Exhibit 2.1
PRIVATE EQUITY LINE OF CREDIT AGREEMENT
Between
Hillgreen Investments Limited
And
Milestone Scientific Inc.
PRIVATE EQUITY LINE OF CREDIT AGREEMENT dated as of January 19, 2001 (the
"Agreement"), between Hillgreen Investments Limited, a British Virgin Islands
corporation (the "Investor") and Milestone Scientific Inc., a corporation
organized and existing under the laws of the State of Delaware (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to Investor from
time to time as provided herein, and Investor shall purchase, up to the
Commitment Amount (as defined below) of Common Stock (as defined below); and
WHEREAS, such investments will be made by the Investor as statutory
underwriter of a registered indirect primary offering of such Common Stock by
the Company.
NOW, THEREFORE, in consideration of the foregoing premises, and the
promises and covenants herein contained, the receipt and sufficiency of which
are hereby acknowledged by the parties hereto, the parties, intending to be
legally bound, hereby agree as follows:
ARTICLE I
Certain Definitions
Section 1.1 "Capital Shares" shall mean the Common Stock and any shares of
any other class of common stock whether now or hereafter authorized, having the
right to participate in the distribution of earnings and assets of the Company.
Section 1.2 "Capital Shares Equivalents" shall mean any securities,
rights, or obligations that are convertible into or exchangeable for or give any
right to subscribe for any Capital Shares of the Company or any warrants,
options or other rights to subscribe for or purchase Capital Shares or any such
convertible or exchangeable securities.
Section 1.3 "Closing" shall mean one of the closings of a purchase and
sale of the Common Stock pursuant to Section 2.1(e).
Section 1.4 "Closing Date" shall have the meaning set forth in Section
2.1(b).
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Section 1.5 "Commitment Amount" shall mean the dollar amount necessary
which the Investor has agreed to provide to the Company in order to purchase up
to 2,100,000 Put Shares, pursuant to the terms and conditions of this Agreement.
Section 1.6 "Commitment Period" shall mean the period commencing on the
Effective Date and expiring on the earliest to occur of (x) the date on which
the Investor shall have purchased the Commitment Amount of Put Shares pursuant
to this Agreement, (y) the date this Agreement is terminated pursuant to Section
2.2, or (z) the date occurring thirty-six (36) months from the date of
commencement of the Commitment Period.
Section 1.7 "Common Stock" shall mean the Company's common stock, par
value $0.001 per share.
Section 1.8 "Condition Satisfaction Date" shall have the meaning set forth
in Section 7.2.
Section 1.9 "Effective Date" shall mean the date on which the SEC first
declares effective a Registration Statement registering the sale by the Company
and resale by the Investor of the Registrable Securities as set forth in Section
7.2(e).
Section 1.10 "Escrow Agent" shall mean the escrow agent designated in the
Escrow Agreement.
Section 1.11 "Escrow Agreement" shall mean the escrow agreement in the
form attached hereto as Exhibit A.
Section 1.12 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
Section 1.13 "Initial Closing" shall have the meaning set forth in Section
2.1(f).
Section 1.14 "Investment Amount" shall mean the dollar amount to be
invested by the Investor to purchase Put Shares with respect to any Put Date as
notified by the Company to the Investor, all in accordance with Section 2.1(a)
hereof.
Section 1.15 "Material Adverse Effect" shall mean any effect on the
business, operations, properties, prospects, or financial condition of the
Company that is material and adverse to the Company and its subsidiaries and
affiliates, taken as a whole, and/or any condition, circumstance, or situation
that would prohibit or otherwise interfere with the ability of the Company to
enter into and perform any of its obligations under this Agreement, the
Registration Rights Agreement or the Escrow Agreement in any material respect;
provided, however, continued losses from operations consistent with prior
quarters shall not, in and of themselves, constitute a Material Adverse Effect.
Section 1.16 "Maximum Put Amount" shall mean, as of any Put Date, the
lesser of (a) $5,000,000, or (b) fifteen percent (15%) of the volume weighted
average price of the Common Stock during the 20 Trading Days immediately prior
to the Put Date multiplied by the total
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trading volume of the Common Stock during the 20 Trading Days immediately prior
to the Put Date.
Section 1.17 "NASD" shall mean the National Association of Securities
Dealers, Inc.
Section 1.18 "Outstanding" when used with reference to shares of Common
Stock or Capital Shares (collectively the "Shares"), shall mean, at any date as
of which the number of such Shares is to be determined, all issued and
outstanding Shares, and shall include all such Shares issuable in respect of
outstanding scrip or any certificates representing fractional interests in such
Shares; provided, however, that "Outstanding" shall not mean any such Shares
then directly or indirectly owned or held by or for the account of the Company.
Section 1.19 "Person" shall mean an individual, a corporation, a
partnership, a limited liability company, an association, a trust or other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
Section 1.20 "Principal Market" shall mean initially the American Stock
Exchange, and shall include the NASDAQ National Market, NASDAQ SmallCap Market,
the OTC Bulletin Board and the New York Stock Exchange, whichever is at the time
the principal trading exchange or market for the Common Stock.
Section 1.21 "Purchase Price" shall mean with respect to the Put Shares,
87.5% (the "Purchase Price Percentage") of the daily volume weighted average
price ("VWAP") (as reported by Bloomberg L.P.) of the Common Stock on each
Trading Day during the Valuation Period related to a Put (or such other date on
which the Purchase Price is calculated in accordance with the terms and
conditions of this Agreement); provided, however, if the Principal Market is the
OTC Bulletin Board, the Purchase Price Percentage shall be eighty-four percent
(84%).
Section 1.22 "Put" shall mean each occasion the Company elects to exercise
its right to tender a Put Notice requiring the Investor to purchase shares of
the Company's Common Stock, subject to the terms of this Agreement.
Section 1.23 "Put Date" shall mean the Trading Day during the Commitment
Period that a Put Notice to sell Common Stock to the Investor is deemed
delivered pursuant to Section 2.1(a) hereof.
Section 1.24 "Put Notice" shall mean a written notice to the Investor
setting forth the Investment Amount that the Company intends to sell to the
Investor in the form attached hereto as Exhibit B.
Section 1.25 "Put Shares" shall mean all shares of Common Stock or other
securities issued or issuable pursuant to a Put that has occurred or may occur
in accordance with the terms and conditions of this Agreement.
Section 1.26 "Registrable Securities" shall mean the Put Shares and the
Warrant Shares until the earliest of (i) all Put Shares and Warrant Shares have
been disposed of pursuant to the Registration Statement, (ii) all Put Shares and
Warrant Shares may be sold pursuant to Rule 144
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(or any similar provision then in force) under the Securities Act ("Rule 144");
provided, however, that all of the circumstances under which all of the
applicable conditions of Rule 144, except for the Investor's obligation to file
such shares on Form 144, are met and that the Company has provided to the
Investor or its transfer agent any documentation reasonably requested by the
Investor or transfer agent to sell such shares pursuant to Rule 144 (including
an opinion of counsel that such Put Shares and Warrant Shares may be sole
pursuant to Rule 144), or (iii) such time as, in the opinion of counsel to the
Company, all Put Shares and Warrant Shares may be sold without any time, volume
or manner limitations pursuant to Rule 144(k) (or any similar provision then in
effect) under the Securities Act.
Section 1.27 "Registration Rights Agreement" shall mean the agreement
regarding the filing of the Registration Statement for the sale and resale of
the Registrable Securities annexed hereto as Exhibit C.
Section 1.28 "Registration Statement" shall mean collectively one or more
registration statements on Form S-3 (if use of such form is then available to
the Company pursuant to the rules of the SEC and, if not, on such other form
promulgated by the SEC, such as Form X-0, X-0 or SB-2, for which the Company
then qualifies and which counsel for the Company shall deem appropriate, and
which form shall be available for the resale by the Investor of the Registrable
Securities to be registered thereunder in accordance with the provisions of this
Agreement, the Registration Rights Agreement, and in accordance with the
intended method of distribution of such securities), for the registration of the
resale by the Investor of the Registrable Securities under the Securities Act.
Section 1.29 "SEC" shall mean the Securities and Exchange Commission.
Section 1.30 "Securities Act" shall mean the Securities Act of 1933, as
amended.
Section 1.31 "SEC Documents" shall mean the Company's latest Form 10-K or
10-KSB as of the time in question, all Forms 10-Q or 10-QSB and 8-K filed
thereafter, and the Proxy Statement for its latest fiscal year as of the time in
question until such time as the Company no longer has an obligation to maintain
the effectiveness of a Registration Statement as set forth in the Registration
Rights Agreement.
Section 1.32 "Trading Cushion" shall mean the mandatory five (5) Trading
Days between Valuation Periods.
Section 1.33 "Trading Day" shall mean any day during which the Principal
Market shall be open for business.
Section 1.34 "Valuation Period" shall mean the period of twenty (20)
Trading Days beginning on the Trading Day immediately following the Put Date.
Section 1.35 "Warrant" shall mean the warrant to purchase up to 100,000
shares of Common Stock, in the form of Exhibit D attached hereto, to be issued
to the Investor at the Initial Closing. The Warrant shall have an exercise price
equal to 120% of the average of the closing bid prices (as reported by Bloomberg
L.P.) of the Common Stock for the five (5) Trading Days immediately prior to the
Initial Closing Date. The Warrant shall have a term of three (3)
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years from its date of issuance. The Common Stock underlying the Warrant shall
be registered in the Registration Statement. "Warrant Shares" shall mean the
shares of Common Stock issuable upon exercise of the Warrants.
ARTICLE II
Purchase and Sale of Common Stock
Section 2.1 Investments. Subject to the satisfaction of the conditions set
forth herein (including, without limitation, the provisions of Article VII
hereof), the parties agree as follows:
(a) Put Right. At any time during the Commitment Period,
subject to the conditions set forth in Section 7.2, the Company, may, in
its sole discretion, issue and exercise a Put, which Put the Investor will
be obligated to accept; provided, however, that the Investment Amount for
each Put as designated by the Company in the applicable Put Notice shall
be neither less than $50,000 per Put nor more than the Maximum Put Amount.
Only one Put shall be allowed in each Valuation Period. A Put Notice shall
be deemed delivered on (i) the Trading Day it is received by facsimile or
otherwise by the Investor if such notice is received prior to 12:00 noon
Eastern Time, or (ii) the immediately succeeding Trading Day if it is
received by facsimile or otherwise after 12:00 noon Eastern Time on a
Trading Day or at any time on a day which is not a Trading Day. No Put
Notice may be deemed delivered on a day that is not a Trading Day.
(b) Closing Date. The price per share paid by the Investor
shall be the Purchase Price on each separate Trading Day during the
Valuation Period. The number of shares of Common Stock purchased by the
Investor with respect to each Put shall be determined on a daily basis
during each Valuation Period and settled on, (i) as to the 1st to the 10th
Trading Days after a Valuation Period commences, on or before the 12th
Trading Day after a Valuation Period commences, and (ii) as to the 11th to
the 20th Trading Days after a Valuation Period commences, on or before the
22nd Trading Day after a Valuation Period. (each, a "Closing Date"). In
connection with each Valuation Period, the Company may set a Threshold
Price, if any, in the Put Notice.
(c) Calculation of Shares. The number of Put Shares to be
issued in connection with each Put shall be equal to the sum of the
quotients (for each Trading Day within the Valuation Period) of (x) 1/20th
of the Investment Amount and (y) the Purchase Price on each Trading Day
within the Valuation Period, subject to the following adjustments:
(i) If the VWAP on a given Trading Day during a
Valuation period is less than the Threshold Price,
then the Put will be reduced by 1/20th and that
day shall be withdrawn from the Valuation Period;
and
(ii) If trading of the Common Stock on the Principal
Market is suspended for more than three (3) hours,
in the aggregate,
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on any Trading Day during the Valuation Period,
then the Put shall be reduced by 1/20th and that
day shall be withdrawn from the Valuation Period.
(d) Maximum Aggregate Amount of Puts. Anything in this
Agreement to the contrary notwithstanding, (i) at no time will the Company
request a Put which would result in the issuance of an aggregate number of
shares of Common Stock pursuant to this Agreement which exceeds 19.9% of
the number of shares of Common Stock issued and outstanding on any Closing
Date without obtaining stockholder approval of such excess issuance, and
(ii) the Company may not make a Put to the extent that, after such
purchase by the Investor, the sum of the number of shares of Common Stock
and Warrants beneficially owned by the Investor and its affiliates would
result in beneficial ownership by the Investor and its affiliates of more
than 9.9% of the then outstanding shares of Common Stock. For purposes of
the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Exchange Act.
(e) Closings. On or before each Closing Date for a Put the
Investor shall deliver one half of the Investment Amount specified in the
Put Notice subject to adjustment herein by wire transfer of immediately
available funds to the Escrow Agent. In addition, on or prior to the
Closing Date, each of the Company and the Investor shall deliver to the
Escrow Agent all documents, instruments and writings required to be
delivered or reasonably requested by either of them pursuant to this
Agreement and the Escrow Agreement in order to implement and effect the
transactions contemplated herein. Upon receipt of notice from the Escrow
Agent that the Escrow Agent has possession of the Investment Amount, the
Company shall electronically transmit the Put Shares to the Depository
Trust Company ("DTC") through DTC's Deposit Withdrawal Agent Commission
("DWAC") system, per written account instructions delivered by the
Investor to the Company, registered in the name of such account or
accounts as may be designated by the Investor. Payment of funds to the
Company shall occur out of escrow in accordance with the Escrow Agreement;
provided, however, that to the extent the Company has not paid the fees,
expenses, and disbursements of the Investor's counsel in accordance with
Section 12.7, the amount of such fees, expenses, and disbursements shall
be paid in immediately available funds, at the direction of the Investor,
to Investor's counsel with no reduction in the number of Put Shares
issuable to the Investor on such Closing Date.
(f) Initial Closing. The delivery of executed documents under
this Agreement and the other agreements referred to herein and the payment
of the fees set forth in Article I of the Escrow Agreement, (the "Initial
Closing") shall take place (i) at the offices of Xxxxxxx Xxxxxx & Green,
P.C., 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 within fifteen (15) days
from the date hereof, or (ii) such other time and place or on such date as
the Investor and the Company may agree upon (the "Initial Closing Date").
Each party shall deliver all documents, instruments and writings required
to be delivered by such party pursuant to this Agreement at or prior to
the Initial Closing.
Section 2.2 Termination of Investment Obligation.
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(a) The obligation of the Investor to purchase shares of
Common Stock shall terminate permanently (including with respect to a
Closing Date that has not yet occurred) in the event that (i) there shall
occur any stop order or suspension of the effectiveness of the
Registration Statement for an aggregate of thirty (30) Trading Days during
the Commitment Period, for any reason other than deferrals or suspensions
in accordance with the Registration Rights Agreement as a result of
corporate developments subsequent to the Effective Date that would require
such Registration Statement to be amended to reflect such event in order
to maintain its compliance with the disclosure requirements of the
Securities Act or (ii) the Company shall at any time fail to comply with
the requirements of Article VI.
(b) Without limitation to the Company's other remedies,
including damages, the obligation of the Company to sell Put Shares to the
Investor shall terminate if the Investor fails to honor one Put Notice
within 10 Trading Days or more than one Put Notice within two (2) Trading
Days of the Closing Date scheduled for such Put, and the Company notifies
Investor of such termination. Upon such termination, the Company shall
maintain the Registration Statement in effect for such reasonable period,
not to exceed forty-five (45) days, as the Investor may request in order
to dispose of any remaining Put Shares.
Section 2.3 Additional Shares. In the event that during any periods
commencing on any Put Date and ending five (5) Trading Days after the Closing
Date applicable to such Put Date, a Suspension Period occurs (as defined in
Section 3(f) of the Registration Right Agreement), the Company must compensate
the Investor for any net decline in the value of the Securities held by the
Investor during any such Suspension Periods or committed to be purchased and
purchased by the Investor during such period. Net decline shall be the
difference between the highest daily VWAP during the applicable Suspension
Period and the daily VWAP at the end of such Suspension Period multiplied by the
number of Put Shares and/or Warrant Shares sold by the Investor within five (5)
Trading Days from the end of the applicable Suspension; provided, however, if
the price at which the Investor sells any such Put Shares and/or Warrant Shares
within such five (5) Trading Day period is more than the highest daily VWAP
during such Suspension Period, the Investor shall not be entitled to such
compensation as to the Put Shares and/or Warrant Shares sold at such higher
price. At the election of the Investor, the Company may issue, in lieu of such
amounts, a number of shares of Common Stock based on the daily VWAP of the
Common Stock on the Trading Day immediately prior to the Trading Day such shares
are to be issued to the Investor ("Blackout Shares").
Section 2.4 Liquidated Damages. The parties hereto acknowledge and agree
that the obligation to issue Blackout Shares under Section 2.5 above shall
constitute liquidated damages and not penalties. The parties further acknowledge
that (a) the amount of loss or damages likely to be incurred is incapable or is
difficult to precisely estimate, (b) the amounts specified in Section 2.5 bear a
reasonable proportion and are not plainly or grossly disproportionate to the
probable loss likely to be incurred by the Investor in connection with the
failure by the Company to timely cause the registration of the Blackout Shares
or in connection with a "blackout period" under the Registration Rights
Agreement, and (c) the parties are sophisticated business parties and have been
represented by legal and financial counsel and negotiated this Agreement at
arm's length.
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ARTICLE III
Representations and Warranties of Investor
Investor represents and warrants to the Company that:
Section 3.1 Intent. The Investor is entering into this Agreement for its
own account and the Investor has no present arrangement (whether or not legally
binding) at any time to sell the Common Stock to or through any person or
entity; provided, however, that by making the representations herein, the
Investor does not agree to hold the Common Stock for any minimum or other
specific term and reserves the right to dispose of the Common Stock at any time
in accordance with federal and state securities laws applicable to such
disposition.
Section 3.2 Sophisticated Investor. The Investor is a sophisticated
investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited
investor (as defined in Rule 501 of Regulation D), and Investor has such
experience in business and financial matters that it has the capacity to protect
its own interests in connection with this transaction and is capable of
evaluating the merits and risks of an investment in Common Stock. The Investor
acknowledges that an investment in the Common Stock is speculative and involves
a high degree of risk.
Section 3.3 Authority. This Agreement has been duly authorized and validly
executed and delivered by the Investor and is a valid and binding agreement of
the Investor enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by other
equitable principles of general application.
Section 3.4 Not an Affiliate. Investor is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of the Securities Act) of the
Company.
Section 3.5 Organization and Standing. Investor is a corporation duly
organized, validly existing, and in good standing under the laws of the British
Virgin Islands.
Section 3.6 Absence of Conflicts. The execution and delivery of this
Agreement and any other document or instrument executed in connection herewith,
and the consummation of the transactions contemplated thereby, and compliance
with the requirements thereof, will not violate any law, rule, regulation,
order, writ, judgment, injunction, decree or award binding on Investor, or, to
the Investor's knowledge, (a) violate any provision of any indenture, instrument
or agreement to which Investor is a party or is subject, or by which Investor or
any of its assets is bound; (b) conflict with or constitute a material default
thereunder; (c) result in the creation or imposition of any lien pursuant to the
terms of any such indenture, instrument or agreement, or constitute a breach of
any fiduciary duty owed by Investor to any third party; or (d) require the
approval of any third-party (which has not been obtained) pursuant to any
material contract, agreement, instrument, relationship or legal obligation to
which Investor is subject or to which any of its assets, operations or
management may be subject.
Section 3.7 Disclosure; Access to Information. Investor has received and
reviewed all documents, records, books and other publicly available information
pertaining to Investor's investment in the Company that have been requested by
Investor. The Company is subject to the
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periodic reporting requirements of the Exchange Act, and Investor has reviewed
copies of any such reports that have been requested by it.
Section 3.8 Manner of Sale. At no time was Investor presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
Section 3.9 Financial Capacity. Investor currently has the financial
capacity to meet its obligations to the Company hereunder, and the Investor has
no present knowledge of any circumstances which could cause it to become unable
to meet such obligations in the future.
Section 3.10 Underwriter Liability. Investor understands that it is the
position of the SEC that the Investor is an underwriter within the meaning of
Section 2(11) of the Securities Act and that the Investor will be identified as
an underwriter of the Put Shares in the Registration Statement.
ARTICLE IV
Representations and Warranties of the Company
The Company represents and warrants to the Investor that, except as set forth on
the Disclosure Schedule prepared by the Company and attached hereto:
Section 4.1 Organization of the Company. The Company is a corporation duly
incorporated and existing in good standing under the laws of the State of
Delaware and has all requisite corporate authority to own its properties and to
carry on its business as now being conducted. The Company does not have any
subsidiaries and does not own more that fifty percent (50%) of or control any
other business entity except as set forth in the SEC Documents. The Company is
duly qualified and is in good standing as a foreign corporation to do business
in every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, other than those in which the
failure so to qualify would not have a Material Adverse Effect.
Section 4.2 Authority. (i) The Company has the requisite corporate power
and corporate authority to enter into and perform its obligations under this
Agreement, the Registration Rights Agreement, the Escrow Agreement, and the
Warrants and to issue the Put Shares, the Warrants and the Warrant Shares
pursuant to their respective terms, (ii) the execution, issuance and delivery of
this Agreement, the Registration Rights Agreement, the Escrow Agreement and the
Warrants by the Company and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action and no further consent or authorization of the Company or its
Board of Directors or stockholders is required, and (iii) this Agreement, the
Registration Rights Agreement, the Escrow Agreement and the Warrants have been
duly executed and delivered by the Company and at the Initial Closing shall
constitute valid and binding obligations of the Company enforceable against the
Company in accordance with their terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable
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principles of general application. The Company has duly and validly authorized
and reserved for issuance shares of Common Stock sufficient in number for the
issuance of the Put Shares and for the exercise of the Warrants
Section 4.3 Capitalization. The authorized capital stock of the Company
consists of 25,000,000 shares of Common Stock, $0.001 par value per share, of
which 10,652,898 shares are issued and outstanding and no preferred stock.
Except for (i) outstanding options and warrants as set forth in the SEC
Documents and (ii) as set forth in the Disclosure Schedule, there are no
outstanding Capital Share Equivalents nor any agreements or understandings
pursuant to which any Capital Shares Equivalents may become outstanding. The
Company is not a party to any agreement granting registration or anti-dilution
rights to any person with respect to any of its equity or debt securities. All
of the outstanding shares of Common Stock of the Company have been duly and
validly authorized and issued and are fully paid and non-assessable.
Section 4.4 Common Stock. The Company has registered its Common Stock
pursuant to Section 12(b) or (g) of the Exchange Act and is in full compliance
with all reporting requirements of the Exchange Act, and the Company is in
compliance with all requirements for the continued listing or quotation of its
Common Stock, and such Common Stock is currently listed or quoted on, the
Principal Market. The Company has not received any notice regarding, and to its
knowledge there is no threat, of the termination or discontinuance of the
eligibility of the Common Stock for listing on the Principal Market.
Section 4.5 SEC Documents. The Company has made available to the Investor
true and complete copies of the SEC Documents. As of their respective dates, the
SEC Documents complied in all material respects with the requirements of the
Exchange Act, and rules and regulations of the SEC promulgated thereunder and
the SEC Documents did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Documents complied in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC or
other applicable rules and regulations with respect thereto at the time of such
inclusion. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they 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 thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited interim
statements, to normal year-end audit adjustments). Neither the Company nor any
of its subsidiaries has any material indebtedness, obligations or liabilities of
any kind (whether accrued, absolute, contingent or otherwise, and whether due or
to become due) that would have been required to be reflected in, reserved
against or otherwise described in the financial statements or in the notes
thereto in accordance with GAAP, which was not fully reflected in, reserved
against or otherwise described in the financial statements or the notes thereto
included in the SEC Documents or was not incurred in the ordinary course of
business consistent with the Company's past practices since the last date of
such financial statements.
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Section 4.6 Valid Issuances. When issued and paid for in accordance with
the terms hereof or of the Warrants, the Put Shares and the Warrant Shares will
be duly and validly issued, fully paid, and non-assessable. Neither the sales of
the Put Shares, the Warrants or the Warrant Shares pursuant to, nor the
Company's performance of its obligations under, this Agreement, the Registration
Rights Agreement, the Escrow Agreement or the Warrants will (i) result in the
creation or imposition by the Company of any liens, charges, claims or other
encumbrances upon the Put Shares, the Warrants or the Warrant Shares or, except
as contemplated herein, any of the assets of the Company, or (ii) entitle the
holders of Outstanding Capital Shares to preemptive or other rights to subscribe
for or acquire the Capital Shares or other securities of the Company. The Put
Shares, the Warrants and the Warrant Shares shall not subject the Investor to
personal liability to the Company or its creditors by reason of the possession
thereof.
Section 4.7 No Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby, including without limitation the issuance of the Put
Shares, the Warrants and the Warrant Shares, do not and will not (i) result in a
violation of the Company's Certificate of Incorporation or By-Laws or (ii)
conflict with, or constitute a material default (or an event that 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 material
agreement, indenture or instrument, or any "lock-up" or similar provision of any
underwriting or similar agreement to which the Company is a party, or (iii)
result in a violation of any federal, state or local law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or by which any material property or
asset of the Company is bound or affected, nor is the Company otherwise in
violation of, conflict with or default under any of the foregoing (except in
each case for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not have, individually or in the
aggregate, a Material Adverse Effect). The business of the Company is not being
conducted in violation of any law, ordinance or regulation of any governmental
entity, except for possible violations that either singly or in the aggregate
would not have a Material Adverse Effect. The Company is not required under any
Federal, state or local law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement or issue and sell the Put Shares or the
Warrants in accordance with the terms hereof (other than any SEC, Principal
Market or state securities filings that may be required to be made by the
Company subsequent to the Initial Closing, any registration statement that may
be filed pursuant hereto, and any shareholder approval required by the rules
applicable to companies whose common stock trades on the Principal Market);
provided that, for purposes of the representation made in this sentence, the
Company is assuming and relying upon the accuracy of the relevant
representations and agreements of the Investor herein.
Section 4.8 No Material Adverse Change. Since the date of the financial
statement contained in the Company's most recently filed Form 10-Q or Form 10-K,
whichever is most current, no Material Adverse Effect has occurred or exists
with respect to the Company, except as disclosed in the SEC Documents.
Section 4.9 No Undisclosed Events or Circumstances. Since the date of the
financial statement contained in the Company's most recently filed Form 10-Q or
Form 10-K, whichever
11
is most current, no event or circumstance has occurred or exists with respect to
the Company or its businesses, properties, prospects, operations or financial
condition, that, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which has
not been so publicly announced or disclosed in the SEC Documents.
Section 4.10 Litigation and Other Proceedings. Except as disclosed in the
SEC Documents, there are no lawsuits or proceedings pending or, to the knowledge
of the Company, threatened, against the Company or any subsidiary, nor has the
Company received any written or oral notice of any such action, suit, proceeding
or investigation, which could reasonably be expected to have a Material Adverse
Effect. Except as set forth in the SEC Documents, no judgment, order, writ,
injunction or decree or award has been issued by or, to the knowledge of the
Company, requested of any court, arbitrator or governmental agency which could
result in a Material Adverse Effect.
Section 4.11 No Misleading or Untrue Communication. The Company and, to
the knowledge of the Company, any person representing the Company, or any other
person selling or offering to sell the Put Shares or the Warrants in connection
with the transaction contemplated by this Agreement, have not made, at any time,
any oral communication in connection with the offer or sale of the same which
contained any untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading.
Section 4.12 Insurance. The Company and each subsidiary maintains property
and casualty, general liability, workers' compensation, environmental hazard,
personal injury and other similar types of insurance with financially sound and
reputable insurers that is adequate, consistent with industry standards and the
Company's historical claims experience. The Company has not received notice
from, and has no knowledge of any threat by, any insurer (that has issued any
insurance policy to the Company) that such insurer intends to deny coverage
under or cancel, discontinue or not renew any insurance policy presently in
force.
Section 4.13 Tax Matters.
The Company and each subsidiary has filed all Tax Returns
which it is required to file under applicable laws; all such Tax Returns are
true and accurate and have been prepared in compliance with all applicable laws;
the Company has paid all Taxes due and owing by it or any subsidiary (whether or
not such Taxes are required to be shown on a Tax Return) and have withheld and
paid over to the appropriate taxing authorities all Taxes which it is required
to withhold from amounts paid or owing to any employee, stockholder, creditor or
other third parties; and since December 31, 1998, the charges, accruals and
reserves for Taxes with respect to the Company (including any provisions for
deferred income taxes) reflected on the books of the Company are adequate to
cover any Tax liabilities of the Company if its current tax year were treated as
ending on the date hereof.
No claim has been made by a taxing authority in a jurisdiction
where the Company does not file tax returns that the Company or any subsidiary
is or may be subject to taxation by that jurisdiction. There are no foreign,
federal, state or local tax audits or administrative or judicial proceedings
pending or being conducted with respect to the Company
12
or any subsidiary; no information related to Tax matters has been requested by
any foreign, federal, state or local taxing authority; and, except as disclosed
above, no written notice indicating an intent to open an audit or other review
has been received by the Company or any subsidiary from any foreign, federal,
state or local taxing authority. There are no material unresolved questions or
claims concerning the Company's Tax liability. The Company (A) has not executed
or entered into a closing agreement pursuant to ss. 7121 of the Internal Revenue
Code or any predecessor provision thereof or any similar provision of state,
local or foreign law; or (B) has not agreed to or is required to make any
adjustments pursuant to ss. 481 (a) of the Internal Revenue Code or any similar
provision of state, local or foreign law by reason of a change in accounting
method initiated by the Company or any of its subsidiaries or has any knowledge
that the IRS has proposed any such adjustment or change in accounting method, or
has any application pending with any taxing authority requesting permission for
any changes in accounting methods that relate to the business or operations of
the Company. The Company has not been a United States real property holding
corporation within the meaning of ss. 897(c)(2) of the Internal Revenue Code
during the applicable period specified in ss. 897(c)(1)(A)(ii) of the Internal
Revenue Code.
The Company has not made an election under ss. 341(f) of the
Internal Revenue Code. The Company is not liable for the Taxes of another person
that is not a subsidiary of the Company under (A) Treas. Reg. ss. 1.1502-6 (or
comparable provisions of state, local or foreign law), (B) as a transferee or
successor, (C) by contract or indemnity or (D) otherwise. The Company is not a
party to any tax sharing agreement. The Company has not made any payments, is
obligated to make payments or is a party to an agreement that could obligate it
to make any payments that would not be deductible under ss. 280G of the Internal
Revenue Code.
For purposes of this Section 4.14:
"IRS" means the United States Internal Revenue Service.
Tax" or "Taxes" means federal, state, county, local, foreign,
or other income, gross receipts, ad valorem, franchise, profits,
sales or use, transfer, registration, excise, utility,
environmental, communications, real or personal property, capital
stock, license, payroll, wage or other withholding, employment,
social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever
(including, without limitation, deficiencies, penalties, additions
to tax, and interest attributable thereto) whether disputed or not.
"Tax Return" means any return, information report or filing
with respect to Taxes, including any schedules attached thereto and
including any amendment thereof.
Section 4.14 Property. Neither the Company nor any of its subsidiaries
owns any real property. Each of the Company and its subsidiaries has good and
marketable title to all personal property owned by it, free and clear of all
liens, encumbrances and defects except such as do not materially affect the
value of such property and do not materially interfere with the use made and
13
proposed to be made of such property by the Company; and to the Company's
knowledge any real property and buildings held under lease by the Company as
tenant are held by it under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use made and
intended to be made of such property and buildings by the Company.
Section 4.15 Licensing and Permits. The Company holds all necessary
licenses and permits for the conduct of its business. All of such licenses and
permits are in good standing and the Company is not in material default of any
of the conditions thereof.
Section 4.16 Intellectual Property. Each of the Company and its
subsidiaries owns or possesses adequate and enforceable rights to use all
patents, patent applications, trademarks, trademark applications, trade names,
service marks, copyrights, copyright applications, licenses, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) and other similar rights and
proprietary knowledge (collectively, "Intangibles") necessary for the conduct of
its business as now being conducted. To the Company's knowledge, except as
disclosed in the SEC Documents neither the Company nor any of its subsidiaries
is infringing upon or in conflict with any right of any other person with
respect to any Intangibles. Except as disclosed in the SEC Documents, no adverse
claims have been asserted by any person to the ownership or use of any
Intangibles and the Company has no knowledge of any basis for such claim.
Section 4.17 Internal Controls and Procedures. The Company maintains books
and records and internal accounting controls which provide reasonable assurance
that (i) all transactions to which the Company or any subsidiary is a party or
by which its properties are bound are executed with management's authorization;
(ii) the recorded accounting of the Company's consolidated assets is compared
with existing assets at regular intervals; (iii) access to the Company's
consolidated assets is permitted only in accordance with management's
authorization; and (iv) all transactions to which the Company or any subsidiary
is a party or by which its properties are bound are recorded as necessary to
permit preparation of the financial statements of the Company in accordance with
U.S. generally accepted accounting principles.
Section 4.18 Payments and Contributions. Neither the Company, any
subsidiary, nor any of its directors, officers or, to its knowledge, other
employees has (i) used any Company funds for any unlawful contribution,
endorsement, gift, entertainment or other unlawful expense relating to political
activity; (ii) made any direct or indirect unlawful payment of Company funds to
any foreign or domestic government official or employee; (iii) violated or is in
violation of any provision of the Foreign Corrupt Practices Act of 1977, as
amended; or (iv) made any bribe, rebate, payoff, influence payment, kickback or
other similar payment to any person with respect to Company matters.
Section 4.19 No Misrepresentation. The representations and warranties of
the Company contained in this Agreement, any schedule, annex or exhibit hereto
and any agreement, instrument or certificate furnished by the Company to the
Investor pursuant to this Agreement, do not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
14
ARTICLE V
Covenants of the Investor
Investor covenants with the Company that:
Section 5.1 Compliance with Law. The Investor's trading activities with
respect to shares of the Company's Common Stock will be in compliance with all
applicable state and federal securities laws, rules and regulations and rules
and regulations of the Principal Market on which the Company's Common Stock is
listed. Without limiting the generality of the foregoing, the Investor agrees
that it will, whenever required by federal securities laws, deliver the
prospectus included in the Registration Statement to any purchaser of Put Shares
from the Investor.
Section 5.2 No Short Sales. The Investor and its affiliates shall not
engage in short sales of the Company's Common Stock (as defined in applicable
SEC and NASD rules) during the term of this Agreement.
ARTICLE VI
Covenants of the Company
Section 6.1 Registration Rights. The Company shall cause the Registration
Rights Agreement to remain in full force and effect and the Company shall comply
in all material respects with the terms thereof.
Section 6.2 Listing of Common Stock. The Company hereby agrees to maintain
the listing of the Common Stock on a Principal Market, and as soon as
practicable (but in any event prior to the commencement of the Commitment
Period) to list the Put Shares and the Warrant Shares. The Company further
agrees, if the Company applies to have the Common Stock traded on any other
Principal Market, it will include in such application the Put Shares and the
Warrant Shares and will take such other action as is necessary or desirable in
the opinion of the Investor to cause the Common Stock to be listed on such other
Principal Market as promptly as possible. The Company will take all action to
continue the listing and trading of its Common Stock on the Principal Market
(including, without limitation, maintaining sufficient net tangible assets) and
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Principal Market and shall provide
the Investor with copies of any correspondence to or from such Principal Market
which threatens delisting of the Common Stock, within one Trading Day of the
Company's receipt thereof.
Section 6.3 Exchange Act Registration. The Company will cause its Common
Stock to continue to be registered under Section 12(g) or 12(b) of the Exchange
Act, will use its best efforts to comply in all respects with its reporting and
filing obligations under the Exchange Act, and will not take any action or file
any document (whether or not permitted by Exchange Act or the rules thereunder)
to terminate or suspend such registration or to terminate or suspend its
reporting and filing obligations under said Act.
15
Section 6.4 Accuracy of Registration Statement. On each Closing Date, the
Registration Statement and the prospectus therein shall not contain any untrue
statement of a material fact or omit to state any material fact to be required
to be stated therein or necessary in order to make the statements therein not
misleading in light of the circumstances under which they were made; and on such
Closing Date or date of filing of the Registration Statement and the prospectus
therein will not include any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; provided,
however, the Company makes no representations or warranties as to the
information contained in or omitted from the Registration Statement and the
prospectus therein in reliance upon and in conformity with the information
furnished in writing to the Company by the Investor specifically for inclusion
in the Registration Statement and the prospectus therein.
Section 6.5 Legends. The certificates evidencing the Common Stock to be
sold to the Investor shall be free of restrictive legends.
Section 6.6 Corporate Existence. The Company will take all steps necessary
to preserve and continue the corporate existence of the Company.
Section 6.7 Additional SEC Documents. During the Commitment Period, the
Company will deliver to the Investor, within three Trading Days after they are
submitted to the SEC for filing, copies of all SEC Documents so furnished or
submitted to the SEC, or else notify the Investor that such documents are
available on the XXXXX system.
Section 6.8 Notice of Certain Events Affecting Registration; Suspension of
Right to Make a Put. The Company will immediately notify the Investor upon the
occurrence of any of the following events in respect of a registration statement
or related prospectus in respect of an offering of Registrable Securities: (i)
receipt of any request for additional information from the SEC or any other
federal or state governmental authority during the period of effectiveness of
the Registration Statement the response to which would require any amendments or
supplements to the Registration Statement or related prospectus; (ii) the
issuance by the SEC or any other federal or state governmental authority of any
stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose; (iii) receipt of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; (iv) the happening of any event that makes any statement made in the
Registration Statement or related prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in the Registration Statement, related
prospectus or documents so that, in the case of the Registration Statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the related prospectus, it will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and (v) the Company's reasonable determination that a post-effective
amendment to the Registration Statement would be appropriate; and the Company
will promptly make available to the Investor any such supplement or amendment to
the related prospectus. The
16
Company shall not deliver to the Investor any Put Notice during the continuation
of any of the foregoing events.
Section 6.9 Consolidation; Merger. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company to,
another entity (a "Consolidation Event") unless the resulting successor or
acquiring entity (if not the Company) assumes by written instrument or by
operation of law the obligation to deliver to the Investor such shares of stock
and/or securities as the Investor is entitled to receive pursuant to this
Agreement.
Section 6.10 Limitation on Future Financing. The Company agrees that it
will not enter into any sale of its securities for cash at a discount to its
then-current closing bid price during the Commitment Period except for any sales
(i) pursuant to any presently existing stock incentive plan which plan has been
approved by the Company's stockholders, (ii) pursuant to any compensatory plan
for a full-time employee, director or key consultant, (iii) pursuant to any
underwritten public offering with an established investment bank (not including
an equity line of credit type financing), (iv) in connection with a strategic
partnership or other business transaction, the principal purpose of which is not
simply to raise money, (v) pursuant to any option, warrant or agreement
outstanding on the date of this Agreement, (vi) pursuant to a private placement
without registration rights, (vii) to any of the Company's officers, directors
or existing holders of 5% or more of the Common Stock or any of their
affiliates, of up to $5,000,000 of securities, in the aggregate, in any
financing or series of related financings, or (viii) with the prior approval of
the Investor, which will not be unreasonably withheld or delayed. Further, the
Investor shall have a right of first refusal, to elect to participate, in such
subsequent transaction in the case of (vi), (vii) or (viii) above. Such right of
first refusal must be exercised in writing within seven (7) Trading Days of the
Investor's receipt of notice of the proposed terms of such financing.
ARTICLE VII
Conditions to Delivery of Puts
and Conditions to Closing
Section 7.1 Conditions Precedent to the Obligation of the Company to Issue
and Sell Common Stock. The obligation hereunder of the Company to issue and sell
the Put Shares to the Investor incident to each Closing is subject to the
satisfaction, at or before each such Closing, of each of the conditions set
forth below.
(a) Accuracy of the Investor's Representation and Warranties.
The representations and warranties of the Investor shall be true and
correct in all material respects as of the date of this Agreement and as
of the date of each such Closing as though made at each such time.
(b) Performance by the Investor. The Investor shall have
performed, satisfied and complied in all material respects with all
covenants, agreements and
17
conditions required by this Agreement to be performed, satisfied or complied
with by the Investor at or prior to such Closing.
Section 7.2 Conditions Precedent to the Right of the Company to Deliver a
Put Notice and the Obligation of the Investor to Purchase Put Shares. The right
of the Company to deliver a Put Notice and the obligation of Investor hereunder
to acquire and pay for the Put Shares incident to a Closing is subject to the
satisfaction, on both (i) the date of delivery of such Put Notice and (ii) the
applicable Closing Date (each a "Condition Satisfaction Date"), of each of the
following conditions:
(a) Closing Certificate. All representations and warranties of
the Company contained herein shall remain true and correct as of the
Closing Date as though made as of such date and the Company shall have
delivered into escrow an Officer's Certificate signed by its Chief
Executive Officer certifying that all of the Company's representations and
warranties herein remain true and correct as of the Closing Date and that
the Company has performed all covenants and satisfied all conditions to be
performed or satisfied by the Company prior to such Closing;
(b) Blue Sky. The Company shall have obtained all permits and
qualifications required by any state for the offer and sale of the Common
Stock to the Investor and by the Investor as set forth in the Registration
Rights Agreement or shall have the availability of exemptions therefrom;
(c) Delivery of Put Shares. Delivery of the Put Shares to the
Investor's DTC account through DTC's DWAC system;
(d) Opinion of Counsel, etc. Receipt by the Investor of an
opinion of counsel to the Company, in the form of Exhibit E hereto and any
other items as further set forth in the Escrow Agreement;
(e) Registration of the Common Stock with the SEC. The
Registration Statement shall have previously become effective and shall
remain effective and available for making resales of the Put Shares and
Warrant Shares by the Investor on each Condition Satisfaction Date and (i)
neither the Company nor the Investor shall have received notice that the
SEC has issued or intends to issue a stop order with respect to the
Registration Statement or that the SEC otherwise has suspended or
withdrawn the effectiveness of the Registration Statement, either
temporarily or permanently, or intends or has threatened to do so (unless
the SEC's concerns have been addressed and the Investor is reasonably
satisfied that the SEC no longer is considering or intends to take such
action), (ii) no other suspension of the use or withdrawal of the
effectiveness of the Registration Statement or related prospectus shall
exist, and (iii) the Company shall deliver to the Investor a prospectus
supplement on Form 424(b) regarding the sale of the Put Shares prior to
funding;
(f) Legal Compliance. The Company will satisfy all laws and
regulations pertaining to the sale and issuance of the Put Shares;
18
(g) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement, the
Registration Rights Agreement and the Escrow Agreement to be performed,
satisfied or complied with by the Company at or prior to each Condition
Satisfaction Date;
(h) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of
competent jurisdiction that prohibits or directly and adversely affects
any of the transactions contemplated by this Agreement, and no proceeding
shall have been commenced that may have the effect of prohibiting or
adversely affecting any of the transactions contemplated by this
Agreement;
(i) Adverse Changes. Since the date of filing of the Company's
most recent SEC Document, no event that had or is reasonably likely to
have a Material Adverse Effect has occurred;
(j) No Suspension of Trading In or Delisting of Common Stock.
The trading of the Common Stock (including, without limitation, the Put
Shares) is not suspended by the SEC or the Principal Market, and the
Common Stock (including, without limitation, the Put Shares) shall have
been approved for listing or quotation on and shall not have been delisted
from the Principal Market. The issuance of shares of Common Stock with
respect to the applicable Closing, if any, shall not violate the
shareholder approval requirements of the Principal Market. The Company
shall not have received any notice threatening to delist the Common Stock
from the Principal Market;
(k) No Knowledge. The Company has no knowledge of any event
more likely than not to have the effect of causing such Registration
Statement to be suspended or otherwise ineffective (which event is
reasonably likely to occur within the thirty (30) Trading Days following
the Trading Day on which such Notice is deemed delivered);
(l) Trading Cushion. The Trading Cushion shall have elapsed
since the next preceding Put Date;
(m) Future Financing. The Company shall have not completed any
financing prohibited by Section 6.10 unless, prior to the Company
delivering a Put Notice after any such financing, the Company pays the
Investor as a condition to the Investor's obligation to purchase the Put
Shares and not as liquidated damages, the sum of $100,000; and
(n) Other. On each Condition Satisfaction Date, the Investor
shall have received and been reasonably satisfied with such other
certificates and documents as shall have been reasonably requested by the
Investor in order for the Investor to confirm the Company's satisfaction
of the conditions set forth in this Section 7.2.
19
ARTICLE VIII
Due Diligence Review; Non-Disclosure of Non-Public Information.
Section 8.1 Due Diligence Review. The Company shall make available for
inspection and review by the Investor, advisors to and representatives of the
Investor (who may or may not be affiliated with the Investor and who are
reasonably acceptable to the Company), any underwriter participating in any
disposition of the Registrable Securities on behalf of the Investor pursuant to
the Registration Statement, any such registration statement or amendment or
supplement thereto or any blue sky, NASD or other filing, all SEC Documents and
other filings with the SEC, and all other publicly available corporate documents
and properties of the Company as may be reasonably necessary for the purpose of
such review, and cause the Company's officers, directors and employees to supply
all such publicly available information reasonably requested by the Investor or
any such representative, advisor or underwriter in connection with such
Registration Statement (including, without limitation, in response to all
questions and other inquiries reasonably made or submitted by any of them),
prior to and from time to time after the filing and effectiveness of the
Registration Statement for the sole purpose of enabling the Investor and such
representatives, advisors and underwriters and their respective accountants and
attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of the Registration Statement.
Section 8.2 Non-Disclosure of Non-Public Information.
(a) The Company shall not disclose non-public information to
the Investor, advisors to or representatives of the Investor except as set
forth in the Registration Rights Agreement.
(b) The Company represents that it does not disseminate
non-public information to any investors who purchase stock in the Company
in a public offering, to money managers or to securities analysts,
provided, however, that notwithstanding anything herein to the contrary,
the Company will, as hereinabove provided, immediately notify the advisors
and representatives of the Investor and, if any, underwriters, of any
event or the existence of any circumstance (without any obligation to
disclose the specific event or circumstance) of which it becomes aware,
constituting non-public information (whether or not requested of the
Company specifically or generally during the course of due diligence by
such persons or entities), which, if not disclosed in the prospectus
included in the Registration Statement would cause such prospectus to
include a material misstatement or to omit a material fact required to be
stated therein in order to make the statements, therein in light of the
circumstances in which they were made, not misleading. Nothing contained
in this Section 8.2 shall be construed to mean that such persons or
entities other than the Investor (without the written consent of the
Investor prior to disclosure of such information) may not obtain
non-public information in the course of conducting due diligence in
accordance with the terms of this Agreement and nothing herein shall
prevent any such persons or entities from notifying the Company of their
opinion that based on such due diligence by such persons or entities, that
the Registration Statement contains an untrue statement of a material fact
or omits a material fact required to be stated in the Registration
Statement or necessary to make the
20
statements contained therein, in light of the circumstances in which they were
made, not misleading.
ARTICLE IX
Choice of Law
Section 9.1 Governing Law/Arbitration. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable to
contracts made in New York by persons domiciled in New York City and without
regard to its principles of conflicts of laws. The Company and the Investor
agree to submit themselves to the in personam jurisdiction of the state and
federal courts situated within the Southern District of the State of New York
with regard to any controversy arising out of or relating to this Agreement. Any
dispute under this Agreement or any Exhibit attached hereto shall be submitted
to arbitration under the American Arbitration Association (the "AAA") in New
York City, New York, and shall be finally and conclusively determined by the
decision of a board of arbitration consisting of three (3) members (hereinafter
referred to as the "Board of Arbitration") selected as according to the rules
governing the AAA. The Board of Arbitration shall meet on consecutive business
days in New York City, New York, and shall reach and render a decision in
writing (concurred in by a majority of the members of the Board of Arbitration)
with respect to the amount, if any, which the losing party is required to pay to
the other party in respect of a claim filed. In connection with rendering its
decisions, the Board of Arbitration shall adopt and follow the laws of the State
of New York. To the extent practical, decisions of the Board of Arbitration
shall be rendered no more than thirty (30) calendar days following commencement
of proceedings with respect thereto. The Board of Arbitration shall cause its
written decision to be delivered to all parties involved in the dispute. The
Board of Arbitration shall be authorized and is directed to enter a default
judgment against any party refusing to participate in the arbitration proceeding
within thirty days of any deadline for such participation. Any decision made by
the Board of Arbitration (either prior to or after the expiration of such thirty
(30) calendar day period) shall be final, binding and conclusive on the parties
to the dispute, and entitled to be enforced to the fullest extent permitted by
law and entered in any court of competent jurisdiction. The prevailing party
shall be awarded its costs, including reasonable attorneys' fees, from the
non-prevailing party as part of the arbitration award. Any party shall have the
right to seek injunctive relief from any court of competent jurisdiction in any
case where such relief is available. The prevailing party in such injunctive
action shall be awarded its costs, including reasonable attorney's fees, from
the non-prevailing party.
ARTICLE X
Assignment
Section 10.1 Assignment. Neither this Agreement nor any rights of the
Investor or the Company hereunder may be assigned by either party to any other
person except by operation of law. Notwithstanding the foregoing, upon the prior
written consent of the Company, which consent shall not unreasonably be withheld
or delayed in the case of an assignment to an affiliate of the Investor, the
Investor's interest in this Agreement may be assigned at any time, in whole or
in part, to any other person or entity (including any affiliate of the Investor)
who agrees to
21
make the representations and warranties contained in Article III and who agrees
to be bound hereby.
ARTICLE XI
Notices
Section 11.1 Notices. All notices, demands, requests, consents, approvals,
and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by reputable courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to the Company: 000 Xxxxx Xxxxxx Xxx.
Xxxxxxxxxx Corp. Park
Livingston, New Jersey 07039
Attn: Xxxxxxx Xxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to: Morse, Zelnick, Rose & Lander LLP
(shall not constitute notice) 000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
if to the Investor: c/o Mischon deReya Solicitors
00 Xxxxxxxxxxxx Xxx
Xxxxxx XX0X 0XX Xxxxxxx
Facsimile: 011-44-171-404-5982
Attention: Xxxxx Xxxx
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with a copy to: Xxxxxxx Xxxxxx & Green, P.C.
(shall not constitute notice) 000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 11.1 by giving at least ten (10) days' prior
written notice of such changed address or facsimile number to the other party
hereto.
ARTICLE XII
Miscellaneous
Section 12.1 Counterparts/Facsimile/Amendments. This Agreement may be
executed in multiple counterparts, each of which may be executed by less than
all of the parties and shall be deemed to be an original instrument which shall
be enforceable against the parties actually executing such counterparts and all
of which together shall constitute one and the same instrument. Except as
otherwise stated herein, in lieu of the original documents, a facsimile
transmission or copy of the original documents shall be as effective and
enforceable as the original. This Agreement may be amended only by a writing
executed by all parties.
Section 12.2 Entire Agreement. This Agreement, the Exhibits hereto, which
include, but are not limited to the Escrow Agreement, the Registration Rights
Agreement and the Warrants, set forth the entire agreement and understanding of
the parties relating to the subject matter hereof and supersedes all prior and
contemporaneous agreements, negotiations and understandings between the parties,
both oral and written relating to the subject matter hereof. The terms and
conditions of all Exhibits to this Agreement are incorporated herein by this
reference and shall constitute part of this Agreement as is fully set forth
herein.
Section 12.3 Survival; Severability. The representations, warranties,
covenants and agreements of the parties hereto shall survive each Closing
hereunder. In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that such severability shall be ineffective if it materially
changes the economic benefit of this Agreement to any party.
Section 12.4 Title and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
Section 12.5 Reporting Entity for the Common Stock. The reporting entity
relied upon for the determination of the trading price or trading volume of the
Common Stock on any given Trading Day for the purposes of this Agreement shall
be Bloomberg, L.P. or any successor thereto. The written mutual consent of the
Investor and the Company shall be required to employ any other reporting entity.
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Section 12.6 Replacement of Certificates. Upon (i) receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of a certificate representing the Put Shares and (ii) in the case of
any such loss, theft or destruction of such certificate, upon delivery of an
indemnity agreement or security reasonably satisfactory in form and amount to
the Company (which shall not exceed that required by the Company's transfer
agent in the ordinary course) or (iii) in the case of any such mutilation, on
surrender and cancellation of such certificate, the Company at its expense will
execute and deliver, in lieu thereof, a new certificate of like tenor.
Section 12.7 Fees and Expenses. Each of the Company and the Investors
agrees to pay its own expenses incident to the performance of its obligations
hereunder, except that the Company shall pay the fees, expenses and
disbursements of Investors' counsel in the amount of $15,000 plus $1,000 per
Closing of a Put.
Section 12.8 Brokerage. Each of the parties hereto represents that it has
had no dealings in connection with this transaction with any finder or broker
who will demand payment of any fee or commission from the other party except
Jesup & Xxxxxx Securities Corporation whose fee shall be paid by the Company.
The Company on the one hand, and the Investor, on the other hand, agree to
indemnify the other against and hold the other harmless from any and all
liabilities to any person claiming brokerage commissions or finder's fees on
account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby.
Section 12.9 Publicity. The Company agrees that it will not issue any
press release or other public announcement of the transactions contemplated by
this Agreement without the prior consent of the Investor, which shall not be
unreasonably withheld nor delayed by more than two (2) Trading Days from its
receipt of such proposed release; provided, however, that if the Company is
advised by its outside counsel that it is required by law or the applicable
rules of any Principal Market to issue any such press release or public
announcement, then, it may do so without the prior consent of the Investor,
although it shall be required to provide prior notice (which may be by
telephone) to the Investor that it intends to issue such press release or public
announcement. No release shall name the Investor without its express consent,
except as required by law.
Section 12.10 Effectiveness of Agreement. This Agreement shall become
effective only upon satisfaction of the conditions precedent to the Initial
Closing set forth in Article I of the Escrow Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Private Equity
Line of Credit Agreement to be executed by the undersigned, thereunto duly
authorized, as of this 19th day of January, 2001
MILESTONE SCIENTIFIC INC.
By: /s/ Xxxxxxx Xxxxx
----------------------------------------
Xxxxxxx Xxxxx, Chairman & CEO
HILLGREEN INVESTMENTS LIMITED
By: /s/ X.X. Xxxxxxxx
----------------------------------------
Name: X. X. Xxxxxxxx
Title: Director
25
IN WITNESS WHEREOF, the parties hereto have caused this Private Equity
Line of Credit Agreement to be executed by the undersigned, thereunto duly
authorized, as of this 19th day of January, 2001
MILESTONE SCIENTIFIC INC.
By: /s/ Xxxxxxx Xxxxx
----------------------------------------
Xxxxxxx Xxxxx, Chairman & CEO
HILLGREEN INVESTMENTS LIMITED
By:
----------------------------------------
Name:
Title:
25
