STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of
December 14, 2000 by and between Advanced Communications Technologies, Inc., a
Nevada corporation (the "Company"), and Wanquay Limited (the "Purchaser").
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Certain Definitions.
(a) "Average Daily Price" shall be the price based on the VWAP of the
Company on the Principal Market.
(b) "Draw Down" shall have the meaning assigned to such term in Section
6.1(a) hereof.
(c) "Draw Down Pricing Period" shall mean a period of twenty-two (22)
consecutive Trading Days beginning on the date specified in the Draw Down Notice
(as defined in Section 6.1(e) hereof); provided, however, the Draw Down Pricing
Period shall not begin before the day on which receipt of such notice is
confirmed by the Purchaser.
(d) "Effective Date" shall mean the date the Registration Statement of the
Company covering the Shares being subscribed for hereby is declared effective.
(e) "Investment Amount" shall have the meaning assigned to such term in
Section 6.1(e) hereof.
(f) "Material Adverse Effect" shall mean any adverse effect on the
business, operations, properties, prospects 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.
(g) "Principal Market" shall mean initially the OTC Bulletin Board and
shall include the American Stock Exchange, Nasdaq National Market, the New York
Stock Exchange or the Nasdaq SmallCap Market if the Company is listed and trades
on such market or exchange.
(h) "Purchase Price" shall mean with respect to Shares purchased during
each applicable Draw Down Pricing Period (excluding Shares issued upon the
exercise of
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Warrants) eighty-five percent (85%) (the "Purchase Price Percentage") of the
Average Daily Price on the date in question.
(i) "Registration Statement" shall mean the registration statement under
the Securities Act of 1933, as amended, 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).
(j) "SEC Documents" shall mean the Company's latest Form 10-K or l0-KSB as
of the time in question, all Forms 10-Q or l0-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.
(k) "Settlement Period" shall have the meaning assigned to such term in
Section 6.1(b).
(l) "Shares" shall mean, collectively, the shares of Common Stock of the
Company being subscribed for hereunder and those shares of Common Stock issuable
to the Purchaser upon exercise of the Warrants.
(m) "Threshold Price" is the lowest Average Daily Price during any Draw
Down Pricing Period at which the Company will sell its Common Stock with respect
to this Agreement.
(n) "Trading Day" shall mean any day on which the Principal Market is open
for business.
(o) "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 am EST to 4:00 pm EST) using
the VAP function on the date in question.
(p) "Warrants" shall mean the Initial Warrant, the Effective Warrant and
the Draw Down Warrants as those terms are defined in Section 5.2(f) hereof.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section 2.1. Purchase and Sale of Stock. Subject to the terms and
conditions of this Agreement, the Company may issue and sell to the Purchaser
and the Purchaser shall purchase from the Company up to twelve million dollars
($12,000,000) of the Company's Common Stock (the "Commitment Amount"), no par
value per share (the "Common Stock"), and the Warrants, based on Draw Downs of
up to one million dollars ($1,000,000.00) per Draw Down.
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Section 2.2. The Shares. The Company has authorized and has reserved and
covenants to continue to reserve, 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 Shares to be issued in
connection with all Draw Downs requested under this Agreement. Anything in this
Agreement to the contrary notwithstanding, the Company may not issue a number of
shares of Common Stock pursuant to a Draw Down to the extent that such number of
shares exceeds 8% of the then outstanding shares of Common Stock.
Section 2.3. 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 II of the Escrow Agreement, attached as Exhibit
B hereto, (the "Initial Closing") shall take place (i) at the offices of Xxxxxxx
Xxxxxx & Green, P.C., 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 within fifteen
(15) days from 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 III
REPRESENTATIONS AND WARRANTIES
Section 3.1. Representation and Warranties of the Company. 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 Nevada 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. Except as set forth on Schedule 3.1(a), the Company does not have any
subsidiaries and does not own more than fifty percent (50%) of or control any
other business entity 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 have a Material Adverse Effect on the Company's
financial condition.
(b) Authorization. Enforcement. (i) The Company has the requisite
corporate power and corporate authority to enter into and perform its
obligations under this Agreement, the Registration Rights Agreement, the Escrow
Agreement and to issue the Draw Down Shares pursuant to their respective terms,
(ii) the execution, issuance and delivery of this Agreement, the Registration
Rights Agreement and the Escrow Agreement by the Company and the consummation by
it of the transactions contemplated hereby and thereby have been duly authorized
by all necessary corporate action and no further consent or authorization of the
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Company or its Board of Directors or stockholders is required, and (iii) this
Agreement, the Registration Rights Agreement and the Escrow Agreement have been
duly executed and delivered by the Company and at the Initial Closing shall
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. The Company has duly and
validly authorized and reserved for issuance shares of Common Stock sufficient
in number for the issuance of the Draw Down Shares.
(c) Capitalization. The authorized capital stock of the Company consists
of 100,000,000 shares of Common Stock of which 82,197,280 shares are issued and
outstanding and no preferred stock. All of the outstanding shares of the
Company's Common Stock have been duly and validly authorized and are fully-paid
and non-assessable, except as set forth in the SEC Documents. Except as set
forth in this Agreement and the Registration Rights Agreement and as set forth
in the SEC Documents, or on Schedule 3.1(c) hereto, 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 character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company. Furthermore,
except as set forth in this Agreement and as set forth in the SEC Documents or
on Schedule 3.1(c), 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. Except as set forth on
Schedule 3.1(c). 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. Except as set forth on Schedule 3.1(c). 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. Except as set forth in the
SEC Documents or on Schedule 3.1(c) hereto, the offer and sale of all capital
stock, convertible securities, rights, warrants, or options of the Company
issued prior to the Initial Closing complied with all applicable federal and
state securities laws, and no stockholder has a right of rescission or damages
with respect thereto which would have a Material Adverse Effect on the Company's
financial condition or operating results. The Company has made available to the
Purchaser true and correct copies of the Company's Charter 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 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; the 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
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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) 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, 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 do not and will not 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 Securities and
Exchange Commission (the "SEC") or state securities administrators subsequent to
the Initial Closing and any registration statement which may be filed pursuant
hereto); provided that, for purpose of the representation made in this sentence,
the Company is assuming and relying upon the accuracy of the relevant
representations 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 Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and, except as disclosed in the SEC Documents
or on Schedule 3.1(f) hereto, 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 (all of
the foregoing including filings incorporated by reference therein being referred
to herein as the "SEC Documents"). The Company has delivered or made available
to the Purchaser 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 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 and the published
rules and regulations of the SEC or other
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applicable rules and regulations with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles
("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 subsidiary 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 subsidiary. For the purposes of
this Agreement, "subsidiary" shall mean any corporation or other entity of which
at least a majority of the securities or other ownership interests having
ordinary voting power (absolutely or contingently) for the election of directors
or other persons performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other subsidiaries. All of the
outstanding shares of capital stock of each 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 subsidiary for the purchase
or acquisition of any shares of capital stock of any 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
subsidiary is subject to any obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any shares of the capital stock of any subsidiary
or any convertible securities, rights, warrants or options of the type described
in the preceding sentence. Neither the Company nor any subsidiary is a party to,
nor has any knowledge of; any agreement restricting the voting or transfer of
any shares of the capital stock of any subsidiary.
(h) No Material Adverse Effect. Since September 30, 2000 no Material
Adverse Effect has occurred or exists with respect to the Company, except as
disclosed in the SEC Documents or on Schedule 3.l(h) hereof.
(i) No Undisclosed Liabilities. Except as disclosed in the SEC Documents
or on Schedule 3.1(i) hereto, 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 or any
subsidiary (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, do not or would not have a Material
Adverse Effect on the Company or its subsidiaries.
(j) No Undisclosed Events or Circumstances. Since September 30, 2000, no
event or circumstance has occurred or exists with respect to the Company or its
businesses, properties, prospects, 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.
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(k) Indebtedness. The SEC Documents or Schedule 3.1(k) hereto sets forth
as of the date hereof all outstanding secured and unsecured Indebtedness of the
Company or any subsidiary, or for which the Company or any subsidiary has
commitments. For the purposes of this Agreement, "Indebtedness" shall mean (A)
any liabilities for borrowed money or amounts owed in excess of $250,000 (other
than trade accounts payable incurred in the ordinary course of business), (B)
all guaranties, endorsements and contingent obligations in respect of
Indebtedness of others, whether or not the same are or should be reflected in
the Company's balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (C) the present value of
any lease payments in excess of $250,000 due under teases required to be
capitalized in accordance with GAAP. Neither the Company nor any subsidiary is
in default with respect to any Indebtedness.
(1) Title to Assets. Each of the Company and the subsidiaries has good and
marketable 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 indicated in the SEC Documents or on
Schedule 3.1(1) hereto or such that do not cause a Material Adverse Effect on
the Company's financial condition or operating results. All said leases of the
Company and each of its subsidiaries are valid and subsisting and in full force
and effect.
(m) 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 subsidiary which questions the validity of this Agreement or the
transactions contemplated hereby or any action taken or to be taken pursuant
hereto or thereto. Except as set forth in the SEC Documents or on Schedule
3.1(m) hereto, there is no action, suit, claim, investigation or proceeding
pending or, to the knowledge of the Company, threatened, against or involving
the Company, any subsidiary or any of their respective properties or assets.
There are no outstanding orders, judgments, injunctions, awards or decrees of
any court, arbitrator or governmental or regulatory body against the Company or
any subsidiary.
(n) Compliance with Law. The business of the Company and the subsidiaries
has been and is presently being conducted in accordance with all applicable
federal, state and local governmental laws, rules, regulations and ordinances,
except as set forth in the SEC Documents or on Schedule 3.1(n) hereto or such
that do not cause a Material Adverse Effect. The Company and each of its
subsidiaries have all franchises, permits, licenses, consents and other
governmental or 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, could not reasonably be expected to have a Material Adverse Effect.
(o) Taxes. Except as set forth on Schedule 3.1(o), the Company and each
subsidiary has filed all Tax Returns which it is required to file under
applicable laws; all such Tax Returns are true and accurate and have been
prepared in compliance with all applicable laws; the Company has paid all Taxes
due and owing by it or any subsidiary (whether or not such Taxes are required to
be shown on a Tax Return) and have withheld and paid over to the
7
appropriate taxing authorities all Taxes which it is required to withhold from
amounts paid or owing to any employee, stockholder, creditor or other third
parties; and since December 31, 1999, the charges, accruals and reserves for
Taxes with respect to the Company (including any provisions for deferred income
taxes) reflected on the books of the Company are adequate to cover any Tax
liabilities of the Company if its current tax year were treated as ending on the
date hereof.
No claim has been made by a taxing authority in a jurisdiction where the
Company does not file tax returns that the Company or any subsidiary is or may
be subject to taxation by that jurisdiction. There are no foreign, federal,
state or local tax audits or administrative or judicial proceedings pending or
being conducted with respect to the Company or any subsidiary; no information
related to Tax matters has been requested by any foreign, federal, state or
local taxing authority; and, except as disclosed above, no written notice
indicating an intent to open an audit or other review has been received by the
Company or any subsidiary from any foreign, federal, state or local taxing
authority. There are no material unresolved questions or claims concerning the
Company's Tax liability. The Company (A) has not executed or entered into a
closing agreement pursuant to ss. 7121 of the Internal Revenue Code or any
predecessor provision thereof or any similar provision of state, local or
foreign law; and (B) has not agreed to or is required to make any adjustments
pursuant to ss. 481 (a) of the Internal Revenue Code or any similar provision of
state, local or foreign law by reason of a change in accounting method initiated
by the Company or any of its subsidiaries or has any knowledge that the IRS has
proposed any such adjustment or change in accounting method, or has any
application pending with any taxing authority requesting permission for any
changes in accounting methods that relate to the business or operations of the
Company. The Company has not been a United States real property holding
corporation within the meaning of ss. 897(c)(2) of the Internal Revenue Code
during the applicable period specified in ss. 897(c)(l)(A)(ii) of the Internal
Revenue Code.
The Company has not made an election under ss. 341(f) of the Internal
Revenue Code. The Company is not liable for the Taxes of another person that is
not a subsidiary of the Company under (A) Treas. Reg. ss. 1.1502-6 (or
comparable provisions of state, local or foreign law), (B) as a transferee or
successor, (C) by contract or indemnity or (D) otherwise. The Company is not a
party to any tax sharing agreement. The Company has not made any payments, is
not obligated to make payments nor is it a party to an agreement that could
obligate it to make any payments that would not be deductible under ss. 280G of
the Internal Revenue Code.
For purposes of this Section 3.1(o):
"IRS" means the United States Internal Revenue Service.
"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
8
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.
(p) Certain Fees. Except as set forth on Schedule 3.l(p) hereto, no
brokers, finders or financial advisory fees or commissions will be payable by
the Company or any subsidiary with respect to the transactions contemplated by
this Agreement.
(q) Disclosure. To the best of the Company's knowledge, neither this
Agreement or the Schedules hereto nor any other documents, certificates or
instruments furnished to the Purchaser by or on behalf of the Company or any
subsidiary in connection with the transactions contemplated by this Agreement
contain any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements made herein or therein, in the
light of the circumstances under which they were made herein or therein, not
misleading.
(r) Operation of Business. The Company and each of the subsidiaries owns
or possesses all patents, trademarks, service marks, trade names, copyrights,
licenses and authorizations as set forth in the SEC Documents or on Schedule 3.1
(r~ hereto, and all rights with respect to the foregoing, which are necessary
for the conduct of its business as now conducted without any conflict with the
rights of others.
(s) Regulatory Compliance. The Company has all necessary licenses,
registrations and permits to conduct its business as now being conducted in all
states where the Company conducts its business.
(t) Books and Records. The records and documents of the Company and its
subsidiaries accurately reflect in all material respects the information
relating to the business of the Company and the subsidiaries, the location and
collection of their assets, and the nature of all transactions giving rise to
the obligations or accounts receivable of the Company or any subsidiary.
(u) Material Agreements. Except as set forth in the SEC Documents, or on
Schedule 3.1(u) hereto, neither the Company nor any subsidiary 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 a registration statement on Form S-l or other applicable form
(collectively, "Material Agreements") if the Company or any subsidiary were
registering securities under the Securities Act of 1933, as amended (the
"Securities Act"). Except as set forth in Schedule 3.1(u), the Company and each
of its subsidiaries has in all material respects performed all the 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, the result of which
could cause a Material Adverse Effect. No written or oral contract, instrument,
agreement, commitment, obligation, plan or arrangement of the Company or of any
subsidiary limits or shall limit the payment of dividends on the Company's
Common Stock.
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(v) Transactions with Affiliates. Except as set forth in the SEC Documents
or on Schedule 3.1(v) hereto, there are no loans, leases, agreements, contracts,
royalty agreements, management contracts or arrangements or other continuing
transactions exceeding $100,000 between (A) the Company, any subsidiary or any
of their respective customers or suppliers on the one hand, and (B) on the other
hand, any officer, employee, consultant or director of the Company, or any of
its subsidiaries, or any person owning any capital stock of the Company or any
subsidiary or any member of the immediate family of such officer, employee,
consultant, director or stockholder or any corporation or other entity
controlled by such officer, employee, consultant, director or stockholder, or a
member of the immediate family of such officer, employee, consultant, director
or stockholder.
(w) Securities Laws. 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 and/or Warrants 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.
(x) Employees. Neither the Company nor any subsidiary has any collective
bargaining arrangements or agreements covering any of its employees, except as
set forth in the SEC Documents or on Schedule 3.1(x) hereto. Except as set forth
in the SEC Documents or on Schedule 3.1(x) hereto, neither the Company nor any
subsidiary is in breach of any employment contract, agreement regarding
proprietary information, noncompetition agreement, nonsolicitation agreement,
confidentiality agreement, or any other similar contract or restrictive
covenant, relating to the right of any officer, employee or consultant to be
employed or engaged by the Company or such subsidiary. Except as set forth on
Schedule 3.1(x), since the date of the Annual Report on the Company's latest
Form 10-K, no officer, consultant or key employee of the Company or any
subsidiary whose termination, either individually or in the aggregate, could
have a Material Adverse Effect, has terminated or, to the knowledge of the
Company, has any present intention of terminating his or her employment or
engagement with the Company or any subsidiary
(y) Absence of Certain Developments. Except as provided in SEC Documents
or on Schedule 3.1(y) hereto, since March 31, 2000, neither the Company nor any
subsidiary has:
(i) issued any stock, bonds or other corporate securities or any
rights, options or warrants with respect thereto;
(ii) borrowed any amount or incurred or become subject to any
liabilities (absolute or contingent) except current liabilities incurred in the
ordinary course of
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business which are comparable in nature and amount to the current liabilities
incurred in the ordinary course of business during the comparable portion of its
prior fiscal year, as adjusted to reflect the current nature and volume of the
Company's or such subsidiary's business;
(iii) discharged or satisfied any lien or encumbrance or paid any
obligation or liability (absolute or contingent), other than current liabilities
paid in the ordinary course of business;
(iv) declared or made any payment or distribution of cash or other
property to stockholders with respect to its stock, or purchased or redeemed, or
made any agreements so to purchase or redeem, any shares of its capital stock;
(v) sold, assigned or transferred any other tangible assets, or
canceled any debts or claims, except in the ordinary course of business;
(vi) sold, assigned or transferred any patent rights, trademarks,
trade names, copyrights, trade secrets or other intangible assets or
intellectual property rights, or disclosed any proprietary confidential
information to any person except to customers in the ordinary course of business
or to the Purchaser or its representatives;
(vii) suffered any substantial losses or waived any rights of
material value, whether or not in the ordinary course of business, or suffered
the loss of any material amount of prospective business;
(viii) made any changes in employee compensation except in the
ordinary course of business and consistent with past practices;
(ix) made capital expenditures or commitments therefor that
aggregate in excess of $500,000;
(x) entered into any other material transaction, whether or not in
the ordinary course of business;
(xi) suffered any material damage, destruction or casualty loss,
whether or not covered by insurance;
(xii) experienced any material problems with labor or management in
connection with the terms and conditions of their employment; or
(xiii) effected any two or more events of the foregoing kind which
in the aggregate would be material to the Company or its subsidiaries.
(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 and agrees that Purchaser is acting solely in the capacity of arm's
length purchaser with respect to this Agreement and the transactions
contemplated hereunder. The
11
Company further 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.
Section 3.2. 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 this Agreement and to purchase the
Shares being sold to it hereunder. The execution, delivery and performance of
this Agreement by Purchaser and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate action.
(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 such
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; provided that for purposes of the
representation made in this sentence, the Purchaser is assuming and relying upon
the accuracy of the relevant representations and agreements of the Company
herein.
(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.
12
(e) Accredited Investor. The Purchaser is an "accredited investor"
as defined in Regulation D promulgated under the Securities Act.
(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.
ARTICLE IV
COVENANTS
The Company covenants with the Purchaser as follows:
Section 4.1. Securities Compliance.
If applicable, the Company shall notify the NASD, in accordance with their
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 or subsequent holders.
Section 4.2. 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 Agreement, and will not take any action or file
any document (whether or not permitted by the Securities 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 NASD and the
Principal Market and shall provide the Purchasers 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 Purchasers have disposed of all of their Registrable
Securities.
Section 4.3. Escrow Arrangement. The Company and the Purchaser shall enter
into an escrow arrangemeont with Xxxxxxx Xxxxxx & Green, P.C. (the "Escrow
Agent") in the Form of Exhibit B hereto respecting payment against delivery of
the Shares.
Section 4.4. Re2istration Ri2hts 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 Shares to be issued in connection
with such Draw Down.
13
Section 4.5. 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 to be
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 of 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 4.6. 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 4.7. 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.
Section 4.8. Amendments. The Company shall not amend or waive any
provision of the Articles or Bylaws of the Company in any way that would
adversely affect the dividend rights or voting rights of the holders of the
Shares.
Section 4.9. 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 or any subsidiary to perform under this Agreement.
Section 4.10. Notice of Certain Events Affecting Registration: Suspension
of Right to Request a Draw Down. The Company will immediately 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
14
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; and the Company
will promptly make available to the Purchaser any such supplement or amendment
to the related prospectus. The Company shall not deliver to the Purchaser any
Draw Down Notice during the continuation of any of the foregoing events.
Section 4.11. 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") 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 this
Agreement.
Section 4.12. Limitation on Future Financing. The Company agrees that,
except as set forth below, it will not enter into any sale of its securities for
cash at a discount to the current market price until the earlier of (i) 24
months from the effective date of the Registration Statement or (ii) sixty (60)
days after the entire $12,000,000 of Common Stock has been purchased by the
Purchaser. The foregoing shall not prevent or limit the Company from engaging in
any sale of securities (i) in a registered public offering by the Company which
is underwritten by one or more established investment banks (not including an
equity line type of financing), (ii) in one or more private placements where the
purchasers do not have registration rights, (iii) pursuant to any presently
existing or future employee benefit plan which plan has been or is approved by
the Company's stockholders, (iv) pursuant to any compensatory plan for a
full-time employee or key consultant, (v) in connection with a strategic
partnership or other business transaction, the principal purpose of which is not
simply to raise money, or (vi) to which Purchaser gives its written approval.
Further, the Purchaser shall have a right of first refusal, to elect to
participate, in such subsequent transaction in the case of (i), (ii) and (vi)
above. Such right of first refusal must be exercised in writing within seven (7)
Trading Days of the Purchaser's receipt of notice of the proposed terms of such
financing.
The Purchaser covenants with the Company as follows:
15
Section 4.13. Compliance with Law. The Purchaser's 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.
Section 4.14. No Short Sales. The Purchaser and its affiliates shall not
engage in short sales of the Company's Common Stock (as defined in applicable
SEC and NASD rules) during the term of this Agreement.
ARTICLE V
CONDITIONS TO INITIAL CLOSING AND DRAW DOWNS
Section 5.1. Conditions Precedent to the Obligation of the Company to Sell
the Shares. The obligation hereunder of the Company 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 material 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 5.2. 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).
16
(b) Performance by the Company. The Company shall have performed,
satisfied and complied in all 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 the date of the
Initial Closing, in the form of Exhibit C hereto.
(f) Warrants. The Purchaser shall receive (i) at the Initial Closing, a
warrant certificate to purchase up to a number of shares of Common Stock equal
to $240,000 divided by the VWAP on the Trading Day immediately preceding the
Initial Closing Date (the "Initial Warrant"), (ii) on the Effective Date, a
warrant certificate to purchase up to a number of shares of Common Stock equal
to $120,000 divided by the VWAP on the Trading Day immediately preceding the
Effective Date (the "Effective Warrant"), and (iii) on each Settlement Date, a
warrant certificate to purchase up to a number of shares of Common Stock equal
to 1% of the shares purchased at such Settlement (the "Draw Down Warrants"). The
Warrants shall have a term from its date of issuance of three (3) years. The
exercise price of the Warrants shall be the VWAP on the Trading Day immediately
prior to such Warrants issuance. The Common Stock underlying the Warrants will
be registered in the Registration Statement referred to in Section 4.3 hereof.
The Warrants shall be in the form of Exhibit E hereto.
Section 5.3. 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 5.2 hereof.
(b) Effective Registration Statement. The Registration Statement
registering the Shares shall have been declared effective by the SEC and shall
remain effective on each Settlement Date. On the Settlement Date, the Company
shall prepare and deliver to the
17
Purchaser a supplemental prospectus pursuant to Rule 424(b) of the Securities
Act relating to the Shares Purchased on the 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
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 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 items specified in
Exhibit C hereto and any other items set forth in the Escrow Agreement.
(f) Future Financing. The Company shall have not completed any financing
prohibited by Section 4.11 unless, prior to the Company delivering the first
Draw Down Notice after any such financing, the Company pays the Purchaser, as a
condition to funding the Draw Down and not as liquidated damages, the sum of
$100,000.
ARTICLE VI
DRAW DOWN TERMS
Section 6.1. 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 a draw
down (a "Draw Down") during each Draw Down Pricing Period, which Draw Down the
Purchaser will be obligated to accept for a period of 24 months commencing
immediately after the Effective Date.
(b) Only one Draw Down shall be allowed in each 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 6.1(d) herein and
settled on, (i) as to the 1St through the 11th Trading Days after a Draw Down
Pricing Period commences (the "First Settlement Period"), on the 13h Trading Day
after a Draw Down Pricing Period commences and (ii) as to the 12th through the
22nd Trading Days after a Draw Down Pricing Period commences (the "Second
Settlement Period"), the 24th Trading Day after a Draw Down Pricing Period.
(each, a "Settlement Date" and the First and Second Settlement Periods
collectively referred to
18
as "Settlement Periods"). In connection with each Draw Down Pricing Period, the
Company may set the Threshold Price.
(c) The minimum Investment Amount shall be $100,000 and the maximum
Investment Amount shall be the lesser of (i) $1,000,000, and (ii) 4.5% of the
weighted average price for the Common Stock for the three (3) month period
immediately prior to the Commencement Date (defined below) multiplied by the
total trading volume in respect of the Common Stock for the three (3) month
period immediately prior to the Commencement Date.
(d) 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) 1122nd 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 Average Daily Price on a given Trading Day is less than the
Threshold price, then the Investment Amount will be reduced by 1/22nd and that
day shall be withdrawn from the Settlement Period; and
(ii) trading of the Common Stock on the Principal Market is suspended for
more than three (3) hours, in the aggregate, on any Trading Day during the
Settlement Period, the Investment Amount shall be reduced by 1122nd and that day
shall be withdrawn from the applicable Settlement Period.
(e) 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 9.4 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 Draw Down amount for a given Draw Down Pricing
Period so that if the Company chooses not to exercise the maximum permitted Draw
Down in a given Draw Down Pricing Period the Purchaser is not obligated to and
shall not purchase more than the scheduled maximum amount in a subsequent Draw
Down Pricing Period.
(f) On or before each Settlement Date, the Shares purchased by the
Purchaser shall be electronically 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 The
Depository Trust Company's ("DTC") Fast Automated Securities Transfer program
through its Deposit Withdrawal Agent Commission system ("DWAC") by 1:00 pm EST,
the Purchaser shall wire transfer immediately available funds to the Company's
designated account on such day. Upon the Company electronically delivering whole
shares of Common Stock to the Purchaser or its designees via DWAC after 1:00 pm
EST, the Purchaser shall wire transfer next day available funds to the Company's
designated account on such day. In the event the Purchaser elects to use the
Escrow Agent, the
19
Shares shall be credited by the Company to the DTC account designated by the
Purchaser upon receipt by the Escrow Agent of payment for the Draw Down into the
Escrow Agent's trust account as provided in the Escrow Agreement. The Escrow
Agent shall be directed to pay the purchase price to the Company, net of seven
hundred fifty dollars ($750) as escrow expenses to the Escrow Agent per
Settlement and any brokerage or placement agent fees as set forth in the Escrow
Agreement. The delivery of the Shares into the Purchaser's DTC account in
exchange for payment therefor shall be referred to herein as "Settlement".
ARTICLE VII
TERMINATION
Section 7.1. Term. The term of this Agreement shall be twenty-four (24)
months from the Effective Date.
Section 7.2. 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, (ii) the
Common Stock is delisted from the Principal Market unless such de-listing is in
connection with the listing of the Common Stock on the Nasdaq National Market,
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 one (1) Trading
Day's notice if the Purchaser shall fail to fund more than one properly noticed
Draw Down within three (3) Trading Days of a Settlement Date.
Section 7.3. 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 7.1 or 7.2 herein, this Agreement shall become
void and of no further force and effect, except for Sections 9.1 and 9.2, and
Article VIII herein. Nothing in this Section 7.3 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 and the Purchaser to compel specific
performance by the other party of its obligations under this Agreement.
ARTICLE VIII
INDEMNIFICATION
Section 8.1. General Indemnity. 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
20
Purchaser as a result of any inaccuracy in or breach of the representations,
warranties or covenants made by the Company herein. 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 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 8.1 for only that
amount as does not exceed the net proceeds to such Purchaser as a result of the
sale of Shares pursuant to the Registration Statement.
Section 8.2. Indemnification Procedure. Any party entitled to
indemnification under this Article VIII (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 VIII 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
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 VIII 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 VIII 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
21
written notice thereof to the indemnifying party so long as the Indemnified
Party irrevocably agrees to refund such moneys 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 the indemnifying party
may be subject to.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Fees and Expenses. Each party agrees to pay all of its own
fees and expenses related to the transactions contemplated by this Agreement;
provided, however, that the Company shall pay all attorneys' and escrow fees and
expenses (inclusive of disbursements and out-of-pocket expenses) as set forth in
the Escrow Agreement in connection with the preparation, negotiation, execution
and delivery of this Agreement and the transactions contemplated hereunder. 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. The Company shall pay all stamp or
other similar taxes and duties levied in connection with issuance of the Shares
pursuant hereto.
Section 9.2. 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 9.3. Entire Agreement: Amendment. This Agreement, together with
the Registration Rights Agreement and the Escrow Agreement contains the entire
understanding of the parties with respect to the matters covered hereby and,
except as specifically set forth herein, neither the Company nor the Purchaser
makes any representations, warranty, covenant or undertaking with respect to
such matters. 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 9.4. 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
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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: 00000 Xxx Xxxxxx Xxx., Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx Xxx
Tel: (000) 000-0000
Fax: (000) 000-0000
With copies to: Halperin & Associates
notice): 000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000-0000
Telephone: (000) 000-0000 Ext. 105
Facsimile: (000) 000-0000
If to Purchaser: c/o Xxxxxx xx Xxxx Solicitors
00 Xxxxxxxxxxxx Xxx
Xxxxxx XX0X0XX Xxxxxxx
Attn: Xxxxx Xxxx
Fax: 000-000-000-0000000
with copies to: Xxxxxxx Xxxxxx & Green P.C.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attention: 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 9.5. 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 9.6. 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 9.7. 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
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Closing, the assignment by a party to this Agreement of any rights hereunder
shall not affect the obligations of such party under this Agreement.
Section 9.8. 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 9.9. 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. 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 attorney's fees, from the non-prevailing party.
Section 9.10. 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.
Section 9.11. 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. 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 unreasonably withheld or delayed.
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Section 9.12. Severability. The provisions of this Agreement are severable
and, in the event that 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 effect the economic rights of either
party hereto.
Section 9.13. 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 9.14. 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.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorize officer as of this l4th day of
December, 2000.
Advanced Communications Technologies,
Inc.
By:
------------------------------------
Xxxxx Xxx, Chief Executive Officer
Wanquay Limited
By:
------------------------------------
Name:
Title:
