COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of
August 8, 2000 by and between X.X. Xxxxxx Group Inc., a Delaware corporation
(the "Company"), and Seacrown Limited (the "Purchaser").
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Certain Definitions.
(a) "Average Daily Price" shall be the price based on the VWAP of
the Company on the Principal Market.
(b) "Draw Down" shall have the meaning assigned to such term in
Section 6.1(a) hereof.
(c) "Draw Down Pricing Period" shall mean a period of twenty-two
(22) consecutive Trading Days beginning on the date specified in the Draw Down
Notice (as defined in Section 6.1(e) hereof), provided, however, the Draw Down
Pricing Period shall not begin before the day on which receipt of such notice is
confirmed by the Purchaser.
(d) "Effective Date" shall mean the date the Registration Statement
of the Company covering the Shares being subscribed for hereby is declared
effective.
(e) "Material Adverse Effect" shall mean any adverse effect on the
business, operations, properties, prospects or financial condition of the
Company that is material and adverse to the Company and its subsidiaries and
affiliates, taken as a whole, and/or any condition, circumstance, or situation
that would prohibit or otherwise materially interfere with the ability of the
Company to perform any of its material obligations under this Agreement or the
Registration Rights Agreement or to perform its obligations under any other
material agreement.
(f) "Principal Market" shall mean initially the Nasdaq National
Market and shall include the American Stock Exchange, Nasdaq National Market,
the Nasdaq SmallCap Market or the New York Stock Exchange if the Company is
listed and trades on such market or exchange. Principal Market shall not include
the OTC Bulletin Board without the express written consent of the Purchaser.
(g) "Purchase Price" shall mean with respect to Shares (excluding
Shares issued upon the exercise of Warrants), ninety-four percent (94%) of the
Average Daily Price on the date in question.
(h) "Registration Statement" shall mean the registration statement
under the Securities Act of 1933, as amended, to be filed with the Securities
and Exchange Commission for the registration of the Shares pursuant to the
Registration Rights Agreement attached hereto as Exhibit A (the "Registration
Rights Agreement").
(i) "SEC Documents" shall mean the Company's latest Form 10-K or
10-KSB as of the time in question, all Forms 10-Q or 10-QSB and 8-K filed
thereafter and the Proxy Statement for its latest fiscal year as of the time in
question until such time as the Company no longer has an obligation to maintain
the effectiveness of a Registration Statement as set forth in the Registration
Rights Agreement and the press release dated August 3, 2000 reporting earnings
for the quarter ended June 30, 2000.
(j) "Shares" shall mean, collectively, the shares of Common Stock
(as defined in Section 2.1 hereof) of the Company being subscribed for hereunder
and those shares of Common Stock issuable to the Purchaser upon exercise of the
Warrants.
(k) "Threshold Price" is the lowest Average Daily Price during any
Draw Down Pricing Period at which the Company will sell its Common Stock with
respect to this Agreement.
(l) "Trading Day" shall mean any day on which the Principal Market
is open for business.
(m) "VWAP" shall mean the daily volume weighted average price of the
Company's Common Stock on the Principal Market as reported by Bloomberg
Financial L.P. (based on a trading day from 9:30 am EST to 4:00 pm EST) using
the AQR function. Annexed hereto as a schedule is an example of the VWAP
calculation. Notwithstanding the example, in the event of a conflict between the
example and the terms of this section, the terms of this section shall control.
(n) "Warrants" shall mean the Warrants as set forth in Section
5.2(f) hereof.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section 2.1. Purchase and Sale of Stock. Subject to the terms and
conditions of this Agreement, the Company may issue and sell to the Purchaser
and the Purchaser shall purchase from the Company up to Forty-Eight Million
Dollars ($48,000,000) of the Company's Common Stock (the "Commitment Amount"),
$0.001 par value per share (the "Common Stock") and the Warrants, based on Draw
Downs of up to Three Million Dollars ($3,000,000) per Draw Down.
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Section 2.2. The Shares. The Company has authorized and has reserved
and covenants to continue to reserve, free of preemptive rights and other
similar contractual rights of stockholders, a sufficient number of its
authorized but unissued shares of its Common Stock to cover the Shares to be
issued in connection with all Draw Downs requested under this Agreement.
Anything in this Agreement to the contrary notwithstanding, (i) at no time will
the Company request a Draw Down which would result in the issuance of a number
of shares of Common Stock pursuant to this Agreement which exceeds 19.9% of the
number of shares of Common Stock issued and outstanding on the Initial Closing
Date (as defined in Section 2.3 hereof) without obtaining stockholder approval
of such excess issuance, and (ii) the Company may not make a Draw Down to the
extent that, after such purchase by the Purchaser, the sum of the number of
shares of Common Stock beneficially owned by the Purchaser and its affiliates
would result in beneficial ownership by the Purchaser and its affiliates of more
than 9.9% of the then outstanding shares of Common Stock. For purposes of the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
Section 2.3. Purchase Price and Initial Closing. The Company agrees to
issue and sell to the Purchaser and, in consideration of and in express reliance
upon the representations, warranties, covenants, terms and conditions of this
Agreement, the Purchaser agrees to purchase that number of the Shares to be
issued in connection with each Draw Down. The delivery of executed documents
under this Agreement and the other agreements referred to herein and the payment
of the fees set forth in Article II of the Escrow Agreement attached as Exhibit
B hereto (the "Initial Closing") shall take place at the offices of Xxxxxxx
Xxxxxx & Green, P.C., 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 within fifteen
(15) days from the date hereof, or (ii) such other time and place or on such
date as the Purchaser and the Company may agree upon (the "Initial Closing
Date"). Each party shall deliver all documents, instruments and writings
required to be delivered by such party pursuant to this Agreement at or prior to
the Initial Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1. Representation and Warranties of the Company. The Company
hereby makes the following representations and warranties to the Purchaser:
(a) Organization, Good Standing and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate authority to own,
lease and operate its properties and assets and to carry on its business as now
being conducted. Except as set forth in Schedule 3.1(a), the Company is duly
qualified to do business and is in good standing as a foreign corporation in
every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, other than those in which the
failure so to qualify would not have a Material Adverse Effect on the Company's
financial condition.
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(b) Authorization, Enforcement. (i) The Company has the requisite
corporate power and corporate authority to enter into and perform its
obligations under this Agreement, the Registration Rights Agreement, the Escrow
Agreement and to issue the Shares pursuant to their respective terms, (ii) the
execution, issuance and delivery of this Agreement, the Registration Rights
Agreement and the Escrow Agreement by the Company and the consummation by it of
the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action and no further consent or authorization of the
Company or its Board of Directors or stockholders is required, and (iii) this
Agreement, the Registration Rights Agreement and the Escrow Agreement have been
duly executed and delivered by the Company and at the Initial Closing shall
constitute valid and binding obligations of the Company enforceable against the
Company in accordance with their terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation, conservatorship, receivership or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application. The Company has duly and
validly authorized and reserved for issuance shares of Common Stock sufficient
in number for the issuance of the Shares.
(c) Capitalization. The authorized capital stock of the Company
consists of 20,000,000 shares of Common Stock of which 7,981,745 shares are
issued and outstanding and no shares of preferred stock. All of the outstanding
shares of the Company's Common Stock have been duly and validly authorized and
are fully paid and non-assessable, except as set forth in the SEC Documents.
Except as set forth in this Agreement and the Registration Rights Agreement and
as set forth in the SEC Documents, or on Schedule 3.1(c) hereto, no shares of
Common Stock are entitled to preemptive rights or registration rights and there
are no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company. Furthermore,
except as set forth in this Agreement and as set forth in the SEC Documents or
on Schedule 3.1(c), there are no contracts, commitments, understandings, or
arrangements by which the Company is or may become bound to issue additional
shares of the capital stock of the Company or options, securities or rights
convertible into shares of capital stock of the Company. Except as set forth in
Schedule 3.1(c), the Company is not a party to any agreement granting
registration rights to any person with respect to any of its equity or debt
securities. Except as set forth in Schedule 3.1(c), the Company is not a party
to, and it has no knowledge of, any agreement restricting the voting or transfer
of any shares of the capital stock of the Company. Except as set forth in the
SEC Documents or on Schedule 3.1(c) hereto, the offer and sale of all capital
stock, convertible securities, rights, warrants, or options of the Company
issued prior to the Initial Closing complied with all applicable federal and
state securities laws, and no stockholder has a right of rescission or damages
with respect thereto which would have a Material Adverse Effect on the Company's
financial condition or operating results. The Company has made available to the
Purchaser true and correct copies of the Company's Charter as in effect on the
date hereof (the "Charter"), and the Company's Bylaws as in effect on the date
hereof (the "Bylaws"). The Company has not received any notice from the
Principal Market questioning or threatening the continued inclusion of the
Common Stock on such market.
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(d) Issuance of Shares. The Shares to be issued under this
Agreement have been duly authorized by all necessary corporate action and, when
paid for or issued in accordance with the terms hereof, the Shares shall be
validly issued and outstanding, fully paid and non-assessable, and the Purchaser
shall be entitled to all rights accorded to a holder of Common Stock.
(e) No Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated herein do not and will not (i) violate any provision of the
Company's Charter or Bylaws, (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond,
license, lease agreement, instrument or obligation to which the Company is a
party, (iii) create or impose a lien, charge or encumbrance on any property of
the Company under any agreement or any commitment to which the Company is a
party or by which the Company is bound or by which any of its respective
properties or assets are bound, or (iv) result in a violation of any federal,
state, local or other foreign statute, rule, regulation, order, judgment or
decree (including any federal or state securities laws and regulations)
applicable to the Company or any of its subsidiaries or by which any property or
asset of the Company or any of its subsidiaries are bound or affected, except,
in all cases, for such conflicts, defaults, termination, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect. The business of the Company and its
subsidiaries is not being conducted in violation of any laws, ordinances or
regulations of any governmental entity, except for possible violations which
singularly or in the aggregate do not and will not have a Material Adverse
Effect. The Company is not required under any federal, state or local law, rule
or regulation to obtain any consent, authorization or order of, or make any
filing or registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement, or
issue and sell the Shares in accordance with the terms hereof (other than any
filings which may be required to be made by the Company with the Securities and
Exchange Commission (the "SEC") or state securities administrators subsequent to
the Initial Closing and any registration statement which may be filed pursuant
hereto); provided that, for purpose of the representation made in this sentence,
the Company is assuming and relying upon the accuracy of the relevant
representations and agreements of the Purchaser herein.
(f) SEC Documents, Financial Statements. The Common Stock of the
Company is registered pursuant to Section 12(g) of the Exchange Act and, except
as disclosed in the SEC Documents or on Schedule 3.1(f) hereto, the Company has
timely filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the Exchange Act, including material filed pursuant to Section 13(a) or 15(d)
of the Exchange Act (all of the foregoing including filings incorporated by
reference therein being referred to herein as the "SEC Documents"). The Company
has delivered or made available to the Purchaser true and complete copies of the
SEC Documents filed with the SEC since December 31, 1998. The Company has not
provided to the Purchaser any information which, according to applicable law,
rule or regulation, should have been disclosed publicly by
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the Company but which has not been so disclosed, other than with respect to the
transactions contemplated by this Agreement. As of their respective filing
dates, the SEC Documents complied in all material respects with the requirements
of the Exchange Act and the rules and regulations of the SEC promulgated
thereunder applicable to such documents, and, as of their respective filing
dates, none of the SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial statements of the
Company included in the SEC Documents comply as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC or other applicable rules and regulations with respect thereto. Such
financial statements have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis during the periods
involved (except (i) as may be otherwise indicated in such financial statements
or the notes thereto or (ii) in the case of unaudited interim statements, to the
extent they may not include footnotes or may be condensed or summary
statements), and fairly present in all material respects the financial position
of the Company and its subsidiaries as of the dates thereof and the results of
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
(g) Subsidiaries. The SEC Documents or Schedule 3.1(g) hereto
sets forth each subsidiary of the Company, showing the jurisdiction of its
incorporation or organization and showing the percentage of each person's
ownership of the outstanding stock or other interests of such subsidiary. For
the purposes of this Agreement, "subsidiary" shall mean any corporation or other
entity of which at least a majority of the securities or other ownership
interests having ordinary voting power (absolutely or contingently) for the
election of directors or other persons performing similar functions are at the
time owned directly or indirectly by the Company and/or any of its other
subsidiaries. All of the outstanding shares of capital stock of each subsidiary
have been duly authorized and validly issued, and are fully paid and
non-assessable. There are no outstanding preemptive, conversion or other rights,
options, warrants or agreements granted or issued by or binding upon any
subsidiary for the purchase or acquisition of any shares of capital stock of any
subsidiary or any other securities convertible into, exchangeable for or
evidencing the rights to subscribe for any shares of such capital stock. Neither
the Company nor any subsidiary is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of the
capital stock of any subsidiary or any convertible securities, rights, warrants
or options of the type described in the preceding sentence. Neither the Company
nor any subsidiary is a party to, nor has any knowledge of, any agreement
restricting the voting or transfer of any shares of the capital stock of any
subsidiary.
(h) No Material Adverse Effect. Since March 31, 2000 no Material
Adverse Effect has occurred or exists with respect to the Company, except as
disclosed in the SEC Documents or on Schedule 3.1(h) hereof.
(i) No Undisclosed Liabilities. Except as disclosed in the SEC
Documents or on Schedule 3.1(i) hereto, neither the Company nor any of its
subsidiaries has any liabilities, obligations, claims or losses (whether
liquidated or unliquidated, secured or
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unsecured, absolute, accrued, contingent or otherwise) that would be required to
be disclosed on a balance sheet of the Company or any subsidiary (including the
notes thereto) in conformity with GAAP which are not disclosed in the SEC
Documents, other than those incurred in the ordinary course of the Company's or
its subsidiaries' respective businesses since such date and which, individually
or in the aggregate, do not or would not have a Material Adverse Effect on the
Company or its subsidiaries.
(j) No Undisclosed Events or Circumstances. Since March 31, 2000,
no event or circumstance has occurred or exists with respect to the Company or
its businesses, properties, prospects, operations or financial condition, that,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the SEC Documents.
(k) Indebtedness. The SEC Documents or Schedule 3.1(k) hereto
sets forth as of the date hereof all outstanding secured and unsecured
Indebtedness of the Company or any subsidiary, or for which the Company or any
subsidiary has commitments. For the purposes of this Agreement, "Indebtedness"
shall mean (A) any liabilities for borrowed money or amounts owed in excess of
$250,000 (other than trade accounts payable incurred in the ordinary course of
business), (B) all guaranties, endorsements and contingent obligations in
respect of Indebtedness of others, whether or not the same are or should be
reflected in the Company's balance sheet (or the notes thereto), except
guaranties by endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business; and (C) the present
value of any lease payments in excess of $250,000 due under leases required to
be capitalized in accordance with GAAP. Neither the Company nor any subsidiary
is in default with respect to any Indebtedness.
(l) Title to Assets. Each of the Company and the subsidiaries has
good and marketable title to all of its real and personal property reflected in
the SEC Documents, free of any mortgages, pledges, charges, liens, security
interests or other encumbrances, except for those indicated in the SEC Documents
or on Schedule 3.1(1) hereto or such that do not cause a Material Adverse Effect
on the Company's financial condition or operating results. All leases of the
Company and each of its subsidiaries are valid and subsisting and in full force
and effect.
(m) Actions Pending. There is no action, suit, claim,
investigation or proceeding pending or, to the knowledge of the Company,
threatened against the Company or any subsidiary which questions the validity of
this Agreement or the transactions contemplated hereby or any action taken or to
be taken pursuant hereto. Except as set forth in the SEC Documents or on
Schedule 3.1(m) hereto, there is no action, suit, claim, investigation or
proceeding pending or, to the knowledge of the Company, threatened, against or
involving the Company, any subsidiary or any of their respective properties or
assets. There are no outstanding orders, judgments, injunctions, awards or
decrees of any court, arbitrator or governmental or regulatory body against the
Company or any subsidiary.
(n) Compliance with Law. The business of the Company and the
subsidiaries has been and is presently being conducted in accordance with all
applicable federal,
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state and local governmental laws, rules, regulations and ordinances, except as
set forth in the SEC Documents or on Schedule 3.1(n) hereto or such that do not
cause a Material Adverse Effect. The Company and each of its subsidiaries have
all franchises, permits, licenses, consents and other governmental or regulatory
authorizations and approvals necessary for the conduct of their respective
businesses as now being conducted by them unless the failure to possess such
franchises, permits, licenses, consents and other governmental or regulatory
authorizations and approvals, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
(o) Taxes. The Company and each subsidiary has filed all Tax
Returns which it is required to file under applicable laws; all such Tax Returns
are true and accurate and have been prepared in compliance with all applicable
laws; the Company has paid all Taxes due and owing by it or any subsidiary
(whether or not such Taxes are required to be shown on a Tax Return) and have
withheld and paid over to the appropriate taxing authorities all Taxes which it
is required to withhold from amounts paid or owing to any employee, stockholder,
creditor or other third parties; and since December 31, 1999, the charges,
accruals and reserves for Taxes with respect to the Company (including any
provisions for deferred income taxes) reflected on the books of the Company are
adequate to cover any Tax liabilities of the Company if its current tax year
were treated as ending on the date hereof.
No claim has been made by a taxing authority in a jurisdiction where
the Company does not file tax returns that the Company or any subsidiary is or
may be subject to taxation by that jurisdiction. There are no foreign, federal,
state or local tax audits or administrative or judicial proceedings pending or
being conducted with respect to the Company or any subsidiary; no information
related to Tax matters has been requested by any foreign, federal, state or
local taxing authority; and, except as disclosed above, no written notice
indicating an intent to open an audit or other review has been received by the
Company or any subsidiary from any foreign, federal, state or local taxing
authority. There are no material unresolved questions or claims concerning the
Company's Tax liability. The Company (A) has not executed or entered into a
closing agreement pursuant to ss. 7121 of the Internal Revenue Code or any
predecessor provision thereof or any similar provision of state, local or
foreign law; and (B) has not agreed to or is required to make any adjustments
pursuant to ss. 481 (a) of the Internal Revenue Code or any similar provision of
state, local or foreign law by reason of a change in accounting method initiated
by the Company or any of its subsidiaries or has any knowledge that the IRS has
proposed any such adjustment or change in accounting method, or has any
application pending with any taxing authority requesting permission for any
changes in accounting methods that relate to the business or operations of the
Company. The Company has not been a United States real property holding
corporation within the meaning of ss. 897(c)(2) of the Internal Revenue Code
during the applicable period specified in ss. 897(c)(1)(A)(ii) of the Internal
Revenue Code.
The Company has not made an election under ss. 341(f) of the
Internal Revenue Code. The Company is not liable for the Taxes of another person
that is not a subsidiary of the Company under (A) Treas. Reg. ss. 1.1502-6 (or
comparable provisions of state, local or foreign law), (B) as a transferee or
successor, (C) by contract or indemnity or (D) otherwise. The
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Company is not a party to any tax sharing agreement. The Company has not made
any payments, is not obligated to make payments nor is it a party to an
agreement that could obligate it to make any payments that would not be
deductible under ss. 280G of the Internal Revenue Code.
For purposes of this Section 3.1(o):
"IRS" means the United States Internal Revenue Service.
"Tax" or "Taxes" means federal, state, county, local, foreign, or
other income, gross receipts, ad valorem, franchise, profits, sales or use,
transfer, registration, excise, utility, environmental, communications, real or
personal property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.
"Tax Return" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and including any
amendment thereof.
(p) Certain Fees. Except as set forth on Schedule 3.1(p) hereto,
no brokers, finders or financial advisory fees or commissions will be payable by
the Company or any subsidiary with respect to the transactions contemplated by
this Agreement.
(q) Disclosure. To the best of the Company's knowledge, neither
this Agreement or the Schedules hereto nor any other documents, certificates or
instruments furnished to the Purchaser by or on behalf of the Company or any
subsidiary in connection with the transactions contemplated by this Agreement
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made herein or therein, in the light
of the circumstances under which they were made herein or therein, not
misleading.
(r) Operation of Business. The Company and each of the
subsidiaries owns or possesses all patents, trademarks, service marks, trade
names, copyrights, licenses and authorizations as set forth in the SEC Documents
and on Schedule 3.1(r) hereto, and all rights with respect to the foregoing,
which are necessary for the conduct of its business as now conducted without any
conflict with the rights of others.
(s) Regulatory Compliance. The Company has all necessary
licenses, registrations and permits to conduct its business as now being
conducted in all states where the Company conducts its business.
(t) Books and Records. The records and documents of the Company
and its subsidiaries accurately reflect in all material respects the information
relating to the business of the Company and the subsidiaries, the location and
collection of their assets, and the nature of all transactions giving rise to
the obligations or accounts receivable of the Company or any subsidiary.
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(u) Material Agreements. Except as set forth in the SEC
Documents, or on Schedule 3.1(u) hereto, neither the Company nor any subsidiary
is a party to any written or oral contract, instrument, agreement, commitment,
obligation, plan or arrangement, a copy of which would or might be required to
be filed with the SEC as an exhibit to a registration statement on Form S-1 or
other applicable form (collectively, "Material Agreements") if the Company or
any subsidiary were registering securities under the Securities Act of 1933, as
amended (the "Securities Act"). Except as set forth in Schedule 3.1(u), the
Company and each of its subsidiaries has in all material respects performed all
the obligations required to be performed by them to date under the foregoing
agreements, have received no notice of default and, to the best of the Company's
knowledge, are not in default under any Material Agreement now in effect, the
result of which could cause a Material Adverse Effect. No written or oral
contract, instrument, agreement, commitment, obligation, plan or arrangement of
the Company or of any subsidiary limits or shall limit the payment of dividends
on the Company's Common Stock.
(v) Transactions with Affiliates. Except as set forth in the SEC
Documents or on Schedule 3.1(v) hereto, there are no loans, leases, agreements,
contracts, royalty agreements, management contracts or arrangements or other
continuing transactions exceeding $100,000 between (A) the Company, any
subsidiary or any of their respective customers or suppliers on the one hand,
and (B) on the other hand, any officer, employee, consultant or director of the
Company, or any of its subsidiaries, or any person owning any capital stock of
the Company or any subsidiary or any member of the immediate family of such
officer, employee, consultant, director or stockholder or any corporation or
other entity controlled by such officer, employee, consultant, director or
stockholder, or a member of the immediate family of such officer, employee,
consultant, director or stockholder.
(w) Securities Laws. The Company has complied and will comply
with all applicable federal and state securities laws in connection with the
offer, issuance and sale of the Shares hereunder. Neither the Company nor anyone
acting on its behalf, directly or indirectly, has or will sell, offer to sell or
solicit offers to buy the Shares or similar securities to, or solicit offers
with respect thereto from, or enter into any preliminary conversations or
negotiations relating thereto with, any person (other than the Purchaser), so as
to bring the issuance and sale of the Shares and/or Warrants under the
registration provisions of the Securities Act and applicable state securities
laws. Neither the Company nor any of its affiliates, nor any person acting on
its or their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D under the Securities Act) in
connection with the offer or sale of the Shares.
(x) Employees. Neither the Company nor any subsidiary has any
collective bargaining arrangements or agreements covering any of its employees,
except as set forth in the SEC Documents or on Schedule 3.1(x) hereto. Except as
set forth in the SEC Documents or on Schedule 3.1(x) hereto, neither the Company
nor any subsidiary is in breach of any employment contract, agreement regarding
proprietary information, noncompetition agreement, nonsolicitation agreement,
confidentiality agreement, or any other similar contract or restrictive
covenant, relating to the right of any officer, employee or consultant to be
employed or engaged by the Company or such subsidiary. Since the date of the
September 30, 1999 Form
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10-KSB, no officer, consultant or key employee of the Company or any subsidiary
whose termination, either individually or in the aggregate, could have a
Material Adverse Effect, has terminated or, to the knowledge of the Company, has
any present intention of terminating his or her employment or engagement with
the Company or any subsidiary.
(y) Absence of Certain Developments. Except as provided in SEC
Documents or in Schedule 3.1(y) hereto, since March 31, 2000, neither the
Company nor any subsidiary has:
(i) issued any stock, bonds or other corporate
securities or any rights, options or warrants with respect thereto;
(ii) borrowed any amount or incurred or become subject
to any liabilities (absolute or contingent) except current liabilities incurred
in the ordinary course of business which are comparable in nature and amount to
the current liabilities incurred in the ordinary course of business during the
comparable portion of its prior fiscal year, as adjusted to reflect the current
nature and volume of the Company's or such subsidiary's business;
(iii) discharged or satisfied any lien or encumbrance or
paid any obligation or liability (absolute or contingent), other than current
liabilities paid in the ordinary course of business;
(iv) declared or made any payment or distribution of
cash or other property to stockholders with respect to its stock, or purchased
or redeemed, or made any agreements so to purchase or redeem, any shares of its
capital stock;
(v) sold, assigned or transferred any other tangible
assets, or canceled any debts or claims, except in the ordinary course of
business;
(vi) sold, assigned or transferred any patent rights,
trademarks, trade names, copyrights, trade secrets or other intangible assets or
intellectual property rights, or disclosed any proprietary confidential
information to any person except to customers in the ordinary course of business
or to the Purchaser or its representatives;
(vii) suffered any substantial losses or waived any
rights of material value, whether or not in the ordinary course of business, or
suffered the loss of any material amount of prospective business;
(viii) made any changes in employee compensation except
in the ordinary course of business and consistent with past practices;
(ix) made capital expenditures or commitments therefor
that aggregate in excess of $500,000;
(x) entered into any other material transaction, whether
or not in the ordinary course of business;
11
(xi) suffered any material damage, destruction or
casualty loss, whether or not covered by insurance;
(xii) experienced any material problems with labor or
management in connection with the terms and conditions of their employment; or
(xiii) effected any two or more events of the foregoing
kind which in the aggregate would be material to the Company or its
subsidiaries.
(aa) Use of Proceeds. The proceeds from the sale of the Shares
will be used by the Company and its subsidiaries for general corporate purposes.
(bb) Acknowledgment Regarding Purchaser's Purchase of Shares. The
Company acknowledges and agrees that Purchaser is acting solely in the capacity
of arm's length purchaser with respect to this Agreement and the transactions
contemplated hereunder. The Company further acknowledges that the Purchaser is
not acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereunder and any advice given by the Purchaser or any of its representatives or
agents in connection with this Agreement and the transactions contemplated
hereunder is merely incidental to the Purchaser's purchase of the Shares. The
Company further represents to the Purchaser that the Company's decision to enter
into this Agreement has been based solely on the independent evaluation by the
Company and its own representatives and counsel.
Section 3.2. Representations and Warranties of the Purchaser. The
Purchaser hereby makes the following representations and warranties to the
Company:
(a) Organization and Standing of the Purchaser. The Purchaser is
a corporation duly incorporated, validly existing and in good standing under the
laws of the British Virgin Islands and has all the requisite corporate authority
to own, lease and operate its properties and assets and to carry on its business
as now being conducted.
(b) Authorization and Power. (i) The Purchaser has the requisite
power and authority to enter into and perform this Agreement, the Registration
Rights Agreement and the Escrow Agreement and to purchase the Shares being sold
to it hereunder, (ii) the execution and delivery of this Agreement, the
Registration Rights Agreement and the Escrow Agreement by Purchaser and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action and no further consent or
authorization of the Purchaser or its Board of Directors or stockholders is
required, and (iii) this Agreement, the Registration Rights Agreement and the
Escrow Agreement have been duly executed and delivered by the Purchaser and at
the Initial Closing shall constitute valid and binding obligations of the
Purchaser enforceable against the Purchaser in accordance with their terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation, conservatorship,
receivership or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application.
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(c) No Conflicts. The execution, delivery and performance of this
Agreement and the consummation by the Purchaser of the transactions contemplated
hereby or relating hereto do not and will not (i) result in a violation of such
Purchaser's charter documents or bylaws or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of any agreement, indenture or instrument to which
the Purchaser is a party, or result in a violation of any law, rule, or
regulation, or any order, judgment or decree of any court or governmental agency
applicable to the Purchaser or its properties (except for such conflicts,
defaults and violations as would not, individually or in the aggregate, have a
Material Adverse Effect on Purchaser). The Purchaser is not required to obtain
any consent, authorization or order of, or make any filing or registration with,
any court or governmental agency in order for it to execute, deliver or perform
any of its obligations under this Agreement or to purchase the Shares in
accordance with the terms hereof, provided that for purposes of the
representation made in this sentence, the Purchaser is assuming and relying upon
the accuracy of the relevant representations and agreements of the Company
herein.
(d) Financial Risks. The Purchaser acknowledges that it is able
to bear the financial risks associated with an investment in the Shares and that
it has been given full access to such records of the Company and the
subsidiaries and to the officers of the Company and the subsidiaries as it has
deemed necessary or appropriate to conduct its due diligence investigation. The
Purchaser is capable of evaluating the risks and merits of an investment in the
Shares by virtue of its experience as an investor and its knowledge, experience,
and sophistication in financial and business matters and the Purchaser is
capable of bearing the entire loss of its investment in the Shares.
(e) Accredited Investor. The Purchaser is an "accredited
investor" as defined in Regulation D promulgated under the Securities Act.
(f) Compliance With Law. The Purchaser's trading and distribution
activities with respect to the Shares will be in compliance with all applicable
state and federal securities laws, rules and regulations and the rules and
regulations of the Principal Market.
(g) Actions Pending. There is no action, suit, claim,
investigation or proceeding pending or, to the knowledge of the Purchaser,
threatened against the Purchaser or any subsidiary which questions the validity
of this Agreement or the transactions contemplated hereby or any action taken or
to be taken pursuant hereto. There is no action, suit, claim, investigation or
proceeding pending or, to the knowledge of the Purchaser, threatened, against or
involving the Purchaser, any subsidiary or any of their respective properties or
assets. There are no outstanding orders, judgments, injunctions, awards or
decrees of any court, arbitrator or governmental or regulatory body against the
Purchaser or any subsidiary.
(h) General. The Purchaser understands that the Company is
relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of the Purchaser set forth herein
in order to determine the suitability of the Purchaser to acquire the Shares.
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ARTICLE IV
COVENANTS
The Company covenants with the Purchaser as follows:
Section 4.1. Securities Compliance.
If applicable, the Company shall notify the NASD, in accordance with
their rules and regulations, of the transactions contemplated by this Agreement,
and shall take all other necessary action and proceedings as may be required and
permitted by applicable law, rule and regulation, for the legal and valid
issuance of the Shares and the Warrants to the Purchaser or subsequent holders.
Section 4.2. Registration and Listing. The Company will cause its
Common Stock to continue to be registered under Sections 12(b) or 12(g) of the
Exchange Act, will comply in all respects with its reporting and filing
obligations under the Exchange Act, will comply with all requirements related to
any registration statement filed pursuant to this Agreement, and will not take
any action or file any document (whether or not permitted by the Securities Act
or the rules promulgated thereunder) to terminate or suspend such registration
or to terminate or suspend its reporting and filing obligations under the
Exchange Act or Securities Act, except as permitted herein. The Company will
take all action necessary to continue the listing or trading of its Common Stock
on the Principal Market and will comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the NASD
and the Principal Market.
Section 4.3. Registration Statement. The Company shall cause to be
filed the Registration Statement, which Registration Statement shall provide for
the resale of the Shares by the Purchaser to the public in accordance with this
Agreement. The Company shall use its best efforts to cause such Registration
Statement to be declared effective by the SEC as expeditiously as practicable.
Before the Purchaser shall be obligated to accept a Draw Down request from the
Company, the Company shall have caused a sufficient number of shares of Common
Stock to be registered to cover the Shares to be issued in connection with such
Draw Down.
Section 4.4. Escrow Arrangement. The Company and the Purchaser shall
enter into an escrow arrangement with Xxxxxxx Xxxxxx & Green, P.C. (the "Escrow
Agent") in the Form of Exhibit B hereto respecting payment against delivery of
the Shares.
Section 4.5. Registration Rights Agreement. The Company and the
Purchaser shall enter into the Registration Rights Agreement in the Form of
Exhibit A hereto.
Section 4.6. Compliance with Laws. The Company shall comply, and cause
each subsidiary to comply, with all applicable laws, rules, regulations and
orders, noncompliance with which could have a Material Adverse Effect.
14
Section 4.7. Keeping of Records and Books of Account. The Company shall
keep and cause each subsidiary to keep adequate records and books of account, in
which complete entries will be made in accordance with GAAP consistently
applied, reflecting all financial transactions of the Company and its
subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, Taxes, bad debts and other
purposes in connection with its business shall be made.
Section 4.8. Amendments. The Company shall not amend or waive any
provision of the Charter or Bylaws of the Company in any way that would
adversely affect the dividend rights or voting rights of the holders of the
Shares.
Section 4.9. Other Agreements. The Company shall not enter into any
agreement the terms of which such agreement would restrict or impair the ability
to perform of the Company or any subsidiary under this Agreement.
Section 4.10. Notice of Certain Events Affecting Registration;
Suspension of Right to Request a Draw Down. The Company will immediately notify
the Purchaser upon the occurrence of any of the following events in respect of
the Registration Statement or related prospectus in respect of the Shares: (i)
receipt of any request for additional information from the SEC or any other
federal or state governmental authority during the period of effectiveness of
the Registration Statement the response to which would require any amendments or
supplements to the Registration Statement or related prospectus; (ii) the
issuance by the SEC or any other federal or state governmental authority of any
stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose; (iii) receipt of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Shares for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; (iv) the happening
of any event that makes any statement made in the Registration Statement or
related prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or that requires the making
of any changes in the Registration Statement, related prospectus or documents so
that, in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (v) the Company's
reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate; and the Company will promptly make available to
the Purchaser any such supplement or amendment to the related prospectus. The
Company shall not deliver to the Purchaser any Draw Down Notice during the
continuation of any of the foregoing events.
Section 4.11. Consolidation; Merger. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company to,
another entity (a "Consolidation Event") unless the resulting successor or
acquiring entity (if not the Company) assumes by written
15
instrument or by operation of law the obligation to deliver to the Purchaser
such shares of stock and/or securities as the Purchaser is entitled to receive
pursuant to this Agreement.
Section 4.12. Limitation on Future Financing. The Company agrees that,
except as set forth below, it will not enter into any sale of its securities for
cash at a discount to the current market price until the earlier of (i) 18
months from the effective date of the Registration Statement or (ii) sixty (60)
days after the entire $48,000,000 of Shares (excluding the Shares underlying the
Warrants) has been purchased by Purchaser. The foregoing shall not prevent or
limit the Company from engaging in any sale of securities (i) in a registered
public offering by the Company which is underwritten by one or more established
investment banks, (ii) in one or more private placements where the purchasers do
not have registration rights, (iii) pursuant to any presently existing or future
employee benefit plan which plan has been or is approved by the Company's
stockholders, (iv) pursuant to any compensatory plan for a full-time employee or
key consultant, (v) in connection with a strategic partnership or other business
transaction, the principal purpose of which is not simply to raise money or (vi)
to which Purchaser gives its written approval. A "strategic partnership" shall
be deemed to include, without limitation, any transaction with an entity engaged
in the brokerage or financial services businesses acting for its own account, as
principal. Further, the Purchaser shall have a right of first refusal, to elect
to participate, in such subsequent transaction in the case of (ii) and (vi)
above. Such right of first refusal must be exercised in writing within seven (7)
Trading Days of the Purchaser's receipt of notice of the proposed terms of such
financing.
The Purchaser covenants with the Company as follows:
Section 4.13. No Short Sales. The Purchaser and its affiliates shall
not engage in short sales of the Company's Common Stock (as defined in
applicable SEC and NASD rules) during the term of this Agreement.
ARTICLE V
CONDITIONS TO INITIAL CLOSING AND DRAW DOWNS
Section 5.1. Conditions Precedent to the Obligation of the Company to
Sell the Shares. The obligation hereunder of the Company to issue and sell the
Shares to the Purchaser is subject to the satisfaction or waiver, at or before
the Initial Closing and as of each Settlement Date (as defined in Section
6.1(b)), of each of the conditions set forth below. These conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion.
(a) Accuracy of the Purchaser's Representations and Warranties.
The representations and warranties of the Purchaser shall be true and correct in
all material respects as of the date when made and as of the Initial Closing and
as of each Settlement Date as though made at that time, except for
representations and warranties that speak as of a particular date.
(b) Performance by the Purchaser. The Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and
16
conditions required by this Agreement to be performed, satisfied or complied
with by the Purchaser at or prior to the Initial Closing and as of each
Settlement Date.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(d) No Proceedings or Litigation. No action, suit or proceeding
before any arbitrator or any governmental authority shall have been commenced,
and no investigation by any governmental authority shall have been threatened,
against the Purchaser or the Company or any subsidiary, or any of the officers,
directors or affiliates of the Company or any subsidiary seeking to restrain,
prevent or change the transactions contemplated by this Agreement, or seeking
damages in connection with such transactions.
Section 5.2. Conditions Precedent to the Obligation of the Purchaser to
Close. The obligation hereunder of the Purchaser to perform its obligations
under this Agreement and to purchase the Shares is subject to the satisfaction
or waiver, at or before the Initial Closing, of each of the conditions set forth
below. These conditions are for the Purchaser's sole benefit and may be waived
by the Purchaser at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties.
Each of the representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of the Initial
Closing as though made at that time (except for representations and warranties
that speak as of a particular date).
(b) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Initial Closing.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(d) No Proceedings or Litigation. No action, suit or proceeding
before any arbitrator or any governmental authority shall have been commenced,
and no investigation by any governmental authority shall have been threatened,
against the Purchaser or the Company or any subsidiary, or any of the officers,
directors or affiliates of the Company or any subsidiary seeking to restrain,
prevent or change the transactions contemplated by this Agreement, or seeking
damages in connection with such transactions.
(e) Opinion of Counsel, Etc. At the Initial Closing, the
Purchaser shall have received an opinion of counsel to the Company, dated the
date of the Initial Closing, in the form of Exhibit C hereto, and such other
certificates as the Purchaser deems necessary.
17
(f) Warrants. In lieu of a minimum Draw Down commitment by the
Company, the Purchaser shall receive at the Initial Closing, a warrant
certificate to purchase up to a number of shares of Common Stock equal to
$1,200,000 divided by the VWAP on the Trading Day immediately prior to the
Initial Closing Date (the "Warrant"). The Warrant shall have a term from its
date of issuance of three (3) years. The exercise price of the Warrant shall be
115% of the VWAP on the Trading Day prior to the Initial Closing Date. The
Common Stock underlying the Warrant will be registered in the Registration
Statement referred to in Section 4.3 hereof. The Warrant shall be in the form of
Exhibit E hereto.
Section 5.3. Conditions Precedent to the Obligation of the Purchaser to
Accept a Draw Down and Purchase the Shares. The obligation hereunder of the
Purchaser to accept a Draw Down request and to acquire and pay for the Shares is
subject to the satisfaction, at or before each Settlement Date, of each of the
conditions set forth below.
(a) Satisfaction of Conditions to Initial Closing. The Company
shall have satisfied, or the Purchaser shall have waived at the Initial Closing,
the conditions set forth in Section 5.2 hereof.
(b) Effective Registration Statement. The Registration Statement
registering the Shares shall have been declared effective by the SEC on or
before October 31, 2000 and shall remain effective on each Settlement Date.
(c) No Suspension. Trading in the Company's Common Stock shall
not have been suspended by the SEC or the Principal Market (except for any
suspension of trading of limited duration agreed to by the Company, which
suspension shall be terminated prior to the delivery of each Draw Down Notice),
and, at any time prior to such Draw Down Notice, trading in securities generally
as reported on the Principal Market shall not have been suspended or limited, or
minimum prices shall not have been established on securities whose trades are
reported on the Principal Market unless the general suspension or limitation
shall have been terminated prior to the deliver of such Draw Down Notice.
(d) Material Adverse Effect. No Material Adverse Effect and no
Consolidation Event where the successor entity has not agreed to perform the
Company's obligations shall have occurred.
(e) Opinion of Counsel. The Purchaser shall have received a
"down-to-date" letter from the Company's counsel, confirming that there is no
change from the counsel's previously delivered opinion, or else specifying with
particularity the reason for any change.
(f) Future Financing. The Company shall have not completed any
financing prohibited by Section 4.12 unless, prior to the Company delivering the
first Draw Down Notice after any such financing, the Company pays the Purchaser
the sum of $100,000 as liquidated damages.
18
ARTICLE VI
DRAW DOWN TERMS
Section 6.1. Draw Down Terms. Subject to the satisfaction of the
conditions set forth in this Agreement, the parties agree as follows:
(a) The Company, may, in its sole discretion, issue and exercise
a draw down (a "Draw Down") during each Draw Down Pricing Period, which Draw
Down the Purchaser will be obligated to accept for a period of 18 months
commencing immediately after the Effective Date.
(b) Only one Draw Down shall be allowed in each Draw Down Pricing
Period. The price per share paid by the Purchaser shall be based on the Average
Daily Price on each separate Trading Day during the Draw Down Pricing Period.
The number of shares of Common Stock purchased by the Purchaser with respect to
each Draw Down shall be determined on a daily basis during each Draw Down
Pricing Period and settled on, (i) as to the 1st through the 11th Trading Days
after a Draw Down Pricing Period commences (the "First Settlement Period"), on
the 13th Trading Day after a Draw Down Pricing Period commences and (ii) as to
the 12th through the 22nd Trading Days after a Draw Down Pricing Period
commences (the "Second Settlement Period"), the 24th Trading Day after a Draw
Down Pricing Period. (each, a "Settlement Date" and the First and Second
Settlement Periods collectively referred to as "Settlement Periods"). In
connection with each Draw Down Pricing Period, the Company may set the Threshold
Price. If the Average Daily Price on any day within the Draw Down Pricing Period
is less than the Threshold Price, the Company shall not sell and the Purchaser
shall not be obligated to purchase the Shares otherwise to be purchased for such
day.
(c) The minimum Draw Down shall be $250,000 (except that if the
remaining Commitment Amount is less than $250,000, then the Draw Down shall
equal such remaining Commitment Amount) and the maximum Draw Down shall be
$3,000,000; provided, however, the maximum dollar amount of each Draw Down
during any Draw Down Pricing Period shall be limited pursuant to the following
formula: Average Stock Price: average of the Average Daily Prices for the 45
Trading Days prior to the Draw Down Notice date. Average Trading Volume: average
daily trading volume for the 45 Trading Days prior to the Draw Down Notice date.
Maximum dollar amount of each Draw Down: 20% of Average Stock Price x Average
Trading Volume x 22.
(d) The number of Shares of Common Stock to be issued in
connection with each Draw Down shall be a number of shares equal to the sum of
the quotients (for each trading day within the Draw Down Pricing Period) of (x)
1/22nd of the Draw Down amount and (y) the Purchase Price on each Trading Day
within the Draw Down Pricing Period, subject to the following adjustments:
19
(i) If the Average Daily Price on a given Trading Day is
less than the Threshold Price, then the Draw Down will be reduced by 1/22nd and
that day shall be withdrawn from the Draw Down Pricing Period; and
(ii) If trading of the Common Stock on the Principal
Market is suspended for more than three (3) hours, in the aggregate, on any
Trading Day during the Draw Down Pricing Period, then the Draw Down shall be
reduced by 1/22nd and that day shall be withdrawn from the Draw Down Pricing
Period.
(e) The Company must inform the Purchaser by delivering a draw
down notice, in the form of Exhibit D hereto (the "Draw Down Notice"), via
facsimile transmission in accordance with Section 9.4 as to the amount of the
Draw Down the Company wishes to exercise before the first day of the Draw Down
Pricing Period (the "Commencement Date"). If the Commencement Date is to be the
date of the Draw Down Notice, the Draw Down Notice must be delivered to and
receipt confirmed by the Purchaser at least one hour before trading commences on
such date. At no time shall the Purchaser be required to purchase more than the
maximum Draw Down amount for a given Draw Down Pricing Period so that if the
Company chooses not to exercise the maximum permitted Draw Down in a given Draw
Down Pricing Period the Purchaser is not obligated to and shall not purchase
more than the scheduled maximum amount in a subsequent Draw Down Pricing Period.
(f) On or before each Settlement Date, the Shares purchased by
the Purchaser shall be delivered to The Depository Trust Company ("DTC") on the
Purchaser's behalf. Upon the Company delivering whole shares of Common Stock to
the Purchaser or its designees via DWAC by 1:00 pm EST, the Purchaser shall wire
transfer immediately available funds to the Company's designated account on the
such day. Upon the Company delivering whole shares of Common Stock to the
Purchaser or its designees via DWAC after 1:00 pm EST, the Purchaser shall wire
transfer next day available funds to the Company's designated account on such
day. In the event the Purchaser elects to use the Escrow Agent, the Shares shall
be credited by the Company to the DTC account designated by the Purchaser upon
receipt by the Escrow Agent of payment for the Draw Down into the Escrow Agent's
trust account as provided in the Escrow Agreement. The Escrow Agent shall be
directed to pay the purchase price to the Company, net of One Thousand Five
Hundred Dollars ($1,500) as escrow expenses to the Escrow Agent and any
brokerage or placement agent fees as set forth in the Escrow Agreement. The
delivery of the Shares into the Purchaser's DTC account in exchange for payment
therefor shall be referred to herein as "Settlement".
ARTICLE VII
TERMINATION
Section 7.1. Termination. The term of this Agreement shall be eighteen
(18) months from the Effective Date. The Company may terminate this Agreement
upon one (1) Trading Day's notice if the Purchaser shall fail to fund more than
one properly noticed Draw Down within three (3) Trading Days of a Settlement
Date.
20
Section 7.2. Effect of Termination. In the event of termination by the
Company, written notice thereof shall forthwith be given to the other party and
the transactions contemplated by this Agreement shall be terminated without
further action by either party. If this Agreement is terminated as provided in
Section 7.1 herein, this Agreement shall become void and of no further force and
effect, except for Sections 9.1 and 9.2, and Article VIII herein. Nothing in
this Section 7.2 shall be deemed to release the Company or the Purchaser from
any liability for any breach under this Agreement, or to impair the rights of
the Company and the Purchaser to compel specific performance by the other party
of its obligations under this Agreement.
ARTICLE VIII
INDEMNIFICATION
Section 8.1. General Indemnity. The Company agrees to indemnify and
hold harmless the Purchaser (and its directors, officers, affiliates, agents,
successors and assigns) from and against any and all losses, liabilities,
deficiencies, costs, damages and expenses (including, without limitation,
reasonable attorney's fees, charges and disbursements) incurred by the Purchaser
as a result of any inaccuracy in or breach of the representations, warranties or
covenants made by the Company herein. The Purchaser agrees to indemnify and hold
harmless the Company and its directors, officers, affiliates, agents, successors
and assigns from and against any and all losses, liabilities, deficiencies,
costs, damages and expenses (including, without limitation, reasonable attorneys
fees, charges and disbursements) incurred by the Company as result of any
inaccuracy in or breach of the representations, warranties or covenants made by
the Purchaser herein. Notwithstanding anything to the contrary herein, the
Purchaser shall be liable under this Section 8.1 for only that amount as does
not exceed the net proceeds to such Purchaser as a result of the sale of Shares
pursuant to the Registration Statement.
Section 8.2. Indemnification Procedure. Any party entitled to
indemnification under this Article VIII (an "indemnified party") will give
written notice to the indemnifying party of any matters giving rise to a claim
for indemnification; provided, that the failure of any party entitled to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Article VIII except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any action, proceeding or claim is brought against an
indemnified party in respect of which indemnification is sought hereunder, the
indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of counsel to the indemnified party a conflict of interest
between it and the indemnifying party may exist with respect to such action,
proceeding or claim, to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party. In the event that the indemnifying party
advises an indemnified party that it will contest such a claim for
indemnification hereunder, or fails, within thirty (30) days of receipt of any
indemnification notice to notify, in writing, such person of its election to
defend, settle or compromise, at its sole cost and expense, any action,
proceeding or claim (or discontinues its defense at any time after it commences
such defense), then the indemnified party may, at its option, defend, settle or
21
otherwise compromise or pay such action or claim. In any event, unless and until
the indemnifying party elects in writing to assume and does so assume the
defense of any such claim, proceeding or action, the indemnified party's costs
and expenses arising out of the defense, settlement or compromise of any such
action, claim or proceeding shall be losses subject to indemnification
hereunder. The indemnified party shall cooperate fully with the indemnifying
party in connection with any settlement negotiations or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the indemnified party which
relates to such action or claim. The indemnifying party shall keep the
indemnified party fully apprised at all times as to the status of the defense or
any settlement negotiations with respect thereto. If the indemnifying party
elects to defend any such action or claim, then the indemnified party shall be
entitled to participate in such defense with counsel of its choice at its sole
cost and expense. The indemnifying party shall not be liable for any settlement
of any action, claim or proceeding effected without its prior written consent.
Notwithstanding anything in this Article VIII to the contrary, the indemnifying
party shall not, without the indemnified party's prior written consent, settle
or compromise any claim or consent to entry of any judgment in respect thereof
which imposes any future obligation on the indemnified party or which does not
include, as an unconditional term thereof, the giving by the claimant or the
plaintiff to the indemnified party of a release from all liability in respect of
such claim. The indemnification required by this Article VIII shall be made by
periodic payments of the amount thereof during the course of investigation or
defense, as and when bills are received or expense, loss, damage or liability is
incurred, within ten (10) Trading Days of written notice thereof to the
indemnifying party so long as the indemnified party irrevocably agrees to refund
such moneys if it is ultimately determined by a court of competent jurisdiction
that such party was not entitled to indemnification. The indemnity agreements
contained herein shall be in addition to (a) any cause of action or similar
rights of the indemnified party against the indemnifying party or others, and
(b) any liabilities the indemnifying party may be subject to.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Fees and Expenses. The Company shall pay all fees and
expenses related to the transactions contemplated by this Agreement; provided,
that the Company shall pay, at the Initial Closing, all attorneys and escrow
fees and expenses (inclusive of disbursements and out-of-pocket expenses)
incurred by the Purchaser of $35,000 in connection with the preparation,
negotiation, execution and delivery of this Agreement and the transactions
contemplated hereunder. In addition, the Company shall pay all reasonable fees
and expenses incurred by the Purchaser in connection with any subsequent
amendments, modifications or waivers of this Agreement, the Escrow Agreement or
the Registration Rights Agreement or incurred in connection with the enforcement
of this Agreement, the Escrow Agreement and the Registration Rights Agreement,
including, without limitation, all reasonable attorneys fees and expenses. The
Company shall pay all stamp or other similar taxes and duties levied in
connection with issuance of the Shares pursuant hereto.
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Section 9.2. Specific Enforcement. The Company and the Purchaser
acknowledge and agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof or thereof, this being in addition to any other
remedy to which any of them may be entitled by law or equity.
Section 9.3. Entire Agreement; Amendment. This Agreement, together with
the Registration Rights Agreement and the Escrow Agreement contains the entire
understanding of the parties with respect to the matters covered hereby and,
except as specifically set forth herein, neither the Company nor the Purchaser
makes any representation, warranty, covenant or undertaking with respect to such
matters. Except as specifically provided for in this Agreement, no provision of
this Agreement may be waived or amended other than by a written instrument
signed by the party against whom enforcement of any such amendment or waiver is
sought and no condition to closing any Draw Down in favor of the Purchaser may
be waived by the Purchaser.
Section 9.4. Notices. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery or facsimile at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second business day
following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be:
If to the Company: X.X. Xxxxxx Group Inc.
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Tel: (000)000-0000, extension 5810
Attn: Xxxxx Xxxxx
With copies to: Xxxxxxx & Xxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attn: Xxxxxx X. Xxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Purchaser: c/o Dr. Xx. Xxxxxxxx & Partner
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Xxxxxxxxxxxx 00
XX-0000 Xxxxx, Xxxxxxxxxxxxx
Fax: 000-000-000-0000
Attention: Xxxx Xxxxxxx
with copies to: Xxxxxxx Xxxxxx & Green P.C.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx
Any party hereto may from time to time change its address for notices
by giving written notice of such changed address to the other party hereto in
accordance herewith.
Section 9.5. Waivers. No waiver by either party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
Section 9.6. Headings. The article, section and subsection headings in
this Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
Section 9.7. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and permitted
assigns. After the Initial Closing, the assignment by a party to this Agreement
of any rights hereunder shall not affect the obligations of such party under
this Agreement.
Section 9.8. No Third Party Beneficiaries.This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
Section 9.9. Governing Law/Arbitration.This Agreement shall be governed
by and construed in accordance with the internal laws of the State of New York,
without giving effect to the choice of law provisions. Any dispute under this
Agreement or any Exhibit attached hereto shall be submitted to arbitration under
the American Arbitration Association (the "AAA") in New York City, New York, and
shall be finally and conclusively determined by the decision of a board of
arbitration consisting of three (3) members (hereinafter referred to as the
"Board of Arbitration") selected according to the rules governing the AAA. The
Board of Arbitration shall meet on consecutive business days in New York City,
New York, and shall reach and render a decision in writing (concurred in by a
majority of the members of the Board of Arbitration) with respect to the amount,
if any, which the losing party is required to pay to the other party in respect
of a claim filed. In connection with rendering its decisions, the Board of
Arbitration shall adopt and follow the laws of the State of New York. To the
extent practical, decisions of the Board of
24
Arbitration shall be rendered no more than thirty (30) calendar days following
commencement of proceedings with respect thereto. The Board of Arbitration shall
cause its written decision to be delivered to all parties involved in the
dispute. The Board of Arbitration shall be authorized and is directed to enter a
default judgment against any party refusing to participate in the arbitration
proceeding within thirty days of any deadline for such participation. Any
decision made by the Board of Arbitration (either prior to or after the
expiration of such thirty (30) calendar day period) shall be final, binding and
conclusive on the parties to the dispute, and entitled to be enforced to the
fullest extent permitted by law and entered in any court of competent
jurisdiction. The prevailing party shall be awarded its costs, including
attorneys' fees, from the non-prevailing party as part of the arbitration award.
Any party shall have the right to seek injunctive relief from any court of
competent jurisdiction in any case where such relief is available. The
prevailing party in such injunctive action shall be awarded its costs, including
attorney's fees, from the non-prevailing party.
Section 9.10. Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and shall become effective when counterparts have been signed by
each party and delivered to the other party hereto, it being understood that all
parties need not sign the same counterpart. Execution may be made by delivery by
facsimile.
Section 9.11. Publicity. Except as required by applicable law or
regulation, prior to the Initial Closing, neither the Company nor the Purchaser
shall issue any press release or otherwise make any public statement or
announcement with respect to this Agreement or the transactions contemplated
hereby or the existence of this Agreement. After the Initial Closing, the
Company may issue a press release or otherwise make a public statement or
announcement with respect to this Agreement or the transactions contemplated
hereby or the existence of this Agreement; provided, however, that prior to
issuing any such press release, making any such public statement or
announcement, the Company, unless required by law, obtains the prior consent of
the Purchaser which consent shall not be unreasonably withheld or delayed.
Section 9.12. Severability. The provisions of this Agreement are
severable and, in the event that any court or officials of any regulatory agency
of competent jurisdiction shall determine that any one or more of the provisions
or part of the provisions contained in this Agreement shall, for any reason, be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision or part of a
provision of this Agreement and this Agreement shall be reformed and construed
as if such invalid, illegal or unenforceable provision, or part of such
provision, had never been contained herein, so that such provisions would be
valid, legal and enforceable to the maximum extent possible, so long as such
construction does not materially adversely effect the economic rights of either
party hereto.
Section 9.13. Further Assurances. From and after the date of this
Agreement, upon the request of the Purchaser or the Company, each of the Company
and the Purchaser shall execute and deliver such instruments, documents and
other writings as may be reasonably
25
necessary or desirable to confirm and carry out and to effectuate fully the
intent and purposes of this Agreement.
Section 9.14. Effectiveness of Agreement. This Agreement shall become
effective only upon satisfaction of the conditions precedent to the Initial
Closing set forth in Article I of the Escrow Agreement.
26
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of this 8th day of
August, 2000.
X.X. XXXXXX GROUP INC.
By: /s/ Xxxxxx Xxxxx
-----------------------------------
Xxxxxx Xxxxx, Chairman and Chief
Executive Officer
Seacrown Limited
By: /s/ Xxxx Xxxxxxx
-----------------------------------
Xxxx Xxxxxxx, Authorized Signatory
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