Exhibit 10.1
COMMON STOCK PURCHASE AGREEMENT
COMMON STOCK PURCHASE AGREEMENT (the "AGREEMENT"), dated as of September 6,
2000, by and between XXXX.XXX, INC., a Georgia corporation (the "COMPANY"), and
FUSION CAPITAL FUND II, LLC (together with its permitted assigns, the "BUYER").
WHEREAS:
Subject to the terms and conditions set forth in this Agreement including
the terms and conditions set forth in ANNEX A attached hereto (the "COMMON STOCK
PURCHASE TERMS AND CONDITIONS"), the Company wishes to sell to the Buyer, and
the Buyer wishes to buy from the Company, up to Twelve Million Dollars
($12,000,000) of the Company's common stock, par value $0.01 per share (the
"COMMON STOCK"). The Buyer and Company expressly agree that the Common Stock
Purchase Terms and Conditions set forth in ANNEX A hereto are fully incorporated
into and are part of this Agreement. The shares of Common Stock to be purchased
hereunder are referred to herein as, the "PURCHASE SHARES."
NOW THEREFORE, the Company and the Buyer hereby agree as follows:
1. PURCHASE OF COMMON STOCK.
a. COMMENCEMENT OF PURCHASES OF SHARES COMMON STOCK. Subject to the
satisfaction (or waiver) of the conditions set forth in Sections 6 and 7
below and in accordance with the Common Stock Purchase Terms and Conditions
set forth in Annex A hereto, the Company hereby agrees to sell to the Buyer,
and the Buyer hereby agrees to purchase from the Company, shares of Common
Stock as follows: (i) the purchase and sale of the first Six Million Dollars
($6,000,000) of Common Stock hereunder (the "FIRST TRANCHE") shall commence
within five (5) Trading Days (as defined in the last sentence of this
Section 1(a)) of the date that the Registration Statement referred to in the
first sentence of Section 4(a) hereof is declared effective under the
Securities Act of 1933, as amended (the "1933 ACT") by the United States
Securities and Exchange Commission (the "SEC") (the "FIRST COMMENCEMENT");
and (ii) the purchase and sale of the second Six Million Dollars
($6,000,000) of Common Stock hereunder (the "SECOND TRANCHE") shall commence
within five (5) Trading Days of the date that the Registration Statement
referred to in the second sentence of Section 4(a) hereof is declared
effective under the 1933 Act by the SEC (the "SECOND COMMENCEMENT"), (each
such commencement, a "COMMENCEMENT"). It is agreed and acknowledged by the
parties hereto that the commencement of the Second Tranche shall be at the
option of the Company in its sole discretion until such time as the Company
shall have delivered an irrevocable written notice (the "SECOND TRANCHE
NOTICE") to the Buyer stating that the Company elects to commence the Second
Tranche under the terms and conditions provided herein. The Second Tranche
may not commence until the aggregate amount of the First Tranche has been
completed as provided herein. The Buyer is not obligated to commence the
Second Tranche unless the Company has delivered the Second Tranche Notice
prior to the date that is ten (10) Trading Days following the date on which
the aggregate amount of the First Tranche has been completed as provided
herein. Upon delivery of the Second Tranche Notice to the Buyer, subject to
the satisfaction (or waiver) of the conditions set forth in Sections 6 and 7
below, the Company and the Buyer shall be obligated to commence the Second
Tranche. For purposes of this Agreement, "TRADING DAY" shall mean any day on
which the Principal Market (as defined in Section 4(d) hereof) is open for
customary trading.
b. COMMENCEMENT DATES. The date of each Commencement (each a
"COMMENCEMENT DATE") shall be within five (5) Trading Days following the
date of satisfaction (or waiver) of the conditions to the Commencement set
forth in Sections 6 and 7 below (or such later date as is mutually agreed to
by the Company and the Buyer) applicable to such Commencement.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
The Buyer represents and warrants to the Company that:
a. INVESTMENT PURPOSE. The Buyer is entering into this Agreement and
acquiring the Commitment Shares (as defined in Section 7(b) hereof) (this
Agreement and the Commitment Shares are collectively referred to herein as
the "Securities"), for its own account for investment only and not with a
view towards, or for resale in connection with, the public sale or
distribution thereof; provided however, by making the representations
herein, the Buyer does not agree to hold any of the Securities for any
minimum or other specific term.
b. ACCREDITED INVESTOR STATUS. The Buyer is an "accredited investor" as
that term is defined in Rule 501(a)(3) of Regulation D.
c. RELIANCE ON EXEMPTIONS. The Buyer understands that the Securities are
being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws
and that the Company is relying in part upon the truth and accuracy of, and
the Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the
Buyer to acquire the Securities.
d. INFORMATION. The Buyer has been furnished with all materials relating
to the business, finances and operations of the Company and materials
relating to the offer and sale of the Securities that have been reasonably
requested by the Buyer, including, without limitation, the SEC Documents (as
defined in Section 3(f) hereof). The Buyer understands that its investment
in the Securities involves a high degree of risk. The Buyer (i) is able to
bear the economic risk of an investment in the Securities including a total
loss, (ii) has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the
proposed investment in the Securities and (iii) has had an opportunity to
ask questions of and receive answers from the officers of the Company
concerning the financial condition and business of the Company and others
matters related to an investment in the Securities. Neither such inquiries
nor any other due diligence investigations conducted by the Buyer or its
representatives shall modify, amend or affect the Buyer's right to rely on
the Company's representations and warranties contained in Section 3 below.
The Buyer has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with respect to
its acquisition of the Securities.
e. NO GOVERNMENTAL REVIEW. The Buyer understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
f. TRANSFER OR RESALE. The Buyer understands that except as provided in
the Registration Rights Agreement (as defined in Section 6(a) hereof):
(i) the Securities have not been and are not being registered under the 1933
Act or any state securities laws, and may not be offered for sale, sold,
assigned or transferred unless (A) subsequently registered thereunder or
(B) an exemption exists permitting such Securities to be sold, assigned or
transferred without such registration; (ii) any sale of the Securities made
in reliance on Rule 144 may be made only in accordance with the terms of
Rule 144 and further, if Rule 144 is not applicable, any resale of the
Securities under circumstances in which the seller (or the person through
whom the sale is made) may be deemed to be an underwriter (as that term is
defined in the 0000 Xxx) may require compliance with some other exemption
under the 1933 Act or the rules and regulations of the SEC thereunder; and
(iii) neither the Company nor any other person is under any obligation to
register such securities
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under the 1933 Act or any state securities laws or to comply with the terms
and conditions of any exemption thereunder.
g. VALIDITY; ENFORCEMENT. This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Buyer and is a valid and
binding agreement of the Buyer enforceable against the Buyer in accordance
with its terms, subject as to enforceability to general principles of equity
and to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies.
h. RESIDENCY. The Buyer is a resident of the State of Illinois.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Buyer that:
a. ORGANIZATION AND QUALIFICATION. The Company and its "SUBSIDIARIES"
(which for purposes of this Agreement means any entity in which the Company,
directly or indirectly, owns 50% or more of the voting stock or capital
stock or other similar equity interests other than XxxXxxx.xxx, Inc.) are
corporations duly organized and validly existing in good standing under the
laws of the jurisdiction in which they are incorporated, and have the
requisite corporate power and authority to own their properties and to carry
on their business as now being conducted. Each of the Company and its
Subsidiaries is duly qualified as a foreign corporation to do business and
is in good standing in every jurisdiction in which its ownership of property
or the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in
good standing could not reasonably be expected to have a Material Adverse
Effect. As used in this Agreement, "MATERIAL ADVERSE EFFECT" means any
material adverse effect on any of: (i) the business, properties, assets,
operations, results of operations or financial condition of the Company and
its Subsidiaries, if any, taken as a whole, (ii) the value of the Common
Stock or the value of this Agreement, (iii) the transactions contemplated
hereby or by the agreements and instruments to be entered into in connection
herewith or (iv) the authority or ability of the Company to perform its
obligations under the Transaction Documents (as defined in Section 2(b)
hereof). The Company has no Subsidiaries except as set forth on
SCHEDULE 3(a).
b. AUTHORIZATION; ENFORCEMENT; VALIDITY. (i) The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Registration Rights Agreement (as
defined in Section 6(a) hereof) and each of the other agreements entered
into by the parties hereto in connection with the transactions contemplated
by this Agreement (collectively, the "TRANSACTION DOCUMENTS"), and to issue
the Securities in accordance with the terms hereof and thereof, (ii) the
execution and delivery of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby,
including without limitation, the issuance of the Commitment Shares and the
reservation for issuance and the issuance of the Purchase Shares issuable
under this Agreement, have been duly authorized by the Company's Board of
Directors and no further consent or authorization is required by the
Company, its Board of Directors or its shareholders, (iii) this Agreement
has been, and each other Transaction Document shall be at its respective
Commencement, duly executed and delivered by the Company and (iv) this
Agreement constitutes, and each other Transaction Document shall constitute
as of its respective Commencement, the valid and binding obligations of the
Company enforceable against the Company in accordance with their terms,
except as such enforceability may be limited by general principles of equity
or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the
enforcement of creditors' rights and remedies.
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c. CAPITALIZATION. As of the date hereof, the authorized capital stock
of the Company consists of (i) 20,000,000 shares of Common Stock, of which
as of the date hereof, 5,598,627 shares are issued and outstanding, none are
held as treasury shares, 3,000,000 shares are reserved for issuance pursuant
to the Company's stock option plan pursuant to which approximately 585,000
shares remain available for grant and 52,500 warrants shares are issuable
and reserved for issuance pursuant to securities (other than this Agreement
or stock options issued pursuant to the Company's stock option plan)
exercisable or exchangeable for, or convertible into, shares of Common Stock
and (ii) 10,000,000 shares of preferred stock, no par value, of which as of
the date hereof no shares are issued and outstanding. All of such
outstanding shares have been, or upon issuance will be, validly issued and
are fully paid and nonassessable. Except in connection with the transaction
with Fusion Capital Fund I, LLC pursuant to that certain securities purchase
agreement dated as of November 15, 1999 and as disclosed in SCHEDULE 3(c),
(i) no shares of the Company's capital stock are subject to preemptive
rights or any other similar rights or any liens or encumbrances suffered or
permitted by the Company, (ii) there are no outstanding debt securities,
(iii) there are no outstanding options, warrants, scrip, rights to subscribe
to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital
stock of the Company or any of its Subsidiaries or options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Company or any of its Subsidiaries, (iv) there are no
agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of their securities
under the 1933 Act (except the Registration Rights Agreement), (v) there are
no outstanding securities or instruments of the Company or any of its
Subsidiaries which contain any redemption or similar provisions, and there
are no contracts, commitments, understandings or arrangements by which the
Company or any of its Subsidiaries is or may become bound to redeem a
security of the Company or any of its Subsidiaries, (vi) there are no
securities or instruments containing anti-dilution or similar provisions
that will be triggered by the issuance of the Securities as described in
this Agreement and (vii) the Company does not have any stock appreciation
rights or "phantom stock" plans or agreements or any similar plan or
agreement. The Company has furnished to the Buyer true and correct copies of
the Company's Articles of Incorporation, as amended and as in effect on the
date hereof (the "ARTICLES OF INCORPORATION"), and the Company's By-laws, as
amended and as in effect on the date hereof (the "BY-LAWS"), and summaries
of the terms of all securities convertible into or exercisable for Common
Stock, if any, and copies of any documents containing the material rights of
the holders thereof in respect thereto.
d. ISSUANCE OF SECURITIES. The Commitment Shares have been duly
authorized and, upon issuance in accordance with the terms hereof, shall be
(i) validly issued, fully paid and non-assessable and (ii) free from all
taxes, liens and charges with respect to the issue thereof. An aggregate of
1,500,000 shares of Common Stock have been duly authorized and reserved for
issuance upon purchase under the First Tranche. Upon issuance and payment
therefore in accordance with the terms and conditions of this Agreement
including the Common Stock Purchase Terms and Conditions set forth in ANNEX
A hereto, the Purchase Shares shall be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, with the holders being entitled to all rights accorded to a
holder of Common Stock.
e. NO CONFLICTS. Except as disclosed in SCHEDULE 3(E), the execution,
delivery and performance of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and
thereby (including, without limitation, the reservation for issuance and
issuance of the Purchase Shares) will not (i) result in a violation of the
Articles of Incorporation, any Certificate of Designations, Preferences and
Rights of any outstanding series of
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preferred stock of the Company or the By-laws 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 Company or any of its Subsidiaries is a party, or
result in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations and the
rules and regulations of the Principal Market applicable to the Company or
any of its Subsidiaries) or by which any property or asset of the Company or
any of its Subsidiaries is bound or affected which, in the case of (ii),
could not reasonably be expected to result in a Material Adverse Effect.
Except as disclosed in SCHEDULE 3(e), neither the Company nor its
Subsidiaries is in violation of any term of or in default under its Articles
of Incorporation, any Certificate of Designation, Preferences and Rights of
any outstanding series of preferred stock of the Company or By-laws or their
organizational charter or by-laws, respectively. Except as disclosed in
SCHEDULE 3(e), neither the Company nor any of its Subsidiaries is in
violation of any term of or in default under any material contract,
agreement, mortgage, indebtedness, indenture, instrument, judgment, decree
or order or any statute, rule or regulation applicable to the Company or its
Subsidiaries, except for possible conflicts, defaults, terminations or
amendments which could not reasonably be expected to have a Material Adverse
Effect. The business of the Company and its Subsidiaries is not being
conducted, and shall not be conducted, in violation of any law, ordinance,
regulation of any governmental entity, except for possible violations, the
sanctions for which either individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect. Except as
specifically contemplated by this Agreement and as required under the 1933
Act, the Company is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court or governmental
agency or any regulatory or self-regulatory agency in order for it to
execute, deliver or perform any of its obligations under or contemplated by
the Transaction Documents in accordance with the terms hereof or thereof.
Except as disclosed in SCHEDULE 3(e), all consents, authorizations, orders,
filings and registrations which the Company is required to obtain pursuant
to the preceding sentence have been obtained or effected on or prior to the
date hereof. Except as disclosed in SCHEDULE 3(e), the Company is not and
has not been since January 1, 1998, in violation of the listing requirements
of the Principal Market.
f. SEC DOCUMENTS; FINANCIAL STATEMENTS. Except as disclosed in
SCHEDULE 3(F), since January 1, 1999, the Company has timely filed all
reports, schedules, forms, statements and other documents required to be
filed by it with the SEC pursuant to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "1934 ACT") (all of the
foregoing filed prior to the date hereof and all exhibits included therein
and financial statements and schedules thereto and documents incorporated by
reference therein being hereinafter referred to as the "SEC DOCUMENTS"). As
of their respective dates, the SEC Documents complied in all material
respects with the requirements of the 1934 Act and the rules and regulations
of the SEC promulgated thereunder applicable to the SEC Documents, and none
of the SEC Documents, at the time they were filed with the SEC (except as
they may have been correctly amended), 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. As of their
respective dates, the financial statements of the Company included in the
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto. Such financial statements have been prepared in
accordance with generally accepted accounting principles, consistently
applied, during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto or (ii) in the
case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in
all material respects the financial position of the Company as of the dates
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thereof and the results of its operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal year-end
audit adjustments).
g. ABSENCE OF CERTAIN CHANGES. Except as disclosed in SCHEDULE 3(g),
since June 30, 2000, there has been no material adverse change in the
business, properties, operations, financial condition or results of
operations of the Company or its Subsidiaries. The Company has not taken any
steps, and does not currently expect to take any steps, to seek protection
pursuant to any bankruptcy law nor does the Company or any of its
Subsidiaries have any knowledge or reason to believe that its creditors
intend to initiate involuntary bankruptcy proceedings.
h. ABSENCE OF LITIGATION. There is no action, suit, proceeding, inquiry
or investigation before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the
Company or any of its Subsidiaries, threatened against or affecting the
Company, the Common Stock or any of the Company's Subsidiaries or any of the
Company's or the Company's Subsidiaries' officers or directors in their
capacities as such, which could reasonably be expected to have a Material
Adverse Effect. A description of each action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body which, as of the date of this
Agreement, is pending or threatened in writing against or affecting the
Company, the Common Stock or any of the Company's Subsidiaries or any of the
Company's or the Company's Subsidiaries' officers or directors in their
capacities as such, is set forth in SCHEDULE 3(h).
i. ACKNOWLEDGMENT REGARDING BUYER'S PURCHASE OF THE SECURITIES. The
Company acknowledges and agrees that the Buyer is acting solely in the
capacity of arm's length purchaser with respect to the Transaction Documents
and the transactions contemplated hereby and thereby. The Company further
acknowledges that the Buyer is not acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated hereby and thereby
and any advice given by the Buyer or any of its representatives or agents in
connection with the Transaction Documents and the transactions contemplated
hereby and thereby is merely incidental to the Buyer's purchase of the
Securities. The Company further represents to the Buyer that the Company's
decision to enter into the Transaction Documents has been based solely on
the independent evaluation by the Company and its representatives and
advisors.
j. NO GENERAL SOLICITATION. 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 0000 Xxx) in connection with the offer or sale of the
Securities.
k. NO INTEGRATED OFFERING. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers
to buy any security, under circumstances that would require registration of
any of the Securities under the 1933 Act or cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes
of the 1933 Act or any applicable shareholder approval provisions,
including, without limitation, under the rules and regulations of any
exchange or automated quotation system on which any of the securities of the
Company are listed or designated, nor will the Company or any of its
Subsidiaries take any action or steps that would require registration of any
of the Securities under the 1933 Act or cause the offering of the Securities
to be integrated with other offerings.
l. DILUTIVE EFFECT. The Company understands and acknowledges that the
number of Purchase Shares issuable hereunder will increase in certain
circumstances. The Company further acknowledges that its obligation to issue
Purchase Shares under this Agreement in accordance with the term and
conditions herein including the Common Stock Purchase Terms and Conditions
as set
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forth in ANNEX A hereto is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of
other shareholders of the Company.
m. INTELLECTUAL PROPERTY RIGHTS. The Company and its Subsidiaries own or
possess adequate rights or licenses to use all material trademarks, trade
names, service marks, service xxxx registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their
respective businesses as now conducted. Except as set forth on
SCHEDULE 3(m), none of the Company's material trademarks, trade names,
service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, government
authorizations, trade secrets or other intellectual property rights have
expired or terminated, or, by the terms and conditions thereof, could expire
or terminate within two years from the date of this Agreement. The Company
and its Subsidiaries do not have any knowledge of any infringement by the
Company or its Subsidiaries of any material trademark, trade name rights,
patents, patent rights, copyrights, inventions, licenses, service names,
service marks, service xxxx registrations, trade secret or other similar
rights of others, or of any such development of similar or identical trade
secrets or technical information by others and, except as set forth on
SCHEDULE 3(M), there is no claim, action or proceeding being made or brought
against, or to the Company's knowledge, being threatened against, the
Company or its Subsidiaries regarding trademark, trade name, patents, patent
rights, invention, copyright, license, service names, service marks, service
xxxx registrations, trade secret or other infringement, which could
reasonably be expected to have a Material Adverse Effect.
n. ENVIRONMENTAL LAWS. The Company and its Subsidiaries (i) are in
compliance with any and all applicable foreign, federal, state and local
laws and regulations relating to the protection of human health and safety,
the environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits,
licenses or other approvals required of them under applicable Environmental
Laws to conduct their respective businesses and (iii) are in compliance with
all terms and conditions of any such permit, license or approval, except
where, in each of the three foregoing clauses, the failure to so comply
could not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect.
o. TITLE. The Company and its Subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to
all personal property owned by them which is material to the business of the
Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in SCHEDULE 3(o) or
such as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company and any of its Subsidiaries. Any real property and facilities held
under lease by the Company and any of its Subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions as are
not material and do not interfere with the use made and proposed to be made
of such property and buildings by the Company and its Subsidiaries.
p. INSURANCE. The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary has
been refused any insurance coverage sought or applied for and neither the
Company nor any such Subsidiary has any reason to believe that it will not
be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not materially and
adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its Subsidiaries, taken as a
whole.
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q. REGULATORY PERMITS. The Company and its Subsidiaries possess all
material certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company nor any such Subsidiary has
received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit.
r. TAX STATUS. The Company and each of its Subsidiaries has made or
filed all federal and state income and all other material tax returns,
reports and declarations required by any jurisdiction to which it is subject
(unless and only to the extent that the Company and each of its Subsidiaries
has set aside on its books provisions reasonably adequate for the payment of
all unpaid and unreported taxes) and has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to
the periods to which such returns, reports or declarations apply. There are
no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no
basis for any such claim.
s. TRANSACTIONS WITH AFFILIATES. Except as set forth on SCHEDULE 3(s)
and other than the grant or exercise of stock options disclosed on
SCHEDULE 3(c), none of the officers, directors, or employees of the Company
is presently a party to any transaction with the Company or any of its
Subsidiaries (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any officer,
director, or any such employee has an interest or is an officer, director,
trustee or partner.
t. APPLICATION OF TAKEOVER PROTECTIONS. The Company and its board of
directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other similar
anti-takeover provision under the Articles of Incorporation or the laws of
the state of its incorporation which is or could become applicable to the
Buyer as a result of the transactions contemplated by this Agreement,
including, without limitation, the Company's issuance of the Securities and
the Buyer's ownership of the Securities.
u. RIGHTS AGREEMENT. The Company has not adopted a shareholder rights
plan or similar arrangement relating to accumulations of beneficial
ownership of Common Stock or a change in control of the Company.
v. FOREIGN CORRUPT PRACTICES. Neither the Company, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other person
acting on behalf of the Company or any of its Subsidiaries has, in the
course of its actions for, or on behalf of, the Company, used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expenses relating to political activity; made any direct or indirect
unlawful payment to any foreign or domestic government official or employee
from corporate funds; violated or is in violation of any provision of the
U.S. Foreign Corrupt Practices Act of 1977, as amended; or made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment
to any foreign or domestic government official or employee.
4. COVENANTS.
a. FILING REGISTRATION STATEMENT. The Company shall within five
(5) Trading Days from the date hereof file a new Registration Statement
covering the resale of at least 1,200,000 Purchase Shares
9
issuable in the First Tranche and the sale of 154,286 First Tranche
Commitment Shares (as defined in Section 7(b)). The Company shall also
within ten (10) Trading Days from the date of the delivery to the Buyer of
the Second Tranche Notice file a new Registration Statement covering the
resale of a reasonable estimate of the number of Purchase Shares issuable in
the Second Tranche and a reasonable estimate of the number of Second Tranche
Commitment Shares (as defined in Section 7(b)). The Buyer and its counsel
shall have a reasonable opportunity to review and comment upon each such
registration statement or amendment to such registration statement and any
related prospectus prior to its filing with the SEC. The Company shall use
its reasonable best efforts to have such registration statements or
amendments declared effective by the SEC at the earliest possible date.
b. BLUE SKY. The Company shall, on or before the Commencement Date, take
such action, if any, as the Company shall reasonably determine is necessary
in order to obtain an exemption for or to qualify the Commitment Shares and
the Purchase Shares for sale to the Buyer pursuant to this Agreement under
applicable securities or "Blue Sky" laws of the states of the United States,
and shall provide evidence of any such action so taken to the Buyer on or
prior to the Commencement Date. The Company shall make all filings and
reports relating to the offer and sale of the Commitment Shares and the
Purchase Shares required under applicable securities or "Blue Sky" laws of
the states of the United States following the Commencement Date.
c. NO VARIABLE PRICED FINANCING. Other than in connection with the
transaction with Fusion Capital Fund I, LLC and pursuant to this Agreement,
the Company agrees that beginning on the date of this Agreement and ending
on the date of termination of this Agreement (as provided in Section 9(k)
hereof), neither the Company nor any of its Subsidiaries shall, without the
prior written consent of the Buyer, contract for any equity financing
(including any debt financing with an equity component) or issue any equity
securities of the Company or any Subsidiary or securities convertible or
exchangeable into or for equity securities of the Company or any Subsidiary
(including debt securities with an equity component) which, in any case
(i) are convertible into or exchangeable for an indeterminate number of
shares of common stock, (ii) are convertible into or exchangeable for Common
Stock at a price which varies with the market price of the Common Stock,
(iii) directly or indirectly provide for any "re-set" or adjustment of the
purchase price, conversion rate or exercise price or (iv) contain any
"make-whole" provision based upon, directly or indirectly, the market price
of the Common Stock, in each case, other than reasonable and customary
anti-dilution adjustments for issuance of shares of Common Stock at a price
which is below the market price of the Common Stock.
d. LISTING. Promptly after filing each registration statement, the
Company shall secure the listing of the applicable Purchase Shares and
Commitment Shares upon each national securities exchange and automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance) and shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all such
securities from time to time issuable under the terms of the Transaction
Documents. The Company shall maintain the Common Stock's authorization for
quotation on The Nasdaq National Market (the "PRINCIPAL MARKET"). Neither
the Company nor any of its Subsidiaries shall take any action that would be
reasonably expected to result in the delisting or suspension of the Common
Stock on the Principal Market. The Company shall promptly, and in no event
later than the following Trading Day, provide to the Buyer copies of any
notices it receives from the Principal Market regarding the continued
eligibility of the Common Stock for listing on such automated quotation
system or securities exchange. The Company shall pay all fees and expenses
in connection with satisfying its obligations under this Section.
e. LIMITATION ON SHORT SALES AND HEDGING TRANSACTIONS. The Buyer agrees
that beginning on the date of this Agreement and ending on the date of
termination of this Agreement as provided in
10
Section 9(k), the Buyer and its agents, representatives and affiliates shall
not in any manner whatsoever enter into or effect, directly or indirectly,
any (i) "short sale" (as such term is defined in Rule 3b-3 of the 0000 Xxx)
of the Common Stock or (ii) hedging transaction, which establishes a net
short position with respect to the Common Stock; provided, however, that
such restrictions shall not apply (i) if the Buyer promptly submits after a
sale of shares of Common Stock a Purchase Notice (as defined in the Common
Stock Purchase Terms and Conditions) entitling the Buyer to receive a number
of shares of Common Stock at least equal to the number of shares so sold or
(ii) if an Event of Default (as defined the Common Stock Purchase Terms and
Conditions) has occurred under the Common Stock Purchase Terms and
Conditions including any failure by the Company to timely issue any Purchase
Shares pursuant to the Common Stock Purchase Terms and Conditions.
f. LIMITATION ON SALES OF COMMITMENT SHARES. The Buyer agrees that
beginning on the date of this Agreement and ending on the date of
termination of this Agreement as provided in Section 9(k), the Buyer shall
not transfer or sell (i) the First Tranche Commitment Shares (as defined in
Section 7(b) hereof) until six months after the First Commencement Date or
such date as the First Tranche has been completed hereunder or this
Agreement has been terminated and (ii) the Second Tranche Commitment Shares
(as defined in Section 7(b) hereof) until six months after the Second
Commencement Date or such date as the Second Tranche has been completed
hereunder or this Agreement has been terminated; provided, however, that
such restrictions shall not apply: (i) in connection with any transfers to
or among affiliates (as defined in the Securities Exchange Act of 1934, as
amended), (ii) in connection with any pledge in connection with a bona fide
loan or margin account, or (iii) if an Event of Default has occurred, or any
event which, after notice and/or lapse of time, would become an Event of
Default, under the Common Stock Purchase Terms and Conditions including any
failure by the Company to timely issue Purchase Shares under the Common
Stock Purchase Terms and Conditions. Notwithstanding the forgoing, the Buyer
may transfer Commitment Shares to a third party in order to settle a sale
made by the Buyer where the Buyer reasonably expects the Company to deliver
Purchase Shares to Buyer under the Common Stock Purchase Terms and
Conditions so long as the Buyer maintains ownership of the same overall
number of shares of Common Stock by "replacing" the Commitment Shares so
transferred with Purchase Shares when the Purchase Shares are actually
issued by the Company to the Buyer.
h. DUE DILIGENCE. The Buyer shall have the right, from time to time as
the Buyer may reasonably deem appropriate, to perform reasonable due
diligence on the Company during normal business hours. The Company and its
officers and employees shall reasonably cooperate with the Buyer in
connection with any reasonable request by the Buyer related to the Buyer's
due diligence of the Company.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its transfer agent, and
any subsequent transfer agent, to issue certificates, registered in the name of
the Buyer or its respective nominee(s), for the Purchase Shares (the
"IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"). The Company warrants to the Buyer
that no instruction other than the Irrevocable Transfer Agent Instructions
referred to in this Section 5, will be given by the Company to its transfer
agent with respect to the Purchase Shares and that the Commitment Shares and the
Purchase Shares shall otherwise be freely transferable on the books and records
of the Company as and to the extent provided in this Agreement and the
Registration Rights Agreement subject to the provisions of Section 4(f) in the
case of the Commitment Shares. So long as a Registration Statement is available
for the sale of Commitment Shares and the Purchase Shares or if the Buyer
provides the Company with an opinion of counsel, in a generally acceptable form,
to the effect that a public sale, assignment or transfer of the Commitment
Shares or the Purchase Shares may be made without registration under the 1933
Act, the Company shall promptly instruct its transfer
11
agent to issue one or more certificates representing such shares in such name
and in such denominations as specified by the Buyer and without any restrictive
legend. The Buyer hereby confirms it shall comply with all securities laws and
regulations applicable to it including applicable prospectus delivery
requirements upon sale of the Commitment Shares or the Purchase Shares.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO COMMENCE SALES OF SHARES OF
COMMON STOCK.
The obligation of the Company hereunder to commence each of the First
Tranche and the Second Tranche at the respective Commencement Dates is subject
to the satisfaction, at or before the respective Commencement Date, of each of
the following conditions, provided that these conditions are for the Company's
sole benefit and may be waived by the Company at any time in its sole discretion
by providing the Buyer with prior written notice thereof:
a. The Buyer shall have executed each of the Transaction Documents to
which it is a party and delivered the same to the Company applicable to the
respective Commencement Date including the Registration Rights Agreement
substantially in the form of EXHIBIT A hereto (the "REGISTRATION RIGHTS
AGREEMENT").
b. Subject to the Company's compliance with Section 4(a), a Registration
Statement covering the sale of the respective Commitment Shares and the
Purchase Shares issuable in the First Tranche or Second Tranche, as
applicable, shall have been declared effective under the 1933 Act by the SEC
and no stop order with respect to the Registration Statement shall be
pending or threatened by the SEC.
c. The representations and warranties of the Buyer shall be true and
correct in all material respects as of the date when made and as of each
Commencement Date as though made at that time (except for representations
and warranties that speak as of a specific date), and the Buyer shall have
performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Buyer at or prior to the
Commencement Date.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO COMMENCE PURCHASES OF SHARES OF
COMMON STOCK.
The obligation of the Buyer hereunder to commence each of the First Tranche
and the Second Tranche at the respective Commencement Dates is subject to the
satisfaction, at or before the respective Commencement Date, of each of the
following conditions, provided that these conditions are for the Buyer's sole
benefit and may be waived by the Buyer at any time in its sole discretion by
providing the Company with prior written notice thereof:
a. The Company shall have executed each of the Transaction Documents and
delivered the same to the Buyer applicable to the respective Commencement
Date including the Registration Rights Agreement substantially in the form
of EXHIBIT B hereto.
b. On the Commencement Date for the First Commencement the Company shall
have delivered to the Buyer 154,286 shares of Common Stock (the "FIRST
TRANCHE COMMITMENT SHARES"). On the Commencement Date for the Second
Commencement the Company shall have delivered to the Buyer a number of
shares of Common Stock (the "SECOND TRANCHE COMMITMENT SHARES" and together
with the First Commencement Commitment Shares, the "COMMITMENT SHARES")
equal to 8% of $6,000,000 divided by the lower of (A) the arithmetic average
of the Closing Bid Prices (as defined in the Common Stock Purchase Terms and
Conditions) of the Common Stock for the five (5) consecutive Trading Days
immediately preceding the Trading Day which is two (2) Trading Days prior to
the Second Commencement and (B) the arithmetic average of the Closing Bid
Prices of the Common Stock for the five (5) consecutive Trading Days
12
immediately preceding the date of the Second Tranche Notice. The number of
Commitment Shares shall be appropriately adjusted for any reorganization,
recapitalization, non-cash dividend, stock split or other similar
transaction.
c. The Common Stock shall be authorized for quotation on the Principal
Market, trading in the Common Stock shall not have been within the last
365 days suspended by the SEC or the Principal Market and the Purchase
Shares and the Commitment Shares shall be approved for listing upon the
Principal Market.
d. The Buyer shall have received the opinions of the Company's legal
counsel dated as of the Commencement Date in the form of EXHIBIT A attached
hereto.
e. The representations and warranties of the Company shall be true and
correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality in
Section 3 above, in which case, such representations and warranties shall be
true and correct without further qualification) as of the date when made and
as of the respective Commencement Date as though made at that time (except
for representations and warranties that speak as of a specific date) and the
Company shall have performed, satisfied and complied with the covenants,
agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by the Company at or prior to the
Commencement Date. The Buyer shall have received a certificate, executed by
the CEO, President or CFO of the Company, dated as of the Commencement Date,
to the foregoing effect in the form attached hereto as EXHIBIT C.
f. The Board of Directors of the Company shall have adopted resolutions
in the form attached hereto as EXHIBIT D which shall be in full force and
effect without any amendment or supplement thereto as of the Commencement
Date.
g. As of the Commencement Date, the Company shall have reserved out of
its authorized and unissued Common Stock, solely for the purpose of
effecting issuances hereunder at least 1,500,000 shares of Common Stock.
h. The Irrevocable Transfer Agent Instructions, in the form of
EXHIBIT E attached hereto, shall have been delivered to and acknowledged in
writing by the Company and the Company's transfer agent.
i. The Company shall have delivered to the Buyer a certificate
evidencing the incorporation and good standing of the Company in the State
of Georgia issued by the Secretary of State of the State of Georgia as of a
date within ten (10) Trading Days of the Commencement Date.
j. The Company shall have delivered to the Buyer a certified copy of the
Articles of Incorporation as certified by the Secretary of State of the
State of Georgia within ten (10) Trading Days of the Commencement Date.
k. The Company shall have delivered to the Buyer a secretary's
certificate executed by the Secretary of the Company, dated as of the
respective Commencement Date, in the form attached hereto as EXHIBIT F.
l. A Registration Statement covering the sale of all of the respective
Commitment Shares and Purchase Shares issuable in the First Tranche or
Second Tranche, as the case may be, shall have been declared effective under
the 1933 Act by the SEC and no stop order with respect to the Registration
Statement shall be pending or threatened by the SEC. The Company shall have
prepared and delivered to the Buyer a final form of Prospectus to be used by
the Buyer in connection with any sales of any Commitment Shares or any
applicable Purchase Shares. The Company shall have made all filings under
all applicable federal and state securities laws necessary
13
to consummate the issuance of the Commitment Shares and the Purchase Shares
pursuant to this Agreement in compliance with such laws.
m. No Event of Default (as defined in the Common Stock Purchase Terms
and Conditions) has occurred, or any event which, after notice and/or lapse
of time, would become an Event of Default has occurred.
8. INDEMNIFICATION. In consideration of the Buyer's execution and delivery
of the Transaction Documents and acquiring the Securities thereunder and in
addition to all of the Company's other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless the
Buyer and each other holder of the Securities and all of their shareholders,
officers, directors, employees and direct or indirect investors and any of the
foregoing person's agents or other representatives (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the "INDEMNITEES") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and disbursements
(the "INDEMNIFIED LIABILITIES"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(b) any breach of any covenant, agreement or obligation of the Company contained
in the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, or (c) any cause of action, suit or claim
brought or made against such Indemnitee and arising out of or resulting from the
execution, delivery, performance or enforcement of the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby. To
the extent that the foregoing undertaking by the Company may be unenforceable
for any reason, the Company shall make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities which is permissible
under applicable law.
9. GOVERNING LAW; MISCELLANEOUS.
a. GOVERNING LAW; JURISDICTION; JURY TRIAL. The corporate laws of the
State of Georgia shall govern all issues concerning the relative rights of
the Company and its shareholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Agreement and
the other Transaction Documents shall be governed by the internal laws of
the State of Illinois, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of Illinois or any
other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of Illinois. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of Chicago, for the adjudication of any dispute
hereunder or under the other Transaction Documents or in connection herewith
or therewith, or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address
for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to
serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR
THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
14
b. COUNTERPARTS. This Agreement may be executed in two or more identical
counterparts, all of which 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; provided that a facsimile signature shall
be considered due execution and shall be binding upon the signatory thereto
with the same force and effect as if the signature were an original, not a
facsimile signature.
c. HEADINGS. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. SEVERABILITY. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement
in that jurisdiction or the validity or enforceability of any provision of
this Agreement in any other jurisdiction.
e. ENTIRE AGREEMENT; AMENDMENTS. This Agreement supersedes all other
prior oral or written agreements between the Buyer, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement, the Other Transaction Documents and
the instruments referenced herein contain the entire understanding of the
parties with respect to the matters covered herein and therein and, except
as specifically set forth herein or therein, neither the Company nor the
Buyer makes any representation, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be amended other
than by an instrument in writing signed by the Company and the Buyer, and no
provision hereof may be waived other than by an instrument in writing signed
by the party against whom enforcement is sought.
f. NOTICES. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be
in writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Trading Day after deposit
with a nationally recognized overnight delivery service, in each case
properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
If to the Company:
xxxx.xxx, Inc
0000 XxxxxXxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxxx X. Xxxxxx Xx.
With a copy to:
King & Spalding
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 404-572-5100
Attention: Xxxxxx X. Xxxx
15
If to the Buyer:
Fusion Capital Fund II, LLC
000 Xxxxxxxxxxx Xxxx Xxxxx, Xxxxx 0-000
Xxxxxxx, Xxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxxx X. Xxxxxx
with a copy to:
Ungaretti & Xxxxxx
0000 Xxxxx Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 312-977-4405
Attention: Xxxxx X. Xxxxxxxxxx
If to the Transfer Agent:
American Stock Transfer
0000 00xx Xxxxxx, Xxxxx Xxxxx
Xxxxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxx Xxxxxx
or at such other address and/or facsimile number and/or to the attention of
such other person as the recipient party has specified by written notice
given to each other party three (3) Trading Days prior to the effectiveness
of such change. Written confirmation of receipt (A) given by the recipient
of such notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the
time, date, recipient facsimile number and an image of the first page of
such transmission or (C) provided by a nationally recognized overnight
delivery service, shall be rebuttable evidence of personal service, receipt
by facsimile or receipt from a nationally recognized overnight delivery
service in accordance with clause (i), (ii) or (iii) above, respectively.
g. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
assigns. The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Buyer,
including by merger or consolidation. The Buyer may not assign its rights
under this Agreement without the consent of the Company, other than to an
affiliate of the Buyer controlled by Xxxxxx X. Xxxxxx or Xxxxxx X.
Xxxxxxxxxx. Notwithstanding anything to the contrary contained in the
Transaction Documents, the Buyer shall be entitled to pledge the Commitment
Shares and the Purchase Shares in connection with a bona fide loan or margin
account.
h. 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.
i. PUBLICITY. The Company and the Buyer shall have the right to approve
before issuance any press releases or any other public disclosure (including
any filings with the SEC) with respect to the transactions contemplated
hereby; provided, however, that the Company shall be entitled, without the
prior approval of any Buyer, to make any press release or other public
disclosure (including any filings with the SEC) with respect to such
transactions as is required by applicable
16
law and regulations (although the Buyer shall be consulted by the Company in
connection with any such press release or other public disclosure prior to
its release and shall be provided with a copy thereof).
j. FURTHER ASSURANCES. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request in order to carry out the intent
and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
k. TERMINATION; SURVIVAL. This Agreement may be terminated only as
follows:
(i) By the Buyer any time after an Event of Default (as defined in
the Common Stock Purchase Terms and Conditions) has occurred.
(ii) In the event that the First Commencement shall not have
occurred, the Company shall have the option to terminate this Agreement
for any reason or for no reason without liability of any party to any
other party. If this Agreement is terminated pursuant to this
Section 9(k)(ii), the Company shall issue to the Buyer the First
Commencement Commitment Shares immediately prior to the termination
hereof. The number of First Commencement Commitment Shares shall be
appropriately adjusted for any reorganization, recapitalization, non-cash
dividend, stock split or other similar transaction.
(iii) In the event that the First Commencement shall not have
occurred on or before October 31, 2000, due to the failure to satisfy the
conditions set forth in Sections 6 and 7 above with respect to the
Commencement (and the nonbreaching party's failure to waive such
unsatisfied condition(s)), the nonbreaching party shall have the option
to terminate this Agreement at the close of business on such date without
liability of any party to any other party. If this Agreement is
terminated pursuant to this Section 9(k)(iii) prior to the Commencement
other than solely as a result of any material breach of the Buyer's
obligation hereunder, the Company shall issue to the Buyer the First
Commencement Commitment Shares immediately upon the termination hereof.
The number of First Commencement Commitment Shares shall be appropriately
adjusted for any reorganization, recapitalization, non-cash dividend,
stock split or other similar transaction.
(iv) If the First Commencement Date has occurred as provided herein,
by the Company any time after the date the First Tranche has been fully
completed but prior to the delivery to the Buyer of the Second Tranche
Notice.
(v) If the First Commencement Date has occurred as provided herein,
by either the Company or the Buyer if the First Tranche has been fully
completed and the Company has not delivered a Second Tranche Notice to
the Buyer on or prior to the tenth (10th) Trading Day after the First
Tranche has been fully completed.
(vi) If the First Commencement Date has occurred as provided herein,
the First Tranche has been fully completed and the Company has delivered
a Second Tranche Notice to the Buyer, in the event that the Second
Commencement Date shall not have occurred on or before twenty
(20) Trading Days from the date of the Second Tranche Notice due to the
failure to satisfy the conditions set forth in Sections 6 and 7 above
with respect to the Second Commencement (and the nonbreaching party's
failure to waive such unsatisfied condition(s)), the nonbreaching party
shall have the option to terminate this Agreement at the close of
business on such date without liability of any party to any other party.
If this Agreement is terminated pursuant to this Section 9(k)(vi) prior
to the Second Commencement Date other than solely as a result of a
material breach of the Buyer's obligation hereunder, the Company shall
issue to the Buyer the Second Commencement Commitment Shares immediately
upon
17
the termination hereof. In the such case, the number of Second
Commencement Commitment Shares shall be equal to 8% of $6,000,000 divided
by the lower of (A) the arithmetic average of the Closing Bid Prices of
the Common Stock for the five (5) consecutive Trading Days immediately
preceding the Trading Day which is two (2) Trading Days prior to the date
of termination of this Agreement and (B) the arithmetic average of the
Closing Bid Prices of the Common Stock for the five (5) consecutive
Trading Days immediately preceding the date of the Second Tranche Notice.
The number of Commitment Shares shall be appropriately adjusted for any
reorganization, recapitalization, non-cash dividend, stock split or other
similar transaction.
(vii) This Agreement shall automatically terminate on the date that
the Company has sold and the Buyer has purchased an aggregate of Twelve
Million Dollars ($12,000,000) of Common Stock as provided herein.
Except for termination of this Agreement under Section 9(k)(vii), any
termination of this Agreement pursuant to this Section 9(k) shall be
effected by written notice from the Company to the Buyer, or the Buyer to
the Company, as the case may be, setting forth the basis for the termination
hereof. A termination of this Agreement under Section 9(k)(vii) shall
automatically occur on such date as the Company has sold and the Buyer has
purchased an aggregate of Twelve Million Dollars ($12,000,000) of Common
Stock pursuant to the terms of this Agreement, without any action or notice
on the part of any party. Except as expressly set forth in this Agreement,
the representations and warranties of the Company and the Buyer contained in
Sections 2 and 3 hereof, the indemnification provisions set forth in
Section 8 hereof and the agreements and covenants set forth in Section 9,
shall survive the Commencement and any termination hereof.
l. FINANCIAL ADVISOR. The Company acknowledges that it has not engaged
any financial advisor, placement agent, broker or finder in connection with
the transactions contemplated hereby. The Company shall be responsible for
the payment of any fees or commissions, if any, of any financial advisor,
placement agent, broker or finder relating to or arising out of the
transactions contemplated hereby. The Company shall pay, and hold the Buyer
harmless against, any liability, loss or expense (including, without
limitation, attorneys' fees and out of pocket expenses) arising in
connection with any such claim.
m. NO STRICT CONSTRUCTION. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any
party.
n. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The
remedies provided in this Agreement shall be cumulative and in addition to
all other remedies available under this Agreement, at law or in equity
(including a decree of specific performance and/or other injunctive relief),
no remedy contained herein shall be deemed a waiver of compliance with the
provisions giving rise to such remedy and nothing herein shall limit the
Buyer's right to pursue actual damages for any failure by the Company to
comply with the terms of this Agreement. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to the
Buyer and that the remedy at law for any such breach may be inadequate. The
Company therefore agrees that, in the event of any such breach or threatened
breach, the Buyer shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, without the necessity of
showing economic loss and without any bond or other security being required.
o. CHANGES TO THE TERMS OF THIS AGREEMENT. This Agreement and any
provision hereof may only be amended by an instrument in writing signed by
the Company and the Buyer. The term "Agreement" and all reference thereto,
as used throughout this instrument, shall mean this
18
instrument as originally executed, or if later amended or supplemented, then
as so amended or supplemented.
p. ENFORCEMENT AND OTHER COSTS. If: (i) this Agreement is placed in the
hands of an attorney for enforcement or is enforced through any legal
proceeding; or (ii) an attorney is retained to represent the Buyer in any
bankruptcy, reorganization, receivership or other proceedings affecting
creditors' rights and involving a claim under this Agreement; or (iii) an
attorney is retained to represent the Buyer in any other proceedings
whatsoever in connection with this Agreement, then the Company shall pay to
the Buyer all reasonable cost and expenses including attorneys' fees
incurred in connection therewith, in addition to all other amounts due
hereunder.
q. FAILURE OR INDULGENCE NOT WAIVER. No failure or delay in the exercise
of any power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right
or privilege preclude other or further exercise thereof or of any other
right, power or privilege.
* * * * * *
IN WITNESS WHEREOF, the Buyer and the Company have caused this Common Stock
Purchase Agreement to be duly executed as of the date first written above.
THE COMPANY:
XXXX.XXX, INC.
By:___________________
Name:
Title:
BUYER:
FUSION CAPITAL FUND II, LLC
BY: FUSION CAPITAL PARTNERS II, LLC
BY: SGM HOLDINGS CORP.
By:___________________
Name: Xxxxxx X. Xxxxxx
Title: President
19
ANNEX A
COMMON STOCK PURCHASE TERMS AND CONDITIONS
1. PAYMENTS. The Buyer agrees to make payments to the Company for the
purchase of shares of Common Stock as described in Section 2(b) hereof. All
payments made hereunder shall be made in lawful money of the United States of
America by check or wire transfer of immediately available funds to such account
as the Company may from time to time designate by written notice in accordance
with the provisions hereof. Whenever any amount expressed to be due by the terms
hereof is due on any day which is not a Trading Day, the same shall instead be
due on the next succeeding day which is a Trading Day.
2. PURCHASE OF AVAILABLE AMOUNT. The Buyer shall purchase shares of Common
Stock on the terms and conditions set forth in this Section up to the Available
Amount.
(a) CERTAIN DEFINED TERMS. For purposes of these Common Stock Purchase
Terms and Conditions, the following terms shall have the following meanings:
(i) "AVAILABLE AMOUNT" means initially Six Million Dollars
($6,000,000) in the aggregate in respect of the First Tranche and on and
after the Second Commencement Date, an additional Six Million Dollars
($6,000,000) in the aggregate in respect of the Second Tranche, provided
that in each case, such amount shall be reduced by the Purchase Amount as
the Buyer purchases shares of Common Stock pursuant to Section 2 hereof.
(ii) "CLOSING BID PRICE" means, for any security as of any date, the
last closing bid price for such security on the Principal Market as
reported by Bloomberg Financial Markets ("BLOOMBERG"), or, if the
Principal Market is not the principal securities exchange or trading
market for such security, the last closing bid price of such security on
the principal securities exchange or trading market where such security
is listed or traded as reported by Bloomberg.
(iii) "CLOSING SALE PRICE" means, for any security as of any date, the
last closing trade price for such security on the Principal Market as
reported by Bloomberg, or, if the Principal Market is not the principal
securities exchange or trading market for such security, the last closing
trade price of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by
Bloomberg.
(iv) "FIXED PURCHASE PRICE" means $16.50 appropriately adjusted for
any reorganization, recapitalization, non-cash dividend, stock split or
other similar transaction.
(v) "MANDATORY PURCHASE RIGHTS" means the mandatory purchase rights
of the Company pursuant to Section 2(d)(iii).
(vi) "MATURITY DATE" means the date that is six months from the First
Commencement Date, or if the Second Commencement Date occurs, the date
that is six months from the Second Commencement Date, which such date may
be extended in each case by up to an additional six months by the
Company, in its sole discretion, by written notice to the Buyer.
(vii) "MONTHLY BASE AMOUNT" means One Million Dollars ($1,000,000) per
Monthly Period.
(viii) "MONTHLY PURCHASE AMOUNT" means a portion of the Available
Amount equal to the Monthly Base Amount for such Monthly Period plus the
Monthly Base Amount for any prior Monthly Periods which has not been
previously used to purchase Common Stock pursuant to Section 2 hereof;
PROVIDED, HOWEVER, that to the extent that the Company exercises its
Mandatory Purchase Rights, the Monthly Purchase Amount for any remaining
Monthly Periods shall be reduced by any amount subject to the Mandatory
Purchase Rights in reverse
20
chronological order (I.E., the Monthly Purchase Amount for the last
remaining Monthly Period shall be reduced first); provided further, on or
after the Maturity Date, the Monthly Purchase Amount shall thereafter be
the entire remaining Available Amount.
(ix) "MONTHLY PERIOD" means each successive 30 calendar day period
commencing with the First Commencement Date.
(x) "PERSON" means an individual or entity including any a limited
liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization and a government or any department
or agency thereof.
(xi) "PRINCIPAL MARKET" means The Nasdaq National Market.
(xii) "PURCHASE AMOUNT" means the portion of the Available Amount
submitted in a Purchase Notice to be used to purchase Common Stock
pursuant to Section 2 hereof.
(xiii) "PURCHASE DATE" means the actual date that the Buyer submits a
Purchase Notice to the Company to purchase Common Stock hereunder so long
as the Buyer shall transmit by facsimile (or otherwise deliver) to the
Company on or prior to 11:59 p.m., Central Time on such date.
(xiv) "PURCHASE PRICE" means, as of any Purchase Date or other date of
determination, the lower of the (A) Fixed Purchase Price and the
(B) Variable Purchase Price, each in effect as of such date.
(xv) "SALE PRICE" means, for any security as of any date, the trade
price for such security on the Principal Market as reported by Bloomberg,
or, if the Principal Market is not the principal securities exchange or
trading market for such security, the trade price of such security on the
principal securities exchange or trading market where such security is
listed or traded as reported by Bloomberg.
(xvi) "VARIABLE PURCHASE PRICE" means, as of any Purchase Date or
other date of determination, the lower of: (A) the lowest Sale Price of
the Common Stock on the Purchase Date or such other date of determination
and (B) the arithmetic average of any two (2) Closing Bid Prices for the
Common Stock, selected by the Buyer, during the ten (10) consecutive
Trading Days ending on the Trading Day immediately preceding such
Purchase Date or other date of determination (to be appropriately
adjusted for any reorganization, recapitalization, non-cash dividend,
stock split or other similar transaction occurring during such ten
(10) Trading Days).
(b) BUYER'S PURCHASE RIGHTS AND OBLIGATIONS. Subject to the provisions
of Sections 2(d) and 7 below, during each Monthly Period, the Buyer shall
purchase shares of Common Stock equal to the Monthly Purchase Amount for
such Monthly Period in accordance with Section 2(e), at the Purchase Rate
(as defined below). Subject to the provisions of Sections 2(d) and 7 below,
at any time on or after the Maturity Date, the Buyer shall have the right to
purchase shares of Common Stock up to the entire remaining Available Amount
in accordance with Section 2(e), at the Purchase Rate. Within three
(3) Trading Days of receipt of Purchase Shares, the Buyer shall pay to the
Company an amount equal to the Purchase Amount with respect to such Purchase
Shares as full payment for the Purchase Shares so received. The Company
shall not issue any fraction of a share of Common Stock upon any purchase.
All shares of Common Stock (including fractions thereof) issuable upon a
purchase under this Agreement shall be aggregated for purposes of
determining whether the purchase would result in the issuance of a fraction
of a share of Common Stock. If, after the aforementioned aggregation, the
issuance would result in the issuance of a fraction of a share of Common
Stock, the Company shall round such fraction of a share of Common Stock up
or down to the nearest whole share.
21
(c) PURCHASE RATE. The number of shares of Common Stock issuable upon
purchase of a Purchase Amount of this Common Stock Purchase Agreement
pursuant to Section 2(b) shall be determined according to the following
formula (the "PURCHASE RATE"):
Purchase Amount
---------------
Purchase Price
(d) LIMITATIONS ON PURCHASE.
(i) LIMITATION ON BENEFICIAL OWNERSHIP. The Company shall not
effect any purchase under this Agreement and the Buyer shall not purchase
shares of Common Stock under this Agreement pursuant to Section 2(b) to
the extent that after giving effect to such purchase such Person
(together with such Person's affiliates) would beneficially own in excess
of 4.99% of the outstanding shares of the Common Stock following such
purchase. For purposes of the foregoing sentence, the number of shares of
Common Stock beneficially owned by a Person and its affiliates or
acquired by a Person and its affiliates, as the case may be, shall
include the number of shares of Common Stock issuable upon a purchase
under this Agreement with respect to which the determination is being
made, but shall exclude the number of shares of Common Stock which would
be issuable upon (i) a purchase of the remaining Available Amount which
has not been submitted for purchase, and (ii) exercise or conversion of
the unexercised or unconverted portion of any other securities of the
Company (including, without limitation, any warrants) subject to a
limitation on conversion or exercise analogous to the limitation
contained herein beneficially owned by such Person and its affiliates.
For purposes of this Section, in determining the number of outstanding
shares of Common Stock the Buyer may rely on the number of outstanding
shares of Common Stock as reflected in (1) the Company's most recent
Form 10-Q or Form 10-K, as the case may be, (2) a more recent public
announcement by the Company or (3) any other written communication by the
Company or its transfer agent setting forth the number of shares of
Common Stock outstanding. Upon the reasonable written or oral request of
the Buyer, the Company shall promptly confirm orally and in writing to
the Buyer the number of shares Common Stock then outstanding. In any
case, the number of outstanding shares of Common Stock shall be
determined after giving effect to any purchases under this Agreement by
the Buyer since the date as of which such number of outstanding shares of
Common Stock was reported. Except as otherwise set forth herein, for
purposes of this Section 2(d)(i), beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended.
(ii) COMPANY'S RIGHT TO SUSPEND PURCHASES. The right of the Buyer
to purchase shares of Common Stock under this Agreement pursuant to this
Section 2 shall be limited as set forth below. If on any Trading Day the
Closing Sale Price of the Common Stock is below the Fixed Purchase Price,
the Company shall have three (3) Trading Days to give written notice (a
"PURCHASE SUSPENSION NOTICE") to the Buyer suspending any and all
purchases. The Purchase Suspension Notice shall be effective only for
purchases which have a Purchase Date later than three (3) Trading Days
after receipt of the Purchase Suspension Notice by the Buyer. Any
purchases submitted by the Buyer which have a Purchase Date not later
than three (3) Trading Days after receipt by the Buyer of the Company's
Purchase Suspension Notice must be honored by the Company as otherwise
provided herein. Such purchase suspension shall continue in effect until
the earlier of: (A) revocation in writing by the Company, at its sole
discretion; or (B) such time as the Sale Price of the Common Stock is
above the Fixed Purchase Price.
(iii) COMPANY'S MANDATORY PURCHASE RIGHTS. If (A) the Closing Sale
Price of the Common Stock on each of the five (5) Trading Days
immediately prior to the first Trading
22
Day of any Monthly Period is at least twenty-five percent (25%) of the
Fixed Purchase Price and (B) no Event of Default has occurred, then the
Company shall have the right, so long as no Event of Default has occurred
and so long as the Sale Price of the Common Stock remains at least
twenty-five percent (25%) of the Fixed Purchase Price, on or prior to the
first Trading Day of such Monthly Period, by delivering written notice (a
"MANDATORY PURCHASE NOTICE") to the Buyer to require that the Buyer
purchase at the Purchase Rate such Available Amount as specified by the
Company in the Mandatory Purchase Notice during the next two Monthly
Periods on such Trading Days during such Monthly Periods as the Buyer
shall determine. The Company acknowledges and agrees that the Company's
mandatory purchase rights represent an agreement by the Buyer to extend
financial accommodations to the Company. Accordingly, it shall be a
condition to the exercise of the Company's mandatory purchase rights that
no Event of Default shall have occurred, and the Company's delivery of a
Mandatory Purchase Notice shall be deemed a representation to the Buyer
that no Event of Default has occurred. The Company may revoke a Mandatory
Purchase Notice, in whole or in part, by delivering written notice
thereof to the Buyer (a "REVOCATION OF MANDATORY PURCHASE NOTICE"). A
Revocation of Mandatory Purchase Notice shall be effective only as to
purchases which are in excess of the Monthly Purchase Amount and which
have a Purchase Date later than three (3) Trading Days after receipt by
the Buyer of the Revocation of Mandatory Purchase Notice. Any purchases
submitted by the Buyer which have a Purchase Date not later than three
(3) Trading Days after receipt by the Buyer of the Revocation of
Mandatory Purchase Notice must be honored by the Company as otherwise
provided herein.
(e) MECHANICS OF PURCHASING. The purchase of shares of Common Stock
under this Agreement shall be conducted in the following manner:
(i) BUYER'S DELIVERY REQUIREMENTS. To purchase shares of Common
Stock under this Agreement on any date, the Buyer hereof shall transmit
by facsimile (or otherwise deliver) on or prior to 11:59 p.m., Central
Time on such date, a copy of a fully executed notice of purchase in the
form attached hereto as Exhibit I (the "PURCHASE NOTICE") to the Company.
(ii) COMPANY'S RESPONSE. Upon receipt by the Company of a copy of a
Purchase Notice, the Company shall as soon as practicable, but in no
event later than one (1) Trading Day after receipt of such Purchase
Notice, send via facsimile (or otherwise deliver), a confirmation of
receipt of such Purchase Notice in the form attached hereto as
Exhibit II (a "COMPANY CONFIRMATION OF PURCHASE NOTICE") to (1) the Buyer
and (2) along with a copy of the Purchase Notice, the Company's
designated transfer agent (the "TRANSFER AGENT"), which confirmation
shall constitute an irrevocable instruction to the Transfer Agent to
process such Purchase Notice in accordance with the terms herein. Upon
receipt by the Transfer Agent of a copy of the executed Purchase Notice
and a copy of the applicable Company Confirmation of Purchase Notice, the
Transfer Agent shall, on the first (1st) Trading Day following the date
of receipt of the Company Confirmation of Purchase Notice, (A) use its
best efforts to issue and surrender to a common carrier for overnight
delivery to the address as specified in the Purchase Notice, a
certificate, registered in the name of the Buyer or its designee, for the
number of shares of Common Stock to which the Buyer shall be entitled or
(B) provided the Transfer Agent is participating in The Depository Trust
Company ("DTC") Fast Automated Securities Transfer Program, upon the
request of the Buyer, credit such aggregate number of shares of Common
Stock to which the Buyer shall be entitled to the Buyer's or its
designee's balance account with DTC through its Deposit Withdrawal Agent
Commission system.
(iii) DISPUTE RESOLUTION. In the case of a dispute as to the
determination of the Purchase Price or the arithmetic calculation of the
Purchase Rate, the Company shall instruct the Transfer Agent to issue to
the Buyer the number of shares of Common Stock that is not disputed and
shall submit the disputed determinations or arithmetic calculations to
the Buyer
23
via facsimile within one (1) Trading Day of receipt of the Buyer's
Purchase Notice. If the Buyer and the Company are unable to agree upon
the determination of the Purchase Price or arithmetic calculation of the
Purchase Rate within one (1) Trading Day of such disputed determination
or arithmetic calculation being submitted to the Buyer, then the Company
shall within one (1) Trading Day submit via facsimile (A) the disputed
determination of the Purchase Price to an independent, reputable
investment bank selected by the Company and approved by the Buyer or
(B) the disputed arithmetic calculation of the Purchase Rate to the
Company's independent, outside accountant. The Company shall cause the
investment bank or the accountant, as the case may be, to perform the
determinations or calculations and notify the Company and the Buyer of
the results no later than the fifth (5th) day after the date it receives
the disputed determinations or calculations. Such investment bank's or
accountant's determination or calculation, as the case may be, shall be
binding upon all parties absent manifest error.
(iv) RECORD HOLDER. The person or persons entitled to receive the
shares of Common Stock issuable upon a purchase under this Agreement
shall be treated for all purposes as the record holder or holders of such
shares of Common Stock on the Purchase Date.
(v) COMPANY'S FAILURE TO TIMELY DELIVER SHARES. If within five
(5) Trading Days after the Company's receipt of a copy of the Purchase
Notice (subject to extension in accordance with Section 2(e)(iii) for a
good faith dispute made in accordance with the terms of
Section 2(e)(iii)) (the "SHARE DELIVERY PERIOD") the Transfer Agent shall
fail to issue a certificate to the Buyer or credit the Buyer's balance
account with DTC for the number of shares of Common Stock to which such
Buyer is entitled upon such Buyer's purchase of the Available Amount (a
"PURCHASE FAILURE"), in addition to all other available remedies which
such Buyer may pursue under this Common Stock Purchase Agreement
(including indemnification obligations of the Company herein), the
Company shall pay additional damages to the Buyer on each day after such
fifth (5th) Trading Day such purchase is not timely effected in an amount
equal to 1.0% of the product of (I) the number of shares of Common Stock
not issued to the Buyer on a timely basis pursuant to
Section 2(e)(ii) and to which such Buyer is entitled and (II) the Closing
Sale Price of the Common Stock on the last possible date which the
Company could have issued such Common Stock to the Buyer without
violating Section 2(e)(ii).
(vi) BOOK-ENTRY. Notwithstanding anything to the contrary set forth
herein, upon purchase of any portion of the Available Amount in
accordance with the terms hereof, the Buyer shall not be required to
physically surrender this Agreement to the Company. The Buyer and the
Company shall each maintain records showing the remaining Available
Amount and the dates and Purchase Amounts for each purchase or shall use
such other method, reasonably satisfactory to the Buyer and the Company,
so as not to require physical surrender of this Agreement upon each
purchase. The Buyer and any assignee, by acceptance of this Agreement,
acknowledge and agree that, by reason of the provisions of this
paragraph, following purchase of any portion of the Available Amount, the
remaining Available Amount under this Agreement shall be less than the
aggregate Available Amount set forth on the face hereof.
(f) TAXES. The Company shall pay any and all taxes that may be payable
with respect to the issuance and delivery of Common Stock upon any purchases
under this Agreement.
3. COMPANY'S TERMINATION RIGHTS. Subject to the terms and conditions of
this Section, at any time after the First Commencement Date, and so long as the
Company has provided appropriate notice as described below, if during any ten
(10) consecutive Trading Days the Closing Sale Price of the Common Stock is
below the Fixed Purchase Price for each of such ten (10) Trading Days, the
Company shall
24
have three (3) Trading Days to give written notice (a "COMPANY TERMINATION
NOTICE") to the Buyer electing to terminate this Agreement without any liability
or payment to the Buyer (a "COMPANY TERMINATION"). Any purchases submitted by
the Buyer which have a Purchase Date which is not later than three (3) Trading
Days after receipt by the Buyer of the Company Termination Notice, must be
honored by the Company as otherwise provided herein. No such termination of this
Agreement shall effect the Company's or the Buyer's obligations under this
Agreement with respect to pending purchases and the Company and the Buyer shall
complete their respective obligations with respect to any pending purchases
under this Agreement.
4. DEFAULTS AND REMEDIES.
(a) EVENTS OF DEFAULT. An "EVENT OF DEFAULT" shall be deemed to have
occurred at such time as any of the following events:
(i) while any Registration Statement is required to be maintained
effective pursuant to the terms of the Registration Rights Agreement
entered into by the Company and the Buyer (the "REGISTRATION RIGHTS
AGREEMENT"), the effectiveness of such Registration Statement lapses for
any reason (including, without limitation, the issuance of a stop order)
or is unavailable to the Buyer for resale of all of the Registrable
Securities (as defined in the Registration Rights Agreement) in
accordance with the terms of the Registration Rights Agreement, and such
lapse or unavailability continues for a period of ten (10) consecutive
Trading Days or for more than an aggregate of thirty (30) Trading Days in
any 365-day period;
(ii) the suspension from trading or failure of the Common Stock to be
listed on the Principal Market for a period of ten (10) consecutive
Trading Days or for more than an aggregate of thirty (30) Trading Days in
any 365-day period;
(iii) the failure of the Company or the Common Stock to fully meet the
requirements for continued listing on the Principal Market for a period
of ten (10) consecutive Trading Days or for more than an aggregate of
thirty (30) Trading Days in any 365-day period;
(iv) the Company's or the Transfer Agent's notice to the Buyer,
including by way of public announcement, at any time, of its intention
not to comply with a proper request for purchase of the Available Amount
under this Agreement into shares of Common Stock that is tendered in
accordance with the provisions of this Agreement, the failure of the
Company to deliver a Company Confirmation of Purchase Notice to the Buyer
and to the Transfer Agent in accordance with the provisions of this
Agreement within two (2) Trading Days after the receipt by the Company of
a Purchase Notice (subject to extension in accordance with
Section 2(e)(iii) for a good faith dispute made in accordance with the
terms of Section 2(e)(iii)); or the failure of the Transfer Agent to
comply with a Company Confirmation of Purchase Notice tendered in
accordance with the provisions of this Agreement within five (5) Trading
Days after the receipt by the Company of the Purchase Notice;
(v) if at any time the Exchange Cap (as defined in Section 7) is
reached;
(vi) the Company breaches any representation, warranty, covenant or
other term or condition of this Common Stock Purchase Agreement, the
Registration Rights Agreement, or any other agreement, document,
certificate or other instrument delivered in connection with the
transactions contemplated thereby and hereby if such breach could have a
Material Adverse Effect and except, in the case of a breach of a covenant
which is reasonably curable, only if such breach continues for a period
of at least ten (10) Trading Days;
(vii) any payment default under or acceleration prior to maturity of
any mortgage, indenture or instrument under which there may be issued or
by which there may be secured
25
or evidenced any indebtedness for money borrowed by the Company or for
money borrowed the repayment of which is guaranteed by the Company,
whether such indebtedness or guarantee now exists or shall be created
hereafter which is in excess of $1,000,000;
(viii) if any Person commences a proceeding against the Company
pursuant to or within the meaning of any Bankruptcy Law (as defined
below);
(ix) if the Company pursuant to or within the meaning of any
Bankruptcy Law; (A) commences a voluntary case, (B) consents to the entry
of an order for relief against it in an involuntary case, (C) consents to
the appointment of a Custodian of it or for all or substantially all of
its property, (D) makes a general assignment for the benefit of its
creditors, (E) becomes insolvent, or (F) is generally unable to pay its
debts as the same become due; or
(x) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that; (A) is for relief against the Company in an
involuntary case, (B) appoints a Custodian of the Company or for all or
substantially all of its property, or (C) orders the liquidation of the
Company or any subsidiary.
The term "BANKRUPTCY LAW" means Title 11, U.S. Code, or any similar
federal or state law for the relief of debtors. The term "CUSTODIAN"
means any receiver, trustee, assignee, liquidator or similar official
under any Bankruptcy Law.
(b) REMEDIES. If an Event of Default occurs from events described in
clauses (i) through and (ix) of Section 4(a), the Buyer may terminate this
Agreement without any liability or payment to the Company. In the case of an
Event of Default arising from events described in clause (x) of
Section 4(a), this Agreement shall automatically terminate with out any
liability or payment to any party without further action or notice. However,
notwithstanding the forgoing, in case of any such termination, no such
termination of this Agreement shall effect the Company's or the Buyer's
obligations under this Agreement with respect to pending purchases and the
Company and the Buyer shall complete their respective obligations with
respect to any pending purchases under this Agreement.
5. BUYER'S RIGHT TO TERMINATE AGREEMENT. If by the Maturity Date, for any
reason or for no reason the full Available Amount under this Agreement has not
been used to purchase shares of Common Stock as provided for in Section 2 of
this Agreement, the Buyer shall have the right to terminate this Agreement
without any liability or payment to the Company. No such termination of this
Agreement shall effect the Company's or the Buyer's obligations under this
Agreement with respect to pending purchases and the Company and the Buyer shall
complete their respective obligations with respect to any pending purchases
under this Agreement.
6. RESERVATION OF SHARES. The Company shall, so long as any Available
Amount is outstanding, reserve and keep available out of its authorized and
unissued Common Stock, solely for the purpose of effecting purchases of under
this Agreement, such number of shares of Common Stock as shall from time to time
be sufficient to effect the purchase of the entire remaining Available Amount
under this Agreement without regard to any restrictions or limitations on
purchases.
7. EXCHANGE CAP; LIMITATION ON NUMBER OF PURCHASE SHARES. The "Exchange
Cap" shall be deemed to be reached at such time if, upon any Purchase Notice
submitted under this Agreement, the issuance of such shares of Common Stock
would exceed that number of shares of Common Stock which the Company may issue
under this Agreement without breaching the Company's obligations under the rules
or regulations of the Principal Market, in which case, the Company shall not be
obligated to issue any such shares of Common Stock.
26
EXHIBIT I
TO ANNEX A
COMMON STOCK PURCHASE TERMS AND CONDITIONS
XXXX.XXX, INC.
FORM OF PURCHASE NOTICE
Reference is made to the Common Stock Purchase Agreement (the "COMMON STOCK
PURCHASE AGREEMENT") between XXXX.XXX, INC. (the "COMPANY") and FUSION CAPITAL
FUND II, LLC dated . In accordance with and pursuant to the Common
Stock Purchase Agreement, the undersigned hereby elects to purchase shares of
Common Stock, par value $ per share (the "COMMON STOCK"), of the
Company for the Available Amount indicated below of as of the date specified
below.
Purchase Date:
Remaining Available Amount
PRIOR TO this purchase:
Available Amount to be purchased:
Remaining Available Amount
AFTER this purchase:
Please confirm the following information:
Purchase Price per share:
Fixed Purchase Price of $
Low Sale Price on Date Hereof
Average of 2/10 Commencement Bid Prices for ($) and ($)
Number of shares of Common Stock to be issued:
Please issue the shares of Common Stock in the following name and to the
following address:
Issue to:
Authorized Signature:
Name:
Title:
Phone #:
Broker DTC Participant Code:
Account Number *:
*NOTE THAT RECEIVING BROKER MUST INITIATE TRANSACTION ON DWAC SYSTEM.
27
EXHIBIT I
TO ANNEX A
COMMON STOCK PURCHASE TERMS AND CONDITIONS
XXXX.XXX, INC.
FORM OF PURCHASE NOTICE
Reference is made to the Common Stock Purchase Agreement (the "COMMON STOCK
PURCHASE AGREEMENT") between XXXX.XXX, INC. (the "COMPANY") and FUSION CAPITAL
FUND II, LLC dated . In accordance with and pursuant to the Common
Stock Purchase Agreement, the undersigned hereby elects to purchase shares of
Common Stock, par value $ per share (the "COMMON STOCK"), of the
Company for the Available Amount indicated below of as of the date specified
below.
Purchase Date:
----------------------------------------------------
Remaining Available Amount
PRIOR TO this purchase:
----------------------------------------------------
Available Amount to be
purchased:
----------------------------------------------------
Remaining Available Amount
AFTER this purchase:
----------------------------------------------------
Please confirm the following information:
Purchase Price per share:
-----------------------------------------------------------------------
/ / Fixed Purchase Price of $
/ / Low Sale Price on Date Hereof
/ / Average of 2/10 Commencement Bid Prices for ($) and ($)
Number of shares of Common Stock to be issued:
-----------------------------------------------------------------------
Please issue the shares of Common Stock in the following name and to the
following address:
Issue to: ----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
Authorized Signature: ----------------------------------------------------
Name: ----------------------------------------------
Title:
-----------------------------------------------
Phone #: -------------------------------------------
Broker DTC Participant
Code:
----------------------------------------------------
Account Number *:
----------------------------------------------------
*NOTE THAT RECEIVING BROKER MUST INITIATE TRANSACTION ON DWAC SYSTEM.
28
EXHIBIT II
TO ANNEX A
COMMON STOCK PURCHASE TERMS AND CONDITIONS
XXXX.XXX, INC.
FORM OF COMPANY CONFIRMATION OF PURCHASE NOTICE
Reference is made to the Common Stock Purchase Agreement (the "COMMON STOCK
PURCHASE AGREEMENT") between XXXX.XXX, INC. (the "COMPANY") and FUSION CAPITAL
FUND II, LLC dated . In accordance with and pursuant to the Common
Stock Purchase Agreement, the undersigned hereby confirms and authorizes the
issuance of shares of Common Stock, par value $ per share (the "COMMON
STOCK") of the Company, in connection with the Purchase Notice (as defined in
the Common Stock Purchase Agreement) attached hereto. Specifically, the Company
hereby confirms the following information:
Purchase Date:
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Remaining Available Amount
PRIOR TO this purchase:
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Available Amount to be
purchased:
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Remaining Available Amount
AFTER this purchase:
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Purchase Price per share:
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Number of shares of Common
Stock to be issued:
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The shares of Common Stock shall be issued in the name and to the address as set
forth in the applicable Purchase Notice.
Authorized Signature ----------------------------------------------------
Name: ----------------------------------------------
Title:
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Phone #: -------------------------------------------
Fax #: ----------------------------------------------
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