SECURITIES PURCHASE AGREEMENT
Exhibit 10.50
THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of March , 2007, between IWT Tesoro Corp. a corporation organized and existing under the laws of Nevada, having an address of 0000 XX 00xx Xxxxxx, Xxxx Xxxx, XX. 00000 (the “Company”), and Mercatus & Partners, Limited (the “Purchaser”).
WHEREAS, PURCHASER desires to purchase Shares of the Company; and
WHEREAS, Company desires for Purchaser to purchase Shares of the Company.
NOW, THEREFORE, subject to the terms and conditions set forth in this Agreement, for good, valuable and binding consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, now agree as follows:
ARTICLE I
INTRODUCTION AND DEFINITIONS
This Agreement is entered into by the parties for purchase of equity shares of the Company by the Purchaser for placement into a European bank SICAV fund. This is a delayed purchase transaction not an immediate funding. The Company recognizes and agrees that the Purchaser shall have up to forty-five (45) days, as set forth in this Agreement to tender the Purchase Price to the company through the intermediary Custodial Bank and Purchaser’s authorized agent, once the valuation and purchase of the shares is made in accordance with the terms of this Agreement. The Company shall have the right to contact the Custodial Bank administrator for Purchaser account verification and for confirmation of the share status, location and control at each step of the process. Purchaser shall have up to forty-five (45) days from the date of delivery of the Shares to the Custodial Bank to pay the Purchase Price. The particular expected time line and transaction sequence is set forth in Schedule 1 to the Agreement
Certain Definitions. As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated:
“Affiliate” means, with respect to any Person, any Person that, directly or indirectly, controls, is controlled by or is under common control with such Person. For the purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”) shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise.
“Agreement” shall have the meaning set forth in the introductory paragraph of this Agreement.
“Attorney-in-fact” means the agent of the account holder or Designee, Xxxxxx Xxxxxxxx, Esquire. The attorney-in-fact, Xxxxxx Xxxxxxxx, has full oversight authority of the Purchaser and the receiving bank to verify share deposit, valuation process and share transaction status.
“Business Day” means any day except Saturday, Sunday, any day which shall be a legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other government actions to close.
“Change of Control” means the acquisition, directly or indirectly, by any Person of ownership of, or the power to direct the exercise of voting power with respect to, a majority of the issued and outstanding voting shares of the Company.
“Closing” or “Closing Date” shall be the date this Agreement is executed by both parties and the shares have been deposited into the account at Maximum Financial Investment Group.
“Company” shall mean (Company) as set forth in the introductory paragraph.
“Control Person” shall have the meaning set forth in Section 4.8(a)(i).
“Custodial Bank” means the institution that will receive and retain the Shares of the Company on behalf of the parties, until payment is received and the purchase is complete in accordance with Schedule 1. In this case, the Custodial Bank is Maximum Financial Investment Group, New York City, New York. The account holder is Mercatus or its Designee, the intermediary fund receiving bank.
“Default” means any event or condition which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default.
“Disclosure Documents” means the Company’s reports filed under the Exchange Act with the SEC.
“Downside Protection Warrant” shall have the meaning set forth in Section 3.1 (e).
“Downside Protection Warrant Term shall have the meaning set forth in Section 3.1 (e).
“Event of Default” shall have the meaning set forth in Section 3.1(o).
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Execution Date” means the date of this Agreement first written above.
“Indemnified Party” shall have the meaning set forth in Section 4.8(b).
“Indemnifying Party” shall have the meaning set forth in Section 4.8(b).
“Losses” shall have the meaning set forth in Section 4.8(a)(i).
“Material Adverse Effect” shall have the meaning set forth in Section 3.1(a).
“NASD” means the National Association of Securities Dealers, Inc.
“NASDAQ” shall mean the Nasdaq Stock Market, Inc. ®
“OTCBB” shall mean the NASD over-the counter Bulletin Board®.
“Per Share Market Value” of the Common Stock means on any particular date the last sale price of shares of Common Stock on such date or, if no such sale takes place on such date, the last sale price on the most recent prior date, in each case as officially reported on the principal national securities exchange on which the Common Stock is then listed or admitted to trading.
“Person” means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind.
“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened.
“Placement Agent” shall have the meaning set forth in Section 3.1(p).
“Purchase Price” shall have the meaning set forth in Article II.
“Purchaser” shall have the meaning set forth in the introductory paragraph.
“Reporting Issuer” means a company that is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act.
“Required Approvals” shall have the meaning set forth in Section 3.1(g).
“Securities” means the Common Stock and stock of any other class into which such shares may hereafter have been reclassified or changed.
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“SEC” means the Securities and Exchange Commission.
“Securities Act” means the Securities Act of 1933, as amended.
“Shares” shall have the meaning set forth in Article II..
“Subsidiaries” shall have the meaning set forth in Section 3.1(a).
“Trading Day” means (a) a day on which the Common Stock is quoted on NASDAQ, the OTCBB or the principal stock exchange on which the Common Stock has been listed, or (b) if the Common Stock is not quoted on NASDAQ, the OTCBB or any stock exchange.
“Transaction Documents” means this Agreement and all exhibits and schedules hereto, the Registration Rights Agreement and all other documents, instruments and writings required pursuant to this Agreement.
“U.S.” means the United States of America.
“Warrant” means the warrant to purchase the common stock of the Company, or a certain percentage of common stock of the Company being issued to the Purchaser, and all extensions and renewals thereof and replacements therefor, as set forth in further detail in the Warrant Agreement attached hereto as Exhibit A.
ARTICLE II
The Purchaser hereby agrees to purchase the shares of the Common Stock of the Company (the “Shares”). The Purchase Price to be paid by the Purchaser shall be fifty-five cents ($0.55) per share or as adjusted for any splits or changes, which represents a discount of 60% of the average market price on closing. Subject to such adjustments, the total Purchase Price for One Million Eight Hundred Eighteen Thousand One Hundred Eighty-Two (1,818,182) Shares for an aggregate of Two Million Dollars ($2,000,000). The Purchase Price shall be subject to adjustment as provided hereinafter in Section 3.1 (e) 5.14. In addition, the Purchaser shall have the right to purchase Warrants pursuant to the terms of the Warrant Agreement attached hereto as Exhibit A.
This Agreement is subject to the conditions and timing set forth herein.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations, Warranties and Agreements of the Company. The Company hereby makes the following representations and warranties to the Purchaser, all of which shall survive the Closing.
(a) Organization and Qualification. The Company is a publicly traded corporation, duly incorporated, validly existing and in good standing under the laws of the State of Nevada, with the requisite corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. The Company has no subsidiaries other than as set forth on Schedule 3.1(a) attached hereto (collectively, the “Subsidiaries”). Each of the Subsidiaries is a corporation, duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation, with the full corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. Each of the Company and the Subsidiaries is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not, individually or in the aggregate, have a material adverse effect on the results of operations, assets, prospects, or financial condition of the Company and the Subsidiaries, taken as a whole (a “Material Adverse Effect”).
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(b) Authorization, Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated hereby and by each other Transaction Document and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby has been duly authorized by all necessary action on the part of the Company. This Agreement and each of the other Transaction Documents has been or will be duly executed by the Company and when delivered in accordance with the terms hereof or thereafter will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application.
(c) Capitalization. The authorized, issued and outstanding capital stock of the Company is set forth on Schedule 3.1(d). No shares of Common Stock are entitled to preemptive or similar rights, nor is any holder of the Common Stock entitled to preemptive or similar rights arising out of any agreement or understanding with the Company by virtue of this Agreement. Except as disclosed in Schedule 3.1(d), there are no outstanding options, warrants, scripts, rights to subscribe to, registration rights, calls or commitments of any character whatsoever relating to securities, rights or obligations convertible into or exchangeable for, or giving any person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings, or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock, or securities or rights convertible or exchangeable into shares of Common Stock. Neither the Company nor any Subsidiary is in violation of any of the provisions of its Certificate of Incorporation, bylaws or other charter documents.
(d) Issuance of Securities. The Shares have been duly and validly authorized for issuance, offer and sale pursuant to this Agreement and, when issued and delivered as provided hereunder against payment in accordance with the terms hereof, shall be valid and binding obligations of the Company enforceable in accordance with their respective terms.
(e) Downside Protection Warrant. Commencing upon the first anniversary of the tender of this Agreement and terminating at 5:00 PM on the thirtieth (30th) day thereafter (the “Downside Protection Warrant Term”), in the event that the market price, after 60% discount adjustment, of the free trading securities of the Company falls below the Purchase Price of fifty-five cents ($0.55) per share (as adjusted for splits, reverse splits or recapitalizations, if needed) Purchaser shall have the right to exercise this Downside Protection Warrant. This Downside Protection Provision may be exercised by the Purchaser at Purchaser’s sole discretion during the thirty (30) days immediately following the first anniversary of the execution of this Agreement. The reduced market price for the shares shall be deemed the “Adjusted Purchase Price”. The Downside Protection Warrant shall be available to Purchaser as a cashless warrant and is deemed part of this Agreement and entered into upon execution of this Agreement (the “Downside Protection Warrant”). The Downside Protection Warrant provides that the Purchaser shall be issued during the Downside Protection Warrant Term, additional shares in the Company in an amount that equals up to fifty (50%) percent of the number of shares issued (the maximum number of Shares being up to 909,091) to Purchaser pursuant to this Agreement. The actual number of additional shares to be issued to the Purchaser shall be determined by calculating the number of shares that would be issued to the Purchaser for the Purchase Price if the Purchaser were paying the Adjusted Price per share in lieu of fifty-five cents ($0.55) per share, i.e. Stock is Adjusted Price to $0.45 per share at time of exercise of the Downside Protection Warrant right, then Purchase has right to demand an additional four hundred and four thousand forty (404,040) shares.
(f) No Conflicts. The execution, delivery and performance of this Agreement and the other Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of its Certificate of Incorporation or bylaws (each as amended through the date hereof) or (ii) be subject to obtaining any consents except those referred to in Section 3.1(f), 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
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to which the Company is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or its Subsidiaries is subject (including, but not limited to, those of other countries and the federal and state securities laws and regulations), or by which any property or asset of the Company or its Subsidiaries is bound or affected, except in the case of clause (ii), such conflicts, defaults, terminations, 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 law, ordinance or regulation of any governmental authority.
(g) Consents and Approvals. Except as specifically set forth in Schedule 3.1(g), neither the Company nor any Subsidiary is required to obtain any consent, waiver, authorization or order of, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of this Agreement and each of the other Transaction Documents (together with the consents, waivers, authorizations, orders, notices and filings referred to herein or in Schedule 3.1(g), the “Required Approvals”).
(h) Litigation; Proceedings. Except as specifically disclosed in Schedule 3.1(h), there is no action, suit, notice of violation, proceeding or investigation pending or, to the best knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries or any of their respective properties before or by any court, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) which (i) relates to or challenges the legality, validity or enforceability of any of the Transaction Documents or the Shares, (ii) could, individually or in the aggregate, have a Material Adverse Effect or (iii) could, individually or in the aggregate, materially impair the ability of the Company to perform fully on a timely basis its obligations under the Transaction Documents.
(i) No Default or Violation. Except as set forth in Schedule 3.1(i) hereto, neither the Company nor any Subsidiary (i) is in default under or in violation of any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound, except such conflicts or defaults as do not have a Material Adverse Effect, (ii) is in violation of any order of any court, arbitrator or governmental body, except for such violations as do not have a Material Adverse Effect, or (iii) is in violation of any statute, rule or regulation of any governmental authority which could (individually or in the aggregate) adversely affect the legality, validity or enforceability of this Agreement, have a Material Adverse Effect or adversely impair the Company’s ability or obligation to perform fully on a timely basis its obligations under this Agreement.
(j) Disclosure Documents. The Disclosure Documents are accurate in all material respects and do not contain any untrue statement of material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. Violation of this clause is and will be considered grounds for default and could result in the termination of this Agreement. The Company is not relying on this funding to continue its operations or business and Purchaser will not be held responsible for any loss of opportunity or profits of the Company if the funding does not occur for any reason.
(k) Non-Registered Offering. Neither the Company nor any Person acting on its behalf has taken or will take any action (including, without limitation, any offering of any securities of the Company under circumstances which would require the integration of such offering with the offering of the Securities under the Securities Act) which might subject the offering, issuance or sale of the Securities to the registration requirements of Section 5 of the Securities Act.
(l) Registration Rights. The Company agrees: (1) to instruct and require its transfer agent to remove the restrictive legend upon the request of Purchaser following the expiration of the applicable holding period or registration; and (2)there will be no trading by the Company or insiders or restricted persons within thirty (30) days of the purchase of the Shares or ten (10) days before the expiration of the holding period ; and (3) Company agrees to provide the Opinion of Counsel letter for the removal of the legend upon demand of Purchaser therefore.
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(m) Regulation S. Neither the Company nor any affiliate or any person acting on the Company’s behalf, has made or is aware of any “directed selling efforts” in the United States, which is defined in Regulation S to be any activity undertaken for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States for any of the Shares being purchased hereby.
(n) Due Diligence. The Company agrees to cooperate with the Purchaser and provide access to the Company’s books and records so that the Purchase is able to conduct a due diligence review of the Company and its business. The Purchaser shall have up to thirty (30) days following execution of this Agreement to conduct such due diligence review.
(o) Material Misrepresentations. The Company agrees that all materials and information it discloses or otherwise provides to the Purchaser relating to this Agreement and the transactions contemplated pursuant to this Agreement are accurate in all material respects and do not contain any untrue statement of material fact or omit to state any material face necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. Violation of this clause is and will be considered an event of default permitting the Purchaser to terminate the Agreement immediately.
(p) Placement Agent. The Company accepts and agrees that the placement agent Mercari Capital is not acting on behalf of the Company and Purchaser does not regard any person other than the Company as its customer in relation to this Agreement, and that it has not made any recommendation to the Company, in relation to this Agreement and is not advising the Company with regard to the suitability or merits of the transaction. In the event the Company has any agreement for compensation with any party to raise the funds on behalf of the Company (“Company Funding Agent Agreement”), the Company will disclose the terms of that Company Funding Agent Agreement to Purchaser prior to the execution of this Agreement. Following the execution of this Agreement, the Attorney-in-Fact shall be the Company contact for all information relating to the status of funding, location of Shares, settlement of the payment of the Purchase Price and any other information requests of the Company. Notwithstanding the above, in the event the Purchase Price is not paid as required herein, the Company may directly contact the Attorney-in-Fact to provide the Company notice of demand for the return of the Shares.
(q) Piggy-back Registration. From and after the date that is ninety (90) days after the date of this Agreement and until the third anniversary of the Closing Date, for so long as any of the Registrable Securities are outstanding and are not the subject of an effective registration statement, if the Company contemplates making an offering of Common Stock (or other equity securities convertible into or exchangeable for Common Stock) registered for sale under the Securities Act or proposes to file a Registration Statement covering any of its securities other than (i) a registration on Form S-8 or S-4, or any successor or similar forms; and (ii) a shelf registration under Rule 415 for the sole purpose of registering shares to be issued in connection with the acquisition of assets, the Company will to the extent permissible by law at each such time give prompt written notice to the Holders’ Representative and the Purchasers of its intention to do so and of the Purchaser’s rights under this Section 6. Upon the written request of the Purchaser made within thirty (30) days after the receipt of any such notice, the Company will use its best efforts to effect the registration of all Registrable Securities which the Company has been so requested to register by the Purchaser, to the extent requisite to permit the disposition (in accordance with the intended methods of disposition) of the Registrable Securities by the Purchasers requesting registration, by inclusion of such Registrable Securities in the Registration Statement which covers the securities which the Company proposes to register; provided, that if, at any time after giving written notice of its intention to register any Registrable Securities and prior to the effective date of the Registration Statement filed in connection with such registration, the Company shall determine for any reason either not to register or to delay registration of such Registrable Securities, the Company may, at its election, give written notice of such determination to the Holders’ Representative and the Purchasers requesting registration and, thereupon, (i) in the case of a determination not to register, the Company shall be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from its obligation to pay the expenses of registration in connection therewith), and (ii) in the case of a determination to delay registering such Registrable Securities, shall be permitted to delay registering any Registrable Securities, for the same period as the delay in registering such other securities
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The Purchaser acknowledges and agrees that the Company makes no representation or warranty with respect to the transactions contemplated hereby other than those specifically set forth in this Section 3.1.
3.2 Representations and Warranties of the Purchaser. The Purchaser hereby represents and warrants to the Company as follows:
(a) Organization; Authority. The Purchaser is a corporation, duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation with the requisite power and authority to enter into and to consummate the transactions contemplated hereby and by the other Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The acquisition of the Shares to be purchased by the Purchaser hereunder has been duly authorized by all necessary action on the part of the Purchaser. This Agreement has been duly executed and delivered by the Purchaser and constitutes the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to, or affecting generally the enforcement of, creditors rights and remedies or by other general principles of equity.
(b) Investment Intent. The Purchaser is acquiring the Shares to be purchased by it hereunder, for its own account for investment purposes only and not with a view to or for distributing or reselling such Shares, or any part thereof or interest therein, without prejudice, however, to such Purchaser’s right, subject to the provisions of this Agreement, at all times to sell or otherwise dispose of all or any part of such Shares in compliance with applicable federal and state securities laws.
(c) Experience of Purchaser. The Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of an investment in the Shares to be acquired by it hereunder, and has so evaluated the merits and risks of such investment.
(d) Ability of Purchaser to Bear Risk of Investment. The Purchaser is able to bear the economic risk of an investment in the Securities to be acquired by it hereunder and, at the present time, is able to afford a complete loss of such investment.
(e) Reliance. The Purchaser understands and acknowledges that (i) the Shares being offered and sold to it hereunder are being offered and sold without registration under the Securities Act in a private placement that is exempt from the registration provisions of the Securities Act under Section 4(2) of the Securities Act and (ii) the availability of such exemption depends in part on, and that the Company will rely upon the accuracy and truthfulness of, the foregoing representations and such Purchaser hereby consents to such reliance.
(f) Regulation S and/or Regulation D. Purchaser understands and acknowledges that (A) the Shares have not been registered under the Securities Act, are being sold in reliance upon an exemption from registration afforded by Regulation S or Regulation D, whichever may be applicable; and that such Shares have not been registered with any state securities commission or authority; (B) pursuant to the requirements of Regulation S or Regulation D, as the case may be, the Shares may not be transferred, sold or otherwise exchanged unless in compliance with the provisions of Regulation S and/or pursuant to registration under the Securities Act, or pursuant to an available exemption hereunder; and (C) Purchaser is under no obligation to register the Shares under the Securities Act or any state securities law, or to take any action to make any exemption from any such registration provisions available except as agreed in Section 3.1 (d) above.
(g) Purchaser is not a U.S. person and is not acquiring the Shares for the account of any U.S. person; (B) no director or executive officer of Purchaser is a national or citizen of the United States; and (C) it is not otherwise deemed to be a “U.S. Person” within the meaning of Regulation S.
Purchaser was not formed specifically for the purpose of acquiring the Shares purchased pursuant to this Agreement.
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Purchaser is purchasing the Shares for its own account and risk and not for the account or benefit of a U.S. Person as defined in Regulation S and no other person has any interest in or participation in the Shares or any right, option, security interest, pledge or other interest in or to the Shares. Purchaser understands, acknowledges and agrees that it must bear the economic risk of its investment in the Shares for an indefinite period of time and that prior to any such offer or sale, the Company may require, as a condition to effecting a transfer of the Shares, an opinion of counsel, acceptable to the Company, as to the registration or exemption therefrom under the Securities Act and any state securities acts, if applicable.
Purchaser will, after the expiration of the Restricted Period, as set forth under Regulation S Rule 903(b)(3)(iii)(A), offer, sell, pledge or otherwise transfer the Shares only in accordance with Regulation S, or pursuant to an available exemption under the Securities Act and, in any case, in accordance with applicable state securities laws or following the effective date of a Registration of the Shares by the Company. The transactions contemplated by this Agreement have neither been pre-arranged with a purchaser who is in the U.S. or who is a U.S. Person, nor are they part of a plan or scheme to evade the registration provisions of the United States federal securities laws.
The offer leading to the sale evidenced hereby was made in an “offshore transaction.” For purposes of Regulation S, Purchaser understands that an “offshore transaction” as defined under Regulation S is any offer or sale not made to a person in the United States and either (A) at the time the buy order is originated, the purchaser is outside the United States, or the seller or any person acting on his behalf reasonably believes that the purchaser is outside the United States; or (B) for purposes of (1) Rule 903 of Regulation S, the transaction is executed in, or on or through a physical trading floor of an established foreign exchange that is located outside the United States or (2) Rule 904 of Regulation S, the transaction is executed in, on or through the facilities of a designated offshore securities market, and neither the seller nor any person acting on its behalf knows that the transaction has been prearranged with a buyer in the U.S.
Neither the Purchaser nor any affiliate or any person acting on the Purchaser’s behalf, has made or is aware of any “directed selling efforts” in the United States, which is defined in Regulation S to be any activity undertaken for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States for any of the Shares being purchased hereby.
Purchaser understands that the Company is the seller of the Shares which are the subject of this Agreement, and that, for purpose of Regulation S, a “distributor” is any underwriter, dealer or other person who participates, pursuant to a contractual arrangement, in the distribution of securities offered or sold in reliance on Regulation S and that an “affiliate” is any partner, officer, director or any person directly or indirectly controlling, controlled by or under common control with any person in question. Purchaser agrees that Purchaser will not, during the Restricted Period set forth under Rule 903(b)(iii)(A), act as a distributor, either directly or through any affiliate, nor shall it sell, transfer, hypothecate, participate in any short selling as defined by the SEC or otherwise convey the Shares other than to a non-U.S. Person.
Purchaser acknowledges that the Shares will bear a legend in the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN OFFERED AND SOLD IN AN “OFFSHORE TRANSACTION” IN RELIANCE UPON REGULATION S AS PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION. ACCORDINGLY, THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED FROM TIME TO TIME (THE “SECURITIES ACT”) AND MAY NOT BE TRANSFERRED OTHER THAN IN ACCORDANCE WITH REGULATION S, PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF THE COMPANY.
The Company acknowledges and agrees that the Purchaser makes no representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in this Section 3.2.
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ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 Manner of Sale. The Securities are being issued pursuant to Section 4(2) of the Securities Act, and Rule 506 of Regulation D and Regulation S thereunder. The Shares are being issued pursuant to Section 4(2) of the Securities Act and Rule 506 of Regulation D thereunder.
4.2 Non-Shorting The Purchaser shall not engage in short sales of the Company’s Common Stock.
4.3 Notice of Certain Events. The Company shall, on a continuing basis, (i) advise the Purchaser promptly after obtaining knowledge of, and, if requested by the Purchaser, confirm such advice in writing, of (A) the issuance by any state securities commission of any stop order suspending the qualification or exemption from qualification of the Shares, for offering or sale in any jurisdiction, or the initiation of any proceeding for such purpose by any state securities commission or other regulatory authority, or (B) any event that makes any statement of a material fact made by the Company in Section 3.1 or in the Disclosure Documents untrue or that requires the making of any additions to or changes in Section 3.1 or in the Disclosure Documents in order to make the statements therein, in the light of the circumstances under which they are made, not misleading, (ii) use its best efforts to prevent the issuance of any stop order or order suspending the qualification or exemption from qualification of the Securities under any state securities or Blue Sky laws, and (iii) if at any time any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Securities under any such laws, use its best efforts to obtain the withdrawal or lifting of such order at the earliest possible time.
4.4 Blue Sky Laws. The Company shall cooperate with the Purchaser in connection with the exemption from registration of the Securities under the securities or Blue Sky laws of such jurisdictions as the Purchaser may request; provided, however, that neither the Company nor its Subsidiaries shall be required in connection therewith to qualify as a foreign corporation where they are not now so qualified. The Company agrees that it will execute all necessary documents and pay all necessary state filing or notice fees to enable the Company to sell the Securities to the Purchaser.
4.5 Integration. The Company shall ensure that no Affiliate shall sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the Securities Act of the sale of the Securities to the Purchaser.
4.6 Furnishing of Rule 144 Materials. The Company shall, for so long as any of the Securities remain outstanding and during any period in which the Company is not subject to Section 13 or 15(d) of the Exchange Act, make available to any registered holder of the Securities (“Holder” or “Holders”) in connection with any sale thereof and any prospective purchaser of such Securities from such Person, such information in accordance with Rule 144 or Regulation S as promulgated under the Securities Act as is required to sell the Securities under Rule 144 promulgated under the Securities Act.
4.7 Solicitation Materials. The Company shall not (i) distribute any offering materials in connection with the offering and sale of the Shares other than the Disclosure Documents and any amendments and supplements thereto prepared in compliance herewith or (ii) solicit any offer to buy or sell the Shares or, if applicable, by means of any form of general solicitation or advertising.
4.8 Listing of Common Stock. If the Common Stock is or shall become listed on the OTCBB or on another exchange, the Company shall (a) use its best efforts to maintain the listing of its Common Stock on the OTCBB or such other exchange on which the Common Stock is then listed until two (2) years from the date hereof, and (b) shall provide to the Purchaser evidence of such listing.
4.9 Indemnification.
(a) Indemnification
(i) The Company shall, notwithstanding termination of this Agreement and without limitation as to time, indemnify and hold harmless the Purchaser and its officers, directors,
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agents, employees and affiliates, each Person who controls or the Purchaser (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) (each such Person, a “Control Person”) and the officers, directors, agents, employees and affiliates of each such Control Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, costs of preparation and attorneys’ fees) and expenses (collectively, “Losses”), as incurred, arising out of, or relating to, a breach or breaches of any representation, warranty, covenant or agreement by the Company under this Agreement or any other Transaction Document.
(ii) The Purchaser shall, notwithstanding termination of this Agreement and without limitation as to time, indemnify and hold harmless the Company, its officers, directors, agents employees and affiliates, each Control Person and the officers, directors, agents and employees and affiliates of each Control Person, to the fullest extent permitted by application law, from and against any and all Losses, as incurred, arising out of, or relating to, a breach or breaches of any representation, warranty, covenant or agreement by the Purchaser under this Agreement or any other Transaction Document.
(b) Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party promptly shall notify the Person from whom indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have proximately and materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed to pay such fees and expenses; or (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense of the claim against the Indemnified Party but will retain the right to control the overall Proceedings out of which the claim arose and such counsel employed by the Indemnified Party shall be at the expense of the Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any such Proceeding affected without its written consent, which consent shall not be unreasonably withheld. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party to which the Indemnified Party is entitled hereunder (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten (10) Business Days of written notice thereof to the Indemnifying Party.
No right of indemnification under this Section shall be available as to a particular Indemnified Party if there is a non-appealable final judicial determination that such Losses arise solely out of the negligence
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or bad faith of such Indemnified Party in performing the obligations of such Indemnified Party under this Agreement or a breach by such Indemnified Party of its obligations under this Agreement.
(c) Contribution. If a claim for indemnification under this Section is unavailable to an Indemnified Party or is insufficient to hold such Indemnified Party harmless for any Losses in respect of which this Section would apply by its terms (other than by reason of exceptions provided in this Section), then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses in such proportion as is appropriate to reflect the relative benefits received by the Indemnifying Party on the one hand and the Indemnified Party on the other and the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether there was a judicial determination that such Losses arise in part out of the negligence or bad faith of the Indemnified Party in performing the obligations of such Indemnified Party under this Agreement or the Indemnified Party’s breach of its obligations under this Agreement. The amount paid or payable by a party as a result of any Losses shall be deemed to include any attorneys’ or other fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party.
(d) Non-Exclusivity. The indemnity and contribution agreements contained in this Section are in addition to any obligation or liability that the Indemnifying Parties may have to the Indemnified Parties.
ARTICLE V
MISCELLANEOUS
5.1 Fees and Expenses. Except as set forth in this Agreement, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all stamp and other taxes and duties levied in connection with the issuance of the Shares (and, upon conversion or exercise thereof, the Shares) pursuant hereto. Placement Agent shall be paid out of the gross proceeds due to the Company. The Company shall provide the Purchaser with a copy of any agreement with its Placement Agent prior to the execution of this Agreement. The Purchaser shall be responsible for any taxes payable by the Purchaser that may arise as a result of the investment hereunder or the transactions contemplated by this Agreement or any other Transaction Document. The Company shall pay all costs, expenses, fees and all taxes incident to and in connection with: (A) the issuance and delivery of the Securities, (B) the exemption from registration of the Securities for offer and sale to the Purchaser under the securities or Blue Sky laws of the applicable jurisdictions, (C) the preparation of certificates for the Securities (including, without limitation, printing and engraving thereof), and (D) all fees and expenses of counsel and accountants of the Company. The Company shall pay a one time per contract fee of twenty-five thousand dollars ($25,000) to Parscale, Wynn, & Templar, LLC, as contracting and due diligence costs for said contracts said payment to be paid from the gross proceeds due the Company at time of payment to the Company.
5.2 Entire Agreement. This Agreement, together with all of the Exhibits and Schedules annexed hereto, and any other Transaction Document contains the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters. This Agreement shall be deemed to have been drafted and negotiated by both parties hereto and no presumptions as to interpretation, construction or enforceability shall be made by or against either party in such regard.
5.3 Notices. Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given upon facsimile transmission (with
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written transmission confirmation report) at the 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) whichever shall first occur. The addresses for such communications shall be:
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Xxxxx X. Xxxxxxx, CEO |
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0000 XX 00xx Xxx. |
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Xxxx Xxxx, Xxxxxxx 00000 |
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With copies to: |
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If to the Purchaser: |
Mercatus & Partners, Limited |
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c/o Xxxx Xxxx |
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000 Xxxxxxx Xx. |
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Xxxxxxxxxx, XX 00000 |
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With copies to: |
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5.4 Amendments; Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by both the Company and the Purchaser, or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter.
5.5 Headings. The headings herein are for convenience only, do not constitute part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.
5.6 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns. The assignment by a party of this Agreement or any rights hereunder shall not affect the obligations of such party under this Agreement.
5.7 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.
5.8 Governing Law; Venue; Service of Process. The parties hereto acknowledge that the transactions contemplated by this Agreement and the exhibits hereto bear a reasonable relation to the State of New York. The parties hereto agree that the internal laws of the State of New York shall govern this Agreement and the exhibits hereto, including, but not limited to, all issues related to usury. Any action to enforce the terms of this Agreement or any of its exhibits, or any other Transaction Document shall be brought exclusively in the state and/or federal courts situate in the County and State of New York. Service of process in any action by the Purchaser to enforce the terms of this Agreement may be made by serving a copy of the summons and complaint, in addition to any other relevant documents, by commercial overnight courier to the Company at its principal address set forth in this Agreement.
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5.9 Survival. The representations and warranties of the Company and the Purchaser contained in this agreement shall survive the Closing.
5.10 Counterpart Signatures. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof.
5.11 Publicity. The Company and the Purchaser shall consult with each other in issuing any press releases or otherwise making public statements with respect to the transactions contemplated hereby and neither party shall issue any such press release or otherwise make any such public statement without the prior written consent of the other, which consent shall not be unreasonably withheld or delayed, unless counsel for the disclosing party deems such public statement to be required by applicable federal and/or state securities laws, in which event the Company shall provide the Purchaser with a copy of it’s intended communication or filing prior to making it public and giving Purchaser sufficient time to discuss it with the Company. Except as otherwise required by applicable law or regulation, the Company will not disclose to any third party (excluding its legal counsel, accountants and representatives) the names of the Purchaser.
5.12 Severability. In case any one or more of the provisions of this Agreement shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision which shall be a reasonable substitute therefore, and upon so agreeing, shall incorporate such substitute provision in this Agreement.
5.13 Limitation of Remedies. With respect to claims by the Company or any person acting by or through the Company, or by the Purchaser or any person acting through the Purchaser, for remedies at law or at equity relating to or arising out of a breach of this Agreement, liability, if any, shall, in no event, include loss of profits or incidental, indirect, exemplary, punitive, special or consequential damages of any kind. The Companies sole remedy under this agreement will be the return of its shares in the event they are not funded. In the event that the Company should choose to seek the return of its shares after the forty-five (45) day time has run, and it has not received the funding contemplated herein, it must make such request in writing with a notarized signature of an authorized individual representing the Company. The Purchaser will within 20 working days following the receipt of such request secure the return of said shares to the Company.
5.14 Pricing, Value, and Material Information Readjustment. In the event that the Shares being acquired shall decline in value by five percent (5%) of market value before the payment of the Purchase Price or the Company or the Due Diligence process has provided material mis-information regarding the listing or potential standing of the security upon the exchange upon which it is listed, than the Purchaser shall retain the right, at Purchaser’s sole discretion, to either: 1) reject the Shares and return them to the Company; or, 2) suspend the transaction until such time as the parties may mutually agree to a revised Purchase Price.
5.15 Delivery of Securities. The Company shall deliver the Shares directly to the Custodial Bank within five days of the execution of this Agreement in accordance with the directions provided in Schedule 1, to Maximum Financial Investments Group for deposit into the custodial account.
5.16 Delivery of Payment. The Purchaser shall, within forty-five (45) days following the delivery of the Shares to the Custodial Bank issue the Payment to the Company via wire transfer to the directed wire transfer bank and account as specified below:
Beneficiary Account Name:
Beneficiary Account No.:
ABA/Transit No.:
Beneficiary Bank:
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If the Purchase Price is not paid within forty-five (45) days of the delivery of the Shares to the Custodial Bank, the Company has the right to demand recall of the shares after that time, and such Shares will be transmitted back to the Company within twenty (20) business days from the date of the demand. See Appendix A for details of timeline from deposit to payment.
5.17. Delivery of Opinion of Counsel. The Company hereby agrees that it hereby binds itself, if requested in writing to the aforementioned address of the Company, by the Purchaser or their designate or assignee, that it shall deliver, within five (5) days of such demand, an opinion of counsel of the transferability or status of such Shares for the registration or conversion of such Shares as purchased under this Agreement to be in a free tradable format as common shares to the Purchaser. In no case shall such opinion state, and the Company hereby binds itself to this obligation, that Purchaser or its designate or sub-purchaser shall have the same such enforceability rights.
5.18. Duty for Due Diligence. The Company hereby agrees that it, and on behalf, its transfer agent, and any accessed management of the Company by the Purchaser or designee banks or purchasers shall cooperate in the verification of the originating nature of the Shares, the restriction period of the Shares, and the transferability of the Shares during the due diligence period of the Shares involved in this transaction. Such failure of information to said parties is acknowledged as grounds for rejections by the Purchaser or their designees or assignees as described above
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first indicated above.
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IWT Tesoro Corporation |
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By: |
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Name: Xxxxx X. Xxxxxxx |
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Title: CEO |
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Purchaser: |
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Mercatus & Partners, Limited |
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By: Xxxx Xxxx POA on behalf of |
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Mercatus & Partners, Limited |
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