, reflecting all financial transactions of the Company and its
subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
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Section 3.9. OTHER AGREEMENTS. The Company shall not enter into any
agreement the terms of which such agreement would restrict or impair the ability
of the Company to perform its obligations under this Agreement.
Section 3.10. NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION
OF RIGHT TO REQUEST A DRAW DOWN. THE COMPANY WILL PROMPTLY NOTIFY THE PURCHASER
IN WRITING UPON THE OCCURRENCE OF ANY OF THE FOLLOWING EVENTS IN RESPECT OF THE
REGISTRATION STATEMENT OR RELATED PROSPECTUS IN RESPECT OF THE SHARES: (i)
receipt of any request for additional information from the SEC or any other
federal or state governmental authority during the period of effectiveness of
the Registration Statement the response to which would require any amendments or
supplements to the Registration Statement or related prospectus; (ii) the
issuance by the SEC or any other federal or state governmental authority of any
stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose; (iii) receipt of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Shares for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; (iv) the happening
of any event that makes any statement made in the Registration Statement or
related prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or that requires the making
of any changes in the Registration Statement, related prospectus or documents so
that, in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (v) the Company's
reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate. The Company shall not deliver to the Purchaser
any Draw Down Notice during the continuation of any of the foregoing events. The
Company shall promptly make available to the Purchaser any such supplements or
amendments to the related prospectus, at which time, provided that the
registration statement and any supplements and amendments thereto are then
effective, the Company may recommence the delivery of Draw Down Notices.
Section 3.11. CONSOLIDATION; MERGER. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company to,
another entity (a "Consolidation Event") if the closing of such Consolidation
Event occurs after a Draw Down and on or before the Settlement Date with respect
thereto, unless the resulting successor or acquiring entity (if not the Company)
assumes by written instrument or by operation of law the obligation to deliver
to the Purchaser such shares of stock and/or securities as the Purchaser is
entitled to receive pursuant to such Draw Down.
Section 3.12. USE OF PROCEEDS. The proceeds from the sale of the Shares
will be used by the Company and its subsidiaries for general corporate purposes.
The Purchaser covenants with the Company as follows:
11
Section 3.13. COMPLIANCE WITH LAW. The Purchaser agrees that its trading
activities with respect to shares of the Company's Common Stock will be in
compliance with all applicable state and federal securities laws, rules and
regulations and rules and regulations of the Principal Market on which the
Company's Common Stock is listed. Without limiting the generality of the
foregoing, the Purchaser agrees that it will, whenever required by federal
securities laws, deliver the prospectus included in the Registration Statement
to any purchaser of Shares from the Purchaser.
ARTICLE 4
CONDITIONS TO INITIAL CLOSING AND DRAW DOWNS
Section 4.1. CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO
SELL THE SHARES. The obligation hereunder of the Company to proceed to close
this Agreement and to issue and sell the Shares to the Purchaser is subject to
the satisfaction or waiver, at or before the Initial Closing, and as of each
Settlement Date of each of the conditions set forth below. These conditions are
for the Company's sole benefit and may be waived by the Company at any time in
its sole discretion.
(a) ACCURACY OF THE PURCHASER'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Purchaser shall be true and correct
in all material respects as of the date when made and as of the Initial
Closing and as of each Settlement Date as though made at that time,
except for representations and warranties that speak as of a particular
date.
(b) PERFORMANCE BY THE PURCHASER. The Purchaser shall have
performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Purchaser at or prior to the
Initial Closing and as of each Settlement Date.
(c) NO INJUNCTION. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of
competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement.
Section 4.2. CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASER TO
CLOSE. The obligation hereunder of the Purchaser to perform its obligations
under this Agreement and to purchase the Shares is subject to the satisfaction
or waiver, at or before the Initial Closing, of each of the conditions set forth
below. These conditions are for the Purchaser's sole benefit and may be waived
by the Purchaser at any time in its sole discretion.
(a) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. Each
of the representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of the
Initial Closing as though made at that time (except for representations
and warranties that speak as of a particular date).
12
(b) PERFORMANCE BY THE COMPANY. The Company shall have performed,
satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the Company at or prior to the Initial
Closing.
(c) NO INJUNCTION. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of
competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement.
(d) NO PROCEEDINGS OR LITIGATION. No action, suit or proceeding
before any arbitrator or any governmental authority shall have been
commenced, and no investigation by any governmental authority shall have
been threatened, against the Purchaser or the Company or any subsidiary,
or any of the officers, directors or affiliates of the Company or any
subsidiary seeking to restrain, prevent or change the transactions
contemplated by this Agreement, or seeking damages in connection with
such transactions.
(e) OPINION OF COUNSEL, ETC. At the Initial Closing, the Purchaser
shall have received an opinion of counsel to the Company, dated as of the
Initial Closing Date, in the form of EXHIBIT C hereto.
(f) WARRANT. On the Initial Closing Date, the Company shall issue to
the Purchaser a warrant to purchase up to 350,000 shares of Common Stock,
in the aggregate. The Warrant shall have a term from the date of issuance
of five (5) years. The exercise price per share of the Warrant shall be
105% of the average of the VWAPs during the fifteen (15) Trading Days
immediately prior to the Initial Closing Date. The Common Stock
underlying the Warrant will be registered in the Registration Statement
referred to in Section 4.3 hereof. The Warrant shall be in the form of
EXHIBIT E hereto.
Section 4.3. CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASER TO
ACCEPT A DRAW DOWN AND PURCHASE THE SHARES. The obligation hereunder of the
Purchaser to accept a Draw Down request and to acquire and pay for the Shares is
subject to the satisfaction at or before each Settlement Date, of each of the
conditions set forth below.
(a) SATISFACTION OF CONDITIONS TO INITIAL CLOSING. The Company shall
have satisfied, or the Purchaser shall have waived at the Initial
Closing, the conditions set forth in Section 4.2 hereof
(b) EFFECTIVE REGISTRATION STATEMENT. The Registration Statement
registering the Shares shall have been declared effective by the SEC and
shall remain effective on such Settlement Date.
(c) NO SUSPENSION. Trading in the Company's Common Stock shall not
have been suspended by the SEC or the Principal Market (except for any
suspension of trading of limited duration agreed to by the Company, which
suspension shall be
13
terminated prior to the delivery of each Draw Down Notice), and, at any
time prior to such Draw Down Notice, trading in securities generally as
reported on the Principal Market shall not have been suspended or
limited, or minimum prices shall not have been established on securities
whose trades are reported on the Principal Market unless the general
suspension or limitation shall have been terminated prior to the delivery
of such Draw Down Notice.
(d) MATERIAL ADVERSE EFFECT. No Material Adverse Effect and no
Consolidation Event where the successor entity has not agreed to perform
the Company's obligations shall have occurred.
(e) OPINION OF COUNSEL. The Purchaser shall have received (i) a
"down-to-date" letter from the Company's counsel, confirming that there
is no change from the counsel's previously delivered opinion, or else
specifying with particularity the reason for any change and an opinion as
to the additional item specified in EXHIBIT C hereto, (ii) any other
items set forth in the Escrow Agreement, and (iii) a representation from
the Company's General Counsel to the Purchaser, addressed to the
Purchaser and dated such Settlement Date to the effect that: (x) such
counsel has acted as counsel to the Company in connection with the
Purchase Agreement and related matters, including the preparation of the
Registration Statement, and (y) based on the foregoing, no facts have
come to the attention of such counsel which lead them to believe that the
Registration Statement, as of the Effective Date, or any amendment
thereto, contains or contained any untrue statement of a material fact or
omits or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, which
statement shall not address the financial statements and notes thereto
and the schedules and other financial and statistical data derived
therefrom included in the Registration Statement.
ARTICLE 5
DRAW DOWN TERMS
Section 5.1. DRAW DOWN TERMS. Subject to the satisfaction of the
conditions set forth in this Agreement, the parties agree as follows:
(a) The Company may, in its sole discretion, issue and exercise draw
downs (each, a "Draw Down") during the Commitment Period, which Draw Down
the Purchaser shall be obligated to accept.
(b) Only one Draw Down shall be allowed in each Draw Down Pricing
Period. There shall be at least five (5) Trading Days between Draw Down
Pricing Periods. The number of shares of Common Stock purchased by the
Purchaser with respect to each Draw Down shall be determined as set forth
in Section 5.1(e) herein and settled on:
14
(i) as to the 1st through the 10th Trading Days after a Draw
Down Pricing Period commences, on or before the 12th Trading Day
after such Draw Down Pricing Period commences; and
(ii) as to the 11th through the 20th Trading Days after a
Draw Down Pricing Period commences, on or before the 22nd Trading
Day after such Draw Down Pricing Period (such settlement periods and
such settlement dates in subsection (i) and this subsection (ii)
each referred to as a "Settlement Period" and a "Settlement Date",
respectively).
(c) In connection with each Draw Down Pricing Period, the Company
may set the Threshold Price in the Draw Down Notice.
(d) The minimum Investment Amount for any Draw Down shall be
$100,000 and the maximum Investment Amount as to each Draw Down shall be
6.0% of the EQY weighted average price field (as reported on Bloomberg
Financial L.P. using the BLPH function) for the Common Stock for the 60
calendar day period immediately prior to the applicable Commencement Date
(defined below) multiplied by the total trading volume in respect of the
Common Stock for such period. Notwithstanding anything herein to the
contrary, in the event the minimum Investment Amount is greater than the
maximum Investment Amount, as to such Draw Down only, the minimum
Investment Amount shall equal the maximum Investment Amount, but in no
event shall the minimum Investment Amount be less than $50,000 such that
if the maximum Investment Amount is less than $50,000, then the Company
shall be precluded from exercising a Draw Down at such time.
(e) The number of Shares of Common Stock to be issued on each
Settlement Date shall be a number of shares equal to the sum of the
quotients (for each trading day within the Settlement Period) of (x)
1/20th of the Investment Amount, and (y) the Purchase Price on each
Trading Day within the Settlement Period, subject to the following
adjustments:
(i) if the VWAP on a given Trading Day is less than the
Threshold Price, then that portion of the immediately pending
portion of the Investment Amount to be paid on the Settlement Date
will be reduced by 1/20th and that day shall be withdrawn from the
Settlement Period;
(ii) if during any Trading Day during the Settlement Period
trading of the Common Stock on the Principal Market is suspended for
more than three (3) hours, in the aggregate, or if any Trading Day
during the Settlement Period is shortened because of a public
holiday, then that portion of the immediately pending portion of the
Investment Amount to be paid on the Settlement Date shall be reduced
by 1/20th and that day shall be withdrawn from the Settlement
Period; and
15
(iii) if during any Trading Day during the Settlement Period
sales of Draw Down Shares pursuant to the Registration Statement are
suspended by the Company in accordance with Sections 3(j) or 5(e) of
the Registration Rights Agreement for more than three (3) hours, in
the aggregate, during the Settlement Period, then that portion of
the immediately pending portion of the Investment Amount to be paid
on such Settlement Date shall be reduced by 1/20th of the Investment
Amount and such Trading Day shall be withdrawn from the Settlement
Period.
(f) The Company must inform the Purchaser by delivering a draw down
notice, in the form of EXHIBIT D hereto (the "Draw Down Notice"), via
facsimile transmission in accordance with Section 8.4 as to the amount of
the Draw Down (the "Investment Amount") the Company wishes to exercise,
before the first day of the Draw Down Pricing Period (the "Commencement
Date"). If the Commencement Date is to be the date of the Draw Down
Notice, the Draw Down Notice must be delivered to and receipt confirmed
by the Purchaser at least one hour before trading commences on such date.
At no time shall the Purchaser be required to purchase more than the
maximum Investment Amount for a given Draw Down Pricing Period so that if
the Company chooses not to exercise the maximum Investment Amount in a
given Draw Down Pricing Period the Purchaser is not obligated to and
shall not purchase more than the scheduled maximum Investment Amount in a
subsequent Draw Down Pricing Period.
(g) On each Settlement Date, the Shares purchased by the Purchaser
shall be delivered to The Depository Trust Company ("DTC") on the
Purchaser's behalf. Upon the Company electronically delivering whole
shares of Common Stock to the Purchaser or its designees via DTC through
its Deposit Withdrawal Agent Commission ("DWAC") system by 1:00 p.m. EST,
the Purchaser shall wire transfer immediately available funds to the
Company's designated account on such day, less any fees as set forth in
the Escrow Agreement, which fees shall be wired as directed in the Escrow
Agreement. Upon the Company electronically delivering whole shares of
Common Stock to the Purchaser or its designees DTC account via DWAC after
1:00 p.m. EST, the Purchaser shall wire transfer next day available funds
to the Company's designated account on such day, less any fees as set
forth in the Escrow Agreement, which fees shall be wired as directed in
the Escrow Agreement. In the event that either party elects to use the
Escrow Agent, the Shares shall be credited by the Company to the DTC
account designated by the Purchaser via DWAC upon receipt by the Escrow
Agent of payment for the Draw Down Shares into the Escrow Agent's master
escrow account, as further set forth in the Escrow Agreement. The Escrow
Agent shall be directed to pay the purchase price to the Company, net of
$1,000 per Settlement as escrow expenses to the Escrow Agent and any
additional fees as set forth in the Escrow Agreement. The Company
understands that a delay in the delivery of the Draw Down Shares into the
Purchaser's DTC account beyond 3 Trading Days after the dates set forth
herein or in the Escrow Agreement, as the case may be, could result in
economic loss to the Purchaser. Notwithstanding anything herein to the
contrary, as compensation to the Purchaser for such loss, the Company
agrees to pay late payments to the Purchaser for late delivery after
16
3 Trading Days from such dates in accordance with the following schedule
(where "No. Trading Days Late" is defined as the number of Trading Days
beyond three 3 Trading Days from the dates set forth herein or in the
Escrow Agreement, as the case may be, on which such Draw Down Shares are
to be delivered into the Purchaser's DTC account via the DWAC system):
----------------------------------------------------------------------------------------------------------------------
No. Trading Days Xxxx Xxxx Payment for Each
$5,000 of Draw Down Shares
Being Purchased
----------------------------------------------------------------------------------------------------------------------
1 $100
----------------------------------------------------------------------------------------------------------------------
2 $200
----------------------------------------------------------------------------------------------------------------------
3 $300
----------------------------------------------------------------------------------------------------------------------
4 $400
----------------------------------------------------------------------------------------------------------------------
5 $500
----------------------------------------------------------------------------------------------------------------------
6 $600
----------------------------------------------------------------------------------------------------------------------
7 $700
----------------------------------------------------------------------------------------------------------------------
8 $800
----------------------------------------------------------------------------------------------------------------------
9 $900
----------------------------------------------------------------------------------------------------------------------
10 $1,000
----------------------------------------------------------------------------------------------------------------------
More than 10 $1,000 +$200 for each Trading Day
Late beyond 10 Trading Days
----------------------------------------------------------------------------------------------------------------------
The Company shall pay any payments incurred under this Section
5.1(g) in immediately available funds upon demand. Nothing herein shall
limit the Purchaser's right to pursue injunctive relief and/or actual
damages for the Company's failure to issue and deliver the Draw Down
Shares to the Company, including, without limitation, the Purchaser's
actual losses occasioned by any "buy-in" of Common Stock necessitated by
such late delivery. Notwithstanding the above, if the delay in delivering
the Draw Down Shares is due to the Purchaser's failure to notify the
Company's transfer agent via DWAC of its acceptance of the Draw Down
Shares, the Company will not be required to make any such late payments
to the Purchaser with respect to such Draw Down Shares.
ARTICLE 6
TERMINATION
Section 6.1. TERM. The term of this Agreement shall begin on the date
hereof and shall end on the earlier of (a) twenty-four (24) months from the
Effective Date, (b) 36 months from the date hereof, or (c) a date as otherwise
set forth in Section 6.2.
Section 6.2. OTHER TERMINATION.
17
(a) This Agreement shall terminate upon one (1) Trading Day's notice
if (i) an event resulting in a Material Adverse Effect has occurred and
has not been cured for a period of 60 days after giving notice thereof,
(ii) the Common Stock is de-listed from the Principal Market unless such
de-listing is in connection with the Company's subsequent listing of the
Common Stock on the Nasdaq SmallCap Market, the American Stock Exchange,
or the New York Stock Exchange, or (iii) the Company files for protection
from creditors under any applicable law.
(b) The Company may terminate this Agreement upon 5 Trading Days'
notice to the Purchaser provided that such termination notice is not
delivered to the Purchaser during any Draw Down Pricing Period or
otherwise prior to any pending Settlements.
Section 6.3. EFFECT OF TERMINATION. In the event of termination by the
Company or the Purchaser, written notice thereof shall forthwith be given to the
other party and the transactions contemplated by this Agreement shall be
terminated without further action by either party. If this Agreement is
terminated as provided in Section 6.1 or 6.2 herein, this Agreement shall become
void and of no further force and effect, except for Sections 8.1, 8.2, 8.9 and
Article 7 herein. Nothing in this Section 6.3 shall be deemed to release the
Company or the Purchaser from any liability for any breach under this Agreement,
or to impair the rights of the Company or the Purchaser to compel specific
performance by the other party of its obligations under this Agreement.
ARTICLE 7
INDEMNIFICATION
Section 7.1. GENERAL INDEMNITY.
(a) The Company agrees to indemnify and hold harmless the Purchaser
(and its directors, officers, affiliates, agents, successors and assigns)
from and against any and all losses, liabilities, deficiencies, costs,
damages and expenses (including, without limitation, reasonable
attorneys' fees, charges and disbursements) incurred by the Purchaser as
a result of any inaccuracy in or breach of the representations,
warranties or covenants made by the Company herein.
(b) The Purchaser agrees to indemnify and hold harmless the Company
and its directors, officers, affiliates, agents, successors and assigns
from and against any and all losses, liabilities, deficiencies, costs,
damages and expenses (including, without limitation, reasonable
attorneys' fees, charges and disbursements) incurred by the Company as
result of any material inaccuracy in or breach of the representations,
warranties or covenants made by the Purchaser herein. Notwithstanding
anything to the contrary herein, the Purchaser shall be liable under this
Section 7.1(b) for only that amount as does not exceed the net proceeds
to the Purchaser as a result of the sale of the Shares.
18
Section 7.2. INDEMNIFICATION PROCEDURE. Any party entitled to
indemnification under this Article 7 (an "Indemnified Party") will give written
notice to the indemnifying party of any matters giving rise to a claim for
indemnification; provided, that the failure of any party entitled to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Article 7 except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any action, proceeding or claim is brought against an
Indemnified Party in respect of which indemnification is sought hereunder, the
indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of counsel to the Indemnified Party a conflict of interest
between it and the indemnifying party may exist with respect of such action,
proceeding or claim, to assume the defense thereof with counsel reasonably
satisfactory to the Indemnified Party. In the event that the indemnifying party
advises an Indemnified Party that it will contest such a claim for
indemnification hereunder, or fails, within thirty (30) days of receipt of any
indemnification notice to notify, in writing, such person of its election to
defend, settle or compromise, at its sole cost and expense, any action,
proceeding or claim (or discontinues its defense at any time after it commences
such defense), then the Indemnified Party may, at its option, defend, settle or
otherwise compromise or pay such action or claim. In any event, unless and until
the indemnifying party elects in writing to assume and does so assume the
defense of any such claim, proceeding or action, the Indemnified Party's costs
(including reasonable attorneys' fees, charges and disbursements) and expenses
arising out of the defense, settlement or compromise of any such action, claim
or proceeding shall be losses subject to indemnification hereunder. The
Indemnified Party shall cooperate fully with the indemnifying party in
connection with any settlement negotiations or defense of any such action or
claim by the indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the Indemnified Party, which relates to such
action or claim. The indemnifying party shall keep the Indemnified Party fully
apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the Indemnified Party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense. The indemnifying party shall not be liable for any settlement of any
action, claim or proceeding effected without its prior written consent.
Notwithstanding anything in this Article 7 to the contrary, the indemnifying
party shall not, without the Indemnified Party's prior written consent, settle
or compromise any claim or consent to entry of any judgment in respect thereof
which imposes any future obligation on the Indemnified Party or which does not
include, as an unconditional term thereof, the giving by the claimant or the
plaintiff to the Indemnified Party of a release from all liability in respect of
such claim. The indemnification required by this Article 7 shall be made by
periodic payments of the amount thereof during the course of investigation or
defense, as and when bills are received or expense, loss, damage or liability is
incurred, within ten (10) Trading Days of written notice thereof to the
indemnifying party so long as the Indemnified Party irrevocably agrees to refund
such moneys, with interest, if it is ultimately determined by a court of
competent jurisdiction that such party was not entitled to indemnification. The
indemnity agreements contained herein shall be in addition to (a) any cause of
action or similar rights of the Indemnified Party against the indemnifying party
or others, and (b) any liabilities to which the indemnifying party may be
subject.
19
ARTICLE 8
MISCELLANEOUS
Section 8.1. FEES AND EXPENSES. Each of the parties to this Agreement
shall pay its own fees and expenses related to the transactions contemplated by
this Agreement; except that, the Company shall pay, at the Initial Closing, a
non-accountable expense allowance of $35,000 for the Purchaser's legal,
administrative and due diligence costs and expenses and any other additional
fees as set forth in the Escrow Agreement. In addition, the Company shall pay
all reasonable fees and expenses incurred by the Purchaser in connection with
any subsequent amendments, modifications or waivers of this Agreement, the
Escrow Agreement or the Registration Rights Agreement or incurred in connection
with the enforcement of this Agreement, the Escrow Agreement and the
Registration Rights Agreement, including, without limitation, all reasonable
attorneys' fees and expenses if such subsequent amendment, modification or
waiver is at the request of the Company. The Company shall pay all stamp or
other similar taxes and duties levied in connection with issuance of the Shares
pursuant hereto.
Section 8.2. SPECIFIC ENFORCEMENT. The Company and the Purchaser
acknowledge and agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof or thereof, this being in addition to any other
remedy to which any of them may be entitled by law or equity.
Section 8.3. ENTIRE AGREEMENT; AMENDMENT. The Transaction Documents
contain the entire understanding of the parties with respect to the matters
covered in the Transaction Documents. No provision of this Agreement may be
waived or amended other than by a written instrument signed by the party against
whom enforcement of any such amendment or waiver is sought and no condition to
closing any Draw Down in favor of the Purchaser may be waived by the Purchaser.
Section 8.4. NOTICES. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery or facsimile at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second business day
following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be:
If to the Company: 0 Xxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Attn: President
20
Tel: (000) 000-0000
Fax: (000) 000-0000
With copies to: Xxxx and Xxxx LLP
(which shall not 00 Xxxxx Xxxxxx
xxxxxxxxxx xxxxxx) Xxxxxx, XX 00000
Attn: Xxxx Xxxxx
Tel: (000) 000-0000
Fax:
If to Purchaser: x/x Xxxxxx Xxxxxxx Xxxxxxxxxx
Xxxxxxx Xxxxx, 0xx Floor
Waterfront Drive
Road Town, Tortola
British Virgin Islands
Attn: Director
Fax: (000) 000-0000
with copies to: Xxxxxxx Xxxxxx & Green P.C.
(which shall not 000 Xxxx Xxxxxx
xxxxxxxxxx xxxxxx) Xxx Xxxx, XX 00000-0000
Tel: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx
Any party hereto may from time to time change its address for notices by
giving written notice of such changed address to the other party hereto in
accordance herewith.
Section 8.5. WAIVERS. No waiver by either party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provisions, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
Section 8.6. HEADINGS. The article, section and subsection headings in
this Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
Section 8.7. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and assigns. The
parties hereto may not amend this Agreement or any rights or obligations
hereunder without the prior written consent of the Company and each Purchaser to
be affected by the amendment. After Initial Closing, the assignment by a party
to this Agreement of any rights hereunder shall not affect the obligations of
such party under this Agreement.
21
Section 8.8. NO THIRD PARTY BENEFICIARIES.This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
Section 8.9. GOVERNING LAW/ARBITRATION. This Agreement shall be governed
by and construed in accordance with the internal laws of the State of New York,
without giving effect to the choice of law provisions. The Company and the
Purchaser agree to submit themselves to the IN PERSONAM jurisdiction of the
state and federal courts situated within the Southern District of the State of
New York with regard to any controversy arising out of or relating to this
Agreement. Any dispute under this Agreement or any Exhibit attached hereto shall
be submitted to arbitration under the American Arbitration Association (the
"AAA") in New York City, New York, and shall be finally and conclusively
determined by the decision of a board of arbitration consisting of three (3)
members (hereinafter referred to as the "Board of Arbitration") selected as
according to the rules governing the AAA. The Board of Arbitration shall meet on
consecutive business days in New York City, New York, and shall reach and render
a decision in writing (concurred in by a majority of the members of the Board of
Arbitration) with respect to the amount, if any, which the losing party is
required to pay to the other party in respect of a claim filed. In connection
with rendering its decisions, the Board of Arbitration shall adopt and follow
the laws of the State of New York. To the extent practical, decisions of the
Board of Arbitration shall be rendered no more than thirty (30) calendar days
following commencement of proceedings with respect thereto. The Board of
Arbitration shall cause its written decision to be delivered to all parties
involved in the dispute. The Board of Arbitration shall be authorized and is
directed to enter a default judgment against any party refusing to participate
in the arbitration proceeding within thirty days of any deadline for such
participation. Any decision made by the Board of Arbitration (either prior to or
after the expiration of such thirty (30) calendar day period) shall be final,
binding and conclusive on the parties to the dispute, and entitled to be
enforced to the fullest extent permitted by law and entered in any court of
competent jurisdiction. The prevailing party shall be awarded its costs,
including attorneys' fees, from the non-prevailing party as part of the
arbitration award. Any party shall have the right to seek injunctive relief from
any court of competent jurisdiction in any case where such relief is available.
The prevailing party in such injunctive action shall be awarded its costs,
including reasonable attorneys' fees, from the non-prevailing party.
Section 8.10. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart. Execution may be made by delivery by
facsimile.
PUBLICITY. Prior to the Initial Closing, neither the Company nor the
Purchaser shall issue any press release or otherwise make any public statement
or announcement with respect to this Agreement or the transactions contemplated
hereby or the existence of this Agreement, without the prior written consent of
the other party. After the Initial Closing, the Company may issue a press
release or otherwise make a public statement or announcement with respect to
this Agreement or the transactions contemplated hereby or the existence of this
Agreement; provided, however, that prior to issuing any such press release,
making any such public statement or announcement, the Company obtains the prior
consent of the Purchaser, which consent shall not be
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unreasonably withheld or delayed. Notwithstanding the foregoing, if required by
law, the Company may issue a press release or otherwise make a public statement
or announcement with respect to this Agreement or the transactions contemplated
hereby or the existence of this Agreement without the prior written consent of
the Purchaser, provided that the Company use commercially reasonable efforts to
notify the Purchaser of such release, public statement or announcement and to
provide the Purchaser an opportunity to comment.
Section 8.11. SEVERABILITY. The provisions of this Agreement are
severable and, in the event that The Board of Arbitration or any court or
officials of any regulatory agency of competent jurisdiction shall determine
that any one or more of the provisions or part of the provisions contained in
this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision or part of a provision of this Agreement
and this Agreement shall be reformed and construed as if such invalid or illegal
or unenforceable provision, or part of such provision, had never been contained
herein, so that such provisions would be valid, legal and enforceable to the
maximum extent possible, so long as such construction does not materially
adversely affect the economic rights of either party hereto.
Section 8.12. FURTHER ASSURANCES. From and after the date of this
Agreement, upon the request of the Purchaser or the Company, each of the Company
and the Purchaser shall execute and deliver such instruments, documents and
other writings as may be reasonably necessary or desirable to confirm and carry
out and to effectuate fully the intent and purposes of this Agreement.
Section 8.13. EFFECTIVENESS OF AGREEMENT. This Agreement shall become
effective only upon satisfaction of the conditions precedent to the Initial
Closing set forth in Article I of the Escrow Agreement.
ARTICLE 9
DEFINITIONS
Section 9.1. CERTAIN DEFINITIONS.
(a) "COMMENCEMENT DATE" shall have the meaning assigned to such term
in Section 5.1(f) hereof.
(b) "COMMITMENT AMOUNT" shall have the meaning assigned to such term
in Section 1.1 hereof.
(c) "COMMITMENT PERIOD" shall mean the period commencing on the
Effective Date and expiring on the earliest to occur of (i) the date on
which the Purchaser shall have exercised an aggregate amount of Draw
Downs equal to the Commitment Amount, (ii) the date this Agreement is
terminated in accordance with the terms hereof, or (iii) the date
occurring 24 months from the Effective Date.
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(d) "COMMON STOCK" shall mean the Company's common stock, $0.001 par
value per share.
(e) "DRAW DOWN" shall have the meaning assigned to such term in
Section 5.1(a) hereof.
(f) "DRAW DOWN NOTICE" shall have the meaning assigned to such term
in Section 5.1(f) hereof.
(g) "DRAW DOWN PRICING PERIOD" shall mean a period of 20 consecutive
Trading Days beginning on the date specified in the Draw Down Notice (as
defined in Section 5.1(f) herein); PROVIDED, HOWEVER, the Draw Down
Pricing Period shall not begin before the day on which receipt of such
notice is confirmed by the Purchaser.
(h) "DTC" shall have the meaning assigned to such term in Section
5.1(g).
(i) "DWAC" shall have the meaning assigned to such term in Section
5.1(g).
(j) "EFFECTIVE DATE" shall mean the date the Registration Statement
of the Company covering the Shares being subscribed for hereby is
declared effective by the SEC.
(k) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.
(l) "GAAP" shall mean the United States Generally Accepted
Accounting Principles as those conventions, rules and procedures are
determined by the Financial Accounting Standards Board and its
predecessor agencies.
(m) "INITIAL CLOSING" shall have the meaning assigned to such term
in Section 1.2 hereof.
(n) "INITIAL CLOSING DATE" shall have the meaning assigned to such
term in Section 1.2 hereof.
(o) "INVESTMENT AMOUNT" shall have the meaning assigned to such term
in Section 5.1(f) hereof.
(p) "MATERIAL ADVERSE EFFECT" shall mean any adverse effect on the
business, operations, properties, or financial condition of the Company
that is material and adverse to the Company and its subsidiaries and
affiliates, taken as a whole and/or any condition, circumstance, or
situation that would prohibit or otherwise materially interfere with the
ability of the Company to perform any of its material obligations under
this Agreement or the Registration Rights Agreement or to perform its
obligations under any other Material Agreement (as defined in Section
2.1(r)).
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(q) "PRINCIPAL MARKET" shall mean initially the Nasdaq National
Market and shall include the American Stock Exchange, Nasdaq Small-Cap
Market and the New York Stock Exchange if the Company becomes listed and
trades on such market or exchange after the date hereof.
(r) "PURCHASE PRICE" shall mean 90% of the VWAP on the date in
question.
(s) "REGISTRATION STATEMENT" shall mean the registration statement
under the Securities Act, to be filed with the Securities and Exchange
Commission for the registration of the Shares pursuant to the
Registration Rights Agreement attached hereto as EXHIBIT A (the
"Registration Rights Agreement).
(t) "SEC" shall mean the Securities and Exchange Commission.
(u) "SEC DOCUMENTS" shall mean the Company's latest Form 10-K or
Form 10-KSB as of the time in question, all Forms 10-Q or 10-QSB and 8-K
filed thereafter, and the Proxy Statement for its latest fiscal year as
of the time in question until such time as the Company no longer has an
obligation to maintain the effectiveness of a Registration Statement as
set forth in the Registration Rights Agreement.
(v) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
(w) "SETTLEMENT" shall mean the delivery of the Draw Down Shares
into the Purchaser's DTC account via DTC's DWAC System in exchange for
payment therefor.
(x) "SETTLEMENT DATE" shall have the meaning assigned to such term
in Section 5.1(b).
(y) "SETTLEMENT PERIOD" shall have the meaning assigned to such term
in Section 5.1(b).
(z) "SHARES" shall mean, collectively, the shares of Common Stock of
the Company being subscribed for hereunder (the "Draw Down Shares") and
those shares of Common Stock issuable to the Purchaser upon exercise of
the Warrant (the "Warrant Shares").
(aa) "THRESHOLD PRICE" shall mean the price per Share designated by
the Company as the lowest VWAP during any Draw Down Pricing Period at
which the Company shall sell its Common Stock in accordance with this
Agreement.
(bb) "TRADING DAY" shall mean any day on which the Principal Market
is open for business.
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(cc) "TRANSACTION DOCUMENTS" shall mean this Agreement, the
Registration Rights Agreement and the Escrow Agreement.
(dd) "VWAP" shall mean the daily volume weighted average price of
the Company's Common Stock on the Principal Market as reported by
Bloomberg Financial L.P. (based on a trading day from 9:30 a.m. Eastern
Time to 4:02 p.m. Eastern Time) using the VAP function on the date in
question.
(ee) "WARRANT" shall mean the warrant issued to the Purchaser
pursuant to Section 4.2(f) hereof.
[SIGNATURE PAGE FOLLOWS]
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[PURCHASE AGREEMENT SIGNATURE PAGE]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officer as of this 25th day
of May, 2001.
OPEN MARKET, INC.
By: /s/ XXXXXX XXXXXX
-----------------------------------
Xxxxxx Xxxxxx, Chief Financial Officer
THEDDINGWORTH INTERNATIONAL LIMITED
By: /s/ XXXXX XXXX
-----------------------------------
Xxxxx Xxxx, Director
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