EXHIBIT 4.25
COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement') is
dated as of May 24, 2000 by and between NHancement Technologies Inc., a
Delaware corporation (the "Company") and Xxxxxxx Investments 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 Nasdaq SmallCap Market or, if the Nasdaq SmallCap
Market is not the Principal Market, on the Principal Market.
(b) "DRAW DOWN" shall have the meaning assigned to such term
in Section 6.1(a) hereof.
(c) "DRAW DOWN EXERCISE DATE" shall have the meaning assigned
to such term in Section 6.1(b) hereof.
(d) "DRAW DOWN PRICING PERIOD" shall mean a period of eighteen
(18) consecutive Trading Days preceding a Draw Down Exercise Date.
(e) "EFFECTIVE DATE" shall mean the date the Registration
Statement of the Company covering the Shares being subscribed for
hereby is declared effective.
(f) "MATERIAL ADVERSE EFFECT" shall mean any adverse effect on
the business, operations, properties 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.
(g) "PRINCIPAL MARKET" shall mean initially the Nasdaq
SmallCap Market, and shall include the Nasdaq National Market, the
American Stock Exchange 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.
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(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.
(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.
(j) "SHARES" shall mean, collectively, the shares of Common
Stock 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 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 Nasdaq SmallCap Market or on any
Principal Market as reported by Bloomberg Financial using the AQR
function.
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 Fifty Million
Dollars ($50,000,000) of the Company's Common Stock, $0.01 par value per share
(the "Common Stock"), based on up to twelve (12) Draw Downs of up to Four
Million Dollars ($4,000,000), subject to adjustment pursuant to Section 6.1(c)
herein, per Draw Down.
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 Closing Date
without obtaining stockholder approval of such excess issuance, and (ii) at no
time shall the Purchaser be required to accept a
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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 and Exchange Act
of 1934, as amended.
Section 2.3 PURCHASE PRICE AND CLOSING. The Company agrees to
issue and sell to the Purchaser and, in consideration of and in express reliance
upon the representation, 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 closing under this Agreement shall
take place at the offices of Xxxxxxx Xxxxxx & Green, P.C., 000 Xxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000 (the "Closing") 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 "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 Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 REPRESENTATION AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to the Purchaser, that, except as set forth in
the SEC Documents, as of their respective dates:
(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. The Company does not have
any subsidiaries and does not own more that fifty percent (50%) of or
control any other business entity except as set forth in the SEC
Documents. The Company is duly qualified and is in good standing as a
foreign corporation to do business 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.
(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 Draw Down 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
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of the transactions contemplated hereby 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 Draw Down Shares.
(c) CAPITALIZATION. As of April 30, 2000, the authorized
capital stock of the company consists of 20,000,000 shares of Common
Stock, $0.01 par value per share, of which 10,717,610 shares are issued
and outstanding and 2,000,000 shares of preferred stock, $0.01 par
value per share, of which none are issued and none are outstanding. 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 this Agreement and the Registration Rights Agreement, 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, 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. 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. 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. The offer and sale of all capital
stock, convertible securities, rights, warrants, or options of the
Company issued prior to the 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 Certificate of Incorporation as in
effect on the date hereof (the "Certificate"), and the Company's Bylaws
as in effect on the date hereof (the "Bylaws"). The Principal Market
for the Common Stock in the United States is the Nasdaq SmallCap
Market, and the Company has not received any notice from such market
questioning or threatening the continued inclusion of the Common Stock
on such market.
(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
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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 Certificate 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 and state
or 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 "Commission") or state
securities administrators subsequent to the 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) COMMISSION DOCUMENTS, FINANCIAL STATEMENTS. The Common
Stock of the Company is registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the Company has timely filed all reports, schedules, forms, statements
and other documents required to be filed by it with the Commission
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 "Commission Documents"). The
Company has delivered or made
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available to the Purchaser true and complete copies of the Commission
Documents filed with the Commission 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 the Company but which has not been so disclosed,
other than with respect to the transactions contemplated by this
Agreement. As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the Exchange Act and the
rules and regulations of the Commission promulgated thereunder
applicable to such documents, and, as of their respective 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 Commission Documents comply
as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission
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 the Disclosure Schedule
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
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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 December 31, 1999, no
Material Adverse Effect has occurred or exists with respect to the
Company, except as disclosed in the SEC Documents or on the Disclosure
Schedule hereof.
(i) NO UNDISCLOSED LIABILITIES. Neither the Company nor any of
its subsidiaries has any liabilities, obligations, claims or losses
(whether liquidated or unliquidated, secured or 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(s) 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 December 31,
1999, 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. There is no outstanding secured and
unsecured Indebtedness of the Company or any subsidiary, or for which
the Company or any subsidiary has commitments, other than which has
been incurred in the ordinary course of business. 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 the Disclosure Schedule
hereto or such that do not cause a Material Adverse Effect on the
Company's financial condition or operating results. All said leases of
the Company and each of its subsidiaries are valid and subsisting and
in full force and effect.
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(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
or thereto. 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 which could have a Material Adverse
Effect. 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, state and local governmental laws, rules,
regulations and ordinances 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 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
Section 7121 of the Internal Revenue Code or any predecessor provision
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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 Section 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 Section 897(c)(2) of the Internal Revenue Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of
the Internal Revenue Code.
The Company has not made an election under
Section 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. Section 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 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 Section 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. 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 omits 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.
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(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 the Disclosure Schedule 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.
(u) MATERIAL AGREEMENTS. 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 be required to be filed with the Commission 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"). 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, instruments, 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. There are no loans, leases,
agreements, contracts, royalty agreements, management contracts or
arrangements or other continuing transactions exceeding $100,000
between (a) the Company or any subsidiary and (b) to our knowledge, any
officer, executive or director of the Company or any person owning in
excess of 5% of the common stock of the Company or any member of the
immediately family of such officer, director or stockholder or any
corporation or other entity controlled by such officer, director or
stockholder, or a member of the immediate family of such officer,
director or stockholder.
(w) SECURITIES ACT OF 1933. The Company has complied and will
comply with all applicable federal and state securities laws in
connection with the offer,
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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 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) GOVERNMENTAL APPROVALS. Except for the filing of any
notice prior or subsequent to the Closing that may be required under
applicable federal or state securities laws (which if required, shall
be filed on a timely basis), including the filing of a registration
statement or statements pursuant to this Agreement, no authorization,
consent, approval, license, exemption of, filing or registration with
any court or governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, is or will be necessary for,
or in connection with, the execution or delivery of the Shares, or for
the performance by the Company of its obligations under this Agreement.
(y) EMPLOYEES. Neither the Company nor any subsidiary has any
collective bargaining arrangements or agreements covering any of its
employees. 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 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.
(z) ABSENCE OF CERTAIN DEVELOPMENTS. Since December 31, 1999,
the Company (including each subsidiary, if such a development would
materially effect the Company and the other subsidiaries taken as a
whole), has not:
(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;
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(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;
(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, taken as a whole.
(bb) USE OF PROCEEDS. The proceeds from the sale of the Shares
will be used by the Company and its subsidiaries for general corporate
purposes.
(cc) ACKNOWLEDGMENT REGARDING PURCHASER'S PURCHASE OF SHARES.
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
12
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 British Virgin Islands.
(b) AUTHORIZATION AND POWER. The Purchaser has the requisite
power and authority to enter into and perform this Agreement and to
purchase the Shares being sold to it hereunder. The execution, delivery
and performance of this Agreement by Purchaser and the consummation by
it of the transactions contemplated hereby have been duly authorized by
all necessary corporate action. 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.
(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
13
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) 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.
(h) COMPANY COMMON STOCK. Neither the Purchaser nor any of its
affiliates is in the beneficial owner of the Common Stock or has the
right to purchase Common Stock other than pursuant to this Agreement.
ARTICLE IV
COVENANTS
The Company covenants with the Purchaser as follows:
Section 4.1 SECURITIES COMPLIANCE. The Company shall notify
The Nasdaq Stock Market, Inc., 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
14
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 Nasdaq
SmallCap Market or another 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 Nasdaq Stock Market.
Section 4.3 REGISTRATION STATEMENT. The Company shall cause to
be filed the Registration Statement, which Registration Statement shall
provide for the sale of the Shares to the Purchaser and resale by the
Purchaser to the public in accordance with this Agreement. The Company
shall cause such Registration Statement to be declared effective by the
Commission 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 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.
Section 4.6 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 4.7 AMENDMENTS. The Company shall not amend or waive
any provision the Certificate of Incorporation, Bylaws of the Company
in any way that would adversely affect the dividend rights or voting
rights of the holders of the Shares.
Section 4.8 OTHER AGREEMENTS. The Company shall not enter into
any agreement the terms of which such agreement would restrict or
impair the right to perform of the Company or any subsidiary under this
Agreement or the Certificate of Incorporation of the Company.
15
Section 4.9 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 Commission 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 Commission 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 material 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 4.10 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 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 any Draw Down issued by
the Company under this Agreement.
Section 4.11 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) fourteen (14) months from the effective date
of the Registration Statement, (ii) sixty (60) days after the entire
$48,000,000 of Shares has been purchased by Purchaser or (iii) three
(3) years from the date hereof. The foregoing shall not prevent or
limit the Company from engaging
16
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) pursuant to any presently existing or future employee
benefit plan which plan has been or is approved by the Company's
stockholders, (iii) pursuant to any compensatory plan for a full-time
employee or key consultant, (iv) in connection with a strategic
partnership or other business transaction, the principal purpose of
which is not simply to raise money, or (v) to which Purchaser gives its
written approval.
The Purchaser covenants with the Company as follows:
4.12 NO SHORT SALES. Prior to the Effective Date and during
the term hereof, neither the Purchaser or any of its affiliates will be
in a net short position with regard to the Common Stock in any accounts
directly or indirectly controlled by the Purchaser. Notwithstanding
anything to the contrary herein, the sale of Shares on or after the
date of a Draw Down Notice shall not constitute a short position.
4.13 FUTURE PURCHASES. During the term of this Agreement and
other than pursuant to this Agreement, the Purchaser will not purchase
Common Stock of the Company without the prior written consent of the
Company.
ARTICLE V
CONDITIONS TO 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 Closing, 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 Closing and as of each Draw Down Exercise 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
material covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Purchaser
at or prior to the Closing and as of each Draw Down Exercise Date.
(c) NO INJUNCTION. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by
17
any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by
this Agreement.
Section 5.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE
PURCHASER TO CLOSE. The obligation hereunder of the Purchaser to enter
this Agreement is subject to the satisfaction or waiver, at or before
the 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 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 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 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 Closing, the Purchaser
shall have received an opinion of counsel to the Company, dated the
date of Closing, in the form of EXHIBIT C hereto, and such other
certificates and documents as the Purchaser or its counsel shall
reasonably require incident to the Closing.
(f) WARRANTS. In lieu of a minimum Draw Down commitment by the
Company, the Purchaser shall receive a warrant certificate to purchase
up to 120,000 shares of Common Stock (the "Warrant"). The Warrant will
have a three (3) year term from its date of issuance. The Strike Price
of the Warrant shall be 120% of the closing bid price of the Common
Stock on the Trading Day immediately prior to the 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.
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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 or waiver, at or
before each Draw Down Exercise Date, of each of the conditions set
forth below. The conditions are for the Purchaser's sole benefit and
may be waived by the Purchaser at any time in its sole discretion.
(a) SATISFACTION OF CONDITIONS TO CLOSING. The Company shall
have satisfied, or the Purchaser shall have waived, 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 Commission and shall remain effective on each Draw Down Exercise
Date.
(c) NO SUSPENSION. Trading in the Company's Common Stock shall
not have been suspended by the Commission or the Nasdaq SmallCap Market
(except for any suspension of trading of limited duration agreed to by
the Company, which suspension shall be terminated prior to each Draw
Down request), and, at any time prior to such request, trading in
securities generally as reported on the Nasdaq SmallCap Market shall
not have been suspended or limited, or minimum prices shall not have
been established on securities whose trades are reported on the Nasdaq
SmallCap Market.
(d) MATERIAL ADVERSE EFFECT. No Material Adverse Effect and no
Consolidation Event 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) TRADING CUSHION. Five (5) Trading Days shall have elapsed
since the last date of Settlement (as defined in Section 6.1(f)
herein).
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.
19
(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 at the election of the Purchaser on a weekly basis or on the
Draw Down Exercise Date, which shall be the first Trading Day following
the end of the Draw Down Pricing Period. In connection with each Draw
Down Pricing Period, the Company may set an Average Daily Price below
which the Company will not sell any Shares (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) There shall be a maximum of twelve (12) Draw Downs during
the term of this Agreement. Subject to the limitations set forth
immediately below, the Company shall have the right to issue and
exercise a Draw Down of up to $4,000,000 of the Company's Common Stock
per Draw Down ("Maximum Draw Down Amount"); PROVIDED, HOWEVER, the
Maximum Draw Down Amount shall be increased by $500,000 for every $2.00
increase in the Threshold Price over $14.00. The minimum Draw Down
shall be $250,000, unless otherwise agreed by Purchaser.
(d) 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 18 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 18)) the number of
Shares of Common Stock to be issued in connection with each Draw Down
shall be equal to the sum of the quotients (for each trading day within
the Draw Down Pricing Period) of (x) 1/18th of the Draw Down amount and
(y) 92% of the Average Daily Price of the Common Stock on each Trading
Day within the Draw Down Pricing Period (the "Discount Price");
PROVIDED, HOWEVER, the Discount Price shall be increased by 0.1% for
every $4.00 increase in the Threshold Price over $14.00 until the
Discount Price equals 94.5% except that the Discount Price shall be
increased to 94.5% if the Company's market capitalization is equal to
or exceeds One Billion Dollars. The Company's market capitalization
shall be calculated as the product of (i) the number of shares of
Common Stock outstanding as reported by Bloomberg Financial using the
DES function and (ii) the closing bid price of the Common Stock on the
Trading Day Prior to the applicable Draw Down Pricing Period. If the
Average Daily Price on a given Trading Day is less than the Threshold
Price, then the Purchaser's Draw Down will be reduced by 1/18th and
that day shall be withdrawn from the Draw Down Pricing Period.
20
(e) The Company must inform the Purchaser by delivering a Draw
Down Notice, in the form of EXHIBIT D hereto, via facsimile
transmission as to the amount of the Draw Down the Company wishes to
exercise before the first day of the Draw Down Pricing Period (the
"Draw Down Notice"). The Company may set the Threshold Price, if any,
prior to each Draw Down request. At no time shall the Purchaser be
required to purchase more than the scheduled 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 purchase more than the
scheduled maximum amount in a subsequent Draw Down Pricing Period.
(f) On or before three (3) Trading Days after each Settlement
Period, the Shares purchased by the Purchaser shall be delivered to The
Depository Trust Company ("DTC") on the Purchaser's behalf. 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. In the event the Shares so purchased are not delivered to
the DTC by the Company within ten (10) Trading Days after a Draw Down
Exercise Date, the Company will pay the Purchaser (pro-rated on a daily
basis), as liquidated damages for such failure to deliver and not as a
penalty, two percent (2%) of the applicable Draw Down during each
thirty (30) day period following such failure in cash or restricted
shares of Common Stock, at the Purchaser's option, until such Shares
have been delivered. The Escrow Agent shall be directed to pay 98% of
the purchase price to the Company, net of One Thousand Five Hundred
Dollars ($1,500) as escrow expenses to the Escrow Agent, and 2% to the
placement agent upon the delivery of the Shares into the Purchaser's
DTC account in exchange for payment which shall be referred to herein
as "Settlement".
(g) Annexed hereto as a schedule is an example of the draw
down procedure and the stock purchases. Notwithstanding the example, in
the event of a conflict between the example and the terms of this
Article VI, the terms of this Article VI shall control.
ARTICLE VII
TERMINATION
Section 7.1 TERMINATION BY MUTUAL CONSENT. The term of this
Agreement shall be fourteen (14) months from the Effective Date. This
Agreement may be terminated at any time by mutual consent of the
parties.
Section 7.2 OTHER TERMINATION.(a) The Purchaser may terminate
this Agreement upon one (1) Trading Day's notice if (i) an event
resulting in a Material Adverse Effect has occurred, (ii) the Common
Stock is de-listed from the Nasdaq SmallCap Market unless such
de-listing is in connection with the listing of the
21
Common Stock on the Nasdaq National Market, American Stock Exchange, or
the New York Stock Exchange, (iii) the Company files for protection
from creditors under any applicable law, (iv) the Company completes any
financing prohibited by Section 4.11 or (v) the Registration Statement
is not effective by August 31, 2000.
(b) 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 the date
payment for such Draw Down is due.
Section 7.3 EFFECT OF TERMINATION. In the event of termination
by the Company or the Purchaser, 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 or 7.2
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 7.3 shall be deemed to release the Company or
the Purchaser from any liability for any breach under this Agreement,
or to impair the rights to 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, except that, as to actions by the Purchaser
directly against the Company, the Company shall be liable to the
Purchaser only if the Purchaser holds any of the Registrable Securities
at the time any action is brought for any such inaccuracy or breach.
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.
22
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 of 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 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
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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 Closing, all
attorneys and escrow fees and expenses (exclusive of disbursements and
out-of-pocket expenses) incurred by the Purchaser of $40,000 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 amendments,
modifications or waivers by the Company of this Agreement or the
Registration Rights Agreement or incurred in connection with the
enforcement of this 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.
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
representations, warranty, covenant or undertaking with respect to such
matters. 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.
Section 9.4 NOTICES. Any notice, demand, request, waiver or
other communication required or permitted to be given hereunder shall
be in writing and
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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: NHancement Technologies Inc.
0000 Xxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Telephone Number: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxx
With copies to: Broad and Xxxxxx
000 Xxxxx Xxxxxxxx Xxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
If to Purchaser: c/o Dr. Xx. Xxxxxxxx & Partner
Xxxxxxxxxxx 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
Telephone Number: (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 provisions, 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.
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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 assigns. The parties hereto may not amend this Agreement
or any rights or obligations hereunder without the prior written
consent of the Company and each Purchaser to be affected by the
amendment. After 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 as 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 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.
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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
parties 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. Prior to the 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 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, that prior to issuing any
such press release, making any such public statement or announcement,
the Company 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 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 or 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.
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
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 in Article I of the Escrow Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorize officer as
this __ day of May, 2000.
NHANCEMENT TECHNOLOGIES INC.
By:
------------------------------------
Xxxxxxx X. Xxxx, President & CEO
XXXXXXX INVESTMENTS LIMITED
By:
------------------------------------
Xxxx Xxxxxxx, Authorized Signatory
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