Exhibit 99.1
LINE OF CREDIT AGREEMENT dated as of 30th day of September, 1999 (the
"Agreement") between the entities listed on Exhibit A attached hereto, GMF
HOLDINGS (collectively referred to as the "Investor"), MAY XXXXX GROUP (the
"Placement Agent") located at One World Trade Center, New York, New York, a
corporation organized under the laws of New York and CELERITY SYSTEMS, INC.,
Celerity Systems, Inc., a corporation organized and existing under the laws of
the State of Delaware (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Investor,
from time to time as provided herein, and the Investor shall purchase up to Five
Million ($5,000,000) Dollars of Debentures for a total purchase price of Five
Million ($5,000,000) Dollars, and
WHEREAS, such investments will be made in reliance upon the provisions
of Section 4(2) ("Section 4(2)") and the Regulation D ("Regulation D") of the
Securities Act of 1933, as amended, and the regulations promulgated there under
(the "Securities Act"), and or upon such other exemption from the registration
requirements of the Securities Act as may be available with respect to any or
all of the investments in the Debentures to be made hereunder; and
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 "ADVANCE" shall mean each occasion the Company elects to
exercise its right to tender an Advance Notice requiring the Investor to advance
funds to the Company, subject to the terms of this Agreement.
Section 1.2 "ADVANCE DATE" shall mean the date of an Advance by the
Investor to the Company.
Section 1.3 "ADVANCE NOTICE" shall mean a written notice to the
Investor setting forth the Advance Amount that the Company requests from the
Investor and Compliance Certification from the Company as attached hereto as
Exhibit B.
Section 1.4 "BID PRICE" shall mean, on any date, the closing bid price
(as reported by Bloomberg L.P.) of the Common Stock on the Principal Market, or
if the Common Stock is not traded on a Principal Market, the highest reported
bid price for the Common Stock, as furnished by the National Association of
Securities Dealers, Inc, for the five trading days immediately preceding such
date.
Section 1.5 "CLOSING" shall mean one of the closings of a purchase and
sale of the Debentures pursuant to Section 2.1.
Section 1.6 "COMMITMENT AMOUNT" shall mean the $5,000,000 up to which
the Investor has agreed to provide to the Company in order to purchase the
Debentures pursuant to the terms and conditions of this Agreement.
Section 1.7 "COMMITMENT PERIOD" shall mean the period commencing on the
earlier to occur of the Effective Date, or (ii) such earlier date as the Company
and the Investor may mutually agree in writing, and expiring on the earliest to
occur of (x) the date on which the Investor shall have purchased Debentures
pursuant to this Agreement in the amount of at least $5,000,000 unless such date
is extended by the Investor, (y) the date this Agreement is terminated pursuant
to Section 2.4, or (z) the date occurring one year from the date hereof.
Section 1.8 "COMMON STOCK" shall mean the Company's common stock, par
value $0.001 per share.
Section 1.9 "CONDITION SATISFACTION DATE" shall have the meaning set
forth in Section 7.2.
Section 1.10 "DAMAGES" shall mean any loss, claim, damage, liability,
costs and expenses (including, without limitation, reasonable attorney's fees
and disbursements and costs and expenses of expert witnesses and investigation).
Section 1.11 "DEBENTURES" shall mean the Debenture in the form of
Exhibit C annexed hereto.
Section 1.12 "EFFECTIVE DATE" shall mean the date on which the SEC
first declares effective a Registration Statement registering the resale of the
Registrable Securities as set forth in Section 7.2(a).
Section 1.13 "ESCROW AGENT" shall be Xxxxxx Xxxxxxxx, L.L.P. or its
successors.
Section 1.14 "ESCROW AGREEMENT" shall mean the document which is
annexed hereto and referenced in Section 7.1 (j) of this Agreement.
Section 1.15 "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated there under.
Section 1.16 "LEGEND" shall mean that "legend" as set forth in Section
9.1.
Section 1.17 "MATERIAL ADVERSE EFFECT" shall mean any effect on the
business, Bid Price, 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 enter into and perform any of its obligations under this
Agreement, the Debenture, the Registration Rights Agreement or the Escrow
Agreement in any material respect.
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Section 1.18 "MAXIMUM ADVANCE AMOUNT" on any Advance Date shall be
equal to the difference between (i) the amount indicated opposite the range of
the 30 Day Average Daily Trading Volume on such Advance Date, as set forth in
the table below and (ii) the sum of the Advances made pursuant to this
Agreement, in the 30 calendar days immediately preceding the Advance Notice:
30-DAY AVERAGE DAILY TRADING (1) MAXIMUM ADVANCE AMOUNT (2)
-------------------------------- --------------------------
$25,000 - $50,000 $100,000
$50,001 - $100,000 $200,000
$100,001 - $200,000 $350,000
$200,001 and Over $500,000
(1) The 30-Day Average Trading Volume shall be equal to the average of the Bid
Price multiplied by the volume for each of the 30 calendar days preceding the
Advance Date.
(2) Assuming that no Advances have been made pursuant to this Agreement during
the preceding 30 calendar days.
Section 1.19 "NASD" shall mean the National Association of Securities
Dealers, Inc.
Section 1.20 "PERSON" shall mean an individual, a corporation, a
partnership, an association, a trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
Section 1.21 "PRINCIPAL MARKET" shall mean the Nasdaq National Market,
the Nasdaq SmallCap Market, the American Stock Exchange or the New York Stock
Exchange, whichever is at the time the principal trading exchange or market for
the Common Stock.
Section 1.22 "REGISTRABLE SECURITIES" shall mean the shares of Common
Stock (i) in respect of which the Registration Statement has not been declared
effective by the SEC, (ii) which have not been sold under circumstances under
which all of the applicable conditions of Rule 144 (or any similar provision
then in force) under the Securities Act ("Rule 144") are met or (iii) which have
not been otherwise transferred to holder who may trade such shares without
restriction under the Securities Act, and the Company has delivered a new
certificate or other evidence of ownership for such securities not bearing a
restrictive legend.
Section 1.23 "REGISTRATION RIGHTS AGREEMENT" shall mean the agreement
regarding the filing of the Registration Statement for the resale of the
Registrable Securities, entered into between the Company and the Investor on the
Subscription Date annexed hereto as Exhibit D.
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Section 1.24 "REGISTRATION STATEMENT" shall mean a registration
statement on Form S-3 (if use of such form is then available to the Company
pursuant to the rules of the SEC and, if not, on such other form promulgated by
the SEC for which the Company then qualifies and which counsel for the Company
shall deem appropriate, and which form shall be available for the resale of the
Registrable Securities to be registered there under in accordance with the
provisions of this Agreement and the Registration Rights Agreement, and in
accordance with the intended method of distribution of such securities), for the
registration of the resale by the Investor of the Registrable Securities under
the Securities Act.
Section 1.25 "REGULATION D" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.26 "SEC" shall mean the Securities and Exchange Commission.
Section 1.27 "SECTION 4(2)" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.28 "SECURITIES ACT" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.29 "SEC DOCUMENTS" shall meant the Form 10-KSB, Form
10-QSB's, Form 8-K's, Proxy Statements of the Company as supplemented to the
date hereof, filed by the Company for a period of at twelve (12) months
immediately preceding the date hereof or the Advance Date, as the case may be,
until such time as the Company no longer has an obligation to maintain the
effectiveness of a Registration Statement as set forth in the Registration
Rights Agreement.
Section 1.30 "SUBSCRIPTION DATE" shall mean the date on which this
Agreement is executed and delivered by the parties hereto.
Section 1.31 "TRADING DAY" shall mean any day during which the New York
Stock Exchange shall be open for business.
ARTICLE II
ADVANCES
Section 2.1 INVESTMENTS.
(a) ADVANCES. Upon the terms and conditions set forth herein
(including without limitation, the provisions of Article VII hereof), on any
Advance Date the Company may request an Advance by the Investor by the delivery
of an Advance Notice. The amount of the Debenture that the Investor shall
receive pursuant to such Advance shall be equal to the amount of the Advance
specified in the Advance Notice, which Advance shall not exceed the Maximum
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Advance Amount on such date.
Section 2.2 MECHANICS.
(a) ADVANCE NOTICE. At any time during the Commitment Period,
the Company may deliver an Advance Notice to the Investor, subject to the
conditions set forth in Section 2.4; provided, however, the amount for each
Advance as designated by the Company in the applicable Advance notice shall not
be (i) less than $25,000, or (ii) more than the Maximum Advance Amount. The
aggregate amount of the Advances pursuant to this Agreement shall not exceed the
Commitment Amount, unless otherwise agreed by the Investor in the Investor's
sole and absolute discretion.
(b) DATE OF DELIVERY OF ADVANCE NOTICE. An Advance Notice
shall be deemed delivered on (i) the Trading Day it is received by
facsimile or otherwise by the Investor if such notice is received prior
to 12:00 noon Easter Time, or (ii) the immediately succeeding Trading
Day if it is received by facsimile or otherwise after 12:00 noon
Eastern Time on a Trading Day or at any time on a day which is not a
Trading Day. No Advance Notice may be deemed delivered, on a day that
is not a Trading Day.
Section 2.3 CLOSINGS. On each Advance Date for an Advance, which shall
be within five (5) Trading Days of an Advance Notice, (i) the Company shall
deliver to the Escrow Agent one or more Debentures at the Investor's option,
representing the amount of the Advance by the Investor pursuant to Section 2.1
herein, registered in the name of the Investor and (ii) the Investor shall
deliver to escrow the amount of the Advance specified in the Advance Notice by
wire transfer of immediately available funds to the Escrow Agent on or before
the Advance Date. In addition, on or prior to the Advance Date, each of the
Company and the Investor shall deliver to the Escrow Agent all documents,
instruments and writings required to be delivered or reasonably requested by
either of them pursuant to this Agreement in order to implement and effect the
transactions contemplated herein. Payment of funds to the Company and delivery
of the Debentures to the Investor shall occur out of escrow in accordance with
the conditions set forth above and those contained in the Escrow Agreement
referred to in Section 7.2(j); provided, however, that to the extent the Company
has not paid the fees, expenses, and disbursements of the Investor's counsel,
Escrow Agent, and the Placement Agent in accordance with Section 13.4, the
amount of such fees, expenses, and disbursements must be paid by the Company in
immediately available funds from the Amount of the Advance held by the Escrow
Agent, at the direction of the Investor, to Investor's counsel, the Escrow
Agent, and the Placement Agent with no reduction in the amount of Debenture on
such Advance Date.
Section 2.4 TERMINATION OF INVESTMENT. The obligation of the Investor
to make an Advance to the Company pursuant to this Agreement shall terminate
permanently (including with respect to an Advance Date that has not yet
occurred) in the event that (i) there shall occur any stop order or suspension
of the effectiveness of the Registration Statement for an aggregate of twenty
(20) Trading Days during the Commitment Period, for any reason other than
deferral or suspensions in accordance with the Registration Rights Agreement as
a result of corporate developments subsequent to the Subscription Date that
would require such Registration
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Statement to be amended to reflect such event in order to maintain its
compliance with the disclosure requirements of the Securities Act or (ii) the
Company shall at any time fail materially to comply with the requirements of
Section 6.3, 6.4 or 6.6.
Section 2.5 AGREEMENT TO ADVANCE FUNDS.
(a) The Investor agrees to advance the amount specified in the
Advance Notice to the Company within five Trading Days after the completion of
each of the following conditions and the other conditions set forth in this
Agreement:
(i) the execution and delivery by the Company, and the
Investor, or this Agreement, and all Exhibits and Attachments hereto;
(ii) delivery into escrow by the Company of the original
Debenture;
(iii) the Company's Registration Statement with respect to the
resale of the Registrable Securities in accordance with the terms of
the Registration Rights Agreement shall have been declared effective by
the SEC;
(iv) the Company shall have obtained all permits and
qualifications required by any applicable state for the offer and sale
of the Registrable Securities, or shall have the availability of
exemptions therefrom. The sale and issuance of the Registrable
Securities shall be legally permitted by all laws and regulations to
which the Company is subject; and
(v) payment of fees as set forth in Section 13.4 below.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
Investor represents and warrants to, and agrees with, the Company that:
Section 3.1 ORGANIZATION AND AUTHORIZATION. Investor is duly
incorporated or organized and validly existing in the jurisdiction of its
incorporation or organization and has all requisite power and authority to
purchase and hold the securities issuable hereunder. The decision to invest and
the execution and delivery of this Agreement by such Investor, the performance
by such Investor of its obligations hereunder and the consummation by such
Investor of the transactions contemplated hereby have been duly authorized and
requires no other proceedings on the part of the Investor. The undersigned has
all right, power and authority to execute and deliver this Agreement and all
other instruments ( including, without limitations, the Registration Rights
Agreement), on behalf of the Investor. This Agreement has been duly executed and
delivered by the Investor and, assuming the execution and delivery hereof and
acceptance thereof by the Company, will constitute the legal, valid and binding
obligations of the Investor, enforceable against the Investor in accordance with
its terms.
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Section 3.2 EVALUATION OF RISKS. The Investor has such knowledge and
experience in financial tax and business matters as to be capable of evaluating
the merits and risks of, and bearing the economic risks entailed by, an
investment in the Company and of protecting its interests in connection with
this transaction. It recognizes that its investment in the Company involves a
high degree of risk. The Investor acknowledges that it has been furnished with,
and has carefully read the applicable form of Debenture and form of Registration
Rights Agreement.
Section 3.3 INDEPENDENT COUNSEL. The Investor acknowledges that it has
been advised to consult with its own attorney regarding legal matters concerning
the Company and to consult with its tax advisor regarding the tax consequences
of acquiring the securities issuable hereunder.
Section 3.4 NO REGISTRATION. The Investor understands that the
Debenture and Common Stock underlying the Debenture issuable hereunder have not
been registered under the Act or any other securities laws but are being offered
and sold to it in reliance upon specific exemptions from the registration
requirements of Federal and State securities laws and that the Company is
relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of the Investor set forth herein
in order to determine the applicability of such exemptions and the suitability
of the Investor to acquire the securities hereunder.
Section 3.5 INVESTMENT INTENT. The securities are being purchased by
the Investor for its own account, for investment and without any view to the
distribution, assignment or resale to others or fractionalization in whole or in
part. The Investor is neither an underwriter, nor a dealer in, the Debenture or
the Common Stock issuable on conversion thereof. The Investor agrees not to
assign or in any way transfer the Investor's rights to the securities or any
interest therein and acknowledges that the Company will not recognize any
purported assignment or transfer. No other person has or will have a direct or
indirect beneficial interest in the securities. The Investor agrees not to sell,
hypothecate or otherwise transfer the Investor's securities unless the
securities are registered under Federal and applicable state securities law or
unless, in the opinion of counsel satisfactory to the Company, an exemption from
such laws is available.
Section 3.6 ACCREDITED INVESTOR. All of the information that the
Investor has heretofore furnished to the Company or which is set forth herein
with respect to the Investor's financial position and business experience, is
correct, complete and not misleading as of the date hereof and the Investor will
advise the Company immediately in writing of any change in any response hereto.
The Investor understands that this investment is suitable for an is available
only to "Accredited Investors," as that term is defined in Regulation D
promulgated under the 1993 Act as set forth in Exhibit E and that the Investor
satisfies at least one of the categories set forth below (please check all
applicable boxes).
[ ] a corporation, business trust, or partnership not formed for
the specific purpose of acquiring the securities offered, with
total assets in excess of $5,000,000.
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[ ] any trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities
offered, whose purchase is directed by a sophisticated person
who has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits
and risks of the prospective investment.
an individual, who
[ ] is a director, executive officer or general partner of the
issuer of the securities being offered or sold or a director,
executive officer or general partner of a general partner of
that issuer.
[ ] has an individual net worth, or joint net worth with that
person's spouse, at the time of his purchase exceeding
$1,000,000.
[ ] had an individual income in excess of $200,000 in each of
the two most recent years or joint income with that person's
spouse in excess of $300,000 in each of those years and has a
reasonable expectation of reaching the same income level in
the current year.
[ ] any entity in which all of the equity owners are "accredited
investors."
The Investor acknowledges that the information set forth herein is not intended
to be exhaustive and is provided only as a guide to assist each potential
investor in making an independent investigation of the Company and the
Securities being offered.
Section 3.7 SEC DOCUMENTS. The Investor has carefully read and is
familiar with and has carefully reviewed the SEC Documents. The Investor has
evaluated the merits and risks of the Investor's investment in the securities,
and has determined that the securities are a suitable investment. The Investor
has availed itself of the opportunity to ask question of the Company concerning
the terms and conditions of this offering and obtained such additional
information as the Investor has deemed necessary. The Company has answered all
inquiries concerning the terms and conditions of this offering and has afforded
the Investor the opportunity to obtain any additional information (to the extent
that the Company possesses such information or can acquire it without
unreasonable effort expense) necessary to verify the accuracy of the
information.
Section 3.8 REGISTRATION RIGHTS. The parties have entered into the
Registration Rights Agreement.
Section 3.9 NO ADVERTISEMENTS. The Investor is not entering into this
Agreement as a result of or subsequent to any advertisement, article, notice or
other communication published in any newspaper, magazine, or similar media or
broadcast over television or radio, or presented at any seminar or meeting.
Section 3.10 NOT AN AFFILIATE. The Investor is not an officer, director
or "affiliate" (as
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that term is defined in Rule 405 of the Securities Act) of the Company. The
Investor agrees that following the date of the Agreement it will not, and will
cause its Affiliates not to engage in any short sales, swaps, purchasing of
puts, or other hedging activities with respect to the Common Stock or any
activity that involves the direct or indirect use of Common Stock to hedge its
investment in the Debentures until the expiration of the conversion period of
the Debentures.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as stated below or on the Disclosure Schedule attached hereto as
Exhibit F (the "Disclosure Schedule"), the Company hereby represents and
warrants to, and covenants with, the Investors that the following are true and
correct as of the date hereof and as of the Advance Date:
Section 4.1 ORGANIZATION: QUALIFICATION. The Company is a corporation
duly organized and validly existing under the laws of the State of Delaware. The
Company has all requisite corporate power and authority to own, lease and
operate its properties and assets, and to carry on its business as presently
conducted. The Company is qualified to do business as a foreign corporation in
each jurisdiction in which the ownership of its property or the nature of its
business requires such qualification, except where failure to so qualify would
not have a material adverse effect on the Company.
Section 4.2 CAPITALIZATION. The authorized capital stock of the Company
consists of Fifteen Million (15,000,000) shares of Common Stock, $0.001 par
value per share, of which, Four Million Seven Hundred and Sixty Three Four
Hundred and Twelve (4,763,412) on the date hereof, are outstanding, and Three
Million (3,000,000) shares of preferred stock, $.01 par value per share, of
which no shares are outstanding on the date hereof. All issued and outstanding
shares of Common Stock have been duly authorized and validly issued and are
fully paid and nonassessable.
Section 4.3. AUTHORIZATION. The Company has all requisite corporate
right, power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. All corporate action on the
part of the Company, its directors and stockholders necessary for the
authorization, execution, deliver and performance of this Agreement by the
Company, the authorization, sale, issuance and delivery of the securities
issuable hereunder and the performance of the Company's obligations hereunder
have been taken. This Agreement has been duly executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the Company
enforceable in accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies,
and to limitations of public policy as they may apply to the indemnification
provisions set forth in of this Agreement. Upon their issuance and delivery
pursuant to this Agreement, the shares of Common Stock issuable upon the
conversion of the Debentures will be validly issued, fully paid and
nonassessable and will be free of any liens or encumbrances other than those
created hereunder or by the actions of the Investors; PROVIDED, however that the
securities are subject to restrictions on transfer under this Agreement or state
and/or federal securities laws. The issuance
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and sale of the securities hereunder will not give rise to any preemptive right
or right of first refusal or right to participation on behalf of any person.
Section 4.4 NO CONFLICT. Except as listed on the Disclosure Schedule
the execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby will not, conflict with, or result in any
violation of, or default, or give rise to a right of termination, cancellation
or acceleration of any material obligation or to a loss of a material benefit,
under, any provision of the Articles of Incorporation, and any amendments
thereto, Bylaws, Stockholders Agreements and any amendments thereto of the
Company or any material mortgage, indenture, lease or other agreement, permit,
concession, franchise, license, judgment, order, decree statute, law, ordinance,
rule or regulation applicable to the Company, its properties or assets and which
would have a material adverse effect on the Company's business and financial
condition.
Section 4.5 NO UNDISCLOSED LIABILITIES OR EVENTS. The Company has no
MATERIAL liabilities or obligations other than those disclosed in the SEC
Documents filed by the Company for a period of twelve (12) months immediately
preceding the date hereof, or the Advance Date as the case may be, except for
(i) this Agreement or (ii) those incurred in the ordinary course of the
Company's business since, and, in each case, which individually or in the
aggregate, do not or would not have a material adverse effect on the properties,
business, condition (financial or otherwise), results of operations or prospects
of the Company. No event or circumstances has occurred or exists with respect to
the Company or its properties, business, condition (financial or otherwise),
results of operations or prospects, which, 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.
Section 4.6 NO DEFAULT. Except as described in the disclosure the
Disclosure Schedule, the Company is not in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust or other material instrument
or agreement to which it is a party or by which it is or its properly is bound,
and neither the execution, nor the delivery by the Company, nor the performance
by the Company of its obligations under this Agreement or any of the Exhibits or
attachments hereto, including the conversion provision of the Debentures, will
conflict with or result in the breach or violation of any of the terms or
provisions of, or constitute a default or result in the creation or imposition
of any lien or charge on any assets or properties of the Company under, any
material indenture, mortgage, deed of trust or other material agreement
applicable to the Company or instrument to which the Company is a party or by
which it is bound, other than anti-dilution provisions of certain agreements and
instruments with respect to warrants and other Common Stock equivalents, or any
statute or the memorandum or Articles of the Company, or any decree, judgment,
order, other than anti-dilution provisions of certain agreements and instruments
with respect to warrants and other Common Stock equivalents, rules of regulation
of any court or governmental agency or body having jurisdiction over the Company
or its properties, in each case which default, lien or charge is likely to cause
a material adverse effect on the Company's business and financial condition.
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Section 4.7 ABSENCE OF EVENTS OF DEFAULT. Except for matters described
in the SEC Documents, the Disclosure Schedule and/or this Agreement, no Event of
Default, as defined in the respective agreement to which the Company is a party,
and no event which, with the giving of notice or the passage of time or both,
would become an Event of Default (as so defined), has occurred and is
continuing, which would have a material adverse effect on the Company's
business, properties, prospects, financial condition or results of operations.
Section 4.8 GOVERNMENTAL CONSENT, ETC. Except for matters described in
the Disclosure Schedule, no consent, approval or authorization of or
designation, declaration or filing with any governmental authority on the part
of the Company is required in connection with the valid execution and delivery
of this Agreement, or the offer, sale or issuance of the securities hereunder,
or the consummation of any other transaction contemplated hereby.
Section 4.9 INTELLECTUAL PROPERTY RIGHTS. Except as disclosed in the
SEC Documents, the Company has sufficient trademarks, trade names, patent
rights, copyrights and licenses to conduct its business as presently conducted
in the SEC Documents, except where failure to have any such intellectual
property would not cause a material adverse effect on the business and financial
condition of the Company. To the Company's knowledge, neither the Company nor
its products ARE infringing or will infringe any trademark, trade name, patent
right, copyright, license, trade secret or other similar right of others
currently in existence; and there is no claim being made against the Company
regarding any trademark, trade name, patent, copyright, license, trade secret or
other intellectual property right which could have a material adverse effect on
the business or financial condition of the Company.
Section 4.10 MATERIAL CONTRACTS. Except as set forth in the SEC
Documents or the Disclosure Schedule, the agreements to which the Company is a
party described in the SEC Documents are valid agreements, constitute all of the
Company's material agreements and are in full force and effect and the Company
is not in material breach or material default under any of such agreements,
except where such breach or default would not cause a material adverse effect on
the business and financial condition of the Company.
Section 4.11 LITIGATION. Except as disclosed in the SEC Documents and
the Disclosure Schedule, there is no action, proceeding or investigation
pending, or to the Company's knowledge threatened, against the Company which
might result, either individually or in the aggregate, in any material adverse
change in the business, prospects, financial conditions or operations of the
Company. The Company is not a party to or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency or
instrumentality.
Section 4.12 TITLE TO ASSETS. Except as set forth in the SEC Documents,
the Company has good and marketable title to all properties and material assets
described in the SEC Documents as owned by it, free and clear of any pledge,
lien, security interest, encumbrance, claim or equitable interest other than
such as are not material to the business of the Company.
Section 4.13 SUBSIDIARIES. Except as disclosed in the SEC Documents,
the Company
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does not presently own or control, directly or indirectly, any interest in any
other corporation, partnership, association or other business entity.
Section 4.14 REQUIRED GOVERNMENTAL PERMITS. Except as set forth in the
SEC Documents, the Company is in possession of and operating in compliance with
all authorizations, licenses, certificates, consents, orders and permits from
state, federal and other regulatory authorities which are material to the
conduct of its business, all of which are valid and in full force and effect.
Section 4.15 OTHER OUTSTANDING SECURITIES/FINANCING RESTRICTIONS. As of
the date hereof only, other than warrants and options to acquire shares of
Common Stock as disclosed in the SEC Documents, there are no other warrants and
options registered with the SEC, which are available for sale as unrestricted
("free trading") stock.
Section 4.16 USE OF PROCEEDS. The Company represents that the net
proceeds from this offering will be used for working capital purposes and/or
general corporate purposes. However, in no event shall the net proceeds from
this offering be used by the Company for the payment (or loaned to any such
person for the payment) of any judgment, or other liability, incurred by any
executive officer, officer, director, or employee of the Company.
Section 4.17 FURTHER REPRESENTATION AND WARRANTIES OF THE COMPANY. For
so long as any securities issuable hereunder held by the Investor remain
outstanding, the Company acknowledges, represents, warrants and agrees that it
will use commercially reasonable efforts to maintain the listing of its Common
Stock on the NASDAQ Small Cap Stock Market.
Section 4.18 SEC FILINGS/FULL DISCLOSURE. For a period of at least
twelve (12) months immediately preceding the date hereof or the Advanced Date,
as the case may be, none of the Company's filing with the Securities and
Exchange Commission have been amended or supplemented as provided in the SEC
Documents) 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 statement
therein in light of the circumstances under which they were made, not misleading
as of the date of such filing (or in such amendment or supplement, as the case
may be). The Company has timely, subject to permitted extensions, filed all
requisite forms, reports and exhibits thereto with the Securities and Exchange
Commission.
Section 4.19 FULL DISCLOSURE. There is no fact known to the Company
(other than general economic conditions known to the public generally) that has
not been disclosed in writing to the Investor that (i) could reasonably be
expected to have a material adverse effect on the financial condition or in the
earnings, business affairs, business prospects, properties or assets of the
Company, or (ii) could reasonably be expected to materially and adversely affect
the ability of the Company to perform its obligations pursuant to this
Agreement.
Section 4.20 OPINION OF COUNSEL. Investor shall receive an opinion
letter from counsel to the Company (updated where applicable) prior to each
Closing substantially to the effect that:
12
(a) the Company is incorporated and validly existing in the
jurisdiction of its incorporation. The Company and/or its subsidiaries are duly
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions where, to such counsel's knowledge, the Company and/or its
subsidiaries owns or leases properties, maintains employees or conducts
business, except for jurisdictions in which the failure to so qualify would not
have a material adverse effect on the Company, and has all requisite corporate
power and authority to own its properties and conduct its business.
(b) to such counsel's knowledge, except for matters disclosed
in the SEC Documents, there is no action, proceeding or investigation pending,
or threatened against the Company which might result, either individually or in
the aggregate, in any material adverse change in the business or financial
condition of the Company.
(c) to such counsel's knowledge, except for matters disclosed
in the SEC Documents, the Company is not a party to or subject to the provisions
of any order, writ, injunction, judgment or decree of any court or government
agency or instrumentality.
(d) the shares of Common Stock issuable upon the conversion of
the Debentures, based on the Bid Price on the day of such closing, have
been duly authorized and upon issuance will be validly issued under the
laws of the Company's state of incorporation.
(e) this Agreement, the issuance of the Debentures hereunder,
and the shares of Common Stock issuable upon conversion of the Debentures, have
been duly approved by all required corporate action and that all such shares of
Common Stock, upon execution and delivery that shall be validly issued and
outstanding, fully paid and nonassessable.
(f) the issuance of the Debentures and the shares of Common
Stock issuable upon conversion thereof, does not violate the applicable listing
agreement between the Company and any securities exchange or market on which the
Company's securities are listed.
(g) the authorized capital stock of the Company consists of
Fifteen Million (15,000,000) shares of Common Stock, $0.001 par value per share,
and Three Million (3,000,000) shares of preferred stock, $0.01 par value per
share.
(h) the Common Stock is registered pursuant to Section 12(g)
of the Securities and Exchange Act of 1934
Section 4.21 OPINION OF COUNSEL. The Company will obtain for the
Investor, at the Company's expense, any and all opinions of counsel which may be
reasonably required in order to convert, exercise or sell the securities
issuable hereunder, including, but not limited to, obtaining for Investors, at
the Company's expense an opinion of counsel, subject only to receipt of a Notice
of Conversion in the form of Exhibit F, duly executed by the Investor which
shall be satisfactory to the Transfer Agent, directing the Transfer Agent to
remove the self-liquidating
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legend.
Section 4.22 DILUTION. The Company is aware and acknowledges that
conversion of the Debentures could cause dilution to existing shareholder and
could significantly increase the outstanding number of shares of Common Stock.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND INVESTOR
The Investor and the Company represent to the other the following with
respect to itself:
Section 5.1 LINE OF CREDIT AGREEMENT. This Agreement has been duly
authorized, validly executed and delivered on behalf of the Company and the
Investor and is a valid and binding agreement in accordance with its terms,
subject to general principles of equity and to bankruptcy or other laws
affecting the enforcement of creditors' rights generally.
Section 5.2 NON-CONTRAVENTION. Subject to the exceptions referred to
elsewhere in this Agreement (including the Disclosure Schedule) the execution
and delivery of this Agreement along with all Exhibits and Attachments, and the
consummation of the issuance of the securities and the transactions contemplated
by this Agreement do not and will not conflict with or result in a breach by the
Company or the Investor of any of the terms or provisions of, or constitute a
default under, the articles of incorporation or by-laws of the Company or the
Investor, or any indenture, mortgage, deed of trust of other material agreement
or instrument to which the Company or the Investor is a party or by which it or
any of its properties or assets are bound, or any existing applicable law, rule
or regulation or any applicable decree, judgment or order of any court, Federal
or State regulatory body, administrative agency or other governmental body
having jurisdiction over the Company or Investor or any of its properties or
assets.
Section 5.3 APPROVALS. Neither the Company nor Investor is aware of any
authorization, approval or consent of any governmental body which is legally
required for the issuance and sale of the securities.
Section 5.4 INDEMNIFICATION. Each of the Company and the Investors
agree to indemnify the other and to hold the other harmless from and against any
and all losses, damages, liabilities, costs and expenses (Including reasonable
attorneys' fees) which the other may sustain or incur in connection with the
breach by the indemnifying party of any representation, warranty or covenant
made by it in this Agreement.
ARTICLE VI
COVENANTS OF THE COMPANY
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Section 6.1 REGISTRATION RIGHTS. The Company shall cause the
Registration Rights Agreement to remain in full force and effect and the Company
shall comply in all material respects with the terms thereof.
Section 6.2 RESERVATION OF COMMON STOCK. The Company shall authorize
and reserve and keep available at all times, free of preemptive rights, shares
of Common Stock for the purpose of enabling the Company to satisfy any
obligation to issue shares of Common Stock underlying the Debentures, such
number of shares of Common Stock to be reserved shall be calculated based upon
the Bid Price of the Common Stock from time to time while such Debentures are
outstanding. The number of shares so reserved from time to time, while such
Debentures are outstanding, as theretofore increased or reduced as hereinafter
provided, may be limited to shares issuable under outstanding Debentures at the
Bid Price reduced by the number of shares actually delivered pursuant to the
Debentures and the number of shares so reserved shall be increased or decreased
to reflect potential increases or decreases in the Common Stock that the Company
may thereafter be so obligated to issue.
Section 6.3 LISTING OF COMMON STOCK. The Company further agrees, if the
Company applies to have the Common Stock traded on any Principal Market, other
than the Nasdaq Small Cap Market, it will include in such application the shares
of Common Stock issuable upon the conversion of the Debentures and will take
such other action as is necessary or desirable in the opinion of the investor to
cause the Common Stock to be listed on such other Principal Market as promptly
as possible and will use commercially reasonable efforts to comply in all
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of the Principal Market.
Section 6.4 EXCHANGE ACT REGISTRATION. The Company will cause its
Common Stock to continue to be registered under Section 12(g) of the Exchange
Act, will use its best efforts to comply in all respects with its reporting and
filing obligations under the Exchange Act, and will not take any action or file
any document (whether or not permitted by Exchange Act or the rules there under
to terminate or suspend such registration or to terminate or suspend its
reporting and filing obligations under said Act.
Section 6.5 LEGENDS. The certificates evidencing the Common Stock to be
sold by the Investor pursuant to Section 9.1 shall be free of legends, except as
set forth herein.
Section 6.6 CORPORATE EXISTENCE. The Company will take all steps
necessary to preserve and continue the corporate existence of the Company.
SECTION 6.7 NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION: SUSPENSION
OF RIGHT TO MAKE AN ADVANCE. The Company will immediately notify the Investor
upon its becoming aware of the occurrence of any of the following events in
respect of a registration statement or related prospectus relating to an
offering of Registrable Securities; (i) receipt of any request for additional
information by the SEC or any other federal or state governmental authority
during the period of effectiveness of the Registration Statement for amendments
or supplements to the registration statement or related prospectus; (ii) the
issuance by the SEC or any other federal or
15
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 Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; (iv) subject to the Registration Rights Agreement
the happening of any event that makes any statement made in the Registration
Statement or related prospectus of any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in the Registration Statement, related
prospectus or documents so that, in the case of the Registration Statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the related prospectus, it will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and (v) the Company's reasonable determination that a post-effective
amendment to the Registration Statement would be appropriate; and the Company
will promptly make available to the Investor any such supplement or amendment to
the related prospectus. The Company shall not deliver to the Investor any
Advance Notice during the continuation of any of the foregoing events.
Section 6.8 EXPECTATIONS REGARDING ADVANCE NOTICES. Within ten (10)
days after the commencement of each calendar quarter occurring subsequent to the
commencement of the Commitment Period, the Company must notify the Investor, in
writing, as to its reasonable expectations as to the dollar amount it intends to
raise during such calendar quarter, if any, through the issuance of Advance
Notices. Such notification shall constitute only the Company's good faith
estimate and shall in no way obligate the Company to raise such amount, or any
amount, or otherwise limit its ability to deliver Advance Notices. The failure
by the Company to comply with this provision can be cured by the Company's
notifying the Investor, in writing, at any time as to its reasonable
expectations with respect to the current calendar quarter.
Section 6.9 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 the assets of the Company to
another entity (a "Consolidation Event") unless the resulting successor or
acquiring entity (if not the Company) assumes by written instrument the
obligation to deliver to the investor such shares of stock and/or securities as
the Investor is entitled to receive pursuant to this Agreement.
Section 6.10 ISSUANCE OF DEBENTURES. The sale of the Debentures and the
issuance of the shares of Commons Stock pursuant to conversion hereof shall be
made in accordance with the provision and requirements of Section 4(2) of the
Securities Act, or Regulation D and any applicable state securities law.
16
ARTICLE VII
CONDITIONS FOR ADVANCE AND CONDITIONS TO CLOSING
Section 7.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO
ISSUE AND SELL THE DEBENTURES. The obligation hereunder of the Company to issue
and sell the Debentures to the Investor incident to each Closing is subject to
the satisfaction, or waiver by the Company, at or before each such Closing, of
each of the conditions set forth below.
(a) ACCURACY OF THE INVESTOR'S REPRESENTATION AND WARRANTIES.
The representations and warranties of the Investor shall be true and correct in
all material respects as of the date of this Agreement and as of the date of
each such Closing as though made at each such time.
(b) PERFORMANCE BY THE INVESTOR. The Investor shall have
performed, satisfied and complied in all respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the Investor at or prior to such Closing.
Section 7.2 CONDITIONS PRECEDENT TO THE RIGHT OF THE COMPANY TO DELIVER
AN ADVANCE NOTICE AND THE OBLIGATION OF THE INVESTOR TO PURCHASE DEBENTURES. The
right of the Company to deliver an Advance Notice and the obligation of the
Investor hereunder to acquire and pay for the Debentures incident to a Closing
is subject to the satisfaction or waiver by the Investor, on (i) the date of
delivery of such Advance Notice and (ii) the applicable Advance Date (each a
"Condition Satisfaction Date"), of each of the following conditions:
(a) REGISTRATION OF THE COMMON STOCK WITH THE SEC. The Company
shall have filed with the SEC a Registration Statement with respect to the
resale of the Registrable Securities in accordance with the terms of the
Registration Rights Agreement. As set forth in the Registration Rights
Agreement, the Registration Statement shall have previously become effective and
shall remain effective on each Condition Satisfaction Date and (i) neither the
Company nor the Investor shall have received notice that the SEC has issued or
intends to issue a stop order with respect to the Registration Statement or that
the SEC otherwise has suspended or withdrawn the effectiveness of the
Registration Statement, either temporarily or permanently, or intends or has
threatened to do so (unless the SEC's concerns have been addressed and the
Investor is reasonably satisfied that the SEC no longer is considering or
intends to take such action), and (ii) no other suspension of the use or
withdrawal of the effectiveness of the Registration Statement or related
prospectus shall exist. The Registration Statement must have been declared
effective by the SEC prior to the first Advance Date.
(b) AUTHORITY. The Company shall have obtained all permits and
qualifications required by any applicable state in accordance with the
Registration Rights Agreement for the offer and sale of the Debentures and the
shares of Common Stock issuable
17
upon the conversion thereof, or shall have the availability of exemptions
therefrom. The sale and issuance of the Debentures and the shares of Common
Stock issuable upon the conversion thereof shall be legally permitted by all
laws and regulations to which the Company is subject.
(c) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company shall be true and correct in
all material respects as of each Condition Satisfaction Date as though made at
each such time (except for representations and warranties specifically made as
of a particular date) with respect to all periods, and as to all events and
circumstances occurring or existing to and including each Condition Satisfaction
Date, except for any conditions which have temporarily caused any
representations or warranties herein to be incorrect and which have been
corrected with no continuing impairment to the Company or the Investor.
(d) PERFORMANCE BY THE COMPANY. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement, the Debenture and the
Registration Rights Agreement to be performed, satisfied or complied with by the
Company at or prior to each Condition Satisfaction Date.
(e) NO INJUNCTION. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction that prohibits or directly and adversely affects any of the
transactions contemplated by this Agreement, and no proceeding shall have been
commenced that may have the effect of prohibiting or adversely affecting any of
the transactions contemplated by this Agreement.
(f) ADVERSE CHANGES. Since the date of filing of the Company's
most recent SEC Document, no event that had or is reasonably likely to have a
Material Adverse Effect has occurred, other than possible de-listing of the
Common Stock from the Nasdaq Smallcap Market.
(g) NO SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK.
The trading of the Common Stock is not suspended by the SEC or the Principal
Market (if the Common Stock is traded on a Principal Market). The issuance of
shares of Common Stock with respect to the applicable Closing, if any, shall not
violate the shareholder approval requirements of the Principal Market (if the
Common Stock is traded on a Principal market). The Company shall not have
received any notice threatening the listing of the Common Stock on the Principal
Market (if the Common Stock is traded on a Principal Market).
(h) MAXIMUM ADVANCE AMOUNT. The amount of the advance
requested by the Company does not exceed the Maximum Advance Amount.
(i) NO KNOWLEDGE. The Company has no knowledge of any event
more likely than not to have the effect of causing such Registration Statement
to be suspended or otherwise ineffective (which event is more likely than not to
occur within the fifteen (15) Trading Days
18
following the Trading Day on which such Notice is deemed delivered).
(j) ESCROW AGREEMENT. The parties hereto shall have entered
into the Escrow Agreement in the form annexed hereto.
(k) OTHER. On each Condition Satisfaction Date, the Investor
shall have received and been reasonably satisfied with such other certificates
and documents as shall have been reasonably requested by the Investor in order
for the Investor to confirm the Company's satisfaction of the conditions set
forth in this Section 7.2, including, without limitation, a certificate in
substantially the form and substance of Exhibit "B" hereto, executed in either
case by an executive officer of the Company and to the effect that all the
conditions to such Closing shall have been satisfied as at the date of each such
certificate.
ARTICLE VIII
DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION
Section 8.1 DUE DILIGENCE REVIEW. Prior to the filing of the
Registration Statement the Company shall make available for inspection and
review by the Investor, advisors to and representatives of the Investor, any
underwriter participating in any disposition of the Registrable Securities on
behalf of the Investor pursuant to the Registration Statement, any such
registration statement or amendment or supplement thereto or any blue sky, NASD
or other filing, all financial and other records, all SEC Documents and other
filings with the SEC, and all other corporate documents and properties of the
Company as may be reasonably necessary for the purpose of such review, and cause
the Company's officers, directors and employees to supply all such information
reasonably requested by the Investor or any such representative, advisor or
underwriter in connection with such Registration Statement (including, without
limitation, in response to all questions and other inquiries reasonably made or
submitted by any of them), prior to and from time to time after the filing and
effectiveness of the Registration Statement for the sole purpose of enabling the
Investor and such representatives, advisors and underwriters and their
respective accountants and attorneys to conduct initial and ongoing due
diligence with respect to the Company and the accuracy of the Registration
Statement.
Section 8.2 NON-DISCLOSURE OF NON-PUBLIC INFORMATION.
(a) The Company shall not disclose non-public information to
the Investor, advisors to or representatives of the Investor unless prior to
disclosure of such information the Company identifies such information 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.
19
(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 8.2 shall be
construed to mean that such persons or entities other than the Investor (without
the written consent of the Investor prior to disclosure of such information) may
not obtain non-public information in the course of conducting due diligence in
accordance with the terms of this Agreement and nothing herein shall prevent any
such persons or entities from notifying the Company of their opinion that based
on such due diligence by such persons or entities, that the Registration
Statement contains an untrue statement of material fact or omits a material fact
required to be stated in the Registration Statement or necessary to make the
statements contained therein, in light of the circumstances in which they were
made, not misleading.
ARTICLE IX
LEGENDS
Section 9.1 LEGENDS. The Debentures will bear, and the Common Stock
will also bear a similar a legend, substantially in the form below (the
"Legend"):
THESE SECURITIES AND THE SHARES ISSUABLE UPON CONVERSION
HEREOF, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES
LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE
ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED.
ARTICLE X
CHOICE OF LAW/JURISDICTION
Section 10.1 CHOICE OF LAW: VENUE: JURISDICTION. This Agreement will be
construed and enforced in accordance with and governed by the laws of the State
of Delaware, except for matters arising under the Act, without reference to
principles of conflicts of law. Each of the
20
parties consents to the jurisdiction of the U.S. District Court sitting in the
Southern District of the State of New York or the state courts of the State of
New York sitting in Manhattan in connection with any dispute arising under this
Agreement and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on FORUM NON CONVENIENS to the bringing
of any such proceeding in such jurisdictions. Each party hereby agrees that if
another party to this Agreement obtains a judgment against it in such a
proceeding, the party which obtained such judgment may enforce same by summary
judgment in the courts of any country having jurisdiction over the party against
whom such judgment was obtained, and each party hereby waives any defenses
available to it under local law and agrees to the enforcement of such a
judgment. Each party to this Agreement irrevocably consents to the service of
process in any such proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to such party at its address set forth herein.
Nothing herein shall affect the right of any party to serve process in any other
manner permitted by law.
ARTICLE XI
ASSIGNMENT; TERMINATION
Section 11.1 ASSIGNMENT. Neither this Agreement nor any rights of the
Investor or the Company hereunder may be assigned by either party to any other
person. Notwithstanding the foregoing, (a) the provisions of this Agreement
shall insure to the benefit of, and be enforceable by, any permitted transferee
of any of the Debentures purchased or acquired by the Investor hereunder with
respect to the Common Stock held by such person, and (b) upon the prior written
consent of the Company, which consent shall not unreasonably be withheld, the
Investor's interest in this Agreement may be assigned at any time, in whole or
in part, to any other person or entity (including any affiliate of the Investor)
who agrees to make the representations and warranties contained in Article III
and who agrees to be bound by the covenants of Article V.
Section 11.2 TERMINATION. The obligations of the Investor to make
Advances under Article II hereof shall terminate one (1) year after the date
hereof.
ARTICLE XII
NOTICES
Section 12.1 NOTICES. All notices, demands, requests, consents,
approvals and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice.
Any notice or other communication requested or permitted to be given
hereunder shall be deemed effective (a) upon hand delivery or delivery by
facsimile, with accurate confirmation
21
generated by the transmitting facsimile machine, at the address or number
designed 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 upon actual receipt of any
mailing or delivery, whichever shall first occur. The addresses for such
communications shall be:
If to the Company: 0000 Xxxxxxxxxxx Xxxx.
Xxxxxxxxx, Xxxxxxxxx, 00000
If to the Investor, at the address listed on Schedule A.
Either party hereto may from time to time change its address or
facsimile number for notices under this Section 12.1 by giving at least ten (10)
days' prior written notice of such changed address or facsimile number to the
other party hereto.
ARTICLE XIII
MISCELLANEOUS
Section 13.1 COUNTERPARTS/FACSIMILE/AMENDMENTS. This Agreement may be
executed in multiple counterparts, each of which may be executed by less than
all of the parties and shall be deemed to be an original instrument which shall
be enforceable against the parties actually executing such counterparts and all
of which together shall constitute one and the same instrument. Except as
otherwise stated herein, in lieu of the original documents, a facsimile
transmission or copy of the original documents shall be as effective and
enforceable as the original This Agreement may be amended only by a writing
executed by all parties.
Section 13.2 ENTIRE AGREEMENT. This Agreement, the Exhibits or
Attachments hereto, which include but are not limited to the Debenture, the
Escrow Agreement, and the Registration Rights Agreement set forth the entire
agreement and understanding of the parties relating to the subject matter hereof
and supersedes all prior and contemporaneous agreements, negotiations and
understanding between the parties, both oral and writing relating to the line of
credit.
Section 13.3 REPORTING ENTITY FOR THE COMMON STOCK. The reporting
entity relied upon for the determination of the trading price or trading volume
of the Common Stock on any given Trading Day for the purposes of this Agreement
shall be Bloomberg, L.P. or any successor thereto. The written mutual consent of
the Investor and the Company shall be required to employ any other reporting
entity.
Section 13.4 FEES AND EXPENSES. Each of the parties shall pay its own
fees and expenses (including the fees of any attorneys, accountants, appraisers
or others engaged by such
22
party) in connection with this Agreement and the transactions contemplated
hereby, except that the Company will pay the sum of Twenty Thousand ($20,000)
Dollars, to Xxxxxx Xxxxxxxx, L.L.P. for legal, administrative, and escrow fees,
on the first day the Registration Statement becomes effective. Subsequently on
each advance date, the Company will pay Xxxxxx Xxxxxxxx, L.L.P., the Escrow
Agent, the sum of One Thousand Five Hundred ($1,500) Dollars for escrow fees. On
each advance date the Company shall pay the Placement Agent an amount equal to
10% of the advance. The Company hereby agrees that if such payment, as is
described above, is not made by the Company on the advance date, such payment
will be made at the direction of the Investor as outlined and mandated by
Section 2.3 of this Agreement.
Section 13.5 BROKERAGE. Each of the parties hereto represents that it
has had no dealings in connection with this transaction with any finder or
broker who will demand payment
23
of any fee or commission from the other party, other than the Placement Agent.
The Company on the one hand, and the Investor, on the other hand, agree to
indemnify the other against and hold the other harmless from any and all
liabilities to any person claiming brokerage commissions or finder's fees on
account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby.
Section 13.6 CONFIDENTIALITY. If for any reason the transactions
contemplated by this Agreement are not consummated, each of the parties hereto
shall keep confidential any information obtained from any other party (except
information publicly available or in such party's domain prior to the date
hereof, and except as required by court order) and shall promptly return to the
other parties all schedules, documents, instruments, work papers or other
written information without retaining copies thereof, previously furnished by it
as a result of this Agreement or in connection herein.
IN WITNESS WHEREOF, the parties hereto have caused this Line of Credit Agreement
to be executed by the undersigned, thereunto duly authorized, as of the date
first set forth above.
PLACEMENT AGENT
May Xxxxx Group, Inc.
BY: /s/ Xxxxxxx Xxxxxx
-------------------
Name: Xxxxxxx Xxxxxx
Title: Managing Director
CELERITY SYSTEMS, INC.
BY: /s/ Xxxxxxx X. Van Meter
----------------------------
Name: Xxxxxxx X. Van Meter
Title: President/CEO
INVESTOR
GMF Holdings
BY: /s/ Xxxxx Xxxxx
------------------
Name: Xxxxx Xxxxx
Title:
