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EXHIBIT 4.3
INTEGRAL TECHNOLOGIES, INC.
INVESTMENT AGREEMENT
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE OR OTHER SECURITIES
AUTHORITIES. THEY MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE FEDERAL AND STATE SECURITIES LAWS.
THIS INVESTMENT AGREEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO PURCHASE, ANY OF THE SECURITIES DESCRIBED
HEREIN BY OR TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL. THESE SECURITIES HAVE NOT BEEN
RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES AUTHORITIES, NOR HAVE
SUCH AUTHORITIES CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF
THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. THE
INVESTOR MUST RELY ON ITS OWN ANALYSIS OF THE INVESTMENT AND ASSESSMENT
OF THE RISKS INVOLVED. SEE THE RISK FACTORS SET FORTH IN THE ATTACHED
DISCLOSURE DOCUMENTS AS EXHIBIT J.
SEE ADDITIONAL LEGENDS AT SECTIONS 4.7.
THIS INVESTMENT AGREEMENT (this "Agreement" or "Investment Agreement")
is made as of the 11th day of May, 2000, by and between Integral Technologies,
Inc., a corporation duly organized and existing under the laws of the State of
Nevada (the "Company"), and the undersigned Investor executing this Agreement
("Investor").
RECITALS:
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue to the Investor, and the
Investor shall purchase from the Company, from time to time as provided herein,
shares of the Company's Common Stock, as part of an offering of Common Stock by
the Company to Investor, for a maximum aggregate offering amount of Twenty Five
Million Dollars ($25,000,000) (the "Maximum Offering Amount"); and
WHEREAS, the solicitation of this Investment Agreement and, if accepted
by the Company, the offer and sale of the Common Stock are being made in
reliance upon the provisions of Regulation D ("Regulation D") promulgated under
the Act, Section 4(2) of the Act, and/or upon such other exemption from the
registration requirements of the Act as may be available with respect to any or
all of the purchases of Common Stock to be made hereunder.
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TERMS:
NOW, THEREFORE, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement (including the
recitals above), the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
"20% Approval" shall have the meaning set forth in Section 5.25.
"9.9% Limitation" shall have the meaning set forth in Section 2.3.1(f).
"Accredited Investor" shall have the meaning set forth in Section 3.1.
"Act" shall mean the Securities Act of 1933, as amended.
"Advance Put Notice" shall have the meaning set forth in Section
2.3.1(a), the form of which is attached hereto as Exhibit E.
"Advance Put Notice Confirmation" shall have the meaning set forth in
Section 2.3.1(a), the form of which is attached hereto as Exhibit F.
"Advance Put Notice Date" shall have the meaning set forth in Section
2.3.1(a).
"Affiliate" shall have the meaning as set forth Section 6.4.
"Aggregate Issued Shares" equals the aggregate number of shares of
Common Stock issued to Investor pursuant to the terms of this Agreement or the
Registration Rights Agreement as of a given date, including Put Shares and
Warrant Shares.
"Agreed Upon Procedures Report" shall have the meaning set forth in
Section 2.5.3(b).
"Agreement" shall mean this Investment Agreement.
"Automatic Termination" shall have the meaning set forth in Section
2.3.2.
"Bring Down Cold Comfort Letters" shall have the meaning set forth in
Section 2.3.6(b).
"Business Day" shall mean any day during which the Principal Market is
open for trading.
"Calendar Month" shall mean the period of time beginning on the numeric
day in question in a calendar month and for Calendar Months thereafter,
beginning on the earlier of (i) the same numeric day of the next calendar month
or (ii) the last day of the next calendar month. Each Calendar Month shall end
on the day immediately preceding the beginning of the next succeeding Calendar
Month.
"Cap Amount" shall have the meaning set forth in Section 2.3.10.
"Capital Raising Limitations" shall have the meaning set forth in
Section 6.5.1.
"Capitalization Schedule" shall have the meaning set forth in Section
3.2.4, attached hereto as Exhibit K.
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"Closing" shall mean one of (i) the Investment Commitment Closing and
(ii) each closing of a purchase and sale of Common Stock pursuant to Section 2.
"Closing Bid Price" means, for any security as of any date, the last
closing bid price for such security during Normal Trading on the O.T.C. Bulletin
Board, or, if the O.T.C. Bulletin Board is not the principal securities exchange
or trading market for such security, the last closing bid price during Normal
Trading of such security on the principal securities exchange or trading market
where such security is listed or traded as reported by such principal securities
exchange or trading market, or if the foregoing do not apply, the last closing
bid price during Normal Trading of such security in the over-the-counter market
on the electronic bulletin board for such security, or, if no closing bid price
is reported for such security, the average of the bid prices of any market
makers for such security as reported in the "pink sheets" by the National
Quotation Bureau, Inc. If the Closing Bid Price cannot be calculated for such
security on such date on any of the foregoing bases, the Closing Bid Price of
such security on such date shall be the fair market value as mutually determined
by the Company and the Investor in this Offering. If the Company and the
Investor in this Offering are unable to agree upon the fair market value of the
Common Stock, then such dispute shall be resolved by an investment banking firm
mutually acceptable to the Company and the Investor in this offering and any
fees and costs associated therewith shall be paid by the Company.
"Commitment Evaluation Period" shall have the meaning set forth in
Section 2.6.
"Commitment Warrants" shall have the meaning set forth in Section
2.4.1, the form of which is attached hereto as Exhibit U.
"Commitment Warrant Exercise Price" shall have the meaning set forth in
Section 2.4.1.
"Common Shares" shall mean the shares of Common Stock of the Company.
"Common Stock" shall mean the common stock of the Company.
"Company" shall mean Integral Technologies, Inc., a corporation duly
organized and existing under the laws of the State of Nevada.
"Company Designated Maximum Put Dollar Amount" shall have the meaning
set forth in Section 2.3.1(a).
"Company Designated Minimum Put Share Price" shall have the meaning set
forth in Section 2.3.1(a).
"Company Termination" shall have the meaning set forth in Section
2.3.12.
"Conditions to Investor's Obligations" shall have the meaning as set
forth in Section 2.2.2.
"Delisting Event" shall mean any time during the term of this
Investment Agreement, that the Company's Common Stock is not listed for and
actively trading on the O.T.C. Bulletin Board, the Nasdaq Small Cap Market, the
Nasdaq National Market, the American Stock Exchange, or the New York Stock
Exchange or is suspended or delisted with respect to the trading of the shares
of Common Stock on such market or exchange.
"Disclosure Documents" shall have the meaning as set forth in Section
3.2.4.
"Due Diligence Review" shall have the meaning as set forth in Section
2.5.
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"Effective Date" shall have the meaning set forth in Section 2.3.1.
"Equity Securities" shall have the meaning set forth in Section 6.5.1.
"Evaluation Day" shall have the meaning set forth in Section 2.3.1(b).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Excluded Day" shall have the meaning set forth in Section 2.3.1(b).
"Extended Put Period" shall mean the period of time between the Advance
Put Notice Date until the Pricing Period End Date.
"Impermissible Put Cancellation" shall have the meaning set forth in
Section 2.3.1(e).
"Indemnified Liabilities" shall have the meaning set forth in Section
9.
"Indemnities" shall have the meaning set forth in Section 9.
"Indemnitor" shall have the meaning set forth in Section 9.
"Individual Put Limit" shall have the meaning set forth in Section
2.3.1 (b).
"Ineffective Period" shall mean any period of time that the
Registration Statement or any Supplemental Registration Statement (each as
defined in the Registration Rights Agreement) becomes ineffective or unavailable
for use for the sale or resale, as applicable, of any or all of the Registrable
Securities (as defined in the Registration Rights Agreement) for any reason (or
in the event the prospectus under either of the above is not current and
deliverable) during any time period required under the Registration Rights
Agreement.
"Initial Exercise Price" shall have the meaning set forth in Section
2.4.1.
"Intended Put Share Amount" shall have the meaning set forth in Section
2.3.1(a).
"Investment Commitment Closing" shall have the meaning set forth in
Section 2.2.1.
"Investment Agreement" shall mean this Investment Agreement.
"Investment Commitment Opinion of Counsel" shall mean an opinion from
Company's independent counsel, substantially in the form attached as Exhibit B,
or such other form as agreed upon by the parties, as to the Investment
Commitment Closing.
"Investment Date" shall mean the date of the Investment Commitment
Closing.
"Investor" shall have the meaning set forth in the preamble hereto.
"Key Employee" shall have the meaning set forth in Section 5.17, as set
forth in Exhibit N.
"Late Payment Amount" shall have the meaning set forth in Section
2.3.8.
"Legend" shall have the meaning set forth in Section 4.7.
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"Major Transaction" shall mean and shall be deemed to have occurred at
such time upon any of the following events:
(i) a consolidation, merger or other business combination or event
or transaction following which the holders of Common Stock of the Company
immediately preceding such consolidation, merger, combination or event either
(i) no longer hold a majority of the shares of Common Stock of the Company or
(ii) no longer have the ability to elect the board of directors of the Company
(a "Change of Control"); provided, however, that if the other entity involved in
such consolidation, merger, combination or event is a publicly traded company
with "Substantially Similar Trading Characteristics" (as defined below) as the
Company and the holders of Common Stock are to receive solely Common Stock or no
consideration (if the Company is the surviving entity) or solely common stock of
such other entity (if such other entity is the surviving entity), such
transaction shall not be deemed to be a Major Transaction (provided the
surviving entity, if other than the Company, shall have agreed to assume all
obligations of the Company under this Agreement and the Registration Rights
Agreement). For purposes hereof, an entity shall have Substantially Similar
Trading Characteristics as the Company if the average daily dollar Trading
Volume of the common stock of such entity is equal to or in excess of $500,000
for the 90th through the 31st day prior to the public announcement of such
transaction;
(ii) the sale or transfer of all or substantially all of the
Company's assets; or
(iii) a purchase, tender or exchange offer made to the holders of
outstanding shares of Common Stock, such that following such purchase, tender or
exchange offer a Change of Control shall have occurred.
"Market Price" shall equal the lowest Closing Bid Price for the Common
Stock on the Principal Market during the Pricing Period for the applicable Put.
"Material Facts" shall have the meaning set forth in Section 2.3.6(a).
"Maximum Put Dollar Amount" shall mean the lesser of (i) the Company
Designated Maximum Put Dollar Amount, if any, specified by the Company in a Put
Notice, and (ii) $2 million.
"Maximum Offering Amount" shall mean Twenty Five Million Dollars
($25,000,000).
"Nasdaq 20% Rule" shall have the meaning set forth in Section 2.3.10.
"NASD" shall have the meaning set forth in Section 6.9.
"Normal Trading" shall mean trading that occurs between 9:30 AM and
4:00 PM, New York City Time, on any Business Day, and shall expressly exclude
"after hours" trading.
"NYSE" shall have the meaning set forth in Section 6.9.
"Numeric Day" shall mean the numerical day of the month of the
Investment Date or the last day of the calendar month in question, whichever is
less.
"Offering" shall mean the Company's offering of Common Stock and
Warrants issued under this Investment Agreement.
"Officer's Certificate" shall mean a certificate, signed by an officer
of the Company, to the effect that the representations and warranties of the
Company in this Agreement required to
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be true for the applicable Closing are true and correct in all material respects
and all of the conditions and limitations set forth in this Agreement for the
applicable Closing are satisfied.
"Opinion of Counsel" shall mean, as applicable, the Investment
Commitment Opinion of Counsel, the Put Opinion of Counsel, and the Registration
Opinion.
"Payment Due Date" shall have the meaning set forth in Section 2.3.8.
"Pricing Period" shall mean, unless otherwise shortened under the terms
of this Agreement, the period beginning on the Business Day immediately
following the Put Date and ending on and including the date which is 20 Business
Days after such Put Date.
"Pricing Period End Date" shall mean the last Business Day of any
Pricing Period.
"Principal Market" shall mean the O.T.C. Bulletin Board, the Nasdaq
Small Cap Market, the Nasdaq National Market, the American Stock Exchange or the
New York Stock Exchange, whichever is at the time the principal trading exchange
or market for the Common Stock.
"Proceeding" shall have the meaning as set forth Section 5.1.
"Purchase" shall have the meaning set forth in Section 2.3.7.
"Purchase Warrants" shall have the meaning set forth in Section 2.4.2,
the form of which is attached hereto as Exhibit D.
"Purchase Warrant Exercise Price" shall have the meaning set forth in
Section 2.4.2.
"Put" shall have the meaning set forth in Section 2.3.1(d).
"Put Cancellation" shall have the meaning set forth in Section
2.3.11(a).
"Put Cancellation Notice Confirmation" shall have the meaning set forth
in Section 2.3.11(c), the form of which is attached hereto as Exhibit S.
"Put Cancellation Date" shall have the meaning set forth in Section
2.3.11(a).
"Put Cancellation Notice" shall have the meaning set forth in Section
2.3.11(a), the form of which is attached hereto as Exhibit Q.
"Put Closing" shall have the meaning set forth in Section 2.3.8.
"Put Closing Date" shall have the meaning set forth in Section 2.3.8.
"Put Date" shall mean the date that is specified by the Company in any
Put Notice for which the Company intends to exercise a Put under Section 2.3.1,
unless the Put Date is postponed pursuant to the terms hereof, in which case the
"Put Date" is such postponed date.
"Put Dollar Amount" shall be determined by multiplying the Put Share
Amount by the respective Put Share Prices with respect to such Put Shares,
subject to the limitations herein.
"Put Notice" shall have the meaning set forth in Section 2.3.1(d), the
form of which is attached hereto as Exhibit G.
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"Put Notice Confirmation" shall have the meaning set forth in Section
2.3.1(d), the form of which is attached hereto as Exhibit H.
"Put Opinion of Counsel" shall mean an opinion from Company's
independent counsel, in the form attached as Exhibit I, or such other form as
agreed upon by the parties, as to any Put Closing.
"Put Share Amount" shall have the meaning as set forth Section
2.3.1(b).
"Put Share Price" shall have the meaning set forth in Section 2.3.1(c).
"Put Shares" shall mean shares of Common Stock that are purchased by
the Investor pursuant to a Put.
"Registrable Securities" shall have the meaning as set forth in the
Registration Rights Agreement.
"Registration Opinion" shall have the meaning set forth in Section
2.3.6(a), the form of which is attached hereto as Exhibit R.
"Registration Opinion Deadline" shall have the meaning set forth in
Section 2.3.6(a).
"Registration Rights Agreement" shall mean that certain registration
rights agreement entered into by the Company and Investor on even date herewith,
in the form attached hereto as Exhibit A, or such other form as agreed upon by
the parties.
"Registration Statement" shall have the meaning as set forth in the
Registration Rights Agreement.
"Regulation D" shall mean Regulation D promulgated under the Act.
"Reporting Issuer" shall have the meaning set forth in Section 6.2.
"Required Put Documents" shall have the meaning set forth in Section
2.3.5.
"Risk Factors" shall have the meaning set forth in Section 3.2.4,
attached hereto as Exhibit J.
"Schedule of Exceptions" shall have the meaning set forth in Section 5,
and is attached hereto as Exhibit C.
"SEC" shall mean the Securities and Exchange Commission.
"Securities" shall mean this Investment Agreement, together with the
Common Stock of the Company, the Warrants and the Warrant Shares issuable
pursuant to this Investment Agreement.
"Semi-Annual Non-Usage Fee" shall have the meaning set forth in Section
2.6.
"Share Authorization Increase Approval" shall have the meaning set
forth in Section 5.25.
"Six Month Anniversary" shall mean the date that is the same Numeric
Day of the sixth (6th) calendar month after the Investment Date, and the date
that is the same Numeric Day of
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each sixth (6th) calendar month thereafter, provided that if such date is not a
Business Day, the next Business Day thereafter.
"Stockholder 20% Approval" shall have the meaning set forth in Section
6.11.
"Supplemental Registration Statement" shall have the meaning set forth
in the Registration Rights Agreement.
"Term" shall mean the term of this Agreement, which shall be a period
of time beginning on the date of this Agreement and ending on the Termination
Date.
"Termination Date" shall mean the earlier of (i) the date that is three
(3) years after the Effective Date, or (ii) the date that is thirty (30)
Business Days after the later of (a) the Put Closing Date on which the sum of
the aggregate Put Share Price for all Put Shares equal the Maximum Offering
Amount, (b) the date that the Company has delivered a Termination Notice to the
Investor, (c) the date of an Automatic Termination, and (d) the date that all of
the Warrants have been exercised.
"Termination Fee" shall have the meaning as set forth in Section 2.6.
"Termination Notice" shall have the meaning as set forth in Section
2.3.12.
"Third Party Report" shall have the meaning set forth in Section 3.2.4.
"Trading Volume " shall mean the volume of shares of the Company's
Common Stock that trade between 9:30 AM and 4:00 PM, New York City Time, on any
Business Day, and shall expressly exclude any shares trading during "after
hours" trading.
"Transaction Documents" shall have the meaning set forth in Section 9.
"Transfer Agent Instructions" shall mean the Company's instructions to
its transfer agent, substantially in the form attached as Exhibit T, or such
other form as agreed upon by the parties.
"Trigger Price" shall have the meaning set forth in Section 2.3.1(b).
"Truncated Pricing Period" shall have the meaning set forth in Section
2.3.11(d).
"Truncated Put Share Amount" shall have the meaning set forth in
Section 2.3.11(b).
"Unlegended Share Certificates" shall mean a certificate or
certificates (or electronically delivered shares, as appropriate) (in
denominations as instructed by Investor) representing the shares of Common Stock
to which the Investor is then entitled to receive, registered in the name of
Investor or its nominee (as instructed by Investor) and not containing a
restrictive legend or stop transfer order, including but not limited to the Put
Shares for the applicable Put and Warrant Shares.
"Use of Proceeds Schedule" shall have the meaning as set forth in
Section 3.2.4, attached hereto as Exhibit L.
"Volume Limitations" shall have the meaning set forth in Section
2.3.1(b).
"Warrant Shares" shall mean the Common Stock issued or issuable upon
exercise of the Warrants.
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"Warrants" shall mean Purchase Warrants and Commitment Warrants.
2. Purchase and Sale of Common Stock.
2.1 Offer to Subscribe.
Subject to the terms and conditions herein and the satisfaction
of the conditions to closing set forth in Sections 2.2 and 2.3 below,
Investor hereby agrees to purchase such amounts of Common Stock and
accompanying Warrants as the Company may, in its sole and absolute
discretion, from time to time elect to issue and sell to Investor
according to one or more Puts pursuant to Section 2.3 below.
2.2 Investment Commitment.
2.2.1 Investment Commitment Closing. The closing of this
Agreement (the "Investment Commitment Closing") shall be deemed to occur when
this Agreement and the Registration Rights Agreement have been executed by both
Investor and the Company, the Transfer Agent Instructions have been executed by
both the Company and the Transfer Agent, and the other Conditions to Investor's
Obligations set forth in Section 2.2.2 below have been met.
2.2.2 Conditions to Investor's Obligations. As a prerequisite
to the Investment Commitment Closing and the Investor's obligations hereunder,
all of the following (the "Conditions to Investor's Obligations") shall have
been satisfied prior to or concurrently with the Company's execution and
delivery of this Agreement:
(a) the following documents shall have been delivered to the
Investor: (i) the Registration Rights Agreement (executed by the
Company and Investor), (ii) the Investment Commitment Opinion of
Counsel (signed by the Company's counsel), (iii) the Transfer
Agent Instructions (executed by the Company and the Transfer
Agent), and (iv) a Secretary's Certificate as to (A) the
resolutions of the Company's board of directors authorizing this
transaction, (B) the Company's Certificate of Incorporation, and
(C) the Company's Bylaws;
(b) this Investment Agreement, accepted by the Company, shall have
been received by the Investor;
(c) the Company's Common Stock shall be listed for trading and
actually trading on the O.T.C. Bulletin Board, the Nasdaq Small
Cap Market, the Nasdaq National Market, the American Stock
Exchange or the New York Stock Exchange;
(d) other than continuing losses described in the Risk Factors set
forth in the Disclosure Documents (provided for in Section
3.2.4), as of the Closing there have been no material adverse
changes in the Company's business prospects or financial
condition since the date of the last balance sheet included in
the Disclosure Documents, including but not limited to incurring
material liabilities; and
(e) the representations and warranties of the Company in this
Agreement shall be true and correct in all material respects and
the conditions to Investor's obligations set forth in this
Section 2.2.2 shall have been satisfied as of
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such Closing; and the Company shall deliver an Officer's
Certificate, signed by an officer of the Company, to such effect
to the Investor.
2.3 Puts of Common Shares to the Investor.
2.3.1 Procedure to Exercise a Put. Subject to the Individual
Put Limit, the Maximum Offering Amount and the Cap Amount (if applicable), and
the other conditions and limitations set forth in this Agreement, at any time
beginning on the date on which the Registration Statement is declared effective
by the SEC (the "Effective Date"), the Company may, in its sole and absolute
discretion, elect to exercise one or more Puts according to the following
procedure, provided that each subsequent Put Date after the first Put Date shall
be no sooner than five (5) Business Days following the preceding Pricing Period
End Date:
(a) Delivery of Advance Put Xxxxxx.Xx least ten (10)
Business Days but not more than twenty (20) Business Days prior to any intended
Put Date (unless otherwise agreed in writing by the Investor), the Company shall
deliver advance written notice (the "Advance Put Notice," the form of which is
attached hereto as Exhibit E, the date of such Advance Put Notice being the
"Advance Put Notice Date") to Investor stating the Put Date for which the
Company shall, subject to the limitations and restrictions contained herein,
exercise a Put and stating the number of shares of Common Stock (subject to the
Individual Put Limit and the Maximum Put Dollar Amount) which the Company
intends to sell to the Investor for the Put (the "Intended Put Share Amount").
The Company may, at its option, also designate in any Advance Put
Notice (i) a maximum dollar amount of Common Stock, not to exceed $2,000,000,
which it shall sell to Investor during the Put (the "Company Designated Maximum
Put Dollar Amount") and/or (ii) a minimum purchase price per Put Share at which
the Investor may purchase Shares pursuant to such Put Notice (a "Company
Designated Minimum Put Share Price"). The Company Designated Minimum Put Share
Price, if applicable, shall be no greater than 80% of the Closing Bid Price of
the Company's common stock on the Advance Put Notice Date. The Company may
decrease (but not increase) the Company Designated Minimum Put Share Price for a
Put at any time by giving the Investor written notice of such decrease not later
than 12:00 Noon, New York City time, on the Business Day immediately preceding
the Business Day that such decrease is to take effect. A decrease in the Company
Designated Minimum Put Share Price shall have no retroactive effect on the
determination of Trigger Prices and Excluded Days for days preceding the
Business Day that such decrease takes effect.
Notwithstanding the above, if, at the time of delivery of an Advance
Put Notice, more than two (2) Calendar Months have passed since the date of the
previous Put Closing, such Advance Put Notice shall provide at least twenty (20)
Business Days notice of the intended Put Date, unless waived in writing by the
Investor. In order to effect delivery of the Advance Put Notice, the Company
shall (i) send the Advance Put Notice by facsimile on such date so that such
notice is received by the Investor by 6:00 p.m., New York, NY time, and (ii)
surrender such notice on such date to a courier for overnight delivery to the
Investor (or two (2) day delivery in the case of an Investor residing outside of
the U.S.). Upon receipt by the Investor of a facsimile copy of the Advance Put
Notice, the Investor shall, within two (2) Business Days, send, via facsimile, a
confirmation of receipt (the "Advance Put Notice Confirmation," the form of
which is attached hereto as Exhibit F) of the Advance Put Notice to the Company
specifying that the Advance Put Notice has been received and affirming the
intended Put Date and the Intended Put Share Amount.
(b) Put Share Amount. The "Put Share Amount" is the
number of shares of Common Stock that the Investor shall be obligated to
purchase in a given Put, and shall
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equal the lesser of (i) the Intended Put Share Amount, and (ii) the Individual
Put Limit. The "Individual Put Limit" shall equal the lesser of (i) 15% of the
sum of the aggregate daily reported Trading Volumes in the outstanding Common
Stock on the Company's Principal Market, excluding any block trades of 20,000 or
more shares of Common Stock, for all Evaluation Days (as defined below) in the
Pricing Period, (ii) the number of Put Shares which, when multiplied by their
respective Put Share Prices, equals the Maximum Put Dollar Amount, and (iii) the
9.9% Limitation, but in no event shall the Individual Put Limit exceed 15% of
the sum of the aggregate daily reported Trading Volumes in the outstanding
Common Stock on the Company's Principal Market, excluding any block trades of
20,000 or more shares of Common Stock, for the twenty (20) Business Days
immediately preceding the Put Date (this limitation, together with the
limitation in (i) immediately above, are collectively referred to herein as the
"Volume Limitations"). Company agrees not to trade Common Stock or arrange for
Common Stock to be traded for the purpose of artificially increasing the Volume
Limitations.
For purposes of this Agreement:
"Trigger Price" for any Pricing Period shall mean the greater of
(i) the Company Designated Minimum Put Share Price, plus $.25, or (ii) the
Company Designated Minimum Put Share Price divided by .91.
An "Excluded Day" shall mean each Business Day during a Pricing
Period where the lowest intra-day trading price of the Common Stock is less than
the Trigger Price.
An "Evaluation Day" shall mean each Business Day during a Pricing
Period that is not an Excluded Day.
(c) Put Share Price. The purchase price for the Put
Shares (the "Put Share Price") shall equal the lesser of (i) the Market Price
for such Put, minus $.25, or (ii) 91% of the Market Price for such Put, but
shall in no event be less than the Company Designated Minimum Put Share Price
for such Put, if applicable.
(d) Delivery of Put Notice. After delivery of an Advance
Put Notice, on the Put Date specified in the Advance Put Notice the Company
shall deliver written notice (the "Put Notice," the form of which is attached
hereto as Exhibit G) to Investor stating (i) the Put Date, (ii) the Intended Put
Share Amount as specified in the Advance Put Notice (such exercise a "Put"),
(iii) the Company Designated Maximum Put Dollar Amount (if applicable), and (iv)
the Company Designated Minimum Put Share Price (if applicable). In order to
effect delivery of the Put Notice, the Company shall (i) send the Put Notice by
facsimile on the Put Date so that such notice is received by the Investor by
6:00 p.m., New York, NY time, and (ii) surrender such notice on the Put Date to
a courier for overnight delivery to the Investor (or two (2) day delivery in the
case of an Investor residing outside of the U.S.). Upon receipt by the Investor
of a facsimile copy of the Put Notice, the Investor shall, within two (2)
Business Days, send, via facsimile, a confirmation of receipt (the "Put Notice
Confirmation," the form of which is attached hereto as Exhibit H) of the Put
Notice to Company specifying that the Put Notice has been received and affirming
the Put Date and the Intended Put Share Amount.
(e) Delivery of Required Put Documents. On or before the
Put Date for such Put, the Company shall deliver the Required Put Documents (as
defined in Section 2.3.5 below) to the Investor (or to an agent of Investor, if
Investor so directs). Unless otherwise specified by the Investor, the Put Shares
of Common Stock shall be transmitted electronically pursuant to such electronic
delivery system as the Investor shall request; otherwise delivery shall
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be by physical certificates. If the Company has not delivered all of the
Required Put Documents to the Investor on or before the Put Date, the Put shall
be automatically cancelled, unless the Investor agrees to delay the Put Date by
up to three (3) Business Days, in which case the Pricing Period begins on the
Business Day following such new Put Date. If the Company has not delivered all
of the Required Put Documents to the Investor on or before the Put Date (or new
Put Date, if applicable), and the Investor has not agreed in writing to delay
the Put Date, the Put is automatically canceled (an "Impermissible Put
Cancellation") and, unless the Put was otherwise canceled in accordance with the
terms of Section 2.3.11, the Company shall pay the Investor $5,000 for its
reasonable due diligence expenses incurred in preparation for the canceled Put
and the Company may deliver an Advance Put Notice for the subsequent Put no
sooner than ten (10) Business Days after the date that such Put was canceled,
unless otherwise agreed by the Investor.
(f) Limitation on Investor's Obligation to Purchase
Shares. Notwithstanding anything to the contrary in this Agreement, in no event
shall the Investor be required to purchase, and an Intended Put Share Amount may
not include, an amount of Put Shares, which when added to the number of Put
Shares acquired by the Investor pursuant to this Agreement during the 31 days
preceding the Put Date with respect to which this determination of the permitted
Intended Put Share Amount is being made, would exceed 9.99% of the number of
shares of Common Stock outstanding (on a fully diluted basis, to the extent that
inclusion of unissued shares is mandated by Section 13(d) of the Exchange Act)
on the Put Date for such Pricing Period, as determined in accordance with
Section 13(d) of the Exchange Act (the "Section 13(d) Outstanding Share
Amount"). Each Put Notice shall include a representation of the Company as to
the Section 13(d) Outstanding Share Amount on the related Put Date. In the event
that the Section 13(d) Outstanding Share Amount is different on any date during
a Pricing Period than on the Put Date associated with such Pricing Period, then
the number of shares of Common Stock outstanding on such date during such
Pricing Period shall govern for purposes of determining whether the Investor,
when aggregating all purchases of Shares made pursuant to this Agreement in the
31 calendar days preceding such date, would have acquired more than 9.99% of the
Section 13(d) Outstanding Share Amount. The limitation set forth in this Section
2.3.1(f) is referred to as the "9.9% Limitation."
2.3.2 Termination of Right to Put. The Company's right to
require the Investor to purchase any subsequent Put Shares shall terminate
permanently (each, an "Automatic Termination") upon the occurrence of any of the
following:
(a) the Company shall not exercise a Put or any Put
thereafter if, at any time, either the Company or any director or executive
officer of the Company has engaged in a transaction or conduct related to the
Company that has resulted in (i) a Securities and Exchange Commission
enforcement action, or (ii) a civil judgment or criminal conviction for fraud or
misrepresentation, or for any other offense that, if prosecuted criminally,
would constitute a felony under applicable law;
(b) the Company shall not exercise a Put or any Put
thereafter, on any date after a cumulative time period or series of time
periods, including both Ineffective Periods and Delisting Events, that lasts for
an aggregate of four (4) months;
(c) the Company shall not exercise a Put or any Put
thereafter if at any time the Company has filed for and/or is subject to any
bankruptcy, insolvency, reorganization or liquidation proceedings or other
proceedings for relief under any bankruptcy law or any law for the relief of
debtors instituted by or against the Company or any subsidiary of the Company;
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(d) the Company shall not exercise a Put after the
sooner of (i) the date that is three (3) years after the Effective Date, or (ii)
the Put Closing Date on which the aggregate of the Put Dollar Amounts for all
Puts equal the Maximum Offering Amount; and
(e) the Company shall not exercise a Put after the
Company has breached any covenant in Section 2.6, Section 6, or Section 9
hereof.
(f) if no Registration Statement has been declared
effective by the date that is one (1) year after the date of this Agreement, the
Automatic Termination shall occur on the date that is one (1) year after the
date of this Agreement.
2.3.3 Put Limitations. The Company's right to exercise a Put
shall be limited as follows:
(a) notwithstanding the amount of any Put, the Investor
shall not be obligated to purchase any additional Put Shares once the aggregate
Put Dollar Amount paid by Investor equals the Maximum Offering Amount;
(b) the Investor shall not be obligated to acquire and
pay for the Put Shares with respect to any Put for which the Company has
announced a subdivision or combination, including a reverse split, of its Common
Stock or has subdivided or combined its Common Stock during the Extended Put
Period;
(c) the Investor shall not be obligated to acquire and
pay for the Put Shares with respect to any Put for which the Company has paid a
dividend of its Common Stock or has made any other distribution of its Common
Stock during the Extended Put Period;
(d) the Investor shall not be obligated to acquire and
pay for the Put Shares with respect to any Put for which the Company has made,
during the Extended Put Period, a distribution of all or any portion of its
assets or evidences of indebtedness to the holders of its Common Stock;
(e) the Investor shall not be obligated to acquire and
pay for the Put Shares with respect to any Put for which a Major Transaction has
occurred during the Extended Put Period.
2.3.4 Conditions Precedent to the Right of the Company to
Deliver an Advance Put Notice or a Put Notice and the Obligation of the Investor
to Purchase Put Shares. The right of the Company to deliver an Advance Put
Notice or a Put Notice and the obligation of the Investor hereunder to acquire
and pay for the Put Shares incident to a Closing is subject to the satisfaction,
on (i) the date of delivery of such Advance Put Notice or Put Notice and (ii)
the applicable Put Closing Date, of each of the following conditions:
(a) the Company's Common Stock shall be listed for and actively
trading on the O.T.C. Bulletin Board, the Nasdaq Small Cap
Market, the Nasdaq National Market or the New York Stock
Exchange and the Put Shares shall be so listed, and to the
Company's knowledge there is no notice of any suspension or
delisting with respect to the trading of the shares of
Common Stock on such market or exchange;
(b) the Company shall have satisfied any and all obligations
pursuant to the Registration Rights Agreement, including,
but not limited to, the filing of the Registration Statement
with the SEC with respect to the resale of all
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Registrable Securities and the requirement that the
Registration Statement shall have been declared effective by
the SEC for the resale of all Registrable Securities and the
Company shall have satisfied and shall be in compliance with
any and all obligations pursuant to this Agreement and the
Warrants;
(c) the representations and warranties of the Company are true
and correct in all material respects as if made on such date
and the conditions to Investor's obligations set forth in
this Section 2.3.4 are satisfied as of such Closing, and the
Company shall deliver a certificate, signed by an officer of
the Company, to such effect to the Investor;
(d) the Company shall have reserved for issuance a sufficient
number of Common Shares for the purpose of enabling the
Company to satisfy any obligation to issue Common Shares
pursuant to any Put and to effect exercise of the Warrants;
(e) the Registration Statement is not subject to an Ineffective
Period as defined in the Registration Rights Agreement, the
prospectus included therein is current and deliverable, and
to the Company's knowledge there is no notice of any
investigation or inquiry concerning any stop order with
respect to the Registration Statement; and
(f) if the Aggregate Issued Shares after the Closing of the Put
would exceed the Cap Amount, the Company shall have obtained
the Stockholder 20% Approval as specified in Section 6.11,
if the Company's Common Stock is listed on the NASDAQ Small
Cap Market or NMS, and such approval is required by the
rules of the NASDAQ.
2.3.5 Documents Required to be Delivered on the Put Date as
Conditions to Closing of any Put. The Closing of any Put and Investor's
obligations hereunder shall additionally be conditioned upon the delivery to the
Investor of each of the following (the "Required Put Documents") on or before
the applicable Put Date:
(a) a number of Unlegended Share Certificates (or freely
tradeable electronically delivered shares, as appropriate) equal to the Intended
Put Share Amount, in denominations of not more than 50,000 shares per
certificate;
(b) the following documents: Put Opinion of Counsel,
Officer's Certificate, Put Notice, Registration Opinion, and any report or
disclosure required under Section 2.3.6 or Section 2.5;
(c) all documents, instruments and other writings
required to be delivered on or before the Put Date pursuant to any provision of
this Agreement in order to implement and effect the transactions contemplated
herein.
The Company shall be required to deliver a Put Opinion and a Bring Down
Cold Comfort Letter with respect to the first Put. Notwithstanding the above,
the Company shall not be required to deliver a Bring Down Cold Comfort Letter
with respect to a given Put after the first Put if the Company has filed an
annual report on Form 10-K or a quarterly report on Form 10-Q within the thirty
(30) day period immediately preceding the Put Date for such Put.
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2.3.6 Accountant's Letter and Registration Opinion.
(a) The Company shall have caused to be delivered to the
Investor, (i) whenever required by Section 2.3.6(b) or by Section 2.5.3, and
(ii) on the date that is three (3) Business Days prior to each Put Date (the
"Registration Opinion Deadline"), an opinion of the Company's independent
counsel, in substantially the form of Exhibit R (the "Registration Opinion"),
addressed to the Investor stating, inter alia, that no facts ("Material Facts")
have come to such counsel's attention that have caused it to believe that the
Registration Statement is subject to an Ineffective Period or to believe that
the Registration Statement, any Supplemental Registration Statement (as each may
be amended, if applicable), and any related prospectuses, contain an untrue
statement of material fact or omits a material fact required to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading. If a Registration Opinion cannot be delivered by the
Company's independent counsel to the Investor on the Registration Opinion
Deadline due to the existence of Material Facts or an Ineffective Period, the
Company shall promptly notify the Investor and as promptly as possible amend
each of the Registration Statement and any Supplemental Registration Statements,
as applicable, and any related prospectus or cause such Ineffective Period to
terminate, as the case may be, and deliver such Registration Opinion and updated
prospectus as soon as possible thereafter. If at any time after a Put Notice
shall have been delivered to Investor but before the related Pricing Period End
Date, the Company acquires knowledge of such Material Facts or any Ineffective
Period occurs, the Company shall promptly notify the Investor and shall deliver
a Put Cancellation Notice to the Investor pursuant to Section 2.3.11 by
facsimile and overnight courier by the end of that Business Day.
(b) (i) the Company shall engage its independent
auditors to perform the procedures in accordance with the provisions of
Statement on Auditing Standards No. 71, as amended, as agreed to by the parties
hereto, and reports thereon (the "Bring Down Cold Comfort Letters") as shall
have been reasonably requested by the Investor with respect to certain financial
information contained in the Registration Statement and shall have delivered to
the Investor such a report addressed to the Investor, on the date that is three
(3) Business Days prior to each Put Date.
(ii) in the event that the Investor shall have
requested delivery of an Agreed Upon Procedures Report pursuant to Section
2.5.3, the Company shall engage its independent auditors to perform certain
agreed upon procedures and report thereon as shall have been reasonably
requested by the Investor with respect to certain financial information of the
Company and the Company shall deliver to the Investor a copy of such report
addressed to the Investor. In the event that the report required by this Section
2.3.6(b) cannot be delivered by the Company's independent auditors, the Company
shall, if necessary, promptly revise the Registration Statement and the Company
shall not deliver a Put Notice until such report is delivered.
2.3.7 Investor's Obligation and Right to Purchase Shares.
Subject to the conditions set forth in this Agreement, following the Investor's
receipt of a validly delivered Put Notice, the Investor shall be required to
purchase (each a "Purchase") from the Company a number of Put Shares equal to
the Put Share Amount, in the manner described below.
2.3.8 Mechanics of Put Closing. Each of the Company and the
Investor shall deliver all documents, instruments and writings required to be
delivered by either of them pursuant to this Agreement at or prior to each
Closing. Subject to such delivery and the satisfaction of the conditions set
forth in Sections 2.3.4 and 2.3.5, the closing of the purchase by the Investor
of Shares shall occur by 5:00 PM, New York City Time, on the date which is five
(5) Business Days following the applicable Pricing Period End Date (the "Payment
Due Date") at the offices of Investor. On each or before each Payment Due Date,
the Investor shall deliver to the Company, in the manner specified in Section 8
below, the Put Dollar Amount to be paid for
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such Put Shares, determined as aforesaid. The closing (each a "Put Closing") for
each Put shall occur on the date that both (i) the Company has delivered to the
Investor all Required Put Documents, and (ii) the Investor has delivered to the
Company such Put Dollar Amount and any Late Payment Amount, if applicable (each
a "Put Closing Date"). If requested by the Company, prior to the Payment Due
Date the Investor will provide the Company with calculations regarding the Put
Share Price and the Put Share Amount, and the Company will check and verify any
such calculations promptly after receipt.
If the Investor does not deliver to the Company the Put Dollar Amount for such
Put Closing within five (5) Business Days of the Payment Due Date, then (i) the
Company, in addition to any other remedies it may have, may require the Investor
to pay to the Company, in addition to the Put Dollar Amount, an amount (the
"Late Payment Amount") at a rate of $500 per calendar day for each day that
passes after the day in question until the Put Dollar Amount is paid, up to a
maximum of $20,000; provided, however, that in no event shall the amount of
interest that shall become due and payable hereunder exceed the maximum amount
permissible under applicable law, and (ii) the Investor shall not be entitled to
exercise the Commitment Warrant or any Purchase Warrant until such payment is
made. If the Investor does not deliver to the Company the Put Dollar Amount for
such Put Closing within twenty Business Days of the Payment Due Date, then the
Company, in addition to any other remedies it may have, may terminate this
Agreement without the payment of any Termination Fee, and may cancel the
unexercised portion of the Commitment Warrants and any Purchase Warrants,
provided that the Company shall first give the Investor five (5) Business Days
advance written notice that the remedies in this sentence will be imposed if
payment is not made within five (5) Business Days, which notice may be given
anytime beginning twenty (20) Business Days after the Payment Due Date.
2.3.9 Limitation on Short Sales. The Investor and its
Affiliates shall not engage in short sales of the Company's Common Stock;
provided, however, that the Investor may enter into any short exempt sale or any
short sale or other hedging or similar arrangement it deems appropriate with
respect to Put Shares after it receives a Put Notice with respect to such Put
Shares so long as such sales or arrangements do not involve more than the number
of such Put Shares specified in the Put Notice.
2.3.10 Cap Amount. If the Company becomes listed on the
Nasdaq Small Cap Market or the Nasdaq National Market, then, unless the Company
has obtained Stockholder 20% Approval as set forth in Section 6.11 or unless
otherwise permitted by Nasdaq, in no event shall the Aggregate Issued Shares
exceed the maximum number of shares of Common Stock (the "Cap Amount") that the
Company can, without stockholder approval, so issue pursuant to Nasdaq Rule
4460(i)(1)(d)(ii) (or any other applicable Nasdaq Rules or any successor rule)
(the "Nasdaq 20% Rule").
2.3.11 Put Cancellation.
(a) Mechanics of Put Cancellation. If at any time during
a Pricing Period the Company discovers the existence of Material Facts or any
Ineffective Period or Delisting Event occurs, the Company shall cancel the Put
(a "Put Cancellation"), by delivering written notice to the Investor (the "Put
Cancellation Notice"), attached as Exhibit Q, by facsimile and overnight
courier. The "Put Cancellation Date" shall be the date that the Put Cancellation
Notice is first received by the Investor, if such notice is received by the
Investor by 6:00 p.m., New York, NY time, and shall be the following date, if
such notice is received by the Investor after 6:00 p.m., New York, NY time.
(b) Effect of Put Cancellation. Anytime a Put
Cancellation Notice is delivered to Investor after the Put Date, the Put, shall
remain effective with respect to a
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number of Put Shares (the "Truncated Put Share Amount") equal to the Individual
Put Limit for the Truncated Pricing Period.
(c) Put Cancellation Notice Confirmation. Upon receipt
by the Investor of a facsimile copy of the Put Cancellation Notice, the Investor
shall promptly send, via facsimile, a confirmation of receipt (the "Put
Cancellation Notice Confirmation," a form of which is attached as Exhibit S) of
the Put Cancellation Notice to the Company specifying that the Put Cancellation
Notice has been received and affirming the Put Cancellation Date.
(d) Truncated Pricing Period. If a Put Cancellation
Notice has been delivered to the Investor after the Put Date, the Pricing Period
for such Put shall end at on the close of trading on the last full trading day
on the Principal Market that ends prior to the moment of initial delivery of the
Put Cancellation Notice (a "Truncated Pricing Period") to the Investor.
2.3.12 Investment Agreement Cancellation. The Company may
terminate (a "Company Termination") its right to initiate future Puts by
providing written notice ("Termination Notice") to the Investor, by facsimile
and overnight courier, at any time other than during an Extended Put Period,
provided that such termination shall have no effect on the parties' other rights
and obligations under this Agreement, the Registration Rights Agreement or the
Warrants. Notwithstanding the above, any cancellation occurring during an
Extended Put Period is governed by Section 2.3.11.
2.3.13 Return of Excess Common Shares. In the event that the
number of Shares purchased by the Investor pursuant to its obligations hereunder
is less than the Intended Put Share Amount, the Investor shall promptly return
to the Company any shares of Common Stock in the Investor's possession that are
not being purchased by the Investor.
2.4 Warrants.
2.4.1 Commitment Warrants. In consideration hereof, following
the execution of the Letter of Agreement dated on or about December 12, 1999
between the Company and the Investor, the Company issued and delivered to
Investor or its designated assignees, warrants (the "Commitment Warrants") in
the form attached hereto as Exhibit U, or such other form as agreed upon by the
parties, to purchase 495,000 shares of Common Stock. The Warrant Shares shall be
registered for resale pursuant to the Registration Rights Agreement. The
Investment Commitment Opinion of Counsel shall cover the issuance of the
Commitment Warrant and the issuance of the common stock upon exercise of the
Commitment Warrant.
Notwithstanding any Termination or Automatic Termination of this Agreement,
regardless of whether or not the Registration Statement is or is not filed, and
regardless of whether or not the Registration Statement is approved or denied by
the SEC, the Investor shall retain full ownership of the Commitment Warrant as
consideration for its commitment hereunder.
2.4.2 Purchase Warrants. Within five (5) Business Days of the
end of each Pricing Period, the Company shall issue and deliver to the Investor
a warrant ("Purchase Warrant"), in the form attached hereto as Exhibit D, or
such other form as agreed upon by the parties, to purchase a number of shares of
Common Stock equal to 10% of the Put Share Amount for that Put. Each Purchase
Warrant shall be exercisable at a price (the "Purchase Warrant Exercise Price")
which shall initially equal 110% of the Market Price for the applicable Put, and
shall have semi-annual reset provisions. Each Purchase Warrant shall be
immediately exercisable at the Purchase Warrant Exercise Price, and shall have a
term beginning on the date
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of issuance and ending on the date that is five (5) years thereafter. The
Warrant Shares shall be registered for resale pursuant to the Registration
Rights Agreement.
2.5 Due Diligence Review. The Company shall make available for
inspection and review by the Investor (the "Due Diligence Review"), advisors to
and representatives of the Investor (who may or may not be affiliated with the
Investor and who are reasonably acceptable to the Company), any underwriter
participating in any disposition of Common Stock on behalf of the Investor
pursuant to the Registration Statement, any Supplemental Registration Statement,
or amendments or supplements thereto or any blue sky, NASD or other filing, all
financial and other records, all SEC Documents and other filings with the SEC,
and all other corporate documents and properties of the Company as may be
reasonably necessary for the purpose of such review, and cause the Company's
officers, directors and employees to supply all such information reasonably
requested by the Investor or any such representative, advisor or underwriter in
connection with such Registration Statement (including, without limitation, in
response to all questions and other inquiries reasonably made or submitted by
any of them), prior to and from time to time after the filing and effectiveness
of the Registration Statement for the sole purpose of enabling the Investor and
such representatives, advisors and underwriters and their respective accountants
and attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of the Registration Statement.
2.5.1 Treatment of Nonpublic Information. The Company shall
not disclose nonpublic information to the Investor or to its advisors or
representatives unless prior to disclosure of such information the Company
identifies such information as being nonpublic information and provides the
Investor and such advisors and representatives with the opportunity to accept or
refuse to accept such nonpublic information for review. The Company may, as a
condition to disclosing any nonpublic information hereunder, require the
Investor and its advisors and representatives to enter into a confidentiality
agreement (including an agreement with such advisors and representatives
prohibiting them from trading in Common Stock during such period of time as they
are in possession of nonpublic information) in form reasonably satisfactory to
the Company and the Investor.
Nothing herein shall require the Company to disclose nonpublic information
to the Investor or its advisors or representatives, and the Company represents
that it does not disseminate nonpublic 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 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
nonpublic information (whether or not requested of the Company specifically or
generally during the course of due diligence by and 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 2.5 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
nonpublic information in the course of conducting due diligence in accordance
with the terms of this Agreement; provided, however, that in no event shall the
Investor's advisors or representatives disclose to the Investor the nature of
the specific event or circumstances constituting any nonpublic information
discovered by such advisors or representatives in the course of their due
diligence without the written consent of the Investor prior to disclosure of
such information.
2.5.2 Disclosure of Misstatements and Omissions. The
Investor's advisors or representatives shall make complete disclosure to the
Investor's counsel of all events or
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circumstances constituting nonpublic information discovered by such advisors or
representatives in the course of their due diligence upon which such advisors or
representatives form the opinion that the Registration Statement contains an
untrue statement of a material fact or omits a material fact required to be
stated in the Registration Statement or necessary to make the statements
contained therein, in the light of the circumstances in which they were made,
not misleading. Upon receipt of such disclosure, the Investor's counsel shall
consult with the Company's independent counsel in order to address the concern
raised as to the existence of a material misstatement or omission and to discuss
appropriate disclosure with respect thereto; provided, however, that such
consultation shall not constitute the advice of the Company's independent
counsel to the Investor as to the accuracy of the Registration Statement and
related Prospectus.
2.5.3 Procedure if Material Facts are Reasonably Believed to
be Untrue or are Omitted. In the event after such consultation the Investor or
the Investor's counsel reasonably believes that the Registration Statement
contains an untrue statement or a 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,
(a) the Company shall file with the SEC an amendment to
the Registration Statement responsive to such alleged untrue statement or
omission and provide the Investor, as promptly as practicable, with copies of
the Registration Statement and related Prospectus, as so amended, or
(b) if the Company disputes the existence of any such
material misstatement or omission, (i) the Company's independent counsel shall
provide the Investor's counsel with a Registration Opinion and (ii) in the event
the dispute relates to the adequacy of financial disclosure and the Investor
shall reasonably request, the Company's independent auditors shall provide to
the Company a letter ("Agreed Upon Procedures Report") outlining the performance
of such "agreed upon procedures" as shall be reasonably requested by the
Investor and the Company shall provide the Investor with a copy of such letter.
2.6 Commitment Payments.
On the last Business Day of each six (6) Calendar Month period following
the Effective Date (each such period a "Commitment Evaluation Period"), if the
Company has not Put at least $1,000,000 in aggregate Put Dollar Amount during
that Commitment Evaluation Period, the Company, in consideration of Investor's
commitment costs, including, but not limited to, due diligence expenses, shall
pay to the Investor an amount (the "Semi-Annual Non-Usage Fee ") equal to the
difference of (i) $100,000, minus (ii) 10% of the aggregate Put Dollar Amount of
the Put Shares put to Investor during that Commitment Evaluation Period. In the
event that the Company delivers a Termination Notice to the Investor or an
Automatic Termination occurs, the Company shall pay to the Investor (the
"Termination Fee") the greater of (i) the Semi-Annual Non-Usage Fee for the
applicable Commitment Evaluation Period, or (ii) the difference of (x) $200,000,
minus (y) 10% of the aggregate Put Dollar Amount of the Put Shares put to
Investor during all Puts to date, and the Company shall not be required to pay
the Semi-Annual Non-Usage Fee thereafter.
Each Semi Annual Non-Usage Fee or Termination Fee is payable, in cash,
within five (5) business days of the date it accrued. The Company shall not be
required to deliver any payments to Investor under this subsection until
Investor has paid all Put Dollar Amounts that are then due.
3. Representations, Warranties and Covenants of Investor. Investor hereby
represents and warrants to and agrees with the Company as follows:
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3.1 Accredited Investor. Investor is an accredited investor
("Accredited Investor"), as defined in Rule 501 of Regulation D, and has checked
the applicable box set forth in Section 10 of this Agreement.
3.2 Investment Experience; Access to Information; Independent
Investigation.
3.2.1 Access to Information. Investor or Investor's
professional advisor has been granted the opportunity to ask questions of and
receive answers from representatives of the Company, its officers, directors,
employees and agents concerning the terms and conditions of this Offering, the
Company and its business and prospects, and to obtain any additional information
which Investor or Investor's professional advisor deems necessary to verify the
accuracy and completeness of the information received.
3.2.2 Reliance on Own Advisors. Investor has relied
completely on the advice of, or has consulted with, Investor's own personal tax,
investment, legal or other advisors and has not relied on the Company or any of
its affiliates, officers, directors, attorneys, accountants or any affiliates of
any thereof and each other person, if any, who controls any of the foregoing,
within the meaning of Section 15 of the Act for any tax or legal advice (other
than reliance on information in the Disclosure Documents as defined in Section
3.2.4 below and on the Opinion of Counsel). The foregoing, however, does not
limit or modify Investor's right to rely upon covenants, representations and
warranties of the Company in this Agreement.
3.2.3 Capability to Evaluate. Investor has such knowledge and
experience in financial and business matters so as to enable such Investor to
utilize the information made available to it in connection with the Offering in
order to evaluate the merits and risks of the prospective investment, which are
substantial, including without limitation those set forth in the Disclosure
Documents (as defined in Section 3.2.4 below).
3.2.4 Disclosure Documents. Investor, in making Investor's
investment decision to subscribe for the Investment Agreement hereunder,
represents that (a) Investor has received and had an opportunity to review (i)
the Company's Annual Report on Form 10-SB dated December 2, 1999, as amended on
February 8, 2000, February 18, 2000 and Xxxxx 0, 0000, (xx) the Company's
quarterly report on Form 10-QSB for the quarter ended December 31, 1999, (iii)
the Risk Factors, attached as Exhibit J, (the "Risk Factors") (iv) the
Capitalization Schedule, attached as Exhibit K, (the "Capitalization Schedule")
and (v) the Use of Proceeds Schedule, attached as Exhibit L, (the "Use of
Proceeds Schedule"); (b) Investor has read, reviewed, and relied solely on the
documents described in (a) above, the Company's representations and warranties
and other information in this Agreement, including the exhibits, documents
prepared by the Company which have been specifically provided to Investor in
connection with this Offering (the documents described in this Section 3.2.4(a)
and (b) are collectively referred to as the "Disclosure Documents"), and an
independent investigation made by Investor and Investor's representatives, if
any; (c) Investor has, prior to the date of this Agreement, been given an
opportunity to review material contracts and documents of the Company which have
been filed as exhibits to the Company's filings under the Act and the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and has had an opportunity
to ask questions of and receive answers from the Company's officers and
directors; and (d) is not relying on any oral representation of the Company or
any other person, nor any written representation or assurance from the Company
other than those contained in the Disclosure Documents or incorporated herein or
therein. The foregoing, however, does not limit or modify Investor's right to
rely upon covenants, representations and warranties of the Company in Sections 5
and 6 of this Agreement. Investor acknowledges and agrees that the Company has
no responsibility for, does not ratify, and is under no responsibility
whatsoever to comment upon or
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correct any reports, analyses or other comments made about the Company by any
third parties, including, but not limited to, analysts' research reports or
comments (collectively, "Third Party Reports"), and Investor has not relied upon
any Third Party Reports in making the decision to invest.
3.2.5 Investment Experience; Fend for Self. Investor has
substantial experience in investing in securities and it has made investments in
securities other than those of the Company. Investor acknowledges that Investor
is able to fend for Investor's self in the transaction contemplated by this
Agreement, that Investor has the ability to bear the economic risk of Investor's
investment pursuant to this Agreement and that Investor is an "Accredited
Investor" by virtue of the fact that Investor meets the investor qualification
standards set forth in Section 3.1 above. Investor has not been organized for
the purpose of investing in securities of the Company, although such investment
is consistent with Investor's purposes.
3.3 Exempt Offering Under Regulation D.
3.3.1 No General Solicitation. The Investment Agreement was
not offered to Investor through, and Investor is not aware of, any form of
general solicitation or general advertising, including, without limitation, (i)
any advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, and
(ii) any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
3.3.2 Restricted Securities. Investor understands that the
Investment Agreement is, the Common Stock and Warrants issued at each Put
Closing will be, and the Warrant Shares will be, characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from the Company in a transaction exempt from the registration
requirements of the federal securities laws and that under such laws and
applicable regulations such securities may not be transferred or resold without
registration under the Act or pursuant to an exemption therefrom. In this
connection, Investor represents that Investor is familiar with Rule 144 under
the Act, as presently in effect, and understands the resale limitations imposed
thereby and by the Act.
3.3.3 Disposition. Without in any way limiting the
representations set forth above, Investor agrees that until the Securities are
sold pursuant to an effective Registration Statement or an exemption from
registration, they will remain in the name of Investor and will not be
transferred to or assigned to any broker, dealer or depositary. Investor further
agrees not to sell, transfer, assign, or pledge the Securities (except for any
bona fide pledge arrangement to the extent that such pledge does not require
registration under the Act or unless an exemption from such registration is
available and provided further that if such pledge is realized upon, any
transfer to the pledgee shall comply with the requirements set forth herein), or
to otherwise dispose of all or any portion of the Securities unless and until:
(a) There is then in effect a registration statement
under the Act and any applicable state securities laws covering such proposed
disposition and such disposition is made in accordance with such registration
statement and in compliance with applicable prospectus delivery requirements; or
(b) (i) Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a statement of
the circumstances surrounding the proposed disposition to the extent relevant
for determination of the availability of an exemption from registration, and
(ii) if reasonably requested by the Company, Investor shall have furnished the
Company with an opinion of counsel, reasonably
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satisfactory to the Company, that such disposition will not require registration
of the Securities under the Act or state securities laws. It is agreed that the
Company will not require the Investor to provide opinions of counsel for
transactions made pursuant to Rule 144 provided that Investor and Investor's
broker, if necessary, provide the Company with the necessary representations for
counsel to the Company to issue an opinion with respect to such transaction.
The Investor is entering into this Agreement for its own account
and the Investor has no present arrangement (whether or not legally binding) at
any time to sell the Common Stock to or through any person or entity; provided,
however, that by making the representations herein, the Investor does not agree
to hold the Common Stock for any minimum or other specific term and reserves the
right to dispose of the Common Stock at any time in accordance with federal and
state securities laws applicable to such disposition.
3.4 Due Authorization.
3.4.1 Authority. The person executing this Investment
Agreement, if executing this Agreement in a representative or fiduciary
capacity, has full power and authority to execute and deliver this Agreement and
each other document included herein for which a signature is required in such
capacity and on behalf of the subscribing individual, partnership, trust,
estate, corporation or other entity for whom or which Investor is executing this
Agreement. Investor has reached the age of majority (if an individual) according
to the laws of the state in which he or she resides.
3.4.2 Due Authorization. Investor is duly and validly
organized, validly existing and in good standing as a limited liability company
under the laws of Georgia with full power and authority to purchase the
Securities to be purchased by Investor and to execute and deliver this
Agreement.
3.4.3 Partnerships. If Investor is a partnership, the
representations, warranties, agreements and understandings set forth above are
true with respect to all partners of Investor (and if any such partner is itself
a partnership, all persons holding an interest in such partnership, directly or
indirectly, including through one or more partnerships), and the person
executing this Agreement has made due inquiry to determine the truthfulness of
the representations and warranties made hereby.
3.4.4 Representatives. If Investor is purchasing in a
representative or fiduciary capacity, the representations and warranties shall
be deemed to have been made on behalf of the person or persons for whom Investor
is so purchasing.
4. Acknowledgments Investor is aware that:
4.1 Risks of Investment. Investor recognizes that an investment in
the Company involves substantial risks, including the potential loss of
Investor's entire investment herein. Investor recognizes that the Disclosure
Documents, this Agreement and the exhibits hereto do not purport to contain all
the information, which would be contained in a registration statement under the
Act;
4.2 No Government Approval. No federal or state agency has passed
upon the Securities, recommended or endorsed the Offering, or made any finding
or determination as to the fairness of this transaction;
4.3 No Registration, Restrictions on Transfer. As of the date of
this Agreement, the Securities and any component thereof have not been
registered under the Act or any
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applicable state securities laws by reason of exemptions from the registration
requirements of the Act and such laws, and may not be sold, pledged (except for
any limited pledge in connection with a margin account of Investor to the extent
that such pledge does not require registration under the Act or unless an
exemption from such registration is available and provided further that if such
pledge is realized upon, any transfer to the pledgee shall comply with the
requirements set forth herein), assigned or otherwise disposed of in the absence
of an effective registration of the Securities and any component thereof under
the Act or unless an exemption from such registration is available;
4.4 Restrictions on Transfer. Investor may not attempt to sell,
transfer, assign, pledge or otherwise dispose of all or any portion of the
Securities or any component thereof in the absence of either an effective
registration statement or an exemption from the registration requirements of the
Act and applicable state securities laws;
4.5 No Assurances of Registration. There can be no assurance that
any registration statement will become effective at the scheduled time, or ever,
or remain effective when required, and Investor acknowledges that it may be
required to bear the economic risk of Investor's investment for an indefinite
period of time;
4.6 Exempt Transaction. Investor understands that the Securities
are being offered and sold in reliance on specific exemptions from the
registration requirements of federal and state law and that the representations,
warranties, agreements, acknowledgments and understandings set forth herein are
being relied upon by the Company in determining the applicability of such
exemptions and the suitability of Investor to acquire such Securities.
4.7 Legends. The certificates representing the Put Shares shall
not bear a Restrictive Legend. The certificates representing the Warrant Shares
shall not bear a Restrictive Legend unless they are issued at a time when the
Registration Statement is not effective for resale. It is understood that the
certificates evidencing any Warrant Shares issued at a time when the
Registration Statement is not effective for resale, subject to legend removal
under the terms of Section 6.8 below, shall bear the following legend (the
"Legend"):
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, or applicable state securities
laws, nor the securities laws of any other jurisdiction. They may not
be sold or transferred in the absence of an effective registration
statement under those securities laws or pursuant to an exemption
therefrom."
5. Representations and Warranties of the Company. The Company hereby
makes the following representations and warranties to Investor (which shall be
true in all material respects at the signing of this Agreement, and as of any
such later date as contemplated hereunder) and agrees with Investor that, except
as set forth in the "Schedule of Exceptions" attached hereto as Exhibit C.
5.1 Organization, Good Standing, and Qualification. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Nevada, USA and has all requisite corporate power and
authority to carry on its business as now conducted and as proposed to be
conducted. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure to so qualify would have a
material adverse effect on the business or properties of the Company and its
subsidiaries taken as a whole. The Company is not the subject of any pending,
threatened or, to its knowledge, contemplated investigation or administrative or
legal proceeding (a "Proceeding") by the Internal Revenue Service, the taxing
authorities of any state or local jurisdiction, or the Securities and Exchange
Commission, The National Association of Securities Dealer, Inc., The Nasdaq
Stock Market, Inc. or any state securities commission, or any other governmental
entity, which
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have not been disclosed in the Disclosure Documents. None of the disclosed
Proceedings, if any, will have a material adverse effect upon the Company or the
market for the Common Stock. The Company has the following subsidiaries:
XxxxXxxxxxxx.xxx, Inc., a Delaware corporation; Emergent Technologies Corp., a
West Virginia corporation, and Integral Vision Systems, Inc., a West Virginia
corporation.
5.2 Corporate Condition. The Company's condition is, in all
material respects, as described in the Disclosure Documents (as further set
forth in any subsequently filed Disclosure Documents, if applicable), except for
changes in the ordinary course of business and normal year-end adjustments that
are not, in the aggregate, materially adverse to the Company. Except for
continuing losses, there have been no material adverse changes to the Company's
business, financial condition, or prospects since the dates of such Disclosure
Documents. The financial statements as contained in the 10-SB and 10-QSB have
been prepared in accordance with generally accepted accounting principles,
consistently applied (except as otherwise permitted by Regulation S-X of the
Exchange Act), subject, in the case of unaudited interim financial statements,
to customary year end adjustments and the absence of certain footnotes, and
fairly present the financial condition of the Company as of the dates of the
balance sheets included therein and the consolidated results of its operations
and cash flows for the periods then ended. Without limiting the foregoing,
there are no material liabilities, contingent or actual, that are not disclosed
in the Disclosure Documents (other than liabilities incurred by the Company in
the ordinary course of its business, consistent with its past practice, after
the period covered by the Disclosure Documents). The Company has paid all
material taxes that are due, except for taxes that it reasonably disputes. There
is no material claim, litigation, or administrative proceeding pending or, to
the best of the Company's knowledge, threatened against the Company, except as
disclosed in the Disclosure Documents. This Agreement and the Disclosure
Documents do not contain any untrue statement of a material fact and do not omit
to state any material fact required to be stated therein or herein necessary to
make the statements contained therein or herein not misleading in the light of
the circumstances under which they were made. No event or circumstance exists
relating to the Company which, under applicable law, requires public disclosure
but which has not been so publicly announced or disclosed.
5.3 Authorization. All corporate action on the part of the Company
by its officers, directors and stockholders necessary for the authorization,
execution and delivery of this Agreement, the performance of all obligations of
the Company hereunder and the authorization, issuance and delivery of the Common
Stock being sold hereunder and the issuance (and/or the reservation for
issuance) of the Warrants and the Warrant Shares have been taken, and this
Agreement and the Registration Rights Agreement constitute valid and legally
binding obligations of the Company, enforceable in accordance with their terms,
except insofar as the enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, or other similar laws affecting creditors' rights
generally or by principles governing the availability of equitable remedies. The
Company has obtained all consents and approvals required for it to execute,
deliver and perform each agreement referenced in the previous sentence.
5.4 Valid Issuance of Common Stock. The Common Stock and the
Warrants, when issued, sold and delivered in accordance with the terms hereof,
for the consideration expressed herein, will be validly issued, fully paid and
nonassessable and, based in part upon the representations of Investor in this
Agreement, will be issued in compliance with all applicable U.S. federal and
state securities laws. The Warrant Shares, when issued in accordance with the
terms of the Warrants, shall be duly and validly issued and outstanding, fully
paid and nonassessable, and based in part on the representations and warranties
of Investor, will be issued in compliance with all applicable U.S. federal and
state securities laws. The Put Shares, the Warrants and the Warrant Shares will
be issued free of any preemptive rights.
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5.5 Compliance with Other Instruments. The Company is not in
violation or default of any provisions of its Certificate of Incorporation or
Bylaws, each as amended and in effect on and as of the date of the Agreement, or
of any material provision of any material instrument or material contract to
which it is a party or by which it is bound or of any provision of any federal
or state judgment, writ, decree, order, statute, rule or governmental regulation
applicable to the Company, which would have a material adverse effect on the
Company's business or prospects, or on the performance of its obligations under
this Agreement or the Registration Rights Agreement. The execution, delivery and
performance of this Agreement and the other agreements entered into in
conjunction with the Offering and the consummation of the transactions
contemplated hereby and thereby will not (a) result in any such violation or be
in conflict with or constitute, with or without the passage of time and giving
of notice, either a default under any such provision, instrument or contract or
an event which results in the creation of any lien, charge or encumbrance upon
any assets of the Company, which would have a material adverse effect on the
Company's business or prospects, or on the performance of its obligations under
this Agreement, the Registration Rights Agreement, (b) violate the Company's
Certificate of Incorporation or By-Laws or (c) violate any statute, rule or
governmental regulation applicable to the Company which violation would have a
material adverse effect on the Company's business or prospects.
5.6 Reporting Company. The Company is subject to the reporting
requirements of the Exchange Act, has a class of securities registered under
Section 12 of the Exchange Act, and has filed all reports required by the
Exchange Act since the date the Company first became subject to such reporting
obligations. The Company undertakes to furnish Investor with copies of such
reports as may be reasonably requested by Investor prior to consummation of this
Offering and thereafter, to make such reports available, for the full term of
this Agreement, including any extensions thereof, and for as long as Investor
holds the Securities. The Common Stock is duly listed on the O.T.C. Bulletin
Board. The Company is not in violation of the listing requirements of the O.T.C.
Bulletin Board and does not reasonably anticipate that the Common Stock will be
delisted by the O.T.C. Bulletin Board for the foreseeable future. The Company
has filed all reports required under the Exchange Act. The Company has not
furnished to the Investor any material nonpublic information concerning the
Company.
5.7 Capitalization. The capitalization of the Company as of the
date of this Agreement is, and the capitalization as of the Closing, subject to
exercise of any outstanding warrants and/or exercise of any outstanding stock
options, after taking into account the offering of the Securities contemplated
by this Agreement and all other share issuances occurring prior to this Offering
will be, as set forth in the Capitalization Schedule as set forth in Exhibit K.
There are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the Securities. Except as
disclosed in the Capitalization Schedule, as of the date of this Agreement, (i)
there are no outstanding options, warrants, scrip, rights to subscribe for,
calls or commitments of any character whatsoever relating to, or securities or
rights convertible into or exercisable or exchangeable for, any shares of
capital stock of the Company or any of its subsidiaries, 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,
and (ii) other than as set forth in the Schedule of Exceptions, there are no
agreements or arrangements under which the Company or any of its subsidiaries is
obligated to register the sale of any of its or their securities under the Act
(except the Registration Rights Agreement).
5.8 Intellectual Property. The Company has valid, unrestricted and
exclusive ownership of or rights to use the patents, trademarks, trademark
registrations, trade names, copyrights, know-how, technology and other
intellectual property necessary to the conduct of its business. Exhibit M lists
all patents, trademarks, trademark registrations, trade names and copyrights of
the Company, as well as the names of all provisional patents. The Company has
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granted such licenses or has assigned or otherwise transferred a portion of (or
all of) such valid, unrestricted and exclusive patents, trademarks, trademark
registrations, trade names, copyrights, know-how, technology and other
intellectual property necessary to the conduct of its business as set forth in
Exhibit M. The Company has been granted licenses, know-how, technology and/or
other intellectual property necessary to the conduct of its business as set
forth in Exhibit M. To the best of the Company's knowledge after due inquiry,
the Company is not infringing on the intellectual property rights of any third
party, nor is any third party infringing on the Company's intellectual property
rights. There are no restrictions in any agreements, licenses, franchises, or
other instruments that preclude the Company from engaging in its business as
presently conducted.
5.9 Use of Proceeds. As of the date hereof, the Company expects to
use the proceeds from this Offering (less fees and expenses) for the purposes
and in the approximate amounts set forth on the Use of Proceeds Schedule set
forth as Exhibit L hereto. These purposes and amounts are estimates and are
subject to change without notice to any Investor.
5.10 No Rights of Participation. No person or entity, including,
but not limited to, current or former stockholders of the Company, underwriters,
brokers, agents or other third parties, has any right of first refusal,
preemptive right, right of participation, or any similar right to participate in
the financing contemplated by this Agreement which has not been waived.
5.11 Company Acknowledgment. The Company hereby acknowledges that
Investor may elect to hold the Securities for various periods of time, as
permitted by the terms of this Agreement, the Warrants, and other agreements
contemplated hereby, and the Company further acknowledges that Investor has made
no representations or warranties, either written or oral, as to how long the
Securities will be held by Investor or regarding Investor's trading history or
investment strategies.
5.12 No Advance Regulatory Approval. The Company acknowledges that
this Investment Agreement, the transaction contemplated hereby and the
Registration Statement contemplated hereby have not been approved by the SEC, or
any other regulatory body and there is no guarantee that this Investment
Agreement, the transaction contemplated hereby and the Registration Statement
contemplated hereby will ever be approved by the SEC or any other regulatory
body. The Company is relying on its own analysis and is not relying on any
representation by Investor that either this Investment Agreement, the
transaction contemplated hereby or the Registration Statement contemplated
hereby has been or will be approved by the SEC or other appropriate regulatory
body.
5.13 Underwriter's Fees and Rights of First Refusal. The Company
is not obligated to pay any compensation or other fees, costs or related
expenditures in cash or securities to any underwriter, broker, agent or other
representative other than the Investor in connection with this Offering.
5.14 Availability of Suitable Form for Registration. The Company
is currently eligible and agrees to maintain its eligibility to register the
resale of its Common Stock on a registration statement on a suitable form under
the Act.
5.15 No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any of the Company's securities or
solicited any offers to buy any security under circumstances that would prevent
the parties hereto from consummating the transactions contemplated hereby
pursuant to an exemption from registration under Regulation D of the Act or
would require the issuance of any other securities to be integrated with this
Offering under the Rules of Nasdaq.
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The Company has not engaged in any form of general solicitation or advertising
in connection with the offering of the Common Stock or the Warrants.
5.16 Foreign Corrupt Practices. Neither the Company, nor any of
its subsidiaries, nor any director, officer, agent, employee or other person
acting on behalf of the Company or any subsidiary has, in the course of its
actions for, or on behalf of, the Company, used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
5.17 Key Employees. Each "Key Employee" (as defined in Exhibit N)
is currently serving the Company in the capacity disclosed in Exhibit N. No Key
Employee, to the best knowledge of the Company and its subsidiaries, is, or is
now expected to be, in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each Key Employee does not subject the
Company or any of its subsidiaries to any liability with respect to any of the
foregoing matters. No Key Employee has, to the best knowledge of the Company and
its subsidiaries, any intention to terminate his employment with, or services
to, the Company or any of its subsidiaries.
5.18 Representations Correct. The foregoing representations,
warranties and agreements are true, correct and complete in all material
respects, and shall survive any Put Closing and the issuance of the shares of
Common Stock thereby.
5.19 Tax Status. The Company 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 (unless and only to the extent that the
Company has set aside on its books provisions reasonably adequate for the
payment of all unpaid and unreported taxes) and 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 as 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.
5.20 Transactions With Affiliates. Except as set forth in the
Disclosure Documents, none of the officers, directors, or employees of the
Company is 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.
5.21 Application of Takeover Protections. The Company and its
board of directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination or other
similar anti-takeover provision under Nevada law which is or could become
applicable to the Investor as a result of the transactions contemplated by this
Agreement, including, without limitation, the issuance of the Common Stock, any
exercise of the Warrants and ownership of the Common Shares and Warrant Shares.
The
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Company has not adopted and will not adopt any "poison pill" provision that
will be applicable to Investor as a result of transactions contemplated by this
Agreement.
5.22 Other Agreements. The Company has not, directly or
indirectly, made any agreements with the Investor under a subscription in the
form of this Agreement for the purchase of Common Stock, relating to the terms
or conditions of the transactions contemplated hereby or thereby except as
expressly set forth herein, respectively, or in exhibits hereto or thereto.
5.23 Major Transactions. There are no other Major Transactions
currently pending or contemplated by the Company.
5.24 Financings. There are no other financings currently pending
or contemplated by the Company.
5.25 Shareholder Authorization. The Company shall, at its next
annual shareholder meeting following its listing on either the Nasdaq Small Cap
Market or the Nasdaq National Market, or at a special meeting to be held as soon
as practicable thereafter, use its best efforts to obtain approval of its
shareholders to (i) authorize the issuance of the full number of shares of
Common Stock which would be issuable under this Agreement and eliminate any
prohibitions under applicable law or the rules or regulations of any stock
exchange, interdealer quotation system or other self-regulatory organization
with jurisdiction over the Company or any of its securities with respect to the
Company's ability to issue shares of Common Stock in excess of the Cap Amount
(such approvals being the "20% Approval") and (ii) the increase in the number of
authorized shares of Common Stock of the Company (the "Share Authorization
Increase Approval") such that at least 10,000,000 shares can be reserved for
this Offering. In connection with such shareholder vote, the Company shall use
its best efforts to cause all officers and directors of the Company to promptly
enter into irrevocable agreements to vote all of their shares in favor of
eliminating such prohibitions. As soon as practicable after the 20% Approval and
the Share Authorization Increase Approval, the Company agrees to use its best
efforts to reserve 10,000,000 shares of Common Stock for issuance under this
Agreement.
5.26 Acknowledgment of Limitations on Put Amounts. The Company
understands and acknowledges that the amounts available under this Investment
Agreement are limited, among other things, based upon the liquidity of the
Company's Common Stock traded on its Principal Market.
6. Covenants of the Company
6.1 Independent Auditors. The Company shall, until at least the
Termination Date, maintain as its independent auditors an accounting firm
authorized to practice before the SEC.
6.2 Corporate Existence and Taxes. The Company shall, until at
least the Termination Date, maintain its corporate existence in good standing
and, once it becomes a "Reporting Issuer" (defined as a Company which files
periodic reports under the Exchange Act), remain a Reporting Issuer (provided,
however, that the foregoing covenant shall not prevent the Company from entering
into any merger or corporate reorganization as long as the surviving entity in
such transaction, if not the Company, assumes the Company's obligations with
respect to the Common Stock and has Common Stock listed for trading on a stock
exchange or on Nasdaq and is a Reporting Issuer) and shall pay all its taxes
when due except for taxes which the Company disputes.
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6.3 Registration Rights. The Company will enter into a
registration rights agreement covering the resale of the Common Shares and the
Warrant Shares substantially in the form of the Registration Rights Agreement
attached as Exhibit A.
6.4 Asset Transfers. The Company shall not (i) transfer, sell,
convey or otherwise dispose of any of its material assets to any Subsidiary
except for a cash or cash equivalent consideration and for a proper business
purpose or (ii) transfer, sell, convey or otherwise dispose of any of its
material assets to any Affiliate, as defined below, during the Term of this
Agreement. For purposes hereof, "Affiliate" shall mean any officer of the
Company, director of the Company or owner of twenty percent (20%) or more of the
Common Stock or other securities of the Company.
6.5 Capital Raising Limitations and Rights of First Refusal.
6.5.1 Capital Raising Limitations. During the period from the
date of this Agreement until the date that is six (6) months after the
Termination Date, the Company shall not issue or sell, or agree to issue or sell
Equity Securities (as defined below), for cash in private capital raising
transactions without obtaining the prior written approval of the Investor of the
Offering (the limitations referred to in this subsection 6.5.1 are collectively
referred to as the "Capital Raising Limitations"). For purposes hereof, the
following shall be collectively referred to herein as, the "Equity Securities":
(i) Common Stock or any other equity securities, (ii) any debt or equity
securities which are convertible into, exercisable or exchangeable for, or carry
the right to receive additional shares of Common Stock or other equity
securities, or (iii) any securities of the Company pursuant to an equity line
structure or format similar in nature to this Offering.
6.5.2 Investor's Right of First Refusal. For any private
capital raising transactions of Equity Securities which close after the date
hereof and on or prior to the date that is six (6) months after the Termination
Date of this Agreement, not including any warrants issued in conjunction with
this Investment Agreement, the Company agrees to deliver to Investor, at least
ten (10) days prior to the closing of such transaction, written notice
describing the proposed transaction, including the terms and conditions thereof,
and providing the Investor and its affiliates an option during the ten (10) day
period following delivery of such notice to purchase the securities being
offered in such transaction on the same terms as contemplated by such
transaction.
6.5.3 Exceptions to Rights of First Refusal. Notwithstanding
the above, the Rights of First Refusal shall not apply to any transaction
involving issuances of securities in connection with a merger, consolidation,
acquisition or sale of assets, or in connection with any strategic partnership
or joint venture (the primary purpose of which is not to raise equity capital),
or in connection with the disposition or acquisition of a business, product or
license by the Company or exercise of options by employees, consultants or
directors, or a primary underwritten offering of the Company's Common Stock, or
the transactions set forth on Schedule 6.5.1. The Capital Raising Limitations
also shall not apply to (a) the issuance of securities upon exercise or
conversion of the Company's options, warrants or other convertible securities
outstanding as of the date hereof, (b) the grant of additional options or
warrants, or the issuance of additional securities, under any Company stock
option or restricted stock plan for the benefit of the Company's employees,
directors or consultants, or (c) the issuance of debt securities, with no equity
feature, incurred solely for working capital purposes. If the Investor, at any
time, is more than five (5) business days late in paying any Put Dollar Amounts
that are then due, the Investor shall not be entitled to the benefits of
Sections 6.5.1 and 6.5.2 above until the date that the Investor has paid all Put
Dollar Amounts that are then due.
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6.6 Financial 00-XXX Xxxxxxxxxx, Etc. and Current Reports on Form
8-K. The Company shall deliver to the Investor copies of its annual reports on
Form 10-KSB, and quarterly reports on Form 10-QSB and shall deliver to the
Investor current reports on Form 8-K within two (2) days of filing for the Term
of this Agreement.
6.7 Opinion of Counsel. Investor shall, concurrent with the
Investment Commitment Closing, receive an opinion letter from the Company's
legal counsel, in the form attached as Exhibit B, or in such form as agreed upon
by the parties, and shall, concurrent with each Put Date, receive an opinion
letter from the Company's legal counsel, in the form attached as Exhibit I or in
such form as agreed upon by the parties.
6.8 Removal of Legend. If the certificates representing any
Securities are issued with a restrictive Legend in accordance with the terms of
this Agreement, the Legend shall be removed and the Company shall issue a
certificate without such Legend to the holder of any Security upon which it is
stamped, and a certificate for a security shall be originally issued without the
Legend, if (a) the sale of such Security is registered under the Act, or (b)
such holder provides the Company with an opinion of counsel, in form, substance
and scope customary for opinions of counsel in comparable transactions (the
reasonable cost of which shall be borne by the Investor), to the effect that a
public sale or transfer of such Security may be made without registration under
the Act, or (c) such holder provides the Company with reasonable assurances that
such Security can be sold pursuant to Rule 144. Each Investor agrees to sell all
Securities, including those represented by a certificate(s) from which the
Legend has been removed, or which were originally issued without the Legend,
pursuant to an effective registration statement and to deliver a prospectus in
connection with such sale or in compliance with an exemption from the
registration requirements of the Act.
6.9 Listing. Subject to the remainder of this Section 6.9, the
Company shall ensure that its shares of Common Stock (including all Warrant
Shares and Put Shares) continue to be listed and available for trading on the
O.T.C. Bulletin Board. Thereafter, the Company shall (i) use its best efforts to
continue the listing and trading of its Common Stock on the O.T.C. Bulletin
Board or to become eligible for and listed and available for trading on the
Nasdaq Small Cap Market, the NMS, or the New York Stock Exchange ("NYSE"); and
(ii) comply in all material respects with the Company's reporting, filing and
other obligations under the By-Laws or rules of the National Association of
Securities Dealers ("NASD") and such exchanges, as applicable.
6.10 The Company's Instructions to Transfer Agent. The Company
will instruct the Transfer Agent of the Common Stock, by delivering instructions
in the form of Exhibit T hereto, to issue certificates, registered in the name
of each Investor or its legally permitted nominee, for the Put Shares and
Warrant Shares in such amounts as specified from time to time by the Company
upon any exercise by the Company of a Put and/or exercise of the Warrants by the
holder thereof. Such certificates shall not bear a Legend unless issuance with a
Legend is permitted by the terms of this Agreement and Legend removal is not
permitted by Section 6.8 hereof and the Company shall cause the Transfer Agent
to issue such certificates without a Legend. Nothing in this Section shall
affect in any way Investor's obligations and agreement set forth in Sections
3.3.2 or 3.3.3 hereof to resell the Securities pursuant to an effective
registration statement and to deliver a prospectus in connection with such sale
or in compliance with an exemption from the registration requirements of
applicable securities laws. If (a) an Investor provides the Company with an
opinion of counsel, which opinion of counsel shall be in form, substance and
scope customary for opinions of counsel in comparable transactions, to the
effect that the Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from registration or (b) an Investor transfers
Securities, pursuant to Rule 144, to a transferee which is an accredited
investor, the Company shall permit the transfer, and, in the case of Put Shares
and Warrant Shares, promptly instruct its transfer agent to issue
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one or more certificates in such name and in such denomination as specified by
such Investor. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to an Investor by vitiating the intent and
purpose of the transaction contemplated hereby. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Section 6.10 will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section 6.10, that an
Investor shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or other
security being required.
6.11 Stockholder 20% Approval. Prior to the closing of any Put
that would cause the Aggregate Issued Shares to exceed the Cap Amount, if
required by the rules of NASDAQ because the Company's Common Stock is listed on
NASDAQ, the Company shall obtain approval of its stockholders to authorize (i)
the issuance of the full number of shares of Common Stock which would be
issuable pursuant to this Agreement but for the Cap Amount and eliminate any
prohibitions under applicable law or the rules or regulations of any stock
exchange, interdealer quotation system or other self-regulatory organization
with jurisdiction over the Company or any of its securities with respect to the
Company's ability to issue shares of Common Stock in excess of the Cap Amount
(such approvals being the "Stockholder 20% Approval").
6.12 Press Release. The Company agrees that the Investor shall
have the right to review and comment upon any press release issued by the
Company in connection with the Offering which approval shall not be unreasonably
withheld by Investor.
6.13 Change in Law or Policy. In the event of a change in law, or
policy of the SEC, as evidenced by a No-Action letter or other written
statements of the SEC or the NASD which causes the Investor to be unable to
perform its obligations hereunder, this Agreement shall be automatically
terminated and no Termination Fee shall be due, provided that notwithstanding
any termination under this section 6.13, the Investor shall retain full
ownership of the Commitment Warrant as consideration for its commitment and its
consulting, legal and other services rendered hereunder.
7. Investor Covenant/Miscellaneous.
7.1 Representations and Warranties Survive the Closing;
Severability. Investor's and the Company's representations and warranties shall
survive the Investment Date and any Put Closing contemplated by this Agreement
notwithstanding any due diligence investigation made by or on behalf of the
party seeking to rely thereon. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, or is altered by a term required by the Securities
Exchange Commission to be included in the Registration Statement, this Agreement
shall continue in full force and effect without said provision; provided that if
the removal of such provision materially changes the economic benefit of this
Agreement to the Investor, this Agreement shall terminate.
7.2 Successors and Assigns. This Agreement shall not be assignable
without the Company's written consent, If assigned, 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. 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. Investor may assign Investor's rights hereunder, in
connection with any private sale of the Common Stock of such Investor, so long
as, as a condition precedent to such transfer, the
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transferee executes an acknowledgment agreeing to be bound by the applicable
provisions of this Agreement in a form acceptable to the Company and provides an
original copy of such acknowledgment to the Company.
7.3 Execution in Counterparts Permitted. This Agreement may be
executed in any number of counterparts, each of which shall be enforceable
against the parties actually executing such counterparts, and all of which
together shall constitute one (1) instrument.
7.4 Titles and Subtitles; Gender. 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. The use in this Agreement of a
masculine, feminine or neither pronoun shall be deemed to include a reference to
the others.
7.5 Written Notices, Etc. Any notice, demand or request required
or permitted to be given by the Company or Investor pursuant to the terms of
this Agreement shall be in writing and shall be deemed given when delivered
personally, or by facsimile or upon receipt if by overnight or two (2) day
courier, addressed to the parties at the addresses and/or facsimile telephone
number of the parties set forth at the end of this Agreement or such other
address as a party may request by notifying the other in writing; provided,
however, that in order for any notice to be effective as to the Investor such
notice shall be delivered and sent, as specified herein, to all the addresses
and facsimile telephone numbers of the Investor set forth at the end of this
Agreement or such other address and/or facsimile telephone number as Investor
may request in writing.
7.6 Expenses. Except as set forth in the Registration Rights
Agreement, each of the Company and Investor shall pay all costs and expenses
that it respectively incurs, with respect to the negotiation, execution,
delivery and performance of this Agreement.
7.7 Entire Agreement; Written Amendments Required. This Agreement,
including the Exhibits attached hereto, the Common Stock certificates, the
Warrants, the Registration Rights Agreement, and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof, and no party
shall be liable or bound to any other party in any manner by any warranties,
representations or covenants, whether oral, written, or otherwise except as
specifically set forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought.
7.8 Actions at Law or Equity; Jurisdiction and Venue. The parties
acknowledge that any and all actions, whether at law or at equity, and whether
or not said actions are based upon this Agreement between the parties hereto,
shall be filed in any state or federal court sitting in Atlanta, Georgia.
Georgia law shall govern both the proceeding as well as the interpretation and
construction of the Transaction Documents and the transaction as a whole. In any
litigation between the parties hereto, the prevailing party, as found by the
court, shall be entitled to an award of all attorney's fees and costs of court.
Should the court refuse to find a prevailing party, each party shall bear its
own legal fees and costs.
8. Subscription and Wiring Instructions; Irrevocability.
8.1 Subscription
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(a) Wire transfer of Subscription Funds. Investor shall deliver
Put Dollar Amounts (as payment towards any Put Share Price)
by wire transfer, to the Company pursuant to a wire
instruction letter to be provided by the Company, and signed
by the Company.
(b) Irrevocable Subscription. Investor hereby acknowledges and
agrees, subject to the provisions of any applicable laws
providing for the refund of subscription amounts submitted
by Investor, that this Agreement is irrevocable and that
Investor is not entitled to cancel, terminate or revoke this
Agreement or any other agreements executed by such Investor
and delivered pursuant hereto, and that this Agreement and
such other agreements shall survive the death or disability
of such Investor and shall be binding upon and inure to the
benefit of the parties and their heirs, executors,
administrators, successors, legal representatives and
assigns. If the Securities subscribed for are to be owned by
more than one person, the obligations of all such owners
under this Agreement shall be joint and several, and the
agreements, representations, warranties and acknowledgments
herein contained shall be deemed to be made by and be
binding upon each such person and his heirs, executors,
administrators, successors, legal representatives and
assigns.
8.2 Acceptance of Subscription. Ownership of the number of
securities purchased hereby will pass to Investor upon the Warrant Closing or
any Put Closing.
9. Indemnification.
In consideration of the Investor's execution and delivery of the
Investment Agreement, the Registration Rights Agreement and the Warrants (the
"Transaction Documents") and acquiring the Securities thereunder and in addition
to all of the Company's other obligations under the Transaction Documents, the
Company (in such case, the "Indemnitor") shall defend, protect, indemnify and
hold harmless Investor and all of its stockholders, officers, directors,
employees and direct or indirect investors and any of the foregoing person's
agents, members, partners or other representatives (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, in such case, the "Indemnitees" or the
"Indemnified Parties") 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 Indemnitee is
a party to the action for which indemnification hereunder is sought), and
including reasonable attorney's fees and disbursements (the "Indemnified
Liabilities"), incurred by any Indemnitee 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 the Transaction Documents or any other
certificate, instrument or documents contemplated hereby or thereby, (b) any
breach of any covenant, agreement or obligation of the Company contained in the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (c) any cause of action, suit or claim,
derivative or otherwise, by any stockholder of the Company based on a breach or
alleged breach by the Company or any of its officers or directors of their
fiduciary or other obligations to the stockholders of the Company, or (d) claims
made by third parties against any of the Indemnitees based on a violation of
Section 5 of the Securities Act caused by the integration of the private sale of
common stock to the Investor and the public offering pursuant to the
Registration Statement.
To the extent permitted by law, the Investor (in such case, the
"Indemnitor") will indemnify and hold harmless the Company and the officers and
directors of the Company
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(collectively, in such case, the "Indemnitees" or the "Indemnified Parties"),
against any losses, claims, damages, or liabilities (joint or several) to which
they may become subject under the Act, the 1934 Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements
or omissions: any untrue statement or alleged untrue statement of a material
fact that is provided, in writing to the Company and is contained in such
registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, and which statement
in writing is the proximate cause of an action or proceeding filed against the
Company, and the Investor will reimburse the Company, officer or director for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this subsection
9(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability, or action if such settlement is effected without the consent
of the Investor (which consent shall not be unreasonably withheld).
To the extent that the foregoing undertaking by the Company (or the
Investor, as applicable) may be unenforceable for any reason, the Company (or
the Investor, as applicable) shall make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities which it would be
required to make if such foregoing undertaking was enforceable which is
permissible under applicable law.
Promptly after receipt by an Indemnified Party of notice of the
commencement of any action pursuant to which indemnification may be sought, such
Indemnified Party will, if a claim in respect thereof is to be made against the
other party (hereinafter "Indemnitor") under this Section 9, deliver to the
Indemnitor a written notice of the commencement thereof and the Indemnitor shall
have the right to participate in and to assume the defense thereof with counsel
reasonably selected by the Indemnitor, provided, however, that an Indemnified
Party shall have the right to retain its own counsel, with the reasonably
incurred fees and expenses of such counsel to be paid by the Indemnitor, if
representation of such Indemnified Party by the counsel retained by the
Indemnitor would be inappropriate due to actual or potential conflicts of
interest between such Indemnified Party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
Indemnitor within a reasonable time of the commencement of any such action, if
prejudicial to the Indemnitor's ability to defend such action, shall relieve the
Indemnitor of any liability to the Indemnified Party under this Section 9, but
the omission to so deliver written notice to the Indemnitor will not relieve it
of any liability that it may have to any Indemnified Party other than under this
Section 9 to the extent it is prejudicial.
[INTENTIONALLY LEFT BLANK]
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10. Accredited Investor. Investor is an "accredited investor" because
(check all applicable boxes):
(a) [ ] it is an organization described in Section 501(c)(3) of the
Internal Revenue Code, or a corporation, limited duration
company, limited liability company, business trust, or
partnership not formed for the specific purpose of acquiring
the securities offered, with total assets in excess of
$5,000,000.
(b) [ ] any trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities
offered, whose purchase is directed by a sophisticated
person who has such knowledge and experience in financial
and business matters that he is capable of evaluating the
merits and risks of the prospective investment.
(c) [ ] a natural person, who
[ ] is a director, executive officer or general partner of the
issuer of the securities being offered or sold or a
director, executive officer or general partner of a general
partner of that issuer.
[ ] has an individual net worth, or joint net worth with that
person's spouse, at the time of his purchase exceeding
$1,000,000.
[ ] had an individual income in excess of $200,000 in each of
the two most recent years or joint income with that person's
spouse in excess of $300,000 in each of those years and has
a reasonable expectation of reaching the same income level
in the current year.
(d) [x] an entity each equity owner of which is an entity described
in a - b above or is an individual who could check one (1)
of the last three (3) boxes under subparagraph (c) above.
(e) [ ] other [specify]_____________________________________________.
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The undersigned hereby subscribes the Maximum Offering Amount and
acknowledges that this Agreement and the subscription represented hereby shall
not be effective unless accepted by the Company as indicated below.
IN WITNESS WHEREOF, the undersigned Investor does represent and certify
under penalty of perjury that the foregoing statements are true and correct and
that Investor by the following signature(s) executed this Agreement.
Dated this 11th day of May, 2000.
/s/ Xxxx X. Xxxxxx Xxxxxx Private Equity, LLC
------------------------------------ -------------------------------------------------
Your Signature PRINT EXACT NAME IN WHICH YOU WANT
THE SECURITIES TO BE REGISTERED
Xxxx X. Xxxxxx SECURITY DELIVERY INSTRUCTIONS:
------------------------------------ -------------------------------
Name: Please Print Please type or print address where your security is to be
delivered
Manager Xxxx X. Xxxxxx
------------------------------------ ATTN:---------------------------------------------
Title/Representative Capacity
(if applicable)
Xxxxxx Private Equity, LLC 000 Xxxxxxx Xxxxxx, Xxxxx 000, 1080 Xxxxxxx Bridge Road
------------------------------------ --------------------------------------------------
Name of Company You Represent Street Address
(if applicable)
Roswell, Georgia, U.S.A. Roswell, Georgia 30076, U.S.A.
------------------------------------ --------------------------------------------------
Place of Execution of this Agreement City, State or Province, Country, Offshore Postal Code
NOTICE DELIVERY INSTRUCTIONS: WITH A COPY DELIVERED TO:
----------------------------- -------------------------
Please print address where any Notice Please print address where Copy is to be delivered
is to be delivered
ATTN: ATTN:
--------------------------------------- -------------------------------------
-------------------------------------------- ------------------------------------------
Xxxxxx Xxxxxxx Xxxxxx Xxxxxxx
------------------------------------------------------
------------------------------------------------------
City, State or Province, Country, Offshore Postal Code City, State or Country, Offshore Postal Code
Telephone: Telephone:
-------------------------------------------- --------------------------------------------
Facsimile: Facsimile:
-------------------------------------------- --------------------------------------------
Facsimile: Facsimile:
-------------------------------------------- --------------------------------------------
THIS AGREEMENT IS ACCEPTED BY THE COMPANY IN THE AMOUNT OF THE MAXIMUM OFFERING
AMOUNT ON THE 11th DAY OF MAY, 2000.
INTEGRAL TECHNOLOGIES, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------------------------
Xxxxxxx X. Xxxxxxxx, Chairman & CEO
Address:
Attn: Xxxxxxx Xxxxxxxx
0000 Xxxx Xxxxxx Xxxxxx, Xxxxx 0
Xxxxxxxxx, XX X0X 0X0
Telephone (000) 000-0000
Facsimile (000) 000-0000
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ADVANCE PUT NOTICE
INTEGRAL TECHNOLOGIES, INC. (the "Company") hereby intends, subject to the
Individual Put Limit (as defined in the Investment Agreement), to elect to
exercise a Put to sell the number of shares of Common Stock of the Company
specified below, to _____________________________, the Investor, as of the
Intended Put Date written below, all pursuant to that certain Investment
Agreement (the "Investment Agreement") by and between the Company and Xxxxxx
Private Equity, LLC dated on or about May 11th, 2000.
Date of Advance Put Notice:
-------------------
Intended Put Date :
---------------------------
Intended Put Share Amount:
--------------------
Company Designation Maximum Put Dollar Amount (Optional):
.
---------------------------------------------------------
Company Designation Minimum Put Share Price (Optional):
.
---------------------------------------------------------
INTEGRAL TECHNOLOGIES, INC.
By:
-------------------------------------
Xxxxxxx X. Xxxxxxxx, Chairman & CEO
Address:
Attn: Xxxxxxx Xxxxxxxx
0000 Xxxx Xxxxxx Xxxxxx, Xxxxx 0
Xxxxxxxxx, XX X0X 0X0
Telephone (000) 000-0000
Facsimile (000) 000-0000
EXHIBIT E
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CONFIRMATION OF ADVANCE PUT NOTICE
_________________________________, the Investor, hereby confirms receipt of
INTEGRAL TECHNOLOGIES, INC.'S (the "Company") Advance Put Notice on the Advance
Put Date written below, and its intention to elect to exercise a Put to sell
shares of common stock ("Intended Put Share Amount") of the Company to the
Investor, as of the intended Put Date written below, all pursuant to that
certain Investment Agreement (the "Investment Agreement") by and between the
Company and Xxxxxx Private Equity, LLC dated on or about May 11th, 2000.
Date of Confirmation:
---------------------
Date of Advance Put Notice:
---------------
Intended Put Date:
------------------------
Intended Put Share Amount:
----------------
Company Designation Maximum Put Dollar Amount (Optional):
--------------------------------------------------------.
Company Designation Minimum Put Share Price (Optional):
------------------------------------------------------.
INVESTOR(S)
---------------------------------
Investor's Name
By:
------------------------------
(Signature)
Address:
------------------------------------------
------------------------------------------
------------------------------------------
Telephone No.:
-------------------------------------
Facsimile No.:
-------------------------------------
EXHIBIT F
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PUT NOTICE
INTEGRAL TECHNOLOGIES, INC. (the "Company") hereby elects to exercise a Put to
sell shares of common stock ("Common Stock") of the Company to
_____________________________, the Investor, as of the Put Date, at the Put
Share Price and for the number of Put Shares written below, all pursuant to that
certain Investment Agreement (the "Investment Agreement") by and between the
Company and Xxxxxx Private Equity, LLC dated on or about May 11th, 2000.
Put Date :
---------------------------------
Intended Put Share Amount (from Advance Put
Notice): Common Shares
----------------------
Company Designation Maximum Put Dollar Amount (Optional):
--------------------------------------------------------.
Company Designation Minimum Put Share Price (Optional):
--------------------------------------------------------.
Note: Capitalized terms shall have the meanings ascribed to them in this
Investment Agreement.
INTEGRAL TECHNOLOGIES, INC.
By:
-------------------------------------------------
Xxxxxxx X. Xxxxxxxx, Chairman & CEO
Address:
Attn: Xxxxxxx Xxxxxxxx
0000 Xxxx Xxxxxx Xxxxxx, Xxxxx 0
Xxxxxxxxx, XX X0X 0X0
Telephone (000) 000-0000
Facsimile (000) 000-0000
EXHIBIT G
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CONFIRMATION OF PUT NOTICE
_________________________________, the Investor, hereby confirms receipt of
INTEGRAL TECHNOLOGIES, INC. (the "Company") Put Notice and election to exercise
a Put to sell ___________________________ shares of common stock ("Common
Stock") of the Company to Investor, as of the Put Date, all pursuant to that
certain Investment Agreement (the "Investment Agreement") by and between the
Company and Xxxxxx Private Equity, LLC dated on or about May 11th, 2000.
Date of this Confirmation:
------------------------
Put Date :
-----------------------------------------
Number of Put Shares of
Common Stock to be Issued:
------------------------
Volume Evaluation Period: Business Days
----
Pricing Period: Business Days
-----
INVESTOR(S)
---------------------------------------------------
Investor's Name
By:
------------------------------------------------
(Signature)
Address:
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
Telephone No.:
---------------------------------------------------
Facsimile No.:
---------------------------------------------------
EXHIBIT H
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PUT CANCELLATION NOTICE
INTEGRAL TECHNOLOGIES, INC. (the "Company") hereby cancels the Put specified
below, pursuant to that certain Investment Agreement (the "Investment
Agreement") by and between the Company and Xxxxxx Private Equity, LLC dated on
or about May 11th, 2000, as of the close of trading on the date specified below
(the "Cancellation Date," which date must be on or after the date that this
notice is delivered to the Investor), provided that such cancellation shall not
apply to the number of shares of Common Stock equal to the Truncated Put Share
Amount (as defined in the Investment Agreement).
Cancellation Date:
-------------------------
Put Date of Put Being Canceled:
------------
Number of Shares Put on Put Date:
----------
Reason for Cancellation (check one):
[ ] Material Facts, Ineffective
Registration Period.
[ ] Delisting Event
The Company understands that, by canceling this Put, it must give twenty (20)
Business Days advance written notice to the Investor before effecting the next
Put.
INTEGRAL TECHNOLOGIES, INC.
By:
-------------------------------------------------
Xxxxxxx X. Xxxxxxxx, Chairman & CEO
Address:
Attn: Xxxxxxx Xxxxxxxx
0000 Xxxx Xxxxxx Xxxxxx, Xxxxx 0
Xxxxxxxxx, XX X0X 0X0
Telephone (000) 000-0000
Facsimile (000) 000-0000
EXHIBIT Q
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PUT CANCELLATION NOTICE CONFIRMATION
The undersigned Investor to that certain Investment Agreement (the "Investment
Agreement") by and between the INTEGRAL TECHNOLOGIES, INC.'S, and Xxxxxx Private
Equity, LLC dated on or about May 11th, 2000, hereby confirms receipt of
INTEGRAL TECHNOLOGIES, INC.'S (the "Company") Put Cancellation Notice, and
confirms the following:
Date of this Confirmation:
----------------
Put Cancellation Date :
-------------------
INVESTOR(S)
-------------------------------------------
Investor's Name
By:
----------------------------------------
(Signature)
Address:
-------------------------------------------
-------------------------------------------
-------------------------------------------
Telephone No.:
----------------------------------------
Facsimile No.:
----------------------------------------
EXHIBIT S
42
