INVESTMENT AGREEMENT
Exhibit
10(i)
INVESTMENT
AGREEMENT (this "AGREEMENT"), dated as of August 15, 2005 by and between Nexia
Holdings, Inc., a Nevada corporation (the "Company"), and Dutchess Private
Equities Fund, LP, a Delaware limited partnership (the "Investor").
As
used
in this Agreement, the following terms shall have the following meanings
specified or indicated below, and such meanings shall be equally applicable
to
the singular and plural forms of such defined terms.
“1933
Act”
shall
have the meaning set forth in the preamble of this agreement.
“1934
Act”
shall
mean the Securities Exchange Act of 1934, as it may be amended.
“Affiliate”
shall
have the meaning specified in Section 5(h), below.
“Agreement”
shall
mean this Investment Agreement.
“Best
Bid”
shall
mean the highest posted bid price of the Common Stock.
“Buy
In”
shall
have the meaning specified in Section 6, below.
“Buy
In
Adjustment Amount”
shall
have the meaning specified in Section 6.
1
“By-laws”
shall have the meaning specified in Section 4(c).
“Certificate
of Incorporation” shall have the meaning specified in Section 4(c).
“Closing”
shall
have the meaning specified in Section 2(h).
“Closing
Date”
shall
mean no more than seven (7) Trading Days following the Put Notice
Date.
“Common
Stock”
shall
have the meaning set forth in the preamble of this Agreement.
“Control”
or
“Controls”
shall
have the meaning specified in Section 5(h).
“Covering
Shares”
shall
have the meaning specified in Section 6.
“Effective
Date”
shall
mean the date the SEC declares effective under the 1933 Act the Registration
Statement covering the Securities.
“Environmental
Laws”
shall
have the meaning specified in Section 4(m).
“Execution
Date”
shall
mean the date indicated in the preamble to this Agreement.
“Indemnities”
shall
have the meaning specified in Section 11.
“Indemnified
Liabilities”
shall
have the meaning specified in Section 11.
“Ineffective
Period”
shall
mean any period of time that the Registration Statement or any Supplemental
Registration Statement (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.
“Investor”
shall
have the meaning indicated in the preamble of this Agreement.
“Material
Adverse Effect”
shall
have the meaning specified in Section 4(a).
“Maximum
Common Stock Issuance”
shall
have the meaning specified in Section 2(I).
“Minimum
Acceptable Price”
with
respect to any Put Notice Date shall mean seventy-five percent (75%) of the
lowest closing bid prices for the ten (10) Trading Day period immediately
preceding such Put Notice Date.
2
“Open
Period”
shall
mean the period beginning on and including the Trading Day immediately following
the Effective Date and ending on the earlier to occur of (i)
the date
which is thirty-six (36) months from the Effective Date; or (ii)
termination of the Agreement in accordance with Section 9, below.
“Pricing
Period”
shall
mean the period beginning on the Put Notice Date and ending on and including
the
date that is five (5) Trading Days after such Put Notice Date.
“Principal
Market”
shall
mean the American Stock Exchange, Inc., the National Association of Securities
Dealers, Inc. Over-the-Counter Bulletin Board, the NASDAQ National Market System
or the NASDAQ SmallCap Market, whichever is the principal market on which the
Common Stock is listed.
“Prospectus”
shall
mean the prospectus, preliminary prospectus and supplemental prospectus used
in
connection with the Registration Statement.
“Purchase
Amount”
shall
mean the total amount being paid by the Investor on a particular Closing Date
to
purchase the Securities.
“Purchase
Price”
shall
mean ninety-five percent (95%) of the lowest closing Best Bid price of the
Common Stock during the Pricing Period.
“Put”
shall have the meaning set forth in Section 2(b)(1) hereof.
“Put
Amount”
shall
have the meaning set forth in Section 2(b) hereof.
“Put
Notice”
shall
mean a written notice sent to the Investor by the Company stating the Put Amount
in U.S. dollars, the Company intends to sell to the Investor pursuant to the
terms of the Agreement and stating the current number of Shares issued and
outstanding on such date.
“Put
Notice Date”
shall
mean the Trading Day immediately following the day on which the Investor
receives a Put Notice, however a Put Notice shall be deemed delivered
on
(a)
the
Trading Day it is received by facsimile or otherwise by the Investor if such
notice is received prior to 9:00 am Eastern Time, or (b)
the
immediately succeeding Trading Day if it is received by facsimile or otherwise
after 9:00 am Eastern Time on a Trading Day. No Put Notice may be deemed
delivered on a day that is not a Trading Day.
“Put
Restriction”
shall
mean the days between the beginning of the Pricing Period and Closing Date.
During this time, the Company shall not be entitled to deliver another Put
Notice.
“Registration
Period”
shall
have the meaning specified in Section 5(c), below.
“Registration
Rights Agreement”
shall
have the meaning set forth in the recitals, above.
“Registration
Statement”
means
the registration statement of the Company filed under the 1933 Act covering
the
Common Stock issuable hereunder.
“Related
Party”
shall
have the meaning specified in Section 5(h).
“Resolution”
shall
have the meaning specified in Section 8(e).
3
“SEC”
shall
mean the U.S. Securities & Exchange Commission.
“SEC
Documents”
shall
have the meaning specified in Section 4(f).
“Securities”
shall
mean the shares of Common Stock issued pursuant to the terms of the
Agreement.
“Shares”
shall
mean the shares of the Company’s Common Stock.
“Sold
Shares”
shall
have the meaning specified in Section 6.
“Subsidiaries”
shall
have the meaning specified in Section 4(a).
“Trading
Day”
shall
mean any day on which the Principal Market for the Common Stock is open for
trading, from the hours of 9:30 am until 4:00 pm.
“Transaction
Documents”
shall
mean this Agreement, the Registration Rights Agreement, and each of the other
agreements entered into by the parties hereto in connection with this
Agreement.
(I)
Subject to the terms and conditions of the Transaction Documents, and from
time
to time during the Open Period, the Company may, in its sole discretion, deliver
a Put Notice to the Investor which states the dollar amount (designated in
U.S.
Dollars) (the "Put Amount") ,which the Company intends to sell to the Investor
on a Closing Date (the "Put"). The Put Notice shall be in the form attached
hereto as Exhibit F and incorporated herein by reference. The amount that the
Company shall be entitled to Put to the Investor (the "Put Amount") shall be
equal to, at the Company's election, either: (A) Two Hundred percent (200%)
of
the average daily volume (U.S. market only) of the Common Stock for the twenty
(20) Trading Days prior to the applicable Put Notice Date, multiplied by the
average of the three (3) daily closing bid prices immediately preceding the
Put
Date, or (B) One Hundred Thousand dollars ($100,000); provided that in no event
will the Put Amount be more than One Million Dollars ($1,000,000) with respect
to any single Put. During the Open Period, the Company shall not be entitled
to
submit a Put Notice until after the previous Closing has been completed. The
Purchase Price for the Common Stock identified in the Put Notice shall be equal
to ninety-five percent (95)% of the lowest closing Best Bid price of the Common
Stock during the Pricing Period.
(II)
If
any closing bid price during the applicable Pricing Period with respect to
that
Put Notice is less than Seventy-Five percent (75%) of the any closing bid prices
of the Common Stock for the ten (10) Trading Days prior to the Put Notice Date
(the "Minimum Acceptable Price"), the Put Notice will terminate at the Company's
request, by sending written notice to the Investor to cancel the Put Notice.
4
(C)
RESERVED
(E)
Reserved
(I)
a
Registration Statement shall have been declared effective and shall remain
effective and available for the resale of all the Registrable Securities (as
defined in the Registration Rights Agreement) at all times until the Closing
with respect to the subject Put Notice;
(II)
at
all times during the period beginning on the related Put Notice Date and ending
on and including the related Closing Date, the Common Stock shall have been
listed on the Principal Market and shall not have been suspended from trading
thereon for a period of two (2) consecutive Trading Days during the Open Period
and the Company shall not have been notified of any pending or threatened
proceeding or other action to suspend the trading of the Common Stock;
(III)
the
Company has complied with its obligations and is otherwise not in breach of
a
material provision of, or in default under, this Agreement, the Registration
Rights Agreement or any other agreement executed in connection herewith which
has not been corrected prior to delivery of the Put Notice Date;
(IV)
no
injunction shall have been issued and remain in force, or action commenced
by a
governmental authority which has not been stayed or abandoned, prohibiting
the
purchase or the issuance of the Securities; and
(V)
the
issuance of the Securities will not violate any shareholder approval
requirements of the Principal Market.
If
any of
the events described in clauses (i) through (v) above occurs during a Pricing
Period, then the Investor shall have no obligation to purchase the Put Amount
of
Common Stock set forth in the applicable Put Notice.
5
(G)
RESERVED
The
Company understands that a delay in the issuance of Securities beyond the
Closing Date could result in economic loss to the Investor. After the Effective
Date, as compensation to the Investor for such loss, the Company agrees to
pay
late payments to the Investor for late issuance of Securities (delivery of
Securities after the applicable Closing Date) in accordance with the following
schedule (where "No. of Days Late" is defined as the number of trading days
beyond the Closing Date. The Amounts are cumulative.):
LATE
PAYMENT FOR EACH
|
|
NO.
OF DAYS LATE
|
$10,000
OF COMMON STOCK
|
1
|
$100
|
2
|
$200
|
3
|
$300
|
4
|
$400
|
5
|
$500
|
6
|
$600
|
7
|
$700
|
8
|
$800
|
9
|
$900
|
10
|
$1,000
|
Over
10
|
$1,000
+ $200 for each Business
Day late beyond 10
days
|
The
Company shall pay any payments incurred under this Section in immediately
available funds upon demand by the Investor. Nothing herein shall limit the
Investor's right to pursue actual damages for the Company's failure to issue
and
deliver the Securities to the Investor, except to the extent that such late
payments shall constitute payment for and offset any such actual damages alleged
by the Investor, and any Buy In Adjustment Amount.
6
The
Investor represents and warrants to the Company, and covenants, that:
(A)
SOPHISTICATED INVESTOR. The Investor has, by reason of its business and
financial experience, such knowledge, sophistication and experience in financial
and business matters and in making investment decisions of this type that it
is
capable of (I) evaluating the merits and risks of an investment in the
Securities and making an informed investment decision; (II) protecting its
own
interest; and (III) bearing the economic risk of such investment for an
indefinite period of time.
(C)
SECTION 9 OF THE 1934 ACT. During the term of this Agreement, the Investor
will
comply with the provisions of Section 9 of the 1934 Act, and the rules
promulgated thereunder, with respect to transactions involving the Common Stock.
The Investor agrees not to short, either directly or indirectly through its
affiliates, principals or advisors, the Company's common stock during the term
of this Agreement.
(D)
ACCREDITED INVESTOR. Investor is an "Accredited Investor" as that term is
defined in Rule 501(a)(3) of Regulation D of the 1933 Act.
7
(H)
NO
REGISTRATION AS A DEALER. The Investor is not and will not be required to be
registered as a "dealer" under the 1934 Act, either as a result of its execution
and performance of its obligations under this Agreement or otherwise.
(I)
GOOD
STANDING The
Investor is a Limited Partnership, duly organized, validly existing and in
good
standing in the State of Delaware.
(K)
REGULATION M. The Investor will comply with Regulation M under the 1934 Act,
if
applicable.
Except
as
set forth in the Schedules attached hereto, or as disclosed on the Company's
SEC
Documents, the Company represents and warrants to the Investor that:
(A)
ORGANIZATION AND QUALIFICATION. The Company is a corporation duly organized
and
validly existing in good standing under the laws of the State of Nevada,
and has
the requisite corporate power and authorization to own its properties and to
carry on its business as now being conducted. Both the Company and the companies
it owns or controls, its “Subsidiaries,” are duly qualified to do business and
are in good standing in every jurisdiction in which its ownership of property
or
the nature of the business conducted by it makes such qualification necessary,
except to the extent that the failure to be so qualified or be in good standing
would not have a Material Adverse Effect. As used in this Agreement, "Material
Adverse Effect" means any material adverse effect on the business, properties,
assets, operations, results of operations, financial condition or prospects
of
the Company and its Subsidiaries, if any, taken as a whole, or on the
transactions contemplated hereby or by the agreements and instruments to be
entered into in connection herewith, or on the authority or ability of the
Company to perform its obligations under the Transaction Documents (as defined
in Section 1 and 4(b), below).
(I)
The
Company has the requisite corporate power and authority to enter into and
perform this Agreement, the Registration Rights Agreement, and each of the
other
agreements entered into by the parties hereto in connection with the
transactions contemplated by this Agreement (collectively, the "Transaction
Documents"), and to issue the Securities in accordance with the terms hereof
and
thereof.
(II)
The
execution and delivery of the Transaction Documents by the Company and the
consummation by it, of the transactions contemplated hereby and thereby,
including without limitation the reservation for issuance and the issuance
of
the Securities pursuant to this Agreement, have been duly and validly authorized
by the Company's Board of Directors and no further consent or authorization
is
required by the Company, its Board of Directors, or its shareholders.
8
(III)
The
Transaction Documents have been duly and validly executed and delivered by
the
Company.
(IV)
The
Transaction Documents constitute the valid and binding obligations of the
Company enforceable against the Company in accordance with their terms, except
as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
or
similar laws relating to, or affecting generally, the enforcement of creditors'
rights and remedies.
(I)
no
shares of the Company's capital stock are subject to preemptive rights or any
other similar rights or any liens or encumbrances suffered or permitted by
the
Company; (II) there are no outstanding debt securities; (III) there are no
outstanding shares of capital stock, options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to,
or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, or contracts, commitments, understandings
or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of
its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries; (IV) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any
of
their securities under the 1933 Act (except the Registration Rights Agreement),
(V) there are no outstanding securities of the Company or any of its
Subsidiaries which contain any redemption or similar provisions, and there
are
no contracts, commitments, understandings or arrangements by which the Company
or any of its Subsidiaries is or may become bound to redeem a security of the
Company or any of its Subsidiaries; (VI) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Securities as described in this Agreement; (VII) the Company
does not have any stock appreciation rights or "phantom stock" plans or
agreements or any similar plan or agreement; and (VIII) there is no dispute
as
to the classification of any shares of the Company's capital stock. The Company
has furnished to the Investor, or the Investor has had access through XXXXX
to,
true and correct copies of the Company's Amended and Restated Certificate of
Incorporation, as in effect on the date hereof (the "Certificate of
Incorporation"), and the Company's By-laws, as in effect on the date hereof
(the
"By-laws"), and the terms of all securities convertible into or exercisable
for
Common Stock and the material rights of the holders thereof in respect thereto.
9
(F)
SEC
DOCUMENTS; FINANCIAL STATEMENTS. As of the date hereof, the Company has filed
all reports, schedules, forms, statements and other documents required to be
filed by it with the SEC pursuant to the reporting requirements of the 1934
Act
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the "SEC
Documents"). The Company has delivered to the Investor or its representatives,
or they have had access through XXXXX to, true and complete copies of the SEC
Documents. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. As
of
their respective dates, the financial statements of the Company included in
the
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with
respect thereto. Such financial statements have been prepared in accordance
with
generally accepted accounting principles, by a firm that is a member of the
Public Companies Accounting Oversight Board ("PCAOB") consistently applied,
during the periods involved (except (I) as may be otherwise indicated in such
financial statements or the notes thereto, or (II) in the case of unaudited
interim statements, to the extent they may exclude footnotes or may be condensed
or summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case
of
unaudited statements, to normal year-end audit adjustments). No other written
information provided by or on behalf of the Company to the Investor which is
not
included in the SEC Documents, including, without limitation, information
referred to in Section 4(d) of this Agreement, contains any untrue statement
of
a material fact or omits to state any material fact necessary to make the
statements therein, in the light of the circumstance under which they are or
were made, not misleading. Neither the Company nor any of its Subsidiaries
or
any of their officers, directors, employees or agents have provided the Investor
with any material, nonpublic information which was not publicly disclosed prior
to the date hereof and any material, nonpublic information provided to the
Investor by the Company or its Subsidiaries or any of their officers, directors,
employees or agents prior to any Closing Date shall be publicly disclosed by
the
Company prior to such Closing Date.
10
(I)
ACKNOWLEDGMENT REGARDING INVESTOR'S PURCHASE OF SHARES. The Company acknowledges
and agrees that the Investor is acting solely in the capacity of arm's length
purchaser with respect to the Transaction Documents and the transactions
contemplated hereby and thereby. The Company further acknowledges that the
Investor is not acting as a financial advisor or fiduciary of the Company (or
in
any similar capacity) with respect to the Transaction Documents and the
transactions contemplated hereby and thereby and any advice given by the
Investor or any of its respective representatives or agents in connection with
the Transaction Documents and the transactions contemplated hereby and thereby
is merely incidental to the Investor's purchase of the Securities. The Company
further represents to the Investor that the Company's decision to enter into
the
Transaction Documents has been based solely on the independent evaluation by
the
Company and its representatives.
(J)
NO
UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR CIRCUMSTANCES. Except as set
forth in the SEC Documents, as of the date hereof, no event, liability,
development or circumstance has occurred or exists, or to the Company's
knowledge is contemplated to occur, with respect to the Company or its
Subsidiaries or their respective business, properties, assets, prospects,
operations or financial condition, that would be required to be disclosed by
the
Company under applicable securities laws on a registration statement filed
with
the SEC relating to an issuance and sale by the Company of its Common Stock
and
which has not been publicly announced.
11
12
(U)
DILUTIVE EFFECT. The Company understands and acknowledges that the number of
shares of Common Stock issuable upon purchases pursuant to this Agreement will
increase in certain circumstances including, but not necessarily limited to,
the
circumstance wherein the trading price of the Common Stock declines during
the
period between the Effective Date and the end of the Open Period. The Company's
executive officers and directors have studied and fully understand the nature
of
the transactions contemplated by this Agreement and recognize that they have
a
potential dilutive effect. The Board of Directors of the Company has concluded,
in its good faith business judgment, that such issuance is in the best interests
of the Company. The Company specifically acknowledges that, subject to such
limitations as are expressly set forth in the Transaction Documents, its
obligation to issue shares of Common Stock upon purchases pursuant to this
Agreement is absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other shareholders of
the
Company.
13
(Y)
NO
BROKERS, FINDERS OR FINANCIAL ADVISORY FEES OR COMMISSIONS. No brokers, finders
or financial advisory fees or commissions will be payable by the Company with
respect to the transactions contemplated by this Agreement, other than disclosed
in this Agreement.
(A)
BEST
EFFORTS. The Company shall use commercially reasonable efforts timely to satisfy
each of the conditions to be satisfied by it as provided in Section 7 of this
Agreement.
14
(I)
FILING OF FORM 8-K. On or before the date which is four (4) Trading Days after
the Execution Date, the Company shall file a Current Report on Form 8-K with
the
SEC describing the terms of the transaction contemplated by the Transaction
Documents in the form required by the 1934 Act, if such filing is required.
15
(L)
REIMBURSEMENT. If (I) Investor becomes involved in any capacity in any action,
proceeding or investigation brought by any shareholder of the Company, in
connection with or as a result of the consummation of the transactions
contemplated by the Transaction Documents, or if Investor is impleaded in any
such action, proceeding or investigation by any person (other than as a result
of a breach of the Investor’s representations and warranties set forth in this
Agreement); or (II)Investor becomes involved in any capacity in any action,
proceeding or investigation brought by the SEC against or involving the Company
or in connection with or as a result of the consummation of the transactions
contemplated by the Transaction Documents (other than as a result of a breach
of
the Investor’s representations and warranties set forth in this Agreement), or
if Investor is impleaded in any such action, proceeding or investigation by
any
person, then in any such case, the Company will reimburse Investor for its
reasonable legal and other expenses (including the cost of any investigation
and
preparation) incurred in connection therewith, as such expenses are incurred.
In
addition, other than with respect to any matter in which Investor is a named
party, the Company will pay to Investor the charges, as reasonably determined
by
Investor, for the time of any officers or employees of Investor devoted to
appearing and preparing to appear as witnesses, assisting in preparation for
hearings, trials or pretrial matters, or otherwise with respect to inquiries,
hearing, trials, and other proceedings relating to the subject matter of this
Agreement. The reimbursement obligations of the Company under this section
shall
be in addition to any liability which the Company may otherwise have, shall
extend upon the same terms and conditions to any affiliates of Investor that
are
actually named in such action, proceeding or investigation, and partners,
directors, agents, employees, attorneys, accountants, auditors and controlling
persons (if any), as the case may be, of Investor and any such affiliate, and
shall be binding upon and inure to the benefit of any successors of the Company,
Investor and any such affiliate and any such person.
If
the
number of Shares represented by any Put Notice (s) become restricted or such
Shares are no longer free trading for any reason, and after the applicable
Closing Date, the Investor purchases, in an open market transaction or
otherwise, the Company's Common Stock (the "Covering Shares") in order to make
delivery in satisfaction of a sale of Common Stock by the Investor (the "Sold
Shares"), which delivery such Investor anticipated to make using the Shares
represented by the Put Notice (a "Buy-In"), the Company shall pay to the
Investor the Buy-In Adjustment Amount (as defined below). The "Buy-In Adjustment
Amount" is the amount equal to the excess, if any, of (A) the Investor's total
purchase price (including brokerage commissions, if any) for the Covering Shares
over (B) the net proceeds (after brokerage commissions, if any) received by
the
Investor from the sale of the Sold Shares. The Company shall pay the Buy-In
Adjustment Amount to the Investor in immediately available funds immediately
upon demand by the Investor. By way of illustration and not in limitation of
the
foregoing, if the Investor purchases Common Stock having a total purchase price
(including brokerage commissions) of $11,000 to cover a Buy-In with respect
to
the Common Stock it sold for net proceeds of $10,000, the Buy-In Adjustment
Amount which the Company will be required to pay to the Investor will be $1,000.
16
The
obligation hereunder of the Company to issue and sell the Securities to the
Investor is further subject to the satisfaction, at or before each Closing
Date,
of each of the following conditions set forth below. These conditions are for
the Company's sole benefit and may be waived by the Company at any time in
its
sole discretion.
(A)
The
Investor shall have executed each of this Agreement and the Registration Rights
Agreement and delivered the same to the Company.
(B)
The
Investor shall have delivered to the Company the Purchase Price for the
Securities being purchased by the Investor between the end of the Pricing Period
and the Closing Date via a Put Settlement Sheet (hereto attached as Exhibit
G)
After receipt of confirmation of delivery of such Securities to the Investor,
the Investor, by wire transfer of immediately available funds pursuant to the
wire instructions provided by the Company will disburse the funds constituting
the Purchase Amount.
(C)
No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction which prohibits the consummation of any
of
the transactions contemplated by this Agreement.
The
obligation of the Investor hereunder to purchase Shares is subject to the
satisfaction, on or before each Closing Date, of each of the following
conditions set forth below.
(A)
The
Company shall have executed each of the Transaction Documents and delivered
the
same to the Investor.
(B)
The
Common Stock shall be authorized for quotation on the Principal Market and
trading in the Common Stock shall not have been suspended by the Principal
Market or the SEC, at any time beginning on the date hereof and through and
including the respective Closing Date (excluding suspensions of not more than
one (1) Trading Day resulting from business announcements by the Company,
provided that such suspensions occur prior to the Company's delivery of the
Put
Notice related to such Closing).
(C)
The
representations and warranties of the Company shall be true and correct as
of
the date when made and as of the applicable Closing Date as though made at
that
time (except for (I) representations and warranties that speak as of a specific
date and (II) with respect to the representations made in Sections 4(g), (h)
and
(j) and the third sentence of Section 4(k) hereof, events which occur on or
after the date of this Agreement and are disclosed in SEC filings made by the
Company at least ten (10) Trading Days prior to the applicable Put Notice Date)
and the Company shall have performed, satisfied and complied with the covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by the Company on or before such Closing Date. The
Investor may request an update as of such Closing Date regarding the
representation contained in Section 4(c) above.
17
(D)
The
Company shall have executed and delivered to the Investor the certificates
representing, or have executed electronic book-entry transfer of, the Securities
(in such denominations as such Investor shall request) being purchased by the
Investor at such Closing.
(E)
The
Board of Directors of the Company shall have adopted resolutions consistent
with
Section 4(b)(ii) above (the "Resolutions") and such Resolutions shall not have
been amended or rescinded prior to such Closing Date.
(G)
No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction which prohibits the consummation of any
of
the transactions contemplated by this Agreement.
(H)
The
Registration Statement shall be effective on each Closing Date and no stop
order
suspending the effectiveness of the Registration statement shall be in effect
or
to the Company's knowledge shall be pending or threatened. Furthermore, on
each
Closing Date (I) neither the Company nor Investor shall have received notice
that the SEC has issued or intends to issue a stop order with respect to such
Registration Statement or that the SEC otherwise has suspended or withdrawn
the
effectiveness of such Registration Statement, either temporarily or permanently,
or intends or has threatened to do so (unless the SEC's concerns have been
addressed and Investor is reasonably satisfied that the SEC no longer is
considering or intends to take such action), and (II) no other suspension of
the
use or withdrawal of the effectiveness of such Registration Statement or related
prospectus shall exist.
(I)
At
the time of each Closing, the Registration Statement (including information
or
documents incorporated by reference therein) and any amendments or supplements
thereto shall not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the
statements therein not misleading or which would require public disclosure
or an
update supplement to the prospectus.
(J)
If
applicable, the shareholders of the Company shall have approved the issuance
of
any Shares in excess of the Maximum Common Stock Issuance in accordance with
Section 2(i) or the Company shall have obtained appropriate approval pursuant
to
the requirements of Nevada law and the Company’s Articles of Incorporation and
By-laws.
(K)
The
conditions to such Closing set forth in Section 2(f) shall have been satisfied
on or before such Closing Date.
(L)
The
Company shall have certified to the Investor the number of Shares of Common
Stock outstanding when a Put Notice is given to the Investor.
18
(I)
when
the Investor has purchased an aggregate of Ten Million dollars ($10,000,000)
in
the Common Stock of the Company pursuant to this Agreement; or,
(II)
on
the date which is thirty-six (36) months after the Effective Date;
This
Agreement shall be suspended upon any of the following events, and shall remain
suspended until such event is rectified:
(I)
the
trading of the Common Stock is suspended by the SEC, the Principal Market or
the
NASD for a period of two (2) consecutive Trading Days during the Open Period;
or,
(II)
The
Common Stock ceases to be registered under the 1934 Act or listed or traded
on
the Principal Market. Upon the occurrence of one of the above-described events,
the Company shall send written notice of such event to the
Investor.
In
consideration of the parties mutual obligations set forth In the Transaction
Documents, each of the parties (in such capacity, an "Indemnitor") shall defend,
protect, indemnify and hold harmless the other and all of the other party's
shareholders, officers, directors, employees, counsel, and direct or indirect
investors and any of the foregoing person's agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "Indemnitees")
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and reasonable 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 attorneys' fees and disbursements (the "Indemnified Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to
(I)
any misrepresentation or breach of any representation or warranty made by the
Indemnitor or any other certificate, instrument or document contemplated hereby
or thereby; (II) any breach of any covenant, agreement or obligation of the
Indemnitor contained in the Transaction Documents or any other certificate,
instrument or document contemplated hereby or thereby; or (III) any cause of
action, suit or claim brought or made against such Indemnitee by a third party
and arising out of or resulting from the execution, delivery, performance or
enforcement of the Transaction Documents or any other certificate, instrument
or
document contemplated hereby or thereby, except insofar as any such
misrepresentation, breach or any untrue statement, alleged untrue statement,
omission or alleged omission is made in reliance upon and in conformity with
information furnished to Indemnitor which is specifically intended for use
in
the preparation of any such Registration Statement, preliminary prospectus,
prospectus or amendments to the prospectus. To the extent that the foregoing
undertaking by the Indemnitor may be unenforceable for any reason, the
Indemnitor shall make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities which is permissible under applicable
law. The indemnity provisions contained herein shall be in addition to any
cause
of action or similar rights Indemnitor may have, and any liabilities the
Indemnitor or the Indemnitees may be subject to.
19
(A)
GOVERNING LAW. This Agreement shall be governed by and interpreted in accordance
with the laws of the Commonwealth of Massachusetts without regard to the
principles of conflict of laws. Each party hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in the City
of
Boston, County of Suffolk, for the adjudication of any dispute hereunder or
in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding
is
improper. Each party hereby irrevocably waives personal service of process
and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it
under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or
the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
(B)
LEGAL
FEES; AND MISCELLANEOUS FEES. Except as otherwise set forth in the Transaction
Documents, each party shall pay the fees and expenses of its advisers, counsel,
the accountants and other experts, if any, and all other expenses incurred
by
such party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. Any attorneys' fees and expenses incurred by
either the Company or by the Investor in connection with the preparation,
negotiation, execution and delivery of any amendments to this Agreement or
relating to the enforcement of the rights of any party, after the occurrence
of
any breach of the terms of this Agreement by another party or any default by
another party in respect of the transactions contemplated hereunder, shall
be
paid on demand by the party which breached the Agreement and/or defaulted,
as
the case may be. The Company shall pay all stamp and other taxes and duties
levied in connection with the issuance of any Securities.
(D)
HEADINGS; SINGULAR/PLURAL. The headings of this Agreement are for convenience
of
reference and shall not form part of, or affect the interpretation of, this
Agreement. Whenever required by the context of this Agreement, the singular
shall include the plural and masculine shall include the feminine.
20
If
to the Company:
Nexia
Holdings, Inc.
00
Xxxx
000 Xxxxx
Xxxx
Xxxx
Xxxx, XX 00000
Telephone:
000-000-0000
If
to the Investor:
Dutchess
Private Equities Fund, LP,
000
Xxxxxx Xxxxxx
Xxxxxx,
XX 00000
Telephone:
000-000-0000
Facsimile:
000-000-0000
Each
party shall provide five (5) days' prior written notice to the other party
of
any change in address or facsimile number.
(H)
NO
ASSIGNMENT. This Agreement may not be assigned.
(I)
NO
THIRD PARTY BENEFICIARIES. This Agreement is intended for the benefit of the
parties hereto and is not for the benefit of, nor may any provision hereof
be
enforced by, any other person.
21
(K)
PUBLICITY. The Company and Investor shall consult with each other in issuing
any
press releases or otherwise making public statements with respect to the
transactions contemplated hereby and no party shall issue any such press release
or otherwise make any such public statement without the prior consent of the
other parties, which consent shall not be unreasonably withheld or delayed,
except that no prior consent shall be required if such disclosure is required
by
law, in which such case the disclosing party shall provide the other parties
with prior notice of such public statement. Notwithstanding the foregoing,
the
Company shall not publicly disclose the name of Investor without the prior
consent of such Investor, except to the extent required by law. Investor
acknowledges that this Agreement and all or part of the Transaction Documents
may be deemed to be "material contracts" as that term is defined by Item
601(b)(10) of Regulation S-B, and that the Company may therefore be required
to
file such documents as exhibits to reports or registration statements filed
under the 1933 Act or the 1934 Act. Investor further agrees that the status
of
such documents and materials as material contracts shall be determined solely
by
the Company, in consultation with its counsel.
22
(a)
The
Company shall not disclose non-public information to the Investor, its advisors,
or its representatives, unless prior to disclosure of such information the
Company identifies such information, in writing, as being non-public information
and provides the Investor, such advisors and representatives with the
opportunity to accept or refuse to accept such non-public information for
review. The Company may, as a condition to disclosing any non-public information
hereunder, require the Investor's advisors and representatives to enter into
a
confidentiality agreement in form reasonably satisfactory to the Company and
the
Investor.
(b)
Nothing herein shall require the Company to disclose non-public information
to
the Investor or its advisors or representatives, and the Company represents
that
it does not disseminate non-public information to any investors who purchase
stock in the Company in a public offering, to money managers or to securities
analysts, provided, however, that notwithstanding anything herein to the
contrary, the Company will, as hereinabove provided, immediately notify the
advisors and representatives of the Investor and, if any, underwriters, of
any
event or the existence of any circumstance (without any obligation to disclose
the specific event or circumstance) of which it becomes aware, constituting
non-public information (whether or not requested of the Company specifically
or
generally during the course of due diligence by such persons or entities),
which, if not disclosed in the prospectus included in the Registration Statement
would cause such prospectus to include a material misstatement or to omit a
material fact required to be stated therein in order to make the statements,
therein, in light of the circumstances in which they were made, not misleading.
Nothing contained in this Section 13 shall be construed to mean that such
persons or entities other than the Investor (without the written consent of
the
Investor prior to disclosure of such information) may not obtain non-public
information in the course of conducting due diligence in accordance with the
terms of this Agreement and nothing herein shall prevent any such persons or
entities from notifying the Company of their opinion that based on such due
diligence by such persons or entities, that the Registration Statement contains
an untrue statement of material fact or omits a material fact required to be
stated in the Registration Statement or necessary to make the statements
contained therein, in light of the circumstances in which they were made, not
misleading.
23
*SIGNATURE
PAGE OF INVESTMENT AGREEMENT
Your
signature on this Signature Page evidences your agreement to be bound by the
terms and conditions of the Investment Agreement and the Registration Rights
Agreement as of the date first written above.
The
undersigned signatory hereby certifies that he has read and understands the
Investment Agreement, and the representations made by the undersigned in this
Investment Agreement are true and accurate, and agrees to be bound by its terms.
DUTCHESS
PRIVATE EQUITIES FUND, L.P.
BY
ITS GENERAL PARTNER,
DUTCHESS
CAPITAL MANAGEMENT, LLC
By:
/s/ Xxxxxxx X. Xxxxxxxx
Xxxxxxx
X. Xxxxxxxx, Managing Member
NEXHIA
HOLDINGS, INC.
By
/s/
Xxxxxxx Xxxxxx
Xxxxxxx
Xxxxxx, President and Director
24