COMMON STOCK PURCHASE AGREEMENT
Exhibit
10.1
THIS
COMMON STOCK PURCHASE AGREEMENT (“Agreement”) is made
as of August 31, 2007, by and between Elephant Talk Communications, Inc.,
a
California corporation (the “Company”),
and , (the
“Investor”).
WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant
to
the Securities Act of 1933, as amended (the “Securities Act”)
and Regulation S promulgated thereunder (“Regulation S”), the
Company desires to issue and sell to the Investor, and Investor desires to
purchase from the Company, securities of the Company as more fully described
in
this Agreement.
WHEREAS,
this Agreement is one of several similar agreements for the purchase of an
aggregate of at least US$ 5,000,000 of Common Stock of the Company (the
“Co-Investment Agreements”) by additional investors (the
“Co-Investors”).
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration the receipt and adequacy of
which
are hereby acknowledged, the Company and Investor agree as follows:
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1.
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Purchase
and Sale of Stock.
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1.1.
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Sale
and Issuance of Common Stock. Subject to the terms and conditions of
this Agreement, the Investor agrees to purchase at the Closing,
and the
Company agrees to sell and issue to the Investor at the Closing,
$ 50,000
of shares of the Company's common stock (the “Common
Stock”) at a price 30 percent (thirty %) below the average
closing price of the Common Stock as reported on the OTC Bulletin
Board
for the five (5) days preceding the date of approval of this Agreement
by
the Company’s Board of Directors. This approval has been granted on August
22, 2007.
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1.2.
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Purchase
Price. The parties anticipate that all or a portion of the Purchase
Price will be paid to the Company within seven (7) days of the
date of
this Agreement (the “Payment Date”); provided, that if
all of the Purchase Price is not paid at the Payment Date, the
remaining
portion of the Purchase Price shall be paid on or before November
30, in
one or more installments, together with interest thereon at the
rate of 8%
per annum for the period of delay. Any portion of the Purchase
Price paid
before the Closing shall be paid as a deposit pending the Closing
and
shall be returned to the Investor, without interest, if the Closing
has
not occurred within hundred twenty (120) days of the date hereof
(unless
such date is extended by agreement of the Investor). All payments
of the
Purchase Price shall be made by wire transfer to the following
account:
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1.3.
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Closing.
The purchase and sale of the Shares shall be consummated (the
“Closing”) as soon as practicable following the later
to
occur of the following events:
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(i)
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approval
of this Agreement and the other Co-Investment Agreements by the
Board of
Directors of the Company (without including the vote of any Investor
that
serves as a Director);
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(ii)
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the
filing of amended and restated articles of incorporation by the
Company to
increase the number of shares of authorized Common Stock (the
“Amended
Articles”).
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The
obligation of the Investor to purchase and acquire the Shares hereunder shall
be
subject to (i) the condition that all representations and warranties and
other
statements of the Company shall be true and correct as of and on each of
the
date of this Agreement and the date of the Closing, (ii) the condition that
the
Company shall have performed all of its obligations hereunder theretofore
to be
performed, and (ii) purchase of at least US$5,000,000 of Common Stock by
the
Co-Investors at the Closing.
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1.4.
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Delivery.
Within ten (10) business days of the Closing, the Company will
deliver to
the Investor a certificate or certificates, registered in Investor's
name,
representing the Shares purchased by Investor hereunder, against
payment
of the purchase price therefore.
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2.
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Representations
and Warranties of the Company. The Company hereby represents and
warrants to the Investor as
follows:
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2.1.
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Organization
and Standing; Articles and By-Laws; The Company is a corporation duly
organized and existing under, and by virtue of, the laws of the
State of
Delaware and is in good standing under such laws. The Company has
the
requisite corporate power and authority to own and operate its
properties
and assets, and to carry on its business as presently conducted
and as
proposed to be conducted.
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2.2.
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Capitalization.
The authorized capital stock of the Company consists of 255,000,000
shares
of Capital Stock, of which 250,000,000 are common stock and 5,000,000
are
preferred stock. As of June 30, 2007 (the most recent record date
of the
company), 238,265,927 shares of Common Stock are issued and outstanding
and zero (0) shares of preferred are issued and outstanding. No
capital
stock of the Company has been authorized or issued since the most
recent
record date. The outstanding shares have been duly authorized and
validly
issued, and are fully paid and nonassessable. All outstanding securities
were issued in compliance with applicable federal or state securities
laws.
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2.3.
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Authorization.
All corporate action on the part of the Company and its directors
necessary for the authorization, execution, delivery and performance
of
this Agreement by the Company, the authorization, sale, issuance
and
delivery of the Shares and the performance of all of the Company's
obligations hereunder has been taken or will be taken on or before
August
25, 2007. If board approval for the financing is not received on
or before
August 25, 2007, this Agreement shall forthwith terminate and cease
to
have any further force and effect and neither party shall have
any further
obligation to the other. This Agreement, when executed and delivered
by
the Company and approved by the Board of Directors, shall constitute
a
valid and binding obligation of the Company, enforceable in accordance
with its terms. The Shares, when issued by the Company in compliance
with
the provisions of this Agreement, will be validly issued, fully
paid and
nonassessable, and free of any liens or encumbrances, other than
any liens
and encumbrances created by or imposed upon the holders thereof
through no
action of the Company; provided however, the Shares are subject
to certain
restrictions on transfer under this Agreement and under applicable
state
and federal securities laws.
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2.4.
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Private
Sale. Subject in part to the truth and accuracy of the Investor’s
representations and warranties set forth in Section 3 below, the
offer and
sale of the Shares will not require registration or qualification
with the
U.S. Securities and Exchange Commission (the “SEC) under the Securities
Act of 1933, as amended, pursuant to Regulation S promulgated thereunder,
and neither the Company nor any authorized agent acting on its
behalf will
take any action hereinafter that would cause the loss of such
exemption.
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2.5.
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Delivery
of SEC Filings. The Company has made available to the Investor through
the XXXXX system, true and complete copies of the Company’s most recent
Annual Report on Form 10-KSB for the fiscal year ended December
31, 2006
(the “10-KSB”) and all other reports filed by the Company pursuant to the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”) since the filing of the 10-KSB and prior to the date
hereof
(collectively, the “SEC Filings”). The SEC Filings are
the only filings required of the Company pursuant to the Exchange
Act for
such period. The Company and its Subsidiaries are engaged in all
material
respects only in the business described in the SEC Filings and
the SEC
Filings contain a complete and accurate description in all material
respects of the business of the Company and its Subsidiaries, taken
as a
whole.
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2.6.
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Information
Statement. The parties acknowledge that the holders of a majority of
the Company’s Common Stock have approved the Amended Articles by written
consent in lieu of a meeting and a preliminary Schedule 14C information
statement has been filed with the SEC with respect thereto, but
such a
final information statement has not been filed with the SEC. The
Company
shall use its best efforts to file such final information statement
with
the SEC as soon as practicable and to mail such information statement
to
the shareholders of the Company. The Company shall also use its
best
efforts to file the Amended Articles with the Secretary of State
of the
State of California as soon as
possible.
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3.
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Representations
and Warranties of the Investor. The Investor hereby represents and
warrants to and covenants with the Company
that:
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3.1.
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Binding
Obligation. This Agreement, when executed and delivered by the
Investor, shall constitute a valid and binding obligation of the
Investor,
enforceable in accordance with its terms. The entering into of
this
Agreement and the transactions contemplated hereby do not result
in the
violation of any of the terms and provisions of any law applicable
to the
Investor or of any agreement, written or oral, to which the Investor
may
be a party or by which the Investor is or may be bound. The
sale of the Share to the Investor as contemplated in this Agreement
complies with or is exempt from the applicable securities legislation
of
the jurisdiction of residence of the
Investor.
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3.3.
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Investor
Not a U.S. Person. The Investor is not a U.S. Person (as defined in
Regulation S under the Securities Act). The Investor is not acquiring
the
Shares for the account or benefit of, directly or indirectly, any
U.S.
Person.
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3.4.
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Purchase
Entirely for Own Account. The Investor understands that the Company is
making this Agreement with the Investor in reliance upon the Investor's
representation to the Company, which by the Investor's execution
of this
Agreement the Investor hereby confirms, that the Investor is outside
the
United States when receiving and executing this Agreement and is
acquiring
the Shares as principal for the Investor's own account, not as
a nominee
or agent, and not with a view to the resale or distribution of
any part
thereof, and that the Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same.
By
executing this Agreement, the Investor further represents that
the
Investor does not have any contract, undertaking, agreement or
arrangement
with any person to sell, transfer or grant participations to such
person
or to any third person, with respect to any of the
Shares.
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3.5.
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No
Underwriter. The Investor is not an underwriter of, or dealer in, the
common shares of the Company, nor is the Investor participating,
pursuant
to a contractual agreement or otherwise, in the distribution of
the
Shares.
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3.6.
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Investment
Experience. The Investor acknowledges that it is able to fend for
itself, can bear the economic risk of its investment and has such
knowledge and experience in financial or business matters that
it is
capable of evaluating the merits and risks of the investment in
the Shares
and has the ability to bear the economic risks of its prospective
investment and can afford the complete loss of such
investment.
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3.7.
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No
Directed Selling Efforts. The Investor acknowledges that the Investor
has not acquired the Shares as a result of, and will not itself
engage in,
any "directed selling efforts" (as defined in Regulation S
under the Securities Act) in the U.S. in respect of the Shares
which would
include any activities undertaken for the purpose of, or that could
reasonably be expected to have the effect of, conditioning the
market in
the U.S. for the resale of the Shares; provided, however, that
the
Investor may sell or otherwise dispose of the Shares pursuant to
registration of the Shares pursuant to the Securities Act and any
applicable state and federal securities laws or under an exemption
from
such registration requirements and as otherwise provided
herein.
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3.8.
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No
General Solicitation. The Investor is not aware of any advertisement
of any of the Shares and is not acquiring the Shares as a result
of any
form of general solicitation or general advertising including
advertisements, articles, notices or other communications published
in any
newspaper, magazine or similar media or broadcast over radio or
television, or any seminar or meeting whose attendees have been
invited by
general solicitation or general
advertising.
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3.9.
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Disclosure
of Information. The decision to execute this Agreement and
acquire the Shares hereunder has not been based upon any oral or
written
representation as to fact or otherwise made by or on behalf of
the
Company, and such decision is based entirely upon a review of information
(the receipt of which is hereby acknowledged) which has been filed
by the
Company with the SEC. The Investor and the Investor's advisor(s)
have had
a reasonable opportunity to ask questions of and receive answers
from the
Company in connection with the distribution of the Shares hereunder,
and
to obtain additional information, to the extent possessed or obtainable
without unreasonable effort or expense, necessary to verify the
accuracy
of the information about the Company. The Investor acknowledges
that it
has had access to all the information it considers necessary or
appropriate for deciding whether to purchase the Shares. Notwithstanding
the Company’s representations set forth in Section 2.2 above, the Investor
acknowledges that the Company is (1) concurrently negotiating with
other
prospective investors for the purchase and sale of additional shares
of
Common Stock and (2) preparing an Employee Compensation Plan pursuant
to
which the Company may issue additional shares of Common
Stock.
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3.10.
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U.S.
Civil Remedies. The Investor is acquiring the Shares pursuant to an
exemption from the registration and prospectus requirements of
applicable
securities legislation in all jurisdictions relevant to this subscription,
and, as a consequence, the Investor will not be entitled to use
most of
the civil remedies available under applicable securities legislation
and
the Investor will not receive information that would otherwise
be required
to be provided to the Investor pursuant to applicable securities
legislation.
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3.11.
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No
Other Representations. No person has made to the Investor any written
or oral representations:
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3.11.1.
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that
any person will resell or repurchase any of the
Shares;
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3.11.2.
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that
any person will refund the purchase price of any of the
Shares;
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3.11.3.
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as
to the future price or value of any of the Shares;
or
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3.11.4.
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that
any of the Shares will be listed and posted for trading on any
stock
exchange or automated dealer quotation system or that application
has been
made to list and post any of the Shares of the Company on any stock
exchange or automated dealer quotation
system.
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3.12.
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No
Registration Rights. Except as provided in this Agreement, the
Investor acknowledges that the Company has not undertaken, and
will have
no obligation, to register any of the Shares under the Securities
Act.
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3.13.
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Indemnification.
The Investor will indemnify and hold harmless the Company and,
where
applicable, its directors, officers, employees, agents, advisors
and
shareholders, from and against any and all loss, liability, claim,
damage
and expense whatsoever (including, but not limited to, any and
all fees,
costs and expenses whatsoever reasonably incurred in investigating,
preparing or defending against any claim, lawsuit, administrative
proceeding or investigation whether commenced or threatened) arising
out
of or based upon any representation or warranty of the Investor
contained
herein or in any document furnished by the Investor to the Company
in
connection herewith being untrue in any material respect or any
breach or
failure by the Investor to comply with any covenant or agreement
made by
the Investor to the Company in connection
therewith.
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3.14.
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OTC
Bulletin Board. None of the Shares are listed on any stock exchange or
automated dealer quotation system and no representation has been
made to
the Investor that any of the Shares will become listed on any stock
exchange or automated dealer quotation system, except that currently
market makers make a market for the Company's common shares on
the NASD's
OTC Bulletin Board.
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3.15.
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Investor’s
Advisors. The Investor has been advised to consult the Investor's own
legal, tax and other advisors with respect to the merits and risks
of an
investment in the Units and with respect to applicable resale
restrictions, and it is solely responsible (and the Company is
not in any
way responsible) for compliance
with:
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3.15.1.
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any
applicable laws of the jurisdiction in which the Investor is resident
in
connection with the distribution of the Units hereunder,
and
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3.15.2.
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applicable
resale restrictions; and
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3.15.3.
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this
Agreement is not enforceable by the Investor unless it has been
accepted
by the Company, and the Investor acknowledges and agrees that the
Company
reserves the right to reject any subscription for any
reason.
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3.16.
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Legends.
The Investor acknowledges and agrees that all certificates representing
the Shares will be endorsed with the following legend, or such
similar
legend as deemed advisable by legal counsel for the Purchaser,
to ensure
compliance with Regulation S and to reflect the status of the Shares
as
restricted securities:
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3.16.1.
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“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER
THE SECURITIES ACT OF 1933 (THE "ACT"), AND HAVE BEEN ISSUED IN
RELIANCE
UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT
PROVIDED
BY REGULATION S PROMULGATED UNDER THE ACT. SUCH SECURITIES MAY
NOT BE
REOFFERED FOR SALE OR RESOLD OR OTHERWISE TRANSFERRED EXCEPT IN
ACCORDANCE
WITH THE PROVISIONS OF REGULATION S, PURSUANT TO AN EFFECTIVE REGISTRATION
UNDER THE ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION
UNDER THE ACT. HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY
NOT BE
CONDUCTED UNLESS IN COMPLIANCE WITH THE
ACT.
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THE
SALE
OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT
TO THE
TERMS AND CONDITONS OF A CERTAIN AGREEMENT BETWEEN THE CORPORATION AND CERTAIN
HOLDERS OF STOCK OF THE CORPORATION. COPIES OF SUCH AGREEMENT MAY BE
OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION.”
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3.16.2.
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Any
legend required by the laws of any State, including any legend
required by
the California Department of Corporations and Sections 417 and
418 of the
California Corporations Code.
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3.17.
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Prohibited
Transactions. During the last thirty (30) days prior to the date
hereof, neither Investor nor any Affiliate of Investor which (x)
had
knowledge of the transactions contemplated hereby, (y) has or shares
discretion relating to Investor’s investments or trading or information
concerning Investor’s investments, including in respect of the Shares, or
(z) is subject to Investor’s review or input concerning such Affiliate’s
investments or trading (collectively, “Trading
Affiliates”) has, directly or indirectly, effected or agreed to
effect any short sale, whether or not against the box, established
any
“put equivalent position” (as defined in Rule 16a-1(h) under the Exchange
Act) with respect to the Common Stock, granted any other right
(including,
without limitation, any put or call option) with respect to the
Common
Stock or with respect to any security that includes, relates to
or derived
any significant part of its value from the Common Stock or otherwise
sought to hedge its position in the Shares or sold any Common Stock
(each,
a “Prohibited Transaction”). At no time prior to the
termination of this Agreement, shall Investor or its Trading Affiliates
engage, directly or indirectly, in a Prohibited
Transaction.
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3.18.
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No
Pre-Emptive Rights. The Investor acknowledges and agrees that the
Shares will not be subject to any anti-dilution rights, pre-emptive
rights, rights of first refusal, co-sale, tag-along or similar
rights.
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3.19.
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Lock-Up
Agreement. As an inducement to the Company to enter into
this Agreement and to sell the Shares hereby, the Investor hereby
agrees
that until the first anniversary of the date hereof, the Investor
will not
offer, sell, contract to sell, pledge or otherwise dispose of,
directly or
indirectly, any of the Shares (including any securities issued
with
respect to the Shares in stock dividends, stock splits, recapitalizations
or other similar events), or enter into a transaction which would
have the
same effect, or publicly disclose the intention to make any such
offer,
sale, pledge or disposal without the prior unanimous written consent
of
the Board of Directors of the Company. In furtherance of the
foregoing, the Company and its transfer agent and registrar are
hereby
authorized to decline to make any transfer of the Shares (including
any
securities issued with respect to the Shares in stock dividends,
stock
splits, recapitalizations or other similar events) if such transfer
would
constitute a violation or breach of this
Agreement.
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4.
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Miscellaneous.
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4.1.
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Survival
of Warranties. The warranties, representations and covenants of the
Company and the Investor contained in or made pursuant to this
Agreement
shall survive the execution and delivery of this Agreement and
the
Closing.
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4.2.
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Successors
and Assigns. Except as otherwise provided herein, the terms and
conditions of this Agreement shall inure to the benefit of and
be binding
upon the respective successors and assigns of the parties (including
transferees of any Shares sold hereunder). Nothing in this Agreement,
express or implied, is intended to confer upon any party other
than the
parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this
Agreement.
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4.3.
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Governing
Law; Venue. This Agreement is being delivered and shall be construed
and enforced in accordance with and governed by the laws of California
applicable to contracts which are wholly executed, written and
performed
within California. By execution and delivery of this Agreement,
the
parties agree and accept that any legal action or proceeding brought
with
respect to this Agreement shall be brought in the court of appropriate
jurisdiction in and for the County of San Francisco, State of California,
and the parties expressly waive any objection to personal jurisdiction,
venue or forum non conveniens.
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4.4.
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Counterparts.
This Agreement may be executed in two or more counterparts, each
of which
shall be deemed an original, but all of which together shall constitute
one and the same instrument.
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4.5.
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Titles
and Subtitles. The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing
or
interpreting this Agreement.
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4.6.
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Notices.
Unless otherwise provided, any notice required or permitted under
this
Agreement shall be given in writing and shall be deemed effectively
given
upon personal delivery to the party to be notified or on three
(3) days
after the date of deposit with the United States Post Office, by
registered or certified mail, postage prepaid and addressed to
the Company
at the above address or to the Investor at the address indicated
on the
signature page hereof, or at such other address as the Investor
may
designate by written notice to the
Company.
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4.7.
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Litigation.
If any action at law or in equity is necessary to enforce or interpret
the
terms of this Agreement, the prevailing party shall be entitled
to
reasonable attorney's fees, costs and necessary disbursements in
addition
to any other relief to which such party may be
entitled.
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4.8.
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Amendments
and Waivers. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either
generally
or in a particular instance and either retroactively or prospectively),
only with the written consent of the waiving party. Any amendment
or
waiver affected in accordance with this paragraph shall be binding
upon
each holder of any Common Stock purchased under this Agreement
at the time
outstanding, each future holder of all such Common Stock, and the
Company.
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4.9.
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Severability.
If one or more provisions of this Agreement are held to be unenforceable
under applicable law, such provision shall be excluded from this
Agreement
and the balance of the Agreement shall be interpreted as if such
provision
were so excluded and shall be enforceable in accordance with its
terms.
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4.10.
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Complete
Agreement. This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes
all prior agreements and understandings by and between the Investor
and
the Company.
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IN
WITNESS WHEREOF, the parties have executed this Common Stock Purchase Agreement
dated August 31, 2007
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“COMPANY”
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Elephant
Talk Communications, Inc.,
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a
California corporation
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By:
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Xxxxxx
van der Velden, CEO
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THE
UNDERSIGNED PURCHASER UNDERSTANDS THAT AN INVESTMENT IN THE STOCK OF THE
COMPANY
IS SPECULATIVE IN NATURE AND INVOLVES A HIGH DEGREE OF RISK. PURCHASER
UNDERSTANDS AND HAS CAREFULLY CONSIDERED THE RISKS INVOLVED IN AN INVESTMENT
IN
THE STOCK OF THE COMPANY, AND CAN WITHSTAND THE TOTAL LOSS OF THE
INVESTMENT.
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“INVESTOR”
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