SECURITIES PURCHASE AGREEMENT
THIS AGREEMENT dated as of the 10th day of May 2010 (the "Agreement")
between TANGIERS INVESTORS, LP, a Delaware limited partnership (the
"Investor"), and GENESIS ELECTRONICS GROUP, INC., a corporation
organized and existing under the laws of the State of Nevada (the
"Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the
Investor, as provided herein, and the Investor shall purchase from the
Company up to Five Million Dollars ($5,000,000) of the Company's common
stock, par value $0.001 per share (the "Common Stock"); and
WHEREAS, such investments will be made in reliance upon the provisions
of Regulation D ("Regulation D") of the Securities Act of 1933, as
amended, and the regulations promulgated thereunder (the "Securities
Act"), and or upon such other exemption from the registration
requirements of the Securities Act as may be available with respect to
any or all of the investments to be made hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I. Certain Definitions
Section 1.1. "Advance" shall mean the portion of the Commitment Amount
requested by the Company in the Advance Notice.
Section 1.2. "Advance Date" shall mean the first (1st) Trading Day after
expiration of the applicable Pricing Period for each Advance.
Section 1.3. "Advance Notice" shall mean a written notice in the form
of Exhibit A attached hereto to the Investor executed by an officer of
the Company and setting forth the Advance amount that the Company
requests from the Investor.
Section 1.4. "Advance Notice Date" shall mean each date the Company
delivers (in accordance with Section 2.2(b) of this Agreement) to the
Investor an Advance Notice requiring the Investor to advance funds to
the Company, subject to the terms of this Agreement. No Advance Notice
Date shall be less than ten (10) Trading Days after the prior Advance
Notice Date.
Section 1.5. "Bid Price" shall mean, on any date, the closing bid price
(as reported by Bloomberg L.P.) of the Common Stock on the Principal
Market or if the Common Stock is not traded on a Principal Market, the
highest reported bid price for the Common Stock, as furnished by the
Financial Industry Regulatory Authority.
Section 1.6. "Closing" shall mean one of the closings of a purchase and
sale of Common Stock pursuant to Section 2.3.
Section 1.7. "Commitment Amount" shall mean the aggregate amount of up
to Five Million Dollars ($5,000,000) that the Investor has agreed to
provide to the Company in order to purchase the Company's Common Stock
pursuant to the terms and conditions of this Agreement.
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Section 1.8. "Commitment Period" shall mean the period commencing on
the Effective Date, and expiring on the earliest to occur of (x) the
date on which the Investor shall have made payment of Advances pursuant
to this Agreement in the aggregate amount of the Commitment Amount, (y)
the date this Agreement is terminated pursuant to Section 10.2 or (z)
the date occurring twenty-four (24) months after the Effective Date or
thirty six (36) months after the Effective Date if twenty-four (24)
months after the Effective Date the Company files either an amendment
to the then effective registration statement or a new registration
statement is declared effective.
Section 1.9. "Common Stock" shall mean the Company's common stock, par
value $0.001per share whether issued to the Investor directly or
underlying warrants issued to the Investor.
Section 1.10. "Condition Satisfaction Date" shall have the meaning set
forth in Section 7.2.
Section 1.11. "Damages" shall mean any loss, claim, damage, liability,
costs and expenses (including, without limitation, reasonable
attorney's fees and disbursements and costs and expenses of expert
witnesses and investigation).
Section 1.12. "Effective Date" shall mean the date on which the SEC
first declares effective a Registration Statement registering the
resale of the Registrable Securities as set forth in Section 7.2(a).
Section 1.13. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
Section 1.14. "Material Adverse Effect" shall mean any condition,
circumstance, or situation that would prohibit or otherwise materially
interfere with the ability of the Company to enter into and perform any
of its obligations under this Agreement or the Registration Rights
Agreement in any material respect.
Section 1.15. "Market Price" shall mean the lowest daily volume
weighted average price of the Common Stock during the Pricing Period.
Section 1.16. "Maximum Advance Amount" The maximum dollar amount of
each Advance will be equal to the average daily trading volume in
dollar amount during the ten (10) trading days preceding the Advance
Date. No Advance will be made in an amount lower than the Minimum
Advance Amount (defined below) or higher than One Hundred Thousand
Dollars ($100,000).
Section 1.17. "Minimum Advance Amount" shall be Five Thousand Dollars
($5,000) per Advance Notice.
Section 1.18. "FINRA" shall mean the Financial Industry Regulatory
Authority.
Section 1.19. "Person" shall mean an individual, a corporation, a
partnership, an association, a trust or other entity or organization,
including a government or political subdivision or an agency or
instrumentality thereof.
Section 1.20. "Pricing Period" shall mean the five (5) consecutive
Trading Days after the Advance Notice Date subject to the terms and
conditions provided herein.
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Section 1.21. "Principal Market" shall mean the Nasdaq Global Select
Market, the Nasdaq Global Market, the Nasdaq Capital Market, the
American Stock Exchange, the OTC Bulletin Board or the New York Stock
Exchange, or whichever is at the time the principal trading exchange or
market for the Common Stock.
Section 1.22. "Purchase Price" shall be set at eighty-five percent
(85%) of the Market Price during the Pricing Period.
Section 1.23. "Registrable Securities" shall mean the shares of Common
Stock to be issued hereunder and underlying any warrants that may be
issued by the Company to the Investor from time to time pursuant to
this Agreement; (i) in respect of which the Registration Statement has
not been declared effective by the SEC, (ii) which have not been sold
under circumstances meeting all of the applicable conditions of Rule
144 (or any similar provision then in force) under the Securities Act
("Rule 144") or (iii) which have not been otherwise transferred to a
holder who may trade such shares without restriction under the
Securities Act, and the Company has delivered a new certificate or
other evidence of ownership for such securities not bearing a
restrictive legend.
Section 1.24. "Registration Rights Agreement" shall mean the
Registration Rights Agreement dated the date hereof, regarding the
filing of the Registration Statement for the resale of the Registrable
Securities, entered into between the Company and the Investor.
Section 1.25. "Registration Statement" shall mean a registration
statement on Form S-1 (if use of such form is then available to the
Company pursuant to the rules of the SEC and, if not, on such other
form promulgated by the SEC for which the Company then qualifies and
which counsel for the Company shall deem appropriate, and which form
shall be available for the resale of the Registrable Securities to be
registered thereunder in accordance with the provisions of this
Agreement and the Registration Rights Agreement, and in accordance with
the intended method of distribution of such securities), for the
registration of the resale by the Investor of the Registrable
Securities under the Securities Act.
Section 1.26. "Regulation D" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.27. "SEC" shall mean the United States Securities and
Exchange Commission.
Section 1.28. "Securities Act" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.29. "SEC Documents" shall mean Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and Proxy
Statements of the Company as supplemented to the date hereof, filed by
the Company for a period of at least twelve (12) months immediately
preceding the date hereof or the Advance Date, as the case may be,
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.
Section 1.30. "Trading Day" shall mean any day during which the New
York Stock Exchange shall be open for business.
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Section 1.31. "VWAP" shall mean the volume weighted average price of
the Company's Common Stock as quoted by Bloomberg, LP.
ARTICLE II. Advances
Section 2.1. Advances.
Subject to the terms and conditions of this Agreement (including,
without limitation, the provisions of Article VII hereof), the Company,
at its sole and exclusive option, may issue and sell to the Investor,
and the Investor shall purchase from the Company, shares of the
Company's Common Stock by the delivery, in the Company's sole
discretion, of Advance Notices. The number of shares of Common Stock
that the Investor shall purchase pursuant to each Advance shall be
determined by dividing the amount of the Advance by the Purchase Price.
No fractional shares shall be issued. Fractional shares shall be
rounded to the next higher whole number of shares. The aggregate
maximum amount of all Advances that the Investor shall be obligated to
make under this Agreement shall not exceed the Commitment Amount.
Section 2.2. Mechanics.
(a) Advance Notice. At any time during the Commitment Period, the
Company may require the Investor to purchase shares of Common Stock by
delivering an Advance Notice to the Investor, subject to the conditions
set forth in Section 7.2; provided, however, the amount for each
Advance as designated by the Company in the applicable Advance Notice
shall not be less than the Minimum Advance Amount, nor more than the
Maximum Advance Amount and the aggregate amount of the Advances
pursuant to this Agreement shall not exceed the Commitment Amount. The
Company acknowledges that the Investor may sell shares of the Company's
Common Stock corresponding with a particular Advance Notice after the
Advance Notice is received by the Investor. There shall be a minimum of
ten (10) Trading Days between each Advance Notice Date.
(b) Date of Delivery of Advance Notice. An Advance Notice shall be
deemed delivered on
(i) the Trading Day it is received by facsimile or otherwise by the
Investor if such notice is received prior to 5:00 pm Eastern Time, or
(ii) the immediately succeeding Trading Day if it is received by
facsimile or otherwise after 5:00 pm Eastern Time on a Trading Day or
at any time on a day which is not a Trading Day. No Advance Notice may
be deemed delivered on a day that is not a Trading Day.
Section 2.3. Closings. On each Advance Date (i) the Company shall
deliver to the Investor such number of shares of the Common Stock
registered in the name of the Investor as shall equal (x) the amount of
the Advance specified in such Advance Notice pursuant to Section 2.1
herein, divided by (y) the Purchase Price and (ii) upon receipt of such
shares, the Investor shall deliver to the Company the amount of the
Advance specified in the Advance Notice by wire transfer of immediately
available funds. Provided, however, that if the Company is not DWAC
eligible, then the Investor shall be allowed to deliver the amount of
any Advance specified in the Advance Notice within three (3) to five
(5) business days after the Pricing Period. The parties understand that
the Company's DWAC eligibility will not affect their ability to obtain
Advances under this Agreement, but may extend the timing of an Advance
Date. In addition, on or prior to the Advance Date, each of the Company
and the Investor shall deliver to the other all documents, instruments
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and writings required to be delivered by either of them pursuant to
this Agreement in order to implement and effect the transactions
contemplated herein. To the extent the Company has not paid the fees,
expenses, and disbursements in accordance with Section 12.4, the amount
of such fees, expenses, and disbursements may be deducted by the
Investor (and shall be paid to the relevant party) directly out of the
proceeds of the Advance with no reduction in the amount of shares of
the Company's Common Stock to be delivered on such Advance Date.
(a) Company's Obligations Upon Closing.
On each Advance Date:
(i) The Company shall deliver to the Investor the shares of Common
Stock applicable to the Advance in accordance with Section 2.3. The
certificates evidencing such shares shall be free of restrictive
legends, provided such shares are registered pursuant to an effective
registration statement.
(ii) the Company's Registration Statement with respect to the resale of
the shares of Common Stock delivered in connection with the Advance
shall have been declared effective by the SEC;
(iii) the Company shall have obtained all material permits and
qualifications required by any applicable state for the offer and sale
of the Registrable Securities, or shall have the availability of
exemptions therefrom. The sale and issuance of the Registrable
Securities shall be legally permitted by all laws and regulations to
which the Company is subject;
(iv) the Company shall have filed with the SEC in a timely manner all
reports, notices and other documents required of a "reporting company"
under the Exchange Act and applicable Commission regulations; and
(v) the fees as set forth in Section 12.4 below shall have been paid or
can be withheld as provided in Section 2.3.
(b) Investor's Obligations Upon Closing. Upon receipt of the shares
referenced in Section 2.3(a)(i) above and provided the Company is in
compliance with its obligations in Section 2.3, the Investor shall
deliver to the Company the amount of the Advance specified in the
Advance Notice by wire transfer of immediately available funds.
Section 2.5. Hardship. In the event the Investor sells shares of the
Company's Common Stock after receipt of an Advance Notice and the
Company fails to perform its obligations as mandated in Section 2.3,
and specifically the Company fails to deliver to the Investor on the
Advance Date the shares of Common Stock corresponding to the applicable
Advance pursuant to Section 2.3(a)(i), the Company acknowledges that
the Investor shall suffer financial hardship and, provided that the
Investor has performed its obligations pursuant to Section 2.3, and
therefore the Company shall be liable for any and all losses,
commissions, fees, or financial hardship caused to the Investor.
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ARTICLE III. Representations and Warranties of Investor
Investor hereby represents and warrants to, and agrees with, the
Company that the following are true and correct as of the date hereof
and as of each Advance Date:
Section 3.1. Organization and Authorization. The Investor is duly
incorporated or organized and validly existing in the jurisdiction of
its incorporation or organization and has all requisite power and
authority to purchase and hold the securities issuable hereunder. The
decision to invest and the execution and delivery of this Agreement by
such Investor, the performance by such Investor of its obligations
hereunder and the consummation by such Investor of the transactions
contemplated hereby have been duly authorized and requires no other
proceedings on the part of the Investor. The undersigned has the right,
power and authority to execute and deliver this Agreement and all other
instruments (including, without limitations, the Registration Rights
Agreement), on behalf of the Investor. This Agreement has been duly
executed and delivered by the Investor and, assuming the execution and
delivery hereof and acceptance thereof by the Company, will constitute
the legal, valid and binding obligations of the Investor, enforceable
against the Investor in accordance with its terms.
Section 3.2. Evaluation of Risks. The Investor has such knowledge and
experience in financial, tax and business matters as to be capable of
evaluating the merits and risks of, and bearing the economic risks
entailed by, an investment in the Company and of protecting its
interests in connection with this transaction. It recognizes that its
investment in the Company involves a high degree of risk.
Section 3.3. No Legal Advice From the Company. The Investor
acknowledges that it had the opportunity to review this Agreement and
the transactions contemplated by this Agreement with his or its own
legal counsel and investment and tax advisors. The Investor is relying
solely on such counsel and advisors and not on any statements or
representations of the Company or any of its representatives or agents
for legal, tax or investment advice with respect to this investment,
the transactions contemplated by this Agreement or the securities laws
of any jurisdiction.
Section 3.4. Investment Purpose. The securities are being purchased by
the Investor for its own account, and for investment purposes. The
Investor agrees not to assign or in any way transfer the Investor's
rights to the securities or any interest therein and acknowledges that
the Company will not recognize any purported assignment or transfer
except in accordance with applicable Federal and state securities laws.
No other person has or will have a direct or indirect beneficial
interest in the securities. The Investor agrees not to sell,
hypothecate or otherwise transfer the Investor's securities unless the
securities are registered under Federal and applicable state securities
laws or unless, in the opinion of counsel satisfactory to the Company,
an exemption from such laws is available.
Section 3.5. Accredited Investor. The Investor is and shall be on each
Advance Date, an "Accredited Investor" as that term is defined in Rule
501(a)(3) of Regulation D of the Securities Act.
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Section 3.6. Information. The Investor and its advisors (and its
counsel), if any, have been furnished with all materials relating to
the business, finances and operations of the Company and information it
deemed material to making an informed investment decision. The Investor
and its advisors, if any, have been afforded the opportunity to ask
questions of the Company and its management. Neither such inquiries nor
any other due diligence investigations conducted by such Investor or
its advisors, if any, or its representatives shall modify, amend or
affect the Investor's right to rely on the Company's representations
and warranties contained in this Agreement. The Investor understands
that its investment involves a high degree of risk. The Investor has
sought such accounting, legal and tax advice, as it has considered
necessary to make an informed investment decision with respect to this
transaction.
Section 3.7. Receipt of Documents. The Investor and its counsel have
received and read in their entirety: (i) this Agreement and the
Exhibits annexed hereto; (ii) all due diligence and other information
necessary to verify the accuracy and completeness of such
representations, warranties and covenants; (iii) the Company's most
recent periodic filings filed with the SEC; and (iv) answers to all
questions the Investor submitted to the Company regarding an investment
in the Company; and the Investor has relied on the information
contained therein and has not been furnished any other documents,
literature, memorandum or prospectus.
Section 3.8. Registration Rights Agreement. The parties have entered
into the Registration Rights Agreement dated the date hereof.
Section 3.9. No General Solicitation. 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 of Common Stock offered
hereby.
Section 3.10. Not an Affiliate. The Investor is not an officer,
director or a person that directly, or indirectly through one or more
intermediaries, controls or is controlled by, or is under common
control with the Company or any "Affiliate" of the Company (as that
term is defined in Rule 405 of the Securities Act).
Section 3.11. Trading Activities. The Investor's trading activities
with respect to the Company's Common Stock shall be in compliance with
all applicable federal and state securities laws, rules and regulations
and the rules and regulations of the Principal Market on which the
Company's Common Stock is listed or traded. Neither the Investor nor
its affiliates has an open short position in the Common Stock of the
Company, the Investor agrees that it shall not, and that it will cause
its affiliates not to, engage in any short sales of or hedging
transactions with respect to the Common Stock, provided that the
Company acknowledges and agrees that upon receipt of an Advance Notice
the Investor has the right to sell the shares to be issued to the
Investor pursuant to the Advance Notice during the applicable Pricing
Period.
Section 3.12 Reliance on Exemptions. The Investor understands that the
Common Stock is being offered and sold to it in reliance on specific
exemptions from the registration requirements of United States federal
and state securities laws and that the Company is relying in part upon
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the truth and accuracy of, and such Investor' compliance with, the
representations, warranties, agreements, acknowledgements and
understandings of such Investor set forth here in order to determine
the availability of such exemptions and the eligibility of such
Investor to acquire the Common Stock.
Section 3.13 No Governmental Review. The Investor understands that no
United States, federal or state agency or any other government or
governmental agency has passed on or made any recommendation or
endorsement of the Common Stock issuable pursuant to this Agreement or
the fairness or suitability of the investment in the Common Stock nor
have such authorities passed upon or endorsed the merits of the
offering of the Common Stock.
ARTICLE IV. Representations and Warranties of the Company
Except as stated below, on the disclosure schedules attached hereto or
in the SEC Documents (as defined herein), the Company hereby represents
and warrants to, and covenants with, the Investor that the following
are true and correct as of the date hereof:
Section 4.1. Organization and Qualification. The Company is duly
incorporated or organized and validly existing in the jurisdiction of
its incorporation or organization and has all requisite corporate power
to own its properties and to carry on its business as now being
conducted. Each of the Company and its subsidiaries is duly qualified
as a foreign corporation to do business and is in good standing in
every jurisdiction in which the nature of the business conducted by it
makes such qualification necessary, except to the extent that the
failure to be so qualified or be in good standing would not have a
Material Adverse Effect on the Company and its subsidiaries taken as a
whole.
Section 4.2. Authorization, Enforcement, Compliance with Other
Instruments. (i) The Company has the requisite corporate power and
authority to enter into and perform this Agreement, the Registration
Rights Agreement, and any related agreements, in accordance with the
terms hereof and thereof, (ii) the execution and delivery of this
Agreement, the Registration Rights Agreement and any related agreements
by the Company and the consummation by it of the transactions
contemplated hereby and thereby, have been duly authorized by the
Company's Board of Directors and no further consent or authorization is
required by the Company, its Board of Directors or its stockholders,
(iii) this Agreement, the Registration Rights Agreement and any related
agreements have been duly executed and delivered by the Company, (iv)
this Agreement, the Registration Rights Agreement and assuming the
execution and delivery thereof and acceptance by the Investor and any
related agreements constitute the valid and binding obligations of the
Company enforceable against the Company in accordance with their terms,
except as such enforceability may be limited by general principles of
equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting
generally, the enforcement of creditors' rights and remedies.
Section 4.3. Capitalization. The authorized capital stock of the
Company consists of 300,000,000 shares of Common Stock and 0 shares of
Preferred Stock (with various series), $0.001 par value per share
("Preferred Stock"), of which 153,373,406 shares of Common Stock and 0
shares of Preferred Stock are issued and outstanding. All of such
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outstanding shares have been validly issued and are fully paid and
nonassessable. No shares of Common Stock are subject to preemptive
rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company. As of the date hereof, except for
the financing transactions and acquisitions previously disclosed to the
Investor; (i) 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 or any of its subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any
of its subsidiaries is or may become bound to issue additional shares
of capital stock of the Company or any of its subsidiaries or 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 or any of its
subsidiaries, (ii) there are no outstanding debt securities (iii) there
are no outstanding registration statements other than on Form S-8 and
(iv) there are no agreements or arrangements under which the Company or
any of its subsidiaries is obligated to register the sale of any of
their securities under the Securities Act (except pursuant to the
Registration Rights Agreement). There are no securities or instruments
containing anti-dilution or similar provisions that will be triggered
by this Agreement or any related agreement or the consummation of the
transactions described herein or therein. The Company has furnished to
the Investor true and correct copies of the Company's Certificate of
Incorporation, as amended and as in effect on the date hereof (the
"Certificate of Incorporation"), and the Company's By-laws, as in
effect on the date hereof (the "Bylaws"), and the terms of all
securities convertible into or exercisable for Common Stock and the
material rights of the holders thereof in respect thereto.
Section 4.4. No Conflict. Subject to the Company's Certificate of
Incorporation, the execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby will not (i) result in a violation of
the Certificate of Incorporation, any certificate of designations of
any outstanding series of preferred stock of the Company or By-laws 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
Company or any of its subsidiaries is a party, or result in a violation
of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations and the rules and
regulations of the Principal Market on which the Common Stock is
quoted) applicable to the Company or any of its subsidiaries or by
which any material property or asset of the Company or any of its
subsidiaries is bound or affected and which would cause a Material
Adverse Effect. Neither the Company nor its subsidiaries is in
violation of any term of or in default under its Articles of
Incorporation or By-laws or their organizational charter or by-laws,
respectively, or any material contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or any
statute, rule or regulation applicable to the Company or its
subsidiaries. The business of the Company and its subsidiaries is not
being conducted in violation of any material law, ordinance, and
regulation of any governmental entity. Except as specifically
contemplated by this Agreement and as required under the Securities Act
and any applicable state securities laws, the Company is not required
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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 or
contemplated by this Agreement or the Registration Rights Agreement in
accordance with the terms hereof or thereof. All consents,
authorizations, orders, filings and registrations which the Company is
required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof.
Section 4.5. SEC Documents; Financial Statements. The Company has filed
all reports, schedules, forms, statements and other documents required
to be filed by it with the SEC. As of their respective dates, the
financial statements of the Company disclosed on the Company's website
and disclosed to the Investor (the "Financial Statements") complied as
to form in all material respects with applicable accounting
requirements and the published rules and regulations with respect
thereto. Such Financial Statements have been prepared in accordance
with generally accepted accounting principles, consistently applied,
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 exclude
footnotes or may be condensed or summary statements) and, fairly
present in all material respects the financial position of the Company
as of the dates thereof and the results of its operations and cash
flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). No other information
provided by or on behalf of the Company to the Investor contains any
untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
Section 4.6. 10b-5. None of the documents provided to the Investor
include any untrue statements of material fact, nor do they omit to
state any material fact required to be stated therein necessary to make
the statements made, in light of the circumstances under which they
were made, not misleading.
Section 4.7. No Default. The Company is not in default in the
performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of
trust or other material instrument or agreement to which it is a party
or by which it is or its property is bound (which has not been waived)
and neither the execution, nor the delivery by the Company, nor the
performance by the Company of its obligations under this Agreement or
any of the exhibits or attachments hereto will conflict with or result
in the breach or violation (which has not been waived) of any of the
terms or provisions of, or constitute a default or result in the
creation or imposition of any lien or charge on any assets or
properties of the Company under its Certificate of Incorporation, By-
Laws, any material indenture, mortgage, deed of trust or other material
agreement applicable to the Company or instrument to which the Company
is a party or by which it is bound, or any statute, or any decree,
judgment, order, rules or regulation of any court or governmental
agency or body having jurisdiction over the Company or its properties,
in each case which default, lien or charge is likely to cause a
Material Adverse Effect on the Company's business or financial
condition.
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Section 4.8. Absence of Events of Default. No Event of Default, as
defined in the respective agreement to which the Company is a party,
and no event which, with the giving of notice or the passage of time or
both, would become an Event of Default (as so defined), has occurred
and is continuing, which would have a Material Adverse Effect on the
Company's business, properties, prospects, financial condition or
results of operations.
Section 4.9. Intellectual Property Rights. The Company and its
subsidiaries own or possess adequate rights or licenses to use all
material trademarks, trade names, service marks, service xxxx
registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade
secrets and rights necessary to conduct their respective businesses as
now conducted. The Company and its subsidiaries do not have any
knowledge of any infringement by the Company or its subsidiaries of
trademark, trade name rights, patents, patent rights, copyrights,
inventions, licenses, service names, service marks, service xxxx
registrations, trade secret or other similar rights of others, and, to
the knowledge of the Company, there is no claim, action or proceeding
being made or brought against, or to the Company's knowledge, being
threatened against, the Company or its subsidiaries regarding
trademark, trade name, patents, patent rights, invention, copyright,
license, service names, service marks, service xxxx registrations,
trade secret or other infringement; and the Company and its
subsidiaries are unaware of any facts or circumstances which might give
rise to any of the foregoing.
Section 4.10. Employee Relations. Neither the Company nor any of its
subsidiaries is involved in any labor dispute nor, to the knowledge of
the Company or any of its subsidiaries, is any such dispute threatened.
None of the Company's or its subsidiaries' employees is a member of a
union and the Company and its subsidiaries believe that their relations
with their employees are good.
Section 4.11. Environmental Laws. The Company and its subsidiaries are
(i) in compliance with any and all applicable material foreign,
federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("Environmental
Laws"), (ii) have received all permits, licenses or other approvals
required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval.
Section 4.12. Title. The Company has good and marketable title to its
properties and material assets owned by it, free and clear of any
pledge, lien, security interest, encumbrance, claim or equitable
interest other than such as are not material to the business of the
Company. Any real property and facilities held under lease by the
Company and its subsidiaries are held by them under valid, subsisting
and enforceable leases with such exceptions as are not material and do
not interfere with the use made and proposed to be made of such
property and buildings by the Company and its subsidiaries.
Section 4.13. Insurance. The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility against such
losses and risks and in such amounts as management of the Company
believes to be prudent and customary in the businesses in which the
12
Company and its subsidiaries are engaged. Neither the Company nor any
such subsidiary has been refused any insurance coverage sought or
applied for and neither the Company nor any such 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 at a cost that would not materially and adversely affect
the condition, financial or otherwise, or the earnings, business or
operations of the Company and its subsidiaries, taken as a whole.
Section 4.14. Regulatory Permits. The Company and its subsidiaries
possess all material certificates, authorizations and permits issued by
the appropriate federal, state or foreign regulatory authorities
necessary to conduct their respective businesses, and neither the
Company nor any such subsidiary has received any notice of proceedings
relating to the revocation or modification of any such certificate,
authorization or permit.
Section 4.15. Internal Accounting Controls. The Company and each of its
subsidiaries maintain 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 generally
accepted accounting principles 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.
Section 4.16. No Material Adverse Breaches, etc. Neither the Company
nor any of its subsidiaries is subject to any charter, corporate or
other legal restriction, or any judgment, decree, order, rule or
regulation which in the judgment of the Company's officers has or is
expected in the future to have a Material Adverse Effect on the
business, properties, operations, financial condition, results of
operations or prospects of the Company or its subsidiaries. Neither the
Company nor any of its subsidiaries is in breach of any contract or
agreement which breach, in the judgment of the Company's officers, has
or is expected to have a Material Adverse Effect on the business,
properties, operations, financial condition, results of operations or
prospects of the Company or its subsidiaries.
Section 4.17. Absence of Litigation. There is no action, suit,
proceeding, inquiry or investigation before or by any court, public
board, government agency, self-regulatory organization or body pending
against or affecting the Company, the Common Stock or any of the
Company's subsidiaries, wherein an unfavorable decision, ruling or
finding would (i) have a Material Adverse Effect on the transactions
contemplated hereby (ii) adversely affect the validity or
enforceability of, or the authority or ability of the Company to
perform its obligations under, this Agreement or any of the documents
contemplated herein, or (iii) have a Material Adverse Effect on the
business, operations, properties, financial condition or results of
operation of the Company and its subsidiaries taken as a whole.
13
Section 4.18. Subsidiaries. The Company does not presently own or
control, directly or indirectly, any interest in any other corporation,
partnership, association or other business entity other than what is
reported in the Company's SEC filings.
Section 4.19. Tax Status. The Company and each of its subsidiaries has
made or filed all federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is
subject and (unless and only to the extent that the Company and each of
its subsidiaries has set aside on its books provisions reasonably
adequate for the payment of all unpaid and unreported taxes) has paid
all taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such returns,
reports and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which
such returns, reports or declarations apply. There are no unpaid taxes
in any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for any
such claim.
Section 4.20. Certain Transactions. The Company is not presently a
party to any transaction with the Company (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 corporation,
partnership, trust or other entity in which any officer, director, or
any such employee has a substantial interest or is an officer,
director, trustee or partner.
Section 4.21. Fees and Rights of First Refusal. The Company is not
obligated to offer the securities offered hereunder on a right of first
refusal basis or otherwise to any third parties including, but not
limited to, current or former shareholders of the Company,
underwriters, brokers, agents or other third parties.
Section 4.22. Use of Proceeds. The Company shall use the net proceeds
from this offering for general corporate purposes, including, without
limitation, the payment of loans incurred by the Company. However, in
no event shall the Company use the net proceeds from this offering for
the payment (or loan to any such person for the payment) of any
judgment, or other liability, incurred by any executive officer,
officer, director or employee of the Company, except for any liability
owed to such person for services rendered, expense reimbursement or if
any judgment or other liability is incurred by such person originating
from services rendered to the Company, or the Company has indemnified
such person from liability.
Section 4.23. Further Representation and Warranties of the Company. For
so long as any securities issuable hereunder held by the Investor
remain outstanding, the Company acknowledges, represents, warrants and
agrees that it will use its best efforts to maintain the listing of its
Common Stock on the Principal Market.
14
Section 4.25. Opinion of Counsel. The Company will obtain, subject to
applicable securities laws, for the Investor, at the Company's expense,
any and all opinions of counsel which may be reasonably required in
order to sell the securities issuable hereunder without restriction.
Section 4.26. Dilution. The Company is aware and acknowledges that
issuance of shares of the Company's Common Stock could cause dilution
to existing shareholders and could significantly increase the
outstanding number of shares of Common Stock.
ARTICLE V. Indemnification
The Investor and the Company represent to the other the following with
respect to itself:
Section 5.1. Indemnification.
(a) In consideration of the Investor's execution and delivery of this
Agreement, and in addition to all of the Company's other obligations
under this Agreement, the Company shall defend, protect, indemnify and
hold harmless the Investor, and all of its officers, directors,
partners, employees and agents (including, without limitation, those
retained in connection with the transactions contemplated by this
Agreement) (collectively, the "Investor Indemnitees") from and against
any and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Investor Indemnitee is a
party to the action for which indemnification hereunder is sought), and
including reasonable attorneys' fees and disbursements (the
"Indemnified Liabilities"), incurred by the Investor Indemnitees or any
of them as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by
the Company in this Agreement or the Registration Rights Agreement or
any other certificate, instrument or document contemplated hereby or
thereby, (b) any breach of any covenant, agreement or obligation of the
Company contained in this Agreement or the Registration Rights
Agreement or any other certificate, instrument or document contemplated
hereby or thereby, (c) any cause of action, suit or claim brought or
made against such Investor Indemnitee not arising out of any action or
inaction of an Investor Indemnitee, and arising out of or resulting
from the execution, delivery, performance or enforcement of this
Agreement or any other instrument, document or agreement executed
pursuant hereto by any of the Investor Indemnitees, or (d) any failure
(whether purposeful or not) on the part of either parties' broker,
clearing agent or transfer agent to effectuate the transfer of shares
or any of the transactions contemplated hereunder. To the extent that
the foregoing undertaking by the Company may be unenforceable for any
reason, the Company shall make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities, which is
permissible under applicable law.
(b) In consideration of the Company's execution and delivery of this
Agreement, and in addition to all of the Investor's other obligations
under this Agreement, the Investor shall defend, protect, indemnify and
hold harmless the Company and all of its officers, directors,
shareholders, employees and agents (including, without limitation,
those retained in connection with the transactions contemplated by this
Agreement) (collectively, the "Company Indemnitees") from and against
any and all Indemnified Liabilities incurred by the Company Indemnitees
or any of them as a result of, or arising out of, or relating to (a)
15
any misrepresentation or breach of any representation or warranty made
by the Investor in this Agreement, the Registration Rights Agreement,
or any instrument or document contemplated hereby or thereby executed
by the Investor, (b) any breach of any covenant, agreement or
obligation of the Investor(s) contained in this Agreement, the
Registration Rights Agreement or any other certificate, instrument or
document contemplated hereby or thereby executed by the Investor, or
(c) any cause of action, suit or claim brought or made against such
Company Indemnitee based on misrepresentations or due to a breach by
the Investor and arising out of or resulting from the execution,
delivery, performance or enforcement of this Agreement or any other
instrument, document or agreement executed pursuant hereto by any of
the Company Indemnitees. To the extent that the foregoing undertaking
by the Investor may be unenforceable for any reason, the Investor shall
make the maximum contribution to the payment and satisfaction of each
of the Indemnified Liabilities, which is permissible under applicable
law.
(c) The obligations of the parties to indemnify or make contribution
under this Section 5.1 shall survive termination.
ARTICLE VI. Covenants of the Company
Section 6.1. RESERVED.
Section 6.2. Listing of Common Stock. After obtaining its listing on
the Over-the-Counter Bulletin Board, the Company shall maintain the
Common Stock's authorization for quotation on the Overthe-Counter
Bulletin Board during the term of the Commitment Period.
Section 6.3. Exchange Act Registration. During the term of the
Commitment Period, the Company will cause its Common Stock to continue
to be registered under Section 12(g) of the Exchange Act, will file in
a timely manner all reports and other documents required of it as a
reporting company under the Exchange Act and will not take any action
or file any document (whether or not permitted by Exchange Act or the
rules thereunder) to terminate or suspend such registration or to
terminate or suspend its reporting and filing obligations under said
Exchange Act.
Section 6.4. Transfer Agent Instructions. Upon effectiveness of the
Registration Statement the Company shall deliver instructions to its
transfer agent to issue shares of Common Stock to the Investor free of
restrictive legends on or before each Advance Date.
Section 6.5. Corporate Existence. During the Commitment period, the
Company will take all steps necessary to preserve and continue the
corporate existence of the Company.
Section 6.6. Notice of Certain Events Affecting Registration;
Suspension of Right to Make an Advance. The Company will immediately
notify the Investor upon its becoming aware of the occurrence of any of
the following events in respect of a registration statement or related
prospectus relating to an offering of Registrable Securities: (i)
receipt of any request for additional information by the SEC or any
other Federal or state governmental authority during the period of
effectiveness of the Registration Statement for amendments or
supplements to the registration statement or related prospectus; (ii)
the issuance by the SEC or any other Federal or state governmental
16
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 Registrable Securities 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 of any document
incorporated or deemed to be incorporated therein by reference untrue
in any material respect or that requires the making of any changes in
the Registration Statement, related prospectus or documents so that, in
the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the related prospectus,
it will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under
which they were made, not misleading; and (v) the Company's reasonable
determination that a post-effective amendment to the Registration
Statement would be appropriate; and the Company will promptly make
available to the Investor any such supplement or amendment to the
related prospectus. The Company shall not deliver to the Investor any
Advance Notice during the continuation of any of the foregoing events.
Section 6.7. Restriction on Sale of Capital Stock. The Company shall
not, without the prior written consent of the Investor, (i) issue or
sell any Common Stock or Preferred Stock without consideration or for a
consideration per share less than the Bid Price of the Common Stock
determined immediately prior to its issuance, or (ii) issue or sell any
Preferred Stock warrant, option, right, contract, call, or other
security or instrument granting the holder thereof the right to acquire
Common Stock without consideration or for a consideration per share
less than the Bid Price of the Common Stock determined immediately
prior to its issuance. Notwithstanding the foregoing this Section shall
not apply in respect of an Exempt Issuance or an underwritten public
offering of Common Stock. For purposes of this Agreement "Exempt
Issuance" means the issuance of (a) shares of Common Stock or options
to employees, officers, directors or consultants of the Company
pursuant to any stock or option plan duly adopted for such purpose, by
a majority of the non-employee members of the Board of Directors or a
majority of the members of a committee of non-employee directors
established for such purpose, (b) securities upon the exercise or
exchange of or conversion of any Securities issued hereunder and/or
other securities exercisable or exchangeable for or convertible into
shares of Common Stock issued and outstanding on the date of this
Agreement, provided that such securities have not been amended since
the date of this Agreement to increase the number of such securities or
to decrease the exercise, exchange or conversion price of such
securities, (c) any financing that the Company has in place prior to
the date of this Agreement, and (d) securities issued pursuant to
acquisitions or strategic transactions approved by a majority of the
disinterested directors of the Company, provided that any such issuance
shall only be to a Person which is, itself or through its subsidiaries,
an operating company in a business synergistic with the business of the
Company and in which the Company receives benefits in addition to the
investment of funds, but shall not include a transaction in which the
Company is issuing securities primarily for the purpose of raising
capital or to an entity whose primary business is investing in
securities.
17
Section 6.8. Consolidation; Merger. During the Commitment Period, 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 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 the
obligation to deliver to the Investor such shares of stock and/or
securities as the Investor is entitled to receive pursuant to this
Agreement.
Section 6.9. Issuance of the Company's Common Stock. The sale of the
shares of Common Stock shall be made in accordance with the provisions
and requirements of Regulation D and any applicable state securities
law.
Section 6.10. Review of Public Disclosures. All SEC filings (including,
without limitation, all filings required under the Exchange Act, which
include Forms 10-Q and 10-QSB, 10-K and 10K-SB, 8K, etc) and other
public disclosures made by the Company, including, without limitation,
all press releases, investor relations materials, and scripts of
analysts meetings and calls, shall be reviewed and approved for release
by the Company's attorneys and, if containing financial information,
the Company's independent certified public accountants.
Section 6.11. Market Activities. The Company will not, directly or
indirectly, (i) take any action designed to cause or result in, or that
constitutes or might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Common Stock or (ii)
sell, bid for or purchase the Common Stock, or pay anyone any
compensation for soliciting purchases of the Common Stock.
ARTICLE VII. Conditions Precedent
Section 7.1. Conditions Precedent to the Obligations of the Company.
The obligation hereunder of the Company to issue and sell the shares of
Common Stock to the Investor incident to each Closing is subject to the
satisfaction, or waiver by the Company, at or before each such Closing,
of each of the conditions set forth below.
(a) Accuracy of the Investor's Representations and Warranties. The
representations and warranties of the Investor shall be true and
correct in all material respects.
(b) Performance by the Investor. The Investor shall have performed,
satisfied and complied in all respects with all covenants, agreements
and conditions required by this Agreement and the Registration Rights
Agreement to be performed, satisfied or complied with by the Investor
at or prior to such Closing.
Section 7.2. Conditions Precedent to the Right of the Company to
Deliver an Advance Notice. The right of the Company to deliver an
Advance Notice is subject to the fulfillment by the Company, on such
Advance Notice (a "Condition Satisfaction Date"), of each of the
following conditions:
(a) Registration of the Common Stock with the SEC. The Company shall
have filed with the SEC a Registration Statement with respect to the
resale of the Registrable Securities in accordance with the terms of
18
the Registration Rights Agreement. As set forth in the Registration
Rights Agreement, the Registration Statement shall have previously
become effective and shall remain effective on each Condition
Satisfaction Date and (i) neither the Company nor the Investor shall
have received notice that the SEC has issued or intends to issue a stop
order with respect to the Registration Statement or that the SEC
otherwise has suspended or withdrawn the effectiveness of the
Registration Statement, either temporarily or permanently, or intends
or has threatened to do so (unless the SEC's concerns have been
addressed and the Investor is reasonably satisfied that the SEC no
longer is considering or intends to take such action), and
(ii) no other suspension of the use or withdrawal of the effectiveness
of the Registration Statement or related prospectus shall exist. The
Registration Statement must have been declared effective by the SEC
prior to the first Advance Notice Date.
(b) Authority. The Company shall have obtained all permits and
qualifications required by any applicable state in accordance with the
Registration Rights Agreement for the offer and sale of the shares of
Common Stock, or shall have the availability of exemptions therefrom.
The sale and issuance of the shares of Common Stock shall be legally
permitted by all laws and regulations to which the Company is subject.
(c) Fundamental Changes. There shall not exist any fundamental changes
to the information set forth in the Registration Statement which would
require the Company to file a post-effective amendment to the
Registration Statement.
(d) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement and the
Registration Rights Agreement to be performed, satisfied or complied
with by the Company at or prior to each Condition Satisfaction Date.
(e) 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 that prohibits or directly and adversely affects
any of the transactions contemplated by this Agreement, and no
proceeding shall have been commenced that may have the effect of
prohibiting or adversely affecting any of the transactions contemplated
by this Agreement.
(f) No Suspension of Trading in or Delisting of Common Stock. The
trading of the Common Stock is not suspended by the SEC or the
Principal Market (if the Common Stock is traded on a Principal Market).
The issuance of shares of Common Stock with respect to the applicable
Closing, if any, shall not violate the shareholder approval
requirements of the Principal Market (if the Common Stock is traded on
a Principal Market). The Company shall not have received any notice
threatening the continued listing of the Common Stock on the Principal
Market (if the Common Stock is traded on a Principal Market).
(g) Maximum Advance Amount. The amount of an Advance requested by the
Company shall not exceed the Maximum Advance Amount. In addition, in no
event shall the number of shares issuable to the Investor pursuant to
an Advance cause the aggregate number of shares of Common Stock
beneficially owned by the Investor and its affiliates to exceed nine
19
and 9/10 percent (9.9%) of the then outstanding Common Stock of the
Company. For the purposes of this section beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act.
(h) No Knowledge. The Company has no knowledge of any event which would
be more likely than not to have the effect of causing such Registration
Statement to be suspended or otherwise ineffective.
(i) Executed Advance Notice. The Investor shall have received the
Advance Notice executed by an officer of the Company and the
representations contained in such Advance Notice shall be true and
correct as of each Condition Satisfaction Date.
(j) Deposit Shares. In order to facilitate the efficient issuance of
Advances that will be issued by the Investor to the Company under this
Agreement, the Company will transfer shares equal to two times the
Maximum Advance Amount to the Investor (the "Deposit Shares"). The
Deposit Shares shall be transferred to the Investor immediately after
the SEC declares the Registration Statement effective and before any
Advances may be issued to the Company, pursuant this Agreement. At all
times, during the Term of this Agreement, the Investor shall have in
its possession, shares of the Company's Common Stock equal to two times
the Maximum Advance Amount. In the event the Deposit Shares decrease to
an amount that less than two times the Maximum Advance Amount, then the
Company must issue additional shares to the Investor in an amount that
will increase the Deposit Shares held by the Investor to two times the
Maximum Advance Amount. Until such additional shares have been issued
to the Investor, the Investor may decline to issue any Advances to the
Company. At no time shall the Investor sell, transfer or issue any of
the Deposit Shares, unless and until the Investor receives an Advance
Notice signed by an authorized officer of the Company. In addition, in
no event shall the number of shares issuable to the Investor pursuant
to this Section cause the aggregate number of shares of Common Stock
beneficially owned by the Investor and its affiliates to exceed nine
and 9/10 percent (9.9%) of the then outstanding Common Stock of the
Company. For the purposes of this section beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act.
ARTICLE VIII. Due Diligence Review; Non-Disclosure of Non-Public
Information
Section 8.1. Non-Disclosure of Non-Public Information.
(a) The Company covenants and agrees that it shall refrain from
disclosing, and shall cause its officers, directors, employees and
agents to refrain from disclosing, any material non-public information
to the Investor without also disseminating such information to the
public, unless prior to disclosure of such information the Company
identifies such information as being material non-public information
and provides the Investor with the opportunity to accept or refuse to
accept such material non-public information for review.
(b) Nothing herein shall require the Company to disclose non-public
information to the Investor or its advisors or representatives, and the
Company represents that it does not disseminate non-public information
to any investors who purchase stock in the Company in a public
offering, to money managers or to securities analysts, provided,
however, that notwithstanding anything herein to the contrary, the
Company will, as hereinabove provided, immediately notify the advisors
20
and representatives of the Investor and, if any, underwriters, of any
event or the existence of any circumstance (without any obligation to
disclose the specific event or circumstance) of which it becomes aware,
constituting non-public information (whether or not requested of the
Company specifically or generally during the course of due diligence by
such persons or entities), which, if not disclosed in the prospectus
included in the Registration Statement would cause such prospectus to
include a material misstatement or to omit a material fact required to
be stated therein in order to make the statements, therein, in light of
the circumstances in which they were made, not misleading. Nothing
contained in this Section 8.2 shall be construed to mean that such
persons or entities other than the Investor (without the written
consent of the Investor prior to disclosure of such information) may
not obtain non-public information in the course of conducting due
diligence in accordance with the terms of this Agreement and nothing
herein shall prevent any such persons or entities from notifying the
Company of their opinion that based on such due diligence by such
persons or entities, that the Registration Statement contains an untrue
statement of material fact or omits a material fact required to be
stated in the Registration Statement or necessary to make the
statements contained therein, in light of the circumstances in which
they were made, not misleading.
ARTICLE IX. Choice of Law/Jurisdiction
Section 9.1. Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of California
without regard to the principles of conflict of laws. The parties
further agree that any action between them shall be heard in the State
of California, and expressly consent to the jurisdiction and venue of
the courts, sitting in California and the United States District Court
of California for the adjudication of any civil action asserted
pursuant to this paragraph.
ARTICLE X. Assignment; Termination
Section 10.1. Assignment. Neither this Agreement nor any rights of the
Company hereunder may be assigned to any other Person.
Section 10.2. Termination.
(a) The obligations of the Investor to make Advances under Article II
hereof shall terminate twenty-four (24) months after the Effective Date
or thirty six (36) months after the Effective Date if twenty-four (24)
months after the Effective Date the Company filed either an amendment
to the then effective registration statement or a new registration
statement was declared effective. The Company's obligations under this
Agreement shall terminate on the date that the Investor is no longer
obligated to make Advances.
(b) The obligation of the Investor to make an Advance to the Company
pursuant to this Agreement shall terminate permanently (including with
respect to an Advance Date that has not yet occurred) in the event that
(i) there shall occur any stop order or suspension of the effectiveness
of the Registration Statement for an aggregate of fifty (50) Trading
Days, other than due to the acts of the Investor, during the Commitment
Period, or (ii) the Company shall at any time fail materially to comply
with the requirements of Article VI and such failure is not cured
within thirty (30) days after receipt of written notice from the
21
Investor, provided, however, that this termination provision shall not
apply to any period commencing upon the filing of a post-effective
amendment to such Registration Statement and ending upon the date on
which such post effective amendment is declared effective by the SEC.
ARTICLE XI. Notices
Section 11.1. Notices. Any notices, consents, waivers, or other
communications required or permitted to be given under the terms of
this Agreement must be in writing and will be deemed to have been
delivered (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile, provided a copy is mailed by U.S.
certified mail, return receipt requested; (iii) three (3) days after
being sent by U.S. certified mail, return receipt requested, or (iv)
one (1) day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company, to:
Genesis Electronics Group, Inc. 0000 Xxxxxxxxx Xxxx. Xxxxx 000
Xxxxxxxxx, XX 00000 c/o Xxxxxx X. Xxxxxx Telephone: 000-000-0000
Facsimile: 000-000-0000
Tangiers Investors, LP
If to the Investor(s):
Xxxxxxx Xxxxxx
000 Xxxx Xxxxxxxx
Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Each party shall provide five (5) days' prior written notice to the
other party of any change in address or facsimile number.
ARTICLE XII. Miscellaneous
Section 12.1. Counterparts. This Agreement may be executed in two or
more identical counterparts, all of which 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. In the
event any signature page is delivered by facsimile transmission, the
party using such means of delivery shall cause four (4) additional
original executed signature pages to be physically delivered to the
other party within five (5) days of the execution and delivery hereof,
though failure to deliver such copies shall not affect the validity of
this Agreement.
Section 12.2. Entire Agreement; Amendments. This Agreement supersedes
all other prior oral or written agreements between the Investor, the
Company, their affiliates and persons acting on their behalf with
respect to the matters discussed herein, and this Agreement and the
instruments referenced herein contain the entire understanding of the
parties with respect to the matters covered herein and therein and,
except as specifically set forth herein or therein, neither the Company
nor the Investor makes any representation, warranty, covenant or
22
undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by an instrument in
writing signed by the party to be charged with enforcement.
Section 12.3. Reporting Entity for the Common Stock. The reporting
entity relied upon for the determination of the trading price or
trading volume of the Common Stock on any given Trading Day for the
purposes of this Agreement shall be Bloomberg, L.P. or any successor
thereto. The written mutual consent of the Investor and the Company
shall be required to employ any other reporting entity.
Section 12.4. Commitment Fee. The Company hereby agrees to pay to the
Investor the following fees:
(a) Common Stock in an amount equal to One Hundred Fifty Thousand
Dollars ($150,000) divided by the lowest VWAP of the Company's Common
Stock during the five (5) business days immediately following the date
hereof, as quoted by Bloomberg, LP (the "Investor's Shares"). The
Company shall distribute the Investor Shares to the Investor at such
times and in such amounts as the Investor may elect.
(b) Fully Earned. The Investor's Shares shall be deemed fully earned as
of the date hereof.
(c) Registration Rights. The Investor's Shares will have "piggy-back"
registration rights.
Section 12.5. Brokerage. Each of the parties hereto represents that it
has had no dealings in connection with this transaction with any finder
or broker who will demand payment of any fee or commission from the
other party. The Company on the one hand, and the Investor, on the
other hand, agree to indemnify the other against and hold the other
harmless from any and all liabilities to any person claiming brokerage
commissions or finder's fees on account of services purported to have
been rendered on behalf of the indemnifying party in connection with
this Agreement or the transactions contemplated hereby.
Section 12.6. Confidentiality. If for any reason the transactions
contemplated by this Agreement are not consummated, each of the parties
hereto shall keep confidential any information obtained from any other
party (except information publicly available or in such party's domain
prior to the date hereof, and except as required by court order) and
shall promptly return to the other parties all schedules, documents,
instruments, work papers or other written information without retaining
copies thereof, previously furnished by it as a result of this
Agreement or in connection herein.
[SIGNATURE PAGE TO FOLLOW]
23
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be executed by the undersigned, thereunto duly
authorized, as of the date first set forth above.
COMPANY: GENESIS ELECTRONICS GROUP, INC.
/s/Xxxxxx X. Xxxxxx
-----------------------
Name:Xxxxxx X. Xxxxxx Title: Chief Executive Officer
INVESTOR: TANGIERS INVESTORS, LP
/s/
By: Tangiers Capital, LLC Its: General Partner
24
EXHIBIT A
ADVANCE NOTICE
GENESIS ELECTRONICS GROUP, INC.
The undersigned, _______________________ hereby certifies, with respect
to the sale of shares of Common Stock of GENESIS ELECTRONICS GROUP,
INC. (the "Company") issuable in connection with this Advance Notice,
delivered pursuant to the Securities Purchase Agreement (the
"Agreement"), as follows:
1. The undersigned is the duly elected ______________ of the Company.
2. There are no fundamental changes to the information set forth in the
Registration Statement which would require the Company to file a post
effective amendment to the Registration Statement.
3. The Company has performed in all material respects all covenants and
agreements to be performed by the Company and has complied in all
material respects with all obligations and conditions contained in the
Agreement on or prior to the Advance Notice Date, and shall continue to
perform in all material respects all covenants and agreements to be
performed by the Company through the applicable Advance Date. All
conditions to the delivery of this Advance Notice are satisfied as of
the date hereof.
4. The undersigned hereby represents, warrants and covenants that it
has made all filings ("SEC Filings") required to be made by it pursuant
to applicable securities laws (including, without limitation, all
filings required under the Securities Exchange Act of 1934, which
include Forms 10-Q, 10-K or 8-K, etc.). All SEC Filings and other
public disclosures made by the Company, including, without limitation,
all press releases, analysts meetings and calls, etc. (collectively,
the "Public Disclosures"), have been reviewed and approved for release
by the Company's attorneys and, if containing financial information,
the Company's independent certified public accountants. None of the
Company's Public Disclosures 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.
5. The Advance requested is _____________________.
The undersigned has executed this Certificate this ____ day of
_________________.
GENESIS ELECTRONICS GROUP, INC.
By:
Name: Title:
If Returning This Advance Notice via Facsimile Please Send To:
If by Mail, via Federal Express Tangiers Investors, LP To: 000 Xxxx
Xxxxxxxx Xxxxx 000, Xxxxx 000, Xxx Xxxxx, XX 00000
