EXHIBIT 99.1
COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "AGREEMENT") is dated as of
June 30, 2003 by and between US Dataworks, Inc., a Nevada corporation (the
"COMPANY") and Icon Investors Ltd. (the "PURCHASER").
Capitalized terms used in this Agreement and not otherwise defined
shall have the meanings ascribed to them in Article 9.
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall have the right to issue and sell
to Purchaser from time to time as provided herein, and Purchaser shall be
obligated to purchase from the Company up to $4,000,000 worth of shares of
Common Stock on a private placement basis pursuant to an exemption from
registration under Section 4(2) of the Security Act of 1933; and
WHEREAS, the Purchaser shall be entitled to resell shares of Common
Stock acquired hereunder pursuant to a resale registration statement established
by the Company pursuant to the terms of the Registration Rights Agreement
between the Company and the Purchaser which shall be declared effective by the
Commission prior to the delivery of the Draw Down Notice.
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 DRAW DOWN SHARES. Upon the terms and
subject to the 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 $4,000,000 worth of shares of Common Stock (the
"COMMITMENT AMOUNT").
Section 1.2. INITIAL CLOSING. The execution and delivery of this
Agreement and the other agreements referred to herein (the "INITIAL CLOSING")
shall take place at the offices of Xxxxxxx Xxxxxxxxx LLP, 000 Xxxxxxxxx Xxxxxx,
Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000 (i) at 10:00 a.m. local time within 5
Trading Days of the date hereof, or (ii) at 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.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES
Section 2.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as
set forth under the corresponding section of the Disclosure Schedules attached
hereto, the Company hereby makes the following representations and warranties as
of the date hereof and as of the Closing Date to the Purchaser:
(a) SUBSIDIARIES. The Company has no direct or indirect
subsidiaries. The Company owns, directly or indirectly, all of the
capital stock of each Subsidiary free and clear of any lien, charge,
security interest, encumbrance, right of first refusal or other
restriction (collectively, "LIENS"), and all the issued and outstanding
shares of capital stock of each Subsidiary are validly issued and are
fully paid, non-assessable and free of preemptive and similar rights.
If the Company has no subsidiaries, then references in the Transaction
Documents to the Subsidiaries will be disregarded.
(b) ORGANIZATION AND QUALIFICATION. Each of the Company and
the Subsidiaries is an entity duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with
the requisite power and authority to own and use its properties and
assets and to carry on its business as currently conducted. Neither the
Company nor any Subsidiary is in violation of any of the provisions of
its respective certificate or articles of incorporation, bylaws or
other organizational or charter documents. Each of the Company and the
Subsidiaries is duly qualified to conduct business and is in good
standing as a foreign corporation or other entity in each jurisdiction
in which the nature of the business conducted or property owned by it
makes such qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, would not have or
reasonably be expected to result in (i) a material adverse effect on
the legality, validity or enforceability of any Transaction Document,
(ii) a material adverse effect on the results of operations, assets,
business or financial condition of the Company and the Subsidiaries,
taken as a whole, or (iii) adversely impair the Company's ability to
perform in any material respect on a timely basis its obligations under
any Transaction Document (any of (i), (ii) or (iii), a "MATERIAL
ADVERSE EFFECT").
(c) AUTHORIZATION; ENFORCEMENT. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and
otherwise to carry out its obligations thereunder. The execution and
delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby have been
duly authorized by all necessary action on the part of the Company and
no further action is required by the Company in connection therewith.
Each Transaction Document has been (or upon delivery will have been)
duly executed by the Company and, when delivered in accordance with the
terms hereof, will constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms
except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights generally and (ii) as
limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies.
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(d) NO CONFLICTS. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the
Company of the transactions contemplated thereby do not and will not
(i) conflict with or violate any provision of the Company's or any
Subsidiary's certificate or articles of incorporation, bylaws or other
organizational or charter documents, or (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt
or other instrument (evidencing a Company or Subsidiary debt or
otherwise) or other understanding to which the Company or any
Subsidiary is a party or by which any property or asset of the Company
or any Subsidiary is bound or affected, or (iii) result in a violation
of any law, rule, regulation, order, judgment, injunction, decree or
other restriction of any court or governmental authority to which the
Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset of
the Company or a Subsidiary is bound or affected; except in the case of
each of clauses (ii) and (iii), such as would not have or reasonably be
expected to result in a Material Adverse Effect.
(e) FILINGS, CONSENTS AND APPROVALS. The Company is not
required to obtain any consent, waiver, authorization or order of, give
any notice to, or make any filing or registration with, any court or
other federal, state, local or other governmental authority or other
Person in connection with the execution, delivery and performance by
the Company of the Transaction Documents, other than (a) the filing
with the Commission of the Registration Statement, the application(s)
to each Principal Market for the listing of the Shares for trading
thereon in the time and manner required thereby, and applicable Blue
Sky filings, (b) such as have already been obtained or such exemptive
filings as are required to be made under applicable securities laws and
(c) such other filings as may be required following the Closing Date
under the Securities Act, the Exchange Act and state corporate law.
(f) ISSUANCE OF THE SHARES. The Shares are duly authorized
and, when issued and paid for in accordance with the Transaction
Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens. The Company has reserved
from its duly authorized capital stock the maximum number of shares of
Common Stock issuable pursuant to this Agreement and the Warrants.
(g) CAPITALIZATION. The capitalization of the Company is as
described in the Company's most recent periodic report filed with the
Commission. The Company has not issued any capital stock since such
filing other than pursuant to the exercise of employee stock options
under the Company's stock option plans, the issuance of shares of
Common Stock to employees pursuant to the Company's employee stock
purchase plan and pursuant to the conversion or exercise of outstanding
Common Stock Equivalents. No Person has any right of first refusal,
preemptive right, right of participation, or any similar right to
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participate in the transactions contemplated by the Transaction
Documents. Except as a result of the purchase and sale of the Shares,
there are no outstanding options, warrants, script rights to subscribe
to, calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exchangeable for,
or giving any Person any right to subscribe for or acquire, any shares
of Common Stock, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may become
bound to issue additional shares of Common Stock, or securities or
rights convertible or exchangeable into shares of Common Stock. The
issue and sale of the Shares will not obligate the Company to issue
shares of Common Stock or other securities to any Person (other than
the Purchaser) and will not result in a right of any holder of Company
securities to adjust the exercise, conversion, exchange or reset price
under such securities.
(h) SEC REPORTS; FINANCIAL STATEMENTS. The Company has filed
all reports required to be filed by it under the Securities Act and the
Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for
the two years preceding the date hereof (or such shorter period as the
Company was required by law to file such material) (the foregoing
materials, including the exhibits thereto, being collectively referred
to herein as the "SEC REPORTS" and, together with the Disclosure
Schedules to this Agreement, the "DISCLOSURE MATERIALS") on a timely
basis or has received a valid extension of such time of filing and has
filed any such SEC Reports prior to the expiration of any such
extension. As of their respective dates, the SEC Reports complied in
all material respects with the requirements of the Securities Act and
the Exchange Act and the rules and regulations of the Commission
promulgated thereunder, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company
included in the SEC Reports comply in all material respects with
applicable accounting requirements and the rules and regulations of the
Commission with respect thereto as in effect at the time of filing.
Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
during the periods involved ("GAAP"), except as may be otherwise
specified in such financial statements or the notes thereto and except
that unaudited financial statements may not contain all footnotes
required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated subsidiaries as
of and for the dates thereof and the results of operations and cash
flows for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit adjustments.
(i) MATERIAL CHANGES. Since the date of the latest audited
financial statements included within the SEC Reports, except as
disclosed in the SEC Reports, (i) there has been no event, occurrence
or development that has had or that could reasonably be expected to
result in a Material Adverse Effect, (ii) the Company has not incurred
any liabilities (contingent or otherwise) other than (A) trade payables
and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to be
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reflected in the Company's financial statements pursuant to GAAP or
required to be disclosed in filings made with the Commission, and (iii)
the Company has not altered its method of accounting, (iv) the Company
has not declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock and
(v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock option
plans. The Company does not have pending before the Commission any
request for confidential treatment of information.
(j) LITIGATION. Except as disclosed in the SEC Reports, there
is no action, suit, inquiry, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened
against or affecting the Company, any Subsidiary or any of their
respective properties before or by any court, arbitrator, governmental
or administrative agency or regulatory authority (federal, state,
county, local or foreign) (collectively, an "ACTION") which (i)
adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Shares or
(ii) could, if there were an unfavorable decision, have or reasonably
be expected to result in a Material Adverse Effect. Neither the Company
nor any Subsidiary, nor any director or officer thereof, is or has been
the subject of any Action involving a claim of violation of or
liability under federal or state securities laws or a claim of breach
of fiduciary duty. There has not been, and to the knowledge of the
Company, there is not pending or contemplated, any investigation by the
Commission involving the Company or any current or former director or
officer of the Company. The Commission has not issued any stop order or
other order suspending the effectiveness of any registration statement
filed by the Company or any Subsidiary under the Exchange Act or the
Securities Act.
(k) LABOR RELATIONS. No material labor dispute exists or, to
the knowledge of the Company, is imminent with respect to any of the
employees of the Company which could reasonably be expected to result
in a Material Adverse Effect.
(l) COMPLIANCE. Except as disclosed in the SEC Reports,
neither the Company nor any Subsidiary (i) is in default under or in
violation of (and no event has occurred that has not been waived that,
with notice or lapse of time or both, would result in a default by the
Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of
its properties is bound (whether or not such default or violation has
been waived), (ii) is in violation of any order of any court,
arbitrator or governmental body, or (iii) is or has been in violation
of any statute, rule or regulation of any governmental authority,
including without limitation all foreign, federal, state and local laws
applicable to its business, except in the case of clauses (i), (ii) and
(iii) as would not have or reasonably be expected to result in a
Material Adverse Effect.
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(m) REGULATORY PERMITS. The Company and the Subsidiaries
possess all certificates, authorizations and permits issued by the
appropriate federal, state, local or foreign regulatory authorities
necessary to conduct their respective businesses as described in the
SEC Reports, except where the failure to possess such permits would not
have or reasonably be expected to result in a Material Adverse Effect
("MATERIAL PERMITS"), and neither the Company nor any Subsidiary has
received any notice of proceedings relating to the revocation or
modification of any Material Permit.
(n) TITLE TO ASSETS. The Company and the Subsidiaries have
good and marketable title in fee simple to all real property owned by
them that is material to the business of the Company and the
Subsidiaries and good and marketable title in all personal property
owned by them that is material to the business of the Company and the
Subsidiaries, in each case free and clear of all Liens, except for
Liens as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such
property by the Company and the Subsidiaries and Liens for the payment
of federal, state or other taxes, the payment of which is neither
delinquent nor subject to penalties. Any real property and facilities
held under lease by the Company and the Subsidiaries are held by them
under valid, subsisting and enforceable leases of which the Company and
the Subsidiaries are in compliance.
(o) PATENTS AND TRADEMARKS. To the knowledge of the Company
and each Subsidiary, the Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and
other similar rights that are necessary or material for use in
connection with their respective businesses as described in the SEC
Reports and which the failure to so have could have or reasonably be
expected to result in a Material Adverse Effect (collectively, the
"INTELLECTUAL PROPERTY RIGHTS"). Neither the Company nor any Subsidiary
has received a written notice that the Intellectual Property Rights
used by the Company or any Subsidiary violates or infringes upon the
rights of any Person. To the knowledge of the Company, all such
Intellectual Property Rights are enforceable.
(p) INSURANCE. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the
businesses in which the Company and the Subsidiaries are engaged.
Neither the Company nor any Subsidiary has any reason to believe that
it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business without a
significant increase in cost.
(q) TRANSACTIONS WITH AFFILIATES AND EMPLOYEES. Except as set
forth in the SEC Reports, none of the officers or directors of the
Company and, to the knowledge of the Company, none of the employees of
the Company is presently a party to any transaction with the Company or
any Subsidiary (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental
of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or
any such employee has a substantial interest or is an officer,
director, trustee or partner, in each case in excess of $60,000 other
than (a) for payment of salary or consulting fees for services
rendered, (b) reimbursement for expenses incurred on behalf of the
Company and (c) for other employee benefits, including stock option
agreements under any stock option plan of the Company.
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(r) INTERNAL ACCOUNTING CONTROLS. The Company and each of its
subsidiaries maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only
in accordance with management's general or specific authorization, and
(iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-14 and
15d-14) for the Company and designed such disclosures controls and
procedures to ensure that material information relating to the Company,
including its subsidiaries, is made known to the certifying officers by
others within those entities, particularly during the period in which
the Company's Form 10-K (or 10-KSB) or 10-Q (or 10-QSB), as the case
may be, is being prepared. The Company's certifying officers have
evaluated the effectiveness of the Company's controls and procedures as
of a date within 90 days prior to the filing date of the Form 10-Q (or
10-QSB) for the quarter ended December 31, 2002 (such date, the
"EVALUATION DATE"). The Company presented in its most recently filed
Form 10-k or Form 10-Q (or 10-QSB) the conclusions of the certifying
officers about the effectiveness of the disclosure controls and
procedures based on their evaluations as of the Evaluation Date. Since
the Evaluation Date, there have been no significant changes in the
Company's internal controls (as such term is defined in Item 307(b) of
Regulation S-K under the Exchange Act) or, to the Company's knowledge,
in other factors that could significantly affect the Company's internal
controls.
(s) CERTAIN FEES. No brokerage or finder's fees or commissions
are or will be payable by the Company to any broker, financial advisor
or consultant, finder, placement agent, investment banker, bank or
other Person with respect to the transactions contemplated by this
Agreement. The Purchaser shall have no obligation with respect to any
fees or with respect to any claims made by or on behalf of other
Persons for fees of a type contemplated in this Section that may be due
in connection with the transactions contemplated by this Agreement.
(t) PRIVATE PLACEMENT. Assuming the accuracy of the Purchaser
representations and warranties set forth in Section 2.2, no
registration under the Securities Act is required for the offer and
sale of the Shares by the Company to the Purchaser as contemplated
hereby. The issuance and sale of the Shares hereunder does not
contravene the rules and regulations of the Principal Market.
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(u) INVESTMENT COMPANY. The Company is not, and is not an
Affiliate of, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(v) REGISTRATION RIGHTS. No Person has any right to cause the
Company to effect the registration under the Securities Act of any
securities of the Company.
(w) LISTING AND MAINTENANCE REQUIREMENTS. The Company has not,
in the 12 months preceding the date hereof, received notice from any
Principal Market on which the Common Stock is or has been listed or
quoted to the effect that the Company is not in compliance with the
listing or maintenance requirements of such Principal Market. The
Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing
and maintenance requirements.
(x) APPLICATION OF TAKEOVER PROTECTIONS. The Company and its
Board of Directors have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Company's
Certificate of Incorporation (or similar charter documents) or the laws
of its state of incorporation that is or could become applicable to the
Purchaser as a result of the Purchaser and the Company fulfilling their
obligations or exercising their rights under the Transaction Documents,
including without limitation the Company's issuance of the Shares and
the Purchaser's ownership of the Shares.
(y) DISCLOSURE. The Company confirms that, neither the Company
nor any other Person acting on its behalf has provided any of the
Purchaser or their agents or counsel with any information that
constitutes or might constitute material, non-public information. The
Company understands and confirms that the Purchaser will rely on the
foregoing representations and covenants in effecting transactions in
securities of the Company. All disclosure provided to the Purchaser
regarding the Company, its business and the transactions contemplated
hereby, including the Disclosure Schedules to this Agreement, furnished
by or on behalf of the Company are true and correct and do not contain
any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
(z) NO INTEGRATED OFFERING. Neither the Company, nor any of
its affiliates, nor any Person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that
would cause this offering of the Shares to be integrated with prior
offerings by the Company for purposes of the Securities Act or any
applicable shareholder approval provisions, including, without
limitation, under the rules and regulations of any exchange or
automated quotation system on which any of the securities of the
Company are listed or designated.
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(aa) SOLVENCY. Based on the financial condition of the Company
as of the Closing Date, (i) the Company's fair saleable value of its
assets exceeds the amount that will be required to be paid on or in
respect of the Company's existing debts and other liabilities
(including known contingent liabilities) as they mature; (ii) the
Company's assets do not constitute unreasonably small capital to carry
on its business for the current fiscal year as now conducted and as
proposed to be conducted including its capital needs taking into
account the particular capital requirements of the business conducted
by the Company, and projected capital requirements and capital
availability thereof; and (iii) the current cash flow of the Company,
together with the proceeds the Company would receive, were it to
liquidate all of its assets, after taking into account all anticipated
uses of the cash, would be sufficient to pay all amounts on or in
respect of its debt when such amounts are required to be paid. The
Company does not intend to incur debts beyond its ability to pay such
debts as they mature (taking into account the timing and amounts of
cash to be payable on or in respect of its debt).
Section 2.2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The
Purchaser hereby makes the following representations and warranties to the
Company:
(a) ORGANIZATION; AUTHORITY. The Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with full right, corporate or
partnership power and authority to enter into and to consummate the
transactions contemplated by the Transaction Documents and otherwise to
carry out its obligations thereunder. The execution, delivery and
performance by the Purchaser of the transactions contemplated by this
Agreement has been duly authorized by all necessary corporate action on
the part of the Purchaser. Each Transaction Document to which it is
party has been duly executed by the Purchaser, and when delivered by
the Purchaser in accordance with terms hereof, will constitute the
valid and legally binding obligation of the Purchaser, enforceable
against it in accordance with its terms.
(b) INVESTMENT INTENT. The Purchaser understands that the
Shares are "restricted securities" and have not been registered under
the Securities Act or any applicable state securities law and is
acquiring the Shares as principal for its own account for investment
purposes only and not with a view to or for distributing or reselling
such Shares or any part thereof, has no present intention of
distributing any of such Shares and has no arrangement or understanding
with any other persons regarding the distribution of such Shares (this
representation and warranty not limiting the Purchaser's right to sell
the Shares pursuant to the Registration Statement or otherwise in
compliance with applicable federal and state securities laws). The
Purchaser is acquiring the Shares hereunder in the ordinary course of
its business. The Purchaser does not have any agreement or
understanding, directly or indirectly, with any Person to distribute
any of the Shares.
(c) PURCHASER STATUS. At the time the Purchaser was offered
the Shares, it was, and at the date hereof it is an "accredited
investor" as defined in Rule 501(a) under the Securities Act. The
Purchaser is not required to be registered as a broker-dealer under
Section 15 of the Exchange Act.
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(d) EXPERIENCE OF THE PURCHASER. The Purchaser, either alone
or together with its representatives, has such knowledge,
sophistication and experience in business and financial matters so as
to be capable of evaluating the merits and risks of the prospective
investment in the Shares, and has so evaluated the merits and risks of
such investment. The Purchaser is able to bear the economic risk of an
investment in the Shares and, at the present time, is able to afford a
complete loss of such investment.
(e) GENERAL SOLICITATION. The Purchaser is not purchasing the
Shares as a result of any advertisement, article, notice or other
communication regarding the Shares published in any newspaper, magazine
or similar media or broadcast over television or radio or presented at
any seminar or any other general solicitation or general advertisement.
The Company acknowledges and agrees that each Purchaser does
not make or has not made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in this
Section 2.2.
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
Notice, the Company will have authorized and reserved, free of preemptive rights
and other similar contractual rights of stockholders, a sufficient number of its
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 (a) this Agreement and (b) the Securities Purchase
Agreement referred to in Section 4.1(e) hereof, which exceeds 19.9% of the
number of shares of Common Stock issued and outstanding on the date hereof
without first 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 first obtaining stockholder approval of such excess
issuance, and (ii) the Company may not make a Draw Down to the extent that such
Draw Down exceeds 4.999% of the then outstanding shares of Common Stock.
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
Warrants to the Purchaser.
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Section 3.3. REGISTRATION AND LISTING. The Company will use its
commercially reasonable best efforts to cause its Common Stock to continue to be
registered under Section 12(g) of the Exchange Act, will comply in all respects
with its reporting and filing obligations under the Exchange Act, will comply
with all requirements related to any registration statement filed pursuant to
this Agreement, and will not voluntarily 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 use its
commercially reasonable best efforts 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's counsel 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.
Section 3.4. ESCROW ARRANGEMENT. The Company and the Purchaser shall
enter into an escrow arrangement with Xxxxxxx Xxxxxxxxx LLP (the "ESCROW AGENT")
in the form of EXHIBIT B hereto respecting payment against delivery of the Draw
Down Shares.
Section 3.5. REGISTRATION RIGHTS AGREEMENT. The Company and the
Purchaser shall enter into the Registration Rights Agreement in the Form of
EXHIBIT A hereto. Before the Purchaser shall be obligated to accept a Draw Down
request from the Company, the Company shall have caused a sufficient number of
shares of Common Stock to be registered to cover the Draw Down 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 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 would reasonably be expected to have a Material
Adverse Effect.
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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 entries that are complete in all material respects will be made in
accordance with GAAP consistently applied, reflecting all financial transactions
of the Company and its subsidiaries, and in which, for each fiscal year, all
proper reserves for depreciation, depletion, obsolescence, amortization, taxes,
bad debts and other purposes in connection with its business shall be made.
Section 3.9. 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 in which the Purchaser is entitled to sell the Shares hereunder
or the receipt of notice with respect to the initiation of any proceeding for
such purpose; (iv) becoming aware that any statement made in the Registration
Statement or related prospectus or any document incorporated or deemed to be
incorporated therein by reference is untrue in any material respect or 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 determination that the filing of a post-effective
amendment to or withdrawal of the Registration Statement is required. 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 3.10. CONSOLIDATION; MERGER. The Company shall not, at any time
prior to the termination of this Agreement, effect any merger or consolidation
of the Company with or into, or a transfer of all or substantially all of the
assets of the Company to, another entity (a "CONSOLIDATION EVENT") unless the
resulting successor or acquiring entity (if not the Company) assumes by written
instrument or by operation of law the obligation to deliver to the Purchaser
such shares of Common Stock and/or securities as the Purchaser is entitled to
receive pursuant to this Agreement.
Section 3.11. NON-PUBLIC INFORMATION. The Company covenants and agrees
that neither it nor any other Person acting on its behalf will provide the
Purchaser or its agents or counsel with any information that the Company
believes constitutes material non-public information, unless prior thereto the
Purchaser shall have executed a written agreement regarding the confidentiality
and use of such information. The Company understands and confirms that the
Purchaser shall be relying on the foregoing representations in effecting
transactions in securities of the Company.
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Section 3.12. SUBSEQUENT EQUITY SALES. Until the end of the Commitment
Period, neither the Company nor any Subsidiary shall issue additional shares of
Common Stock or Common Stock Equivalents pursuant to transactions commonly
referred to as equity lines of credit. Notwithstanding anything to the contrary
herein, this Section 3.12 shall not apply to the following (a) the granting of
options to employees, officers and directors of the Company pursuant to any
stock option plan duly adopted by a majority of the non-employee members of the
Board of Directors of the Company or a majority of the members of a committee of
non-employee directors established for such purpose, or (b) the exercise of any
security issued by the Company in connection with the offer and sale of this
Company's securities pursuant to this Agreement, or (c) the exercise of or
conversion of any convertible securities, options or warrants issued and
outstanding on the date hereof, provided such securities have not been amended
since the date hereof, (d) acquisitions or strategic investments, the primary
purpose of which is not to raise capital or (e) the issuance of shares through
any other investment facility other than transactions commonly referred to as
equity lines of credit.
Section 3.13. SECURITIES LAWS DISCLOSURE; PUBLICITY. The Company shall,
within 1 Trading Day of the Closing Date, issue a press release or file a
Current Report on Form 8-K, in each case reasonably acceptable to each Purchaser
disclosing the transactions contemplated hereby and make such other filings and
notices in the manner and time required by the Commission. The Company and each
Purchaser shall consult with each other in issuing any press releases with
respect to the transactions contemplated hereby, and neither the Company nor any
Purchaser shall issue any such press release or otherwise make any such public
statement without the prior consent of the Company, with respect to any press
release of any Purchaser, or without the prior consent of each Purchaser, with
respect to any press release of the Company, which consent shall not
unreasonably be withheld, except if such disclosure is required by law, in which
case the disclosing party shall promptly provide the other party with prior
notice of such public statement or communication. Notwithstanding the foregoing,
the Company shall not publicly disclose the name of any Purchaser, or include
the name of any Purchaser in any filing with the Commission or any regulatory
agency or Trading Market, without the prior written consent of such Purchaser,
except (a) as required by federal securities law in connection with the
registration statement contemplated by the Registration Rights Agreement and (b)
to the extent such disclosure is required by law or Trading Market regulations,
in which case the Company shall provide the Purchaser with prior notice of such
disclosure permitted under subclause (a) or (b).
Section 3.14. SHAREHOLDERS RIGHTS PLAN. No claim will be made or
enforced by the Company or any other Person that any Purchaser is an "Acquiring
Person" under any shareholders rights plan or similar plan or arrangement in
effect or hereafter adopted by the Company, or that any Purchaser could be
deemed to trigger the provisions of any such plan or arrangement, by virtue of
receiving Shares under the Transaction Documents or under any other agreement
between the Company and the Purchaser.
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Section 3.15. MINIMUM COMMITMENT AMOUNT. During the first 12 months
following the Effective Date, the Company shall make Draw Downs of at least
$1,500,000.00, in the aggregate, pursuant to this Agreement, subject to the
limitations of Section 3.1.
The Purchaser covenants with the Company as follows:
Section 3.17. PROSPECTUS DELIVERY REQUIREMENTS. The Purchaser agrees
that it will, whenever required by federal securities laws, deliver the
Prospectus included in the Registration Statement to any purchaser of Draw Down
Shares from the Purchaser in such manner as is required under the federal
securities laws.
ARTICLE 4
CONDITIONS TO INITIAL CLOSING AND DRAW DOWNS
Section 4.1. CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY AND
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 in writing 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, which shall be true and correct in all
material respects as of such dates).
(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.
(d) NO PROCEEDINGS OR LITIGATION. No material action, suit or
proceeding before any arbitrator or any governmental authority shall
have been commenced 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.
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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 in writing 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,
which shall be true and correct in all material respects as of such
date).
(b) PERFORMANCE BY THE COMPANY. The Company shall have
performed, satisfied and complied in all material respects with all
material covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the 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 material action, suit or
proceeding before any arbitrator or any governmental authority shall
have been commenced, 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.
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 at the Initial Closing, 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 to be delivered in connection with the
applicable Draw Down shall have been declared effective by the SEC and
shall remain effective during the applicable Draw Down Pricing Period
and on the applicable Settlement Date.
15
(c) NO SUSPENSION. Trading in the Common Stock shall not have
been suspended by the SEC or the Principal Market (except for any
suspension of trading of limited duration agreed to by the Company,
which suspension shall be terminated prior to the delivery of each Draw
Down Notice), and, at any time prior to such Draw Down Notice, trading
in securities generally as reported on the Principal Market shall not
have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported on the Principal
Market unless the general suspension or limitation shall have been
terminated prior to the delivery of such Draw Down Notice.
(d) MATERIAL ADVERSE EFFECT. No Material Adverse Effect and no
Consolidation Event where the successor entity has not agreed to
deliver to the Purchaser such shares of stock and/or securities as the
Purchaser is entitled to receive pursuant to this Agreement, such
occurrences to be determined in accordance with Section 8.9 herein.
(e) OPINION OF COUNSEL. The Purchaser shall have received a
"bring-down" letter from the Company's counsel, confirming that there
is no change from the counsel's previously delivered opinion, or else
specifying with particularity the reason for any change and an opinion
as to the additional items specified in EXHIBIT C hereto.
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 against the Commitment Amount (each a "DRAW DOWN")
during the Commitment Period, which Draw Downs the Purchaser shall be
obligated to accept, subject to the terms and conditions herein.
(b) Only one Draw Down shall be allowed in each Draw Down
Pricing Period and the Company may not exercise a Draw Down until the
applicable Trading Cushion has elapsed since the end of the previous
Draw Down Pricing Period. 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 or
before the 2nd Trading Day immediately after each consecutive 5 Trading
Day period within a Draw Down Pricing Period (each such 5 Trading Day
settlement period and each such settlement date referred to as a
"SETTLEMENT PERIOD" and a "SETTLEMENT DATE", respectively).
16
(c) In connection with each Draw Down Pricing Period, the
Company shall set the Threshold Price in the Draw Down Notice.
(d) The maximum Investment Amount as to each Draw Down shall
be equal to the number of Settlement Periods within such Draw Down
Pricing Period multiplied by 25% of the product of the average of the 5
VWAPs occurring immediately prior to the applicable Commencement Date
(defined below) and the total aggregate trading volume in respect of
the Common Stock for such Draw Down Pricing Period provided that no
Draw Down shall be less than $25,000. For purposes of clarification, if
the maximum Investment Amount is less than $25,000, 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 Draw Down Pricing Period) of
(x) the Investment Amount divided by the number of Trading Days in the
Draw Down Pricing Period, and (y) the Purchase Price on each Trading
Day within the Draw Down Pricing 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 Investment
Amount to be paid on the immediately pending Settlement Date
shall be reduced by an amount equal to the Investment Amount
divided by the number of Trading Days in the Draw Down Pricing
Period and such Trading Day shall be withdrawn from the Draw
Down Pricing Period; and
(ii) if during any Trading Day during the Draw Down
Pricing Period trading of the Common Stock on the Principal
Market is suspended for more than 3 hours, in the aggregate,
or if any Trading Day during the Draw Down Pricing Period is
shortened because of a public holiday, then that portion of
the Investment Amount to be paid on the immediately pending
Settlement Date shall be reduced by an amount equal to the
Investment Amount divided by the number of Trading Days in the
Draw Down Pricing Period and such Trading Days shall be
withdrawn from the Draw Down Pricing Period; and
(iii) if during any Trading Day during the Draw Down
Pricing Period sales of Draw Down Shares pursuant to the
Registration Statement are suspended by the Company in
accordance with Sections 3(d) or 5(e) of the Registration
Rights Agreement for more than three (3) hours, in the
aggregate, then that portion of the Investment Amount to be
paid on the immediately pending Settlement Date shall be
reduced by an amount equal to the Investment Amount divided by
the number of Trading Days in the Draw Down Pricing Period and
such Trading Days shall be withdrawn from the Draw Down
Pricing Period.
17
(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 8.5 as to the
amount of the Draw Down (the "INVESTMENT AMOUNT") the Company wishes to
exercise. The Draw Down Notice shall also inform the Purchaser the
number of Trading Days within the Draw Down Pricing Period, which must
be in multiples of five up to a maximum of 20 consecutive Trading Days,
and the first day of the Draw Down Pricing Period (the "COMMENCEMENT
DATE"); PROVIDED; HOWEVER, if the Commencement Date shall be the date
on which the Draw Down Notice is delivered, the Draw Down Notice must
delivered to the Purchaser at least 1 hour before trading commences on
such Trading Day date. At no time shall the Purchaser be required to
purchase more than the maximum Investment Amount for a given Draw Down
Pricing Period.
(g) On the Trading Day immediately following the last day of
the Settlement Period, the Company and the Purchaser shall execute a
settlement statement (the "SETTLEMENT STATEMENT") setting forth the
number of Draw Down Shares issuable and the aggregate Purchase Price as
to such Settlement Period. Promptly upon execution of the Settlement
Statement (but in no event more than 1 Trading day after the execution
of such Settlement Statement), the Draw Down Shares purchased pursuant
to such Settlement Statement shall be:
(i) delivered to the Depository Trust Company ("DTC")
account of the Purchaser, or its designees, as designated by
the Purchaser in the Settlement Statement, via DTC's Deposit
Withdrawal Agent Commission system ("DWAC"). Upon the Company
electronically delivering such Draw Down Shares to the DTC
account of the Purchaser, or its designees, via DWAC by 1:00
p.m. ET, the Purchaser shall, on the same day (or the next
Business Day if such day is not a Business Day) wire transfer
immediately available funds to the Company's bank account, as
designated by the Company in the Settlement Statement, for the
amount of the aggregate Purchase Price of such Draw Down
Shares. Upon the Company electronically delivering whole
shares of Common Stock to the Purchaser or its designee's DTC
account via DWAC after 1:00 p.m. ET, the Purchaser shall wire
transfer next day available funds to the Company's designated
account on such day. 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 and
notice to the Company thereof, all as further set forth in the
Escrow Agreement; or
(ii) delivered by the Company to Purchaser (or its
designee) to the address as designated in the Settlement
Statement, the unlegended physical certificate for the Draw
Down Shares which shall be so delivered in lieu of the
electronic delivery via DTC's DWAC and in accordance with the
terms of this Agreement.
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(h) The Company understands that a delay in the delivery of
the Draw Down Shares into the Purchaser's DTC account beyond 5 Trading
Days after the dates set forth herein or in the Escrow Agreement, as
may be applicable, 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 5 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 5 Trading Days from the
dates set forth herein or in the Escrow Agreement, as applicable, on
which such Draw Down Shares are to be delivered into the Purchaser's
DTC account via the DWAC system):
LATE PAYMENT FOR EACH
$5,000 OF DRAW DOWN SHARES
NO. TRADING DAYS LATE BEING PURCHASED
--------------------------------- -------------------------------------
1 $50
2 $100
3 $150
4 $200
5 $250
6 $300
7 $350
8 $400
9 $450
10 $500
More than 10 $500 + $100 for each Trading
Day Late beyond 10 Trading Days
The Company shall pay any payments incurred under this Section 5.1(h)
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.
ARTICLE 6
TERMINATION
Section 6.1. TERM. The term of this Agreement shall begin on the date
hereof and shall end 24 months from the Effective Date or as otherwise set forth
in Section 6.2.
Section 6.2. OTHER TERMINATION.
(a) This Agreement shall terminate upon one (1) Trading Day's
notice if (i) an event resulting in a Material Adverse Effect has
occurred and has not been cured for a period of ninety (90) days after
giving notice thereof, (ii) the Common Stock is de-listed from the
Principal Market unless such de-listing is in connection with a
subsequent listing on another Principal Market, or (iii) the Company
files for protection from creditors under any applicable law.
19
(b) The Company may terminate this Agreement upon 5 Trading
Day's notice if the Purchaser shall fail to fund a properly noticed
Draw Down within 5 Trading Days of the end of the applicable Settlement
Period.
Section 6.3. EFFECT OF TERMINATION. In the event of termination of this
Agreement pursuant to Section 6.2 herein, written notice thereof shall forthwith
be given to the other party and the transactions contemplated by this Agreement
shall be terminated without further action by either party. If this Agreement is
terminated as provided in Section 6.1 or 6.2 herein, this Agreement shall become
void and of no further force and effect, except for Sections 8.1, 8.2 and 8.9,
and Article 7 herein, which shall survive the termination of this Agreement.
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
INDEMNIFICATION OF PURCHASER. The Company will indemnify and hold the
Purchaser and its directors, officers, shareholders, partners, employees and
agents (each, a "Purchaser Party") harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and reasonable
attorneys' fees and costs of investigation that any such Purchaser Party may
suffer or incur as a result of or relating to: (a) any misrepresentation, breach
or inaccuracy, or any allegation by a third party that, if true, would
constitute a breach or inaccuracy, of any of the representations, warranties,
covenants or agreements made by the Company in this Agreement or in the other
Transaction Documents; or (b) any cause of action, suit or claim brought or made
against such Purchaser Party and arising solely out of or solely resulting from
the execution, delivery, performance or enforcement of this Agreement or any of
the other Transaction Documents and without causation by any other activity,
obligation, condition or liability pertaining to the Purchaser. The Company will
reimburse the Purchaser for its reasonable legal and other expenses (including
the cost of any investigation, preparation and travel in connection therewith)
incurred in connection therewith, as such expenses are incurred.
ARTICLE 8
MISCELLANEOUS
Section 8.1. FEES AND EXPENSES. The Company agrees to pay $10,000 to
the Purchaser for its legal, escrow and due diligence fees and expenses incurred
in connection with the investigation and negotiation of the transaction and the
preparation and negotiation of the Transaction Documents upon the execution
hereof. Except as otherwise set forth in this Agreement, each party shall pay
20
the fees and expenses of its advisers, counsel, accountants and other experts,
if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this Agreement.
The Company shall pay all stamp and other taxes and duties levied in connection
with the sale of the Shares.
Section 8.2. ENTIRE AGREEMENT. The Transaction Documents, together with
the exhibits and schedules thereto, contain the entire understanding of the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, with respect to such matters,
which the parties acknowledge have been merged into such documents, exhibits and
schedules.
Section 8.3. NOTICES. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (a) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section prior to 6:30 p.m. (New York City
time) on a Trading Day, (b) the next Trading Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
number specified in this Section on a day that is not a Trading Day or later
than 6:30 p.m. (New York City time) on any Trading Day, (c) the Trading Day
following the date of mailing, if sent by U.S. nationally recognized overnight
courier service, or (d) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices and communications shall be
as set forth on the signature pages attached hereto.
Section 8.4. AMENDMENTS; WAIVERS. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by the Company and the Purchaser or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right.
Section 8.5. CONSTRUCTION. The headings herein are for convenience
only, do not constitute a part of this Agreement and shall not be deemed to
limit or affect any of the provisions hereof. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
Section 8.6. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Purchaser. The Purchaser may
assign any or all of its rights under this Agreement to any Person to whom such
Purchaser assigns or transfers any Shares, provided such transferee agrees in
writing to be bound, with respect to the transferred Shares, by the provisions
hereof that apply to the "Purchaser".
Section 8.7. NO THIRD-PARTY BENEFICIARIES. This Agreement is intended
for the benefit of the parties hereto and their respective successors and
permitted assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person, except as otherwise set forth in Article 7.
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Section 8.8. GOVERNING LAW. All questions concerning the construction,
validity, enforcement and interpretation of the Transaction Documents shall be
governed by and construed and enforced in accordance with the internal laws of
the State of New York, without regard to the principles of conflicts of law
thereof. Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York. Each party hereto hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
the City of New York, New York for the adjudication of any dispute hereunder or
in connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of the any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is
improper. Each party hereto hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. Each party hereto (including its affiliates,
agents, officers, directors and employees) hereby irrevocably waives, to the
fullest extent permitted by applicable law, any and all right to trial by jury
in any legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby. If either party shall commence an action or
proceeding to enforce any provisions of a Transaction Document, then the
prevailing party in such action or proceeding shall be reimbursed by the other
party for its attorneys' fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.
Section 8.9. SURVIVAL. The representations, warranties, agreements and
covenants contained herein shall survive the Closing and the delivery and
exercise of the Shares, as applicable.
Section 8.10. EXECUTION. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
Section 8.11. SEVERABILITY. If any provision of this Agreement is held
to be invalid or unenforceable in any respect, the validity and enforceability
of the remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
22
Section 8.12. REPLACEMENT OF SHARES. If any certificate or instrument
evidencing any Shares is mutilated, lost, stolen or destroyed, the Company shall
issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Shares.
Section 8.13. REMEDIES. In addition to being entitled to exercise all
rights provided herein or granted by law, including recovery of damages, the
Purchaser and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
Section 8.14. 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.
ARTICLE 9
DEFINITIONS
Section 9.1. Certain Definitions.
(a) "AFFILIATE" shall mean any person who is an "affiliate" of
the applicable party within the meaning of Rule 405 promulgated under
the Securities Act.
(b) "COMMENCEMENT DATE" shall have the meaning assigned to
such term in Section 5.1(f) hereof.
(c) "COMMITMENT AMOUNT" shall have the meaning assigned to
such term in Section 1.1 hereof.
(d) "COMMITMENT PERIOD" shall mean the period of 24
consecutive months commencing immediately after the Effective Date.
(e) "COMMON STOCK" shall mean the Company's common stock,
$0.0001 par value per share, and any securities into which such common
stock may hereafter be reclassified
23
(f) "COMMON STOCK EQUIVALENTS" means any securities of the
Company or the Subsidiaries which would entitle the holder thereof to
acquire at any time Common Stock, including without limitation, any
debt, preferred stock, rights, options, warrants or other instrument
that is at any time convertible into or exchangeable for, or otherwise
entitles the holder thereof to receive, Common Stock.
(g) "CONSOLIDATION EVENT" shall mean a sale of all or
substantially all of the Company's assets or a merger pursuant to which
the holders of the voting securities of the Company prior to the merger
do not own a majority of the voting securities of the surviving entity.
(h) "DISCLOSURE LETTER" shall mean the separate disclosure
letter prepared by the Company and delivered concurrently herewith.
(i) "DRAW DOWN" shall have the meaning assigned to such term
in Section 5.1(a) hereof.
(j) "DRAW DOWN NOTICE" shall have the meaning assigned to such
term in Section 5.1(f) hereof.
(k) "DRAW DOWN PRICING PERIOD" shall mean a period of up to 20
consecutive Trading Days, in multiples of 5 Trading Days, beginning on
the date specified in the Draw Down Notice; PROVIDED, HOWEVER, the Draw
Down Pricing Period shall not begin before the day on which receipt of
such notice is delivered to Purchaser pursuant to Section 8.3 herein.
(l) "DRAW DOWN SHARES" shall mean the shares of Common Stock issuable
pursuant to a Draw Down.
(m) "DTC" shall have the meaning assigned to such term in
Section 5.1(g).
(n) "DWAC" shall have the meaning assigned to such term in
Section 5.1(g).
(o) "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.
(p) "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
(q) "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.
24
(r) "INITIAL CLOSING" shall have the meaning assigned to such
term in Section 1.2 hereof.
(s) "INITIAL CLOSING DATE" shall have the meaning assigned to
such term in Section 1.2 hereof.
(t) "INVESTMENT AMOUNT" shall have the meaning assigned to
such term in Section 5.1(f) hereof.
(u) "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, including but not limited to, any bankruptcy,
reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation of the Company.
(v) "MATERIAL AGREEMENT" shall have the meaning set forth in
Section 2.1(b).
(w) "PRINCIPAL MARKET" shall mean initially the American Stock
Exchange and shall include the Nasdaq Small-Cap Market, the Nasdaq
National Market and the New York Stock Exchange if the Company becomes
listed and trades on such market or exchange after the date hereof.
(x) "PURCHASER MATERIAL ADVERSE EFFECT" shall mean any adverse
effect on the business, operations, prospects or financial condition of
the Purchaser that is material and adverse to the Purchaser and/or any
condition, circumstance or situation that would prohibit or otherwise
materially interfere with the ability of the Purchaser to perform any
of its material obligations under this Agreement or the Registration
Rights Agreement.
(y) "PURCHASE PRICE" shall mean, with respect to Draw Down
Shares purchased during each applicable Settlement Period, (i) 87% of
the VWAP on the date in question during such Draw Down Pricing Period,
(ii) if the Company's equity market capitalization is at least
$50,000,000, but less than $100,000,000 on the date of a Draw Down
Notice, 90% of the VWAP on the date in question during such Draw Down
Pricing Period and (iii) if the Company's equity market capitalization
is $100,000,000 or greater on the date of a Draw Down Notice, 92% of
the VWAP on the date in question during such Draw Down Pricing Period.
(z) "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).
25
(aa) "SEC" shall mean the Securities and Exchange Commission.
(bb) "SEC DOCUMENTS" shall mean all reports, schedules, forms,
statements and other documents required to be filed by the Company with
the SEC pursuant to the requirements of the Exchange Act, including
material filed pursuant to Section 13(a) or 15(c) of the Exchange Act,
in each case, together with all exhibits, supplements, amendments and
schedules thereto, and all documents incorporated by reference therein.
(cc) [INTENTIONALLY OMITTED]
(dd) "SECURITIES ACT" shall mean the Securities Act of 1933,
as amended, and the rules and regulations promulgated thereunder.
(ee) "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.
(ff) "SETTLEMENT DATE" shall have the meaning assigned to such
term in Section 5.1(b).
(gg) "SETTLEMENT PERIOD" shall have the meaning assigned to
such term in Section 5.1(b).
(hh) "SHARES" shall mean the Draw Down Shares.
(ii) "SUBSIDIARY" shall have the meaning ascribed to such term
in Section 3.1(a).
(jj) "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, which shall be in no event less than
$0.10.
(kk) "TRADING CUSHION" (ll) shall mean the mandatory 3 Trading
Days between Draw Down Pricing Periods.
(mm) "TRADING DAY" shall mean any day on which the Principal
Market is open for business.
(nn) "TRANSACTION DOCUMENTS" shall mean this Agreement, the
Registration Rights Agreement and the Escrow Agreement.
(oo) "VWAP" shall mean, for any period of time in question,
the price determined by the first of the following clauses that
applies: (a) if the Common Stock is then listed or quoted on a
Principal Market, the volume weighted average price of the Common Stock
26
for such period on the primary Principal Market on which the Common
Stock is then listed or quoted as reported by Bloomberg Financial L.P.
(based on a trading day from 9:30 a.m. ET to 4:02 p.m. Eastern Time);
(b) if the Common Stock is not then listed or quoted on a Principal
Market and if prices for the Common Stock are then quoted on the OTC
Bulletin Board, the volume weighted average price of the Common Stock
for such period; (c) if the Common Stock is not then listed or quoted
on the OTC Bulletin Board and if prices for the Common Stock are then
reported in the "Pink Sheets" published by the National Quotation
Bureau Incorporated (or a similar organization or agency succeeding to
its functions of reporting prices), the most recent closing price per
share of the Common Stock so reported; or (d) in all other cases, the
fair market value of a share of Common Stock as determined by an
independent appraiser selected in good faith by the Purchaser.
[SIGNATURE PAGE FOLLOWS]
27
[SIGNATURE PAGE TO COMMON STOCK PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officer as of this
30th day of June, 2003.
US DATAWORKS, INC.
By: /S/ XXXX X. XXXXXXX
--------------------------------
Name: Xxxx X. Xxxxxxx
Title: CFO
ADDRESS FOR NOTICE:
-------------------
0000 Xxxxxxxxx Xxxx, Xxx. 000
Xxxxxxx, XX 00000
Attn: CEO
Tel: (000) 000-0000
Fax: (000) 000-0000
With a copy to: Pillsbury Winthrop LLP
(which shall not constitute notice) 0000 Xxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000-0000
ATTN: Xxxx Xxxxxx
[SIGNATURE PAGE FOR PURCHASER FOLLOWS]
28
[PURCHASER'S SIGNATURE PAGE]
PURCHASER:
ADDRESS: ICON INVESTORS LTD.
By: /S/ XXXXXX XXXXXXXX
--------------------------------
Name: XXXXXX XXXXXXXX
Title: Authorized Signatory of
COFIDES S.A., DIRECTOR of
ICON INVESTORS LTD.
29
