EXHIBIT 10.1
FORM OF SECURITIES PURCHASE AGREEMENT DATED AS OF
DECEMBER 18, 2003 BETWEEN GALAXY ENERGY AND THE PURCHASER
NAMED THEREIN
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "AGREEMENT") is dated as of
December 18, 2003, among Galaxy Energy Corporation, a Colorado corporation (the
"COMPANY"), and the purchasers identified on the signature pages hereto (each,
including its successors and assigns, a "PURCHASER" and collectively the
"PURCHASERS").
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended
(the "SECURITIES ACT") and Rule 506 promulgated thereunder, the Company desires
to issue and sell to each Purchaser, and each Purchaser, severally and not
jointly, desires to purchase from the Company, securities of the Company as more
fully described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agrees
as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. In addition to the terms defined elsewhere in this
Agreement, the following terms have the meanings indicated in this Section 1.1:
"AFFILIATE" means any Person that, directly or indirectly through
one or more intermediaries, controls or is controlled by or is under
common control with a Person, as such terms are used in and construed
under Rule 144 under the Securities Act.
"CAPITAL SHARES" means 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.
"CAPITAL SHARES EQUIVALENTS" means any securities, rights or
obligations that are convertible into or exchangeable for or give any
right to subscribe for or purchase, directly or indirectly, any Capital
Shares of the Company or any warrants, options or other rights to
subscribe for or purchase, directly or indirectly, Capital Shares or
any such convertible or exchangeable securities.
"CLOSING" means the closing of the purchase and sale of the
Securities pursuant to SECTION 2.2.
"CLOSING DATE" shall have the meaning ascribed to such term in
Section 2.3 hereof.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock of the Company, par value
$.001 per share, and any securities into which such common stock shall
hereinafter have been reclassified into.
"COMPANY COUNSEL" means Xxxx Xxxx Xxxx Xxxxxxxxxx & Xxxxxxxxx,
P.C., with offices at 000 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx
00000.
"EFFECTIVE DATE" means the date that the initial Registration
Statement filed by the Company pursuant to Section 4.13 hereof is first
declared effective by the Commission.
"EFFECTIVENESS DATE" means, with respect to the initial
Registration Statement required hereunder, the 120th calendar day
following the Closing Date and, with respect to any additional
Registration Statements which may be required pursuant to Section
4.13(c)(iii), the 90th calendar day following the date on which the
Company first knows, or reasonably should have known, that such
additional Registration Statement is required hereunder; PROVIDED,
HOWEVER, in the event the Company is notified by the Commission that
one of the above Registration Statements will not be reviewed or is no
longer subject to further review and comments, the Effectiveness Date
as to such Registration Statement shall be the fifth Trading Day
following the date on which the Company is so notified if such date
precedes the dates required above.
"ESCROW AGENT" shall have the meaning set forth in the Escrow
Agreement.
"ESCROW AGREEMENT" shall mean the Escrow Agreement in
substantially the form of EXHIBIT B hereto executed and delivered
contemporaneously with this Agreement.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FILING DATE" means, with respect to the initial Registration
Statement required hereunder, the 30th day following the Closing Date
and, with respect to any additional Registration Statements which may
be required pursuant to Section 4.13(c)(iii), the 15th day following
the date on which the Company first knows, or reasonably should have
known that such additional Registration Statement is required
hereunder.
"GAAP" shall have the meaning ascribed to such term in Section
3.1(h) hereof.
"HOLDER" or "HOLDERS" means the holder or holders, as the case may
be, from time to time of Registrable Securities.
"LIENS" shall have the meaning ascribed to such term in Section
3.1(a) hereof.
"LOSSES" means any and all losses, claims, damages, liabilities,
settlement costs and expenses, including without limitation costs of
preparation and reasonable attorneys' fees.
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"MATERIAL ADVERSE EFFECT" shall have the meaning assigned to such
term in Section 3.1(b) hereof.
"OBLIGATIONS" means all of the Company's obligations under this
Agreement, the Warrants, and any other agreements or obligations
undertaken by the Company to the Purchasers.
"PERSON" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
"PRINCIPAL MARKET" means initially the Over the Counter Bulletin
Board and shall also include the American Stock Exchange, New York
Stock Exchange, the NASDAQ Small-Cap Market or the NASDAQ National
Market, whichever is at the time the principal trading exchange or
market for the Common Stock, based upon share volume.
"PROCEEDING" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"REGISTRABLE SECURITIES" means (i) all of the shares of Common
Stock sold hereunder, (ii) all Warrant Shares, and (iii) any securities
issued or issuable upon any stock split, dividend or other distribution
recapitalization or similar event with respect to the foregoing.
"REGISTRATION STATEMENT" means the registration statement to be
filed by the Company pursuant to Section 4.13 hereof.
"REQUIRED APPROVALS" shall have the meaning ascribed to such term
in Section 3.1(e) hereof.
"RESALE REGISTRATION STATEMENT" OR "REGISTRATION STATEMENT" means
a registration statement meeting the requirements set forth in Section
4.13 hereof and covering the resale of the Securities by each Purchaser
as provided for in such section.
"RULE 144" means Rule 144 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission
having substantially the same effect as such Rule.
"RULE 415" means Rule 415 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission
having substantially the same purpose and effect as such Rule.
"SEC REPORTS" shall have the meaning ascribed to such term in
Section 3.1(h) hereof.
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"SECURITIES" means the Shares, the Warrants and the Warrant
Shares.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" shall mean shares of Common Stock of the Company sold
hereunder.
"SUBSCRIPTION AMOUNT" means, as to each Purchaser, the amount to
be paid for Units purchased hereunder at the rate of $50,000 per Unit,
as specified below such Purchaser's name on the signature page of this
Agreement and next to the heading "Subscription Amount", in United
States Dollars and in immediately available funds.
"SUBSIDIARY" means any subsidiary of the Company as set forth in
the Company's SEC Reports.
"TRADING DAY" means any day during which the Principal Market
shall be open for business.
"TRANSACTION DOCUMENTS" means this Agreement, the Escrow
Agreement, the Warrants, and any other documents or agreements executed
in connection with the transactions contemplated hereunder.
"UNIT" means 35,714 shares of Common Stock and Warrants to
purchase 7,143 shares of Common Stock.
"VWAP" means, for any date, the price determined by the first of
the following clauses that applies: (a) if the Common Stock is then
listed or quoted on a Trading Market, the daily volume weighted average
price of the Common Stock for such date (or the nearest preceding date)
on the Trading Market on which the Common Stock is then listed or
quoted as reported by Bloomberg Financial L.P. (based on a trading day
from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time); (b) if the
Common Stock is not then listed or quoted on a Trading Market and if
prices for the Common Stock are then quoted on the OTC Bulletin Board,
the volume weighted average price of the Common Stock for such date (or
the nearest preceding date) on the OTC Bulletin Board; (c) if the
Common Stock is not then listed or quoted on the OTC Bulletin Board and
if prices for the Common Stock are then reported in the "Pink Sheets"
published by the National Quotation Bureau Incorporated (or a similar
organization or agency succeeding to its functions of reporting
prices), the most recent bid price per share of the Common Stock so
reported; or (d) in all other cases, the fair market value of a share
of Common Stock as determined by an independent appraiser selected in
good faith by the Purchasers and reasonably acceptable to the Company.
"WARRANTS" means collectively the Common Stock purchase warrants,
in the form of EXHIBIT A delivered to the Purchasers at the Closing in
accordance with Section 2.2 hereof, with a term of exercise of 4 years.
"WARRANT SHARES" means the shares of Common Stock issuable upon
exercise of the Warrants.
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ARTICLE II
PURCHASE AND SALE
2.1 ESCROW. The Company and the Escrow Agent shall execute an Escrow
Agreement to implement the terms of this Article II.
2.2 CLOSING.
(a) Upon the terms and subject to the conditions set forth herein,
concurrent with the execution and delivery of this Agreement by the
parties hereto, the Company agrees to sell, and the Purchasers agree to
purchase in the aggregate, severally and not jointly, up to 200 Units
at a price of $50,000 per Unit. Each Purchaser shall deliver to the
Escrow Agent via wire transfer or a certified check immediately
available funds equal to such Purchaser's Subscription Amount and shall
simultaneously deliver or cause to be delivered this Agreement to the
offices of Company Counsel, duly executed by such Purchaser.
(b) The Company, within two Business Days after the Closing Date,
and after being advised by the Escrow Agent that the Escrow Agent has
received the Subscription Amounts for the Closing, shall deliver to
each Purchaser the following via overnight delivery service:
(i) a stock certificate for the number of Shares subscribed,
registered in the name of such Purchaser;
(ii) a Warrant registered in the name of such Purchaser to
purchase up to a number of shares of Common Stock equal to 20% of
the number of Shares subscribed at an exercise price per Warrant
Share equal to 125% of closing price of the Common Stock on the
Trading Market on which the Common Stock is then listed or quoted
as reported by Bloomberg Financial L.P., as of the day prior to
the Closing Date; and
(iii) this Agreement, duly executed by the Company.
2.3 CONDITIONS TO CLOSING. Upon satisfaction or waiver by the party
sought to be benefited thereby of the conditions set forth in this Section 2.3,
the Closing shall occur at the offices of Company Counsel (the "CLOSING DATE").
(a) All representations and warranties of the other party
contained herein shall remain true and correct as of the Closing Date
and all covenants of the other party shall have been performed if due
prior to such date.
(b) There shall have been no Material Adverse Effect (as defined
in Section 3.1(b)) with respect to the Company since the date hereof.
(c) From the date hereof to the Closing Date, trading in the
Common Stock shall not have been suspended by the Commission (except
for any suspension of trading
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of limited duration agreed to by the Company, which suspension shall be
terminated prior to the Closing), and, at any time prior to the Closing
Date, trading in securities generally as reported by Bloomberg
Financial Markets shall not have been suspended or limited, or minimum
prices shall not have been established on securities whose trades are
reported by such service, or on the Principal Market, nor shall a
banking moratorium have been declared either by the United States or
New York State authorities, nor shall there have occurred any material
outbreak or escalation of hostilities or other national or
international calamity of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each case,
in the reasonable judgment of the Purchasers, makes it impracticable or
inadvisable to purchase the Units at the Closing.
(d) The aggregate Subscription Amount in escrow shall be at least
$3,000,000 on or before December 15, 2003, which date may be
unilaterally extended by the Company for up to an additional ten (10)
Trading Days (the "OFFERING TERMINATION DATE").
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
makes the representations and warranties set forth below to each Purchaser.
(a) SUBSIDIARIES. Except as set forth in the SEC Reports, the
Company has no direct or indirect subsidiaries. The Company owns,
directly or indirectly, all of the capital stock or other equity
interests of each Subsidiary free and clear of any lien, charge,
security interest, encumbrance, right of first refusal or other
restriction (collectively, "Liens"), and all the issued and outstanding
shares of capital stock of each Subsidiary are validly issued and are
fully paid, non-assessable and free of preemptive and similar rights.
(b) ORGANIZATION AND QUALIFICATION. Each of the Company and the
Subsidiaries is an entity duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with
the requisite power and authority to own and use its properties and
assets and to carry on its business as currently conducted. Neither the
Company nor any Subsidiary is in violation of any of the provisions of
its respective certificate or articles of incorporation, bylaws or
other organizational or charter documents. Each of the Company and the
Subsidiaries is duly qualified to do business and is in good standing
as a foreign corporation or other entity in each jurisdiction in which
the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or
in good standing, as the case may be, could not, individually or in the
aggregate: (i) adversely affect the legality, validity or
enforceability of any Transaction Document, (ii) have or result in or
be reasonably likely to have or result in a material adverse effect on
the results of operations, assets, prospects, business or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as
a whole, or (iii) adversely impair the Company's ability to perform
fully on a timely basis
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its obligations under any of the Transaction Documents (any of (i),
(ii) or (iii), a "MATERIAL ADVERSE EFFECT").
(c) AUTHORIZATION; ENFORCEMENT. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and
otherwise to carry out its obligations hereunder or thereunder. The
execution and delivery of each of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated
hereby or thereby have been duly authorized by all necessary action on
the part of the Company and no further consent or action is required by
the Company other than Required Approvals. Each of the Transaction
Documents has been (or upon delivery will be) duly executed by the
Company and, when delivered in accordance with the terms hereof, will
constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies
generally and general principles of equity. Neither the Company nor any
Subsidiary is in violation of any of the provisions of its respective
certificate or articles of incorporation, by-laws or other
organizational or charter documents.
(d) NO CONFLICTS. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the
Company of the transactions contemplated thereby do not and will not:
(i) conflict with or violate any provision of the Company's or any
Subsidiary's certificate or articles of incorporation, bylaws or other
organizational or charter documents, or (ii) subject to obtaining the
Required Approvals, conflict with, or constitute a 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 (with or without notice, lapse of time or
both) of, any agreement, credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound
or affected, or (iii) result, in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restriction of
any court or governmental authority to which the Company or a
Subsidiary is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a
Subsidiary is bound or affected; except in the case of each of clauses
(ii) and (iii), such as could not, individually or in the aggregate,
have or result in a Material Adverse Effect.
(e) FILINGS, CONSENTS AND APPROVALS. Neither the Company nor any
Subsidiary is required to obtain any consent, waiver, authorization or
order of, give any notice to, or make any filing or registration with,
any court or other federal, state, local or other governmental
authority or other Person in connection with the execution, delivery
and performance by the Company of the Transaction Documents, other than
(i) the filings required under Section 4.7, (ii) the filing with the
Commission of the Resale Registration Statement, (iii) the notice
and/or application(s) to each applicable Principal Market for the
issuance and sale of the Shares and Warrants and the listing of the
Warrant Shares for trading thereon in the time and manner required
thereby, and (iv) the filing of Form D
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with the Commission and applicable Blue Sky filings (collectively, the
"REQUIRED APPROVALS").
(f) ISSUANCE OF THE SECURITIES. The Securities are duly authorized
and, when issued and paid for in accordance with the applicable
Transaction Documents, will be duly and validly issued, fully paid and
non-assessable, free and clear of all Liens. The Company has reserved
from its duly authorized capital stock a number of shares of Common
Stock for issuance of the Shares and Warrant Shares. The Company has
not, and to the knowledge of the Company, no Affiliate of the Company
has sold, offered for sale or solicited offers to buy or otherwise
negotiated in respect of any security (as defined in Section 2 of the
Securities Act) that would be integrated with the offer or sale of the
Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers, or that
would be integrated with the offer or sale of the Securities for
purposes of the rules and regulations of any Principal Market.
(g) CAPITALIZATION. The number of shares and type of all
authorized, issued and outstanding capital stock of the Company is set
forth in the Company's Registration Statement on Form SB-2, filed with
the Commission on October 29, 2003 (File No. 333-110053) (the "SB-2
REGISTRATION STATEMENT"). No securities of the Company are entitled to
preemptive or similar rights, and no Person has any right of first
refusal, preemptive right, right of participation, or any similar right
to participate in the transactions contemplated by the Transaction
Documents. Except as set forth in the SB-2 Registration Statement and
as a result of the purchase and sale of the Securities, there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities,
rights or obligations convertible into or exchangeable for, or giving
any Person any right to subscribe for or acquire, any shares of Common
Stock, or contracts, commitments, understandings or arrangements by
which the Company or any Subsidiary is or may become bound to issue
additional shares of Common Stock, or securities or rights convertible
or exchangeable into shares of Common Stock. The issuance and sale of
the Securities will not obligate the Company to issue shares of Common
Stock or other securities to any Person (other than the Purchasers) and
will not result in a right of any holder of Company securities to
adjust the exercise, conversion, exchange or reset price under such
securities.
(h) SEC REPORTS; FINANCIAL STATEMENTS. The Company has filed all
reports required to be filed by it under the Exchange Act, including
pursuant to Section 13(a) or 15(d) thereof, for the two years preceding
the date hereof (or such shorter period as the Company was required by
law to file such material) (the foregoing materials being collectively
referred to herein as the "SEC REPORTS") on a timely basis or has
received a valid extension of such time of filing and has filed any
such SEC Reports prior to the expiration of any such extension. The
Company has identified and made available to the Purchasers a copy of
all SEC Reports filed within the 10 days preceding the date hereof. As
of their respective dates, the SEC Reports complied in all material
respects with the requirements of the Securities Act and the Exchange
Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed, contained any
untrue statement of a material fact or omitted to state a material fact
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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 Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission
with respect thereto as in effect at the time of filing. Such financial
statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods
involved ("GAAP"), except as may be otherwise specified in such
financial statements or the notes thereto, and fairly present in all
material respects the financial position of the Company and its
consolidated subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal, immaterial,
year-end audit adjustments.
(i) MATERIAL CHANGES. Since the date of the latest audited
financial statements included within the SEC Reports, except as
specifically disclosed in the SEC Reports: (i) there has been no event,
occurrence or development that has had or that could result in a
Material Adverse Effect, (ii) the Company has not incurred any
liabilities (contingent or otherwise) other than (A) trade payables and
accrued expenses incurred in the ordinary course of business consistent
with past practice and (B) liabilities not required to be reflected in
the Company's financial statements pursuant to GAAP or required to be
disclosed in filings made with the Commission, (iii) the Company has
not altered its method of accounting or the identity of its auditors,
(iv) the Company has not declared or made any dividend or distribution
of cash or other property to its stockholders or purchased, redeemed or
made any agreements to purchase or redeem any shares of its capital
stock, and (v) the Company has not issued any equity securities to any
officer, director or Affiliate, except pursuant to existing Company
stock option or similar plans.
(j) LITIGATION. There is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge of
the Company, threatened against or affecting the Company, any
Subsidiary or any of their respective properties before or by any
court, arbitrator, governmental or administrative agency or regulatory
authority (federal, state, county, local or foreign) (collectively, an
"ACTION") which: (i) adversely affects or challenges the legality,
validity or enforceability of any of the Transaction Documents or the
Securities or (ii) could, if there were an unfavorable decision,
individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect. Neither the Company nor any
Subsidiary, nor any director or officer thereof, is or has been the
subject of any Action involving a claim of violation of or liability
under federal or state securities laws or a claim of breach of
fiduciary duty. The Company does not have pending before the Commission
any request for confidential treatment of information. There has not
been, and to the knowledge of the Company, there is not pending or
contemplated, any investigation by the Commission involving the Company
or any current or former director or officer of the Company. The
Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any
Subsidiary under the Exchange Act or the Securities Act.
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(k) COMPLIANCE. Neither the Company nor any Subsidiary: (i) is in
default under or in violation of (and no event has occurred that has
not been waived that, with notice or lapse of time or both, would
result in a default by the Company or any Subsidiary under), nor has
the Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or
credit agreement or any other agreement or instrument to which it is a
party or by which it or any of its properties is bound (whether or not
such default or violation has been waived), (ii) is in violation of any
order of any court, arbitrator or governmental body, or (iii) is or has
been in violation of any statute, rule or regulation of any
governmental authority, except in each case as could not, individually
or in the aggregate, have or result in a Material Adverse Effect.
(l) LABOR RELATIONS. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the
employees of the Company.
(m) REGULATORY PERMITS. The Company and the Subsidiaries possess
all certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to
conduct their respective businesses as described in the SEC Reports,
except where the failure to possess such permits could not,
individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect ("MATERIAL PERMITS"), and neither
the Company nor any Subsidiary has received any notice of proceedings
relating to the revocation or modification of any Material Permit.
(n) TITLE TO ASSETS. The Company and the Subsidiaries have good
and marketable title in fee simple to all real property owned by them
that is material to the business of the Company and the Subsidiaries
and good and marketable title in all personal property owned by them
that is material to the business of the Company and the Subsidiaries,
in each case free and clear of all Liens, except for Liens as do not
materially affect the value of such property and do not materially
interfere with the use made and proposed to be made of such property by
the Company and the Subsidiaries. Any real property and facilities held
under lease by the Company and the Subsidiaries are held under valid,
subsisting and enforceable leases of which the Company and the
Subsidiaries are in compliance.
(o) INSURANCE. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the
businesses in which the Company and the Subsidiaries are engaged. To
the best of Company's knowledge, such insurance contracts and policies
are accurate and complete. Neither the Company nor any Subsidiary has
any reason to believe 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 without a significant increase in cost.
(p) TRANSACTIONS WITH AFFILIATES AND EMPLOYEES. Except as required
to be set forth in the SEC Reports, none of the officers or directors
of the Company and, to the
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knowledge of the Company, none of the employees of the Company is
presently a party to any transaction with the Company or any Subsidiary
(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 entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee
or partner.
(q) INTERNAL ACCOUNTING CONTROLS. The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions
are recorded as necessary to permit preparation of financial statements
in conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's
general or specific authorization, and (iv) the recorded accountability
for assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences. The
Company has established disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the Company and designed
such disclosures controls and procedures to ensure that material
information relating to the Company, including its subsidiaries, is
made known to the certifying officers by others within those entities,
particularly during the period in which the Company's Form 10-K or
10-Q, as the case may be, is being prepared. The Company's certifying
officers have evaluated the effectiveness of the Company's controls and
procedures as of a date within 90 days prior to the filing date of the
Form 10-Q for the quarter ended May 31, 2003 (such date, the
"EVALUATION DATE"). The Company presented in the Form 10-Q for the
quarter ended May 31, 2003 the conclusions of the certifying officers
about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date. Since the Evaluation
Date, there have been no significant changes in the Company's internal
controls (as such term is defined in Item 307(b) of Regulation S-K
under the Exchange Act) or, the Company's knowledge, in other factors
that could significantly affect the Company's internal controls.
(r) SOLVENCY/INDEBTEDNESS. Based on the financial condition of the
Company as of the Closing Date: (i) the fair saleable value of the
Company's assets exceeds the amount that will be required to be paid on
or in respect of the Company's existing debts and other liabilities
(including known contingent liabilities) as they mature; and (ii) the
current cash flow of the Company, together with the proceeds the
Company would receive, were it to liquidate all of its assets, after
taking into account all anticipated uses of the cash, would be
sufficient to pay all amounts on or in respect of its debt when such
amounts are required to be paid. The Company does not intend to incur
debts beyond its ability to pay such debts as they mature (taking into
account the timing and amounts of cash to be payable on or in respect
of its debt). The Company has no knowledge of any facts or
circumstances which lead it to believe that it will file for
reorganization or liquidation under the bankruptcy or reorganization
laws of any jurisdiction within one year from the Closing Date. The SEC
Reports set forth as of the dates thereof all
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outstanding secured and unsecured Indebtedness of the Company or any
Subsidiary, or for which the Company or any Subsidiary has commitments.
For the purposes of this Agreement, "INDEBTEDNESS" shall mean (a) any
liabilities for borrowed money or amounts owed in excess of $50,000
(other than trade accounts payable incurred in the ordinary course
of business), (b) all guaranties and endorsements, whether or not
the same are or should be reflected in the Company's balance sheet or
the notes thereto, except guaranties by endorsement of negotiable
instruments for deposit or collection in the ordinary course of
business, and (c) the present value of any lease payments in excess
of $50,000 due under leases required to be capitalized in accordance
with GAAP. Neither the Company nor any Subsidiary is in default with
respect to any Indebtedness.
(s) CERTAIN FEES. The Company will pay a finder's fee at Closing
consisting of cash equal to up to 7% of the aggregate amount of the
cash received from the placement of the Units and a warrant to purchase
shares equal to up to 3% of the total number of Shares placed hereunder
plus the Warrant Shares. The Company agrees that the Purchasers shall
have no obligation with respect to any fees or with respect to any
claims made by or on behalf of any Person for fees of the type
contemplated by this Section with the transactions contemplated by this
Agreement.
(t) PRIVATE PLACEMENT. Assuming the accuracy of the
representations and warranties of the Purchasers set forth in Sections
3.2(b)-(f), the offer, issuance and sale of the Securities to the
Purchasers as contemplated hereby are exempt from the registration
requirements of the Securities Act. The issuance and sale of the
Securities hereunder does not contravene the rules and regulations of
the Principal Market.
(u) LISTING AND MAINTENANCE REQUIREMENTS. The Company has not, in
the 12 months preceding the date hereof, received notice from any
Principal Market on which the Common Stock is or has been listed or
quoted to the effect that the Company is not in compliance with the
listing or maintenance requirements of such Principal Market. The
Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing
and maintenance requirements.
(v) 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 Company's
Certificate of Incorporation (or similar charter documents) or the laws
of its state of incorporation that is or could become applicable to the
Purchasers as a result of the Purchasers and the Company fulfilling
their obligations or exercising their rights under the Transaction
Documents, including without limitation as a result of the Company's
issuance of the Securities and the Purchasers' ownership of the
Securities.
(w) DISCLOSURE. To the best knowledge of the Company, neither it
nor any other Person acting on its behalf has provided any of the
Purchasers or their agents or counsel with any information that
constitutes or might constitute material, nonpublic information. The
Company understands and confirms that the Purchasers will rely on the
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foregoing representations in effecting transactions in securities of
the Company. All disclosure provided to the Purchasers regarding the
Company, its business and the transactions contemplated hereby
furnished by or on behalf of the Company with respect to the
representations and warranties made herein are true and correct with
respect to such representations and warranties and do not contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The Company
acknowledges and agrees that no Purchaser makes or has made any
representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section
3.2 hereof.
(x) TAX STATUS. The Company and each of its Subsidiaries has made
or filed all federal, state and foreign income and all other 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 provisions 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. The Company has not executed a waiver with respect to the
statute of limitations relating to the assessment or collection of any
foreign, federal, statue or local tax. None of the Company's tax
returns is presently being audited by any taxing authority.
(y) ACKNOWLEDGMENT REGARDING PURCHASERS' PURCHASE OF SECURITIES.
The Company acknowledges and agrees that the Purchasers are acting
solely in the capacity of arm's length purchasers with respect to this
Agreement and the transactions contemplated hereby. The Company further
acknowledges that any statement made by any Purchaser or any of their
respective representatives or agents in connection with this Agreement
and the transactions contemplated hereby is not advice or a
recommendation and is merely incidental to the Purchasers' purchase of
the Securities. The Company further represents to each Purchaser that
the Company's decision to enter into this Agreement has been based
solely on the independent evaluation of the Company and its
representatives.
(z) NO GENERAL SOLICITATION OR ADVERTISING IN REGARD TO THIS
TRANSACTION. Neither the Company nor, to the knowledge of the Company,
any of its directors or officers (i) has conducted or will conduct any
general solicitation (as that term is used in Rule 502(c) of Regulation
D) or general advertising with respect to the sale of the Units, or
(ii) made any offers or sales of any security or solicited any offers
to buy any security under any circumstances that would require
registration of the Units, the Warrants or the Warrant Shares under the
Securities Act or made any "directed selling efforts" as defined in
Rule 902 of Regulation S.
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3.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Purchaser
hereby, for itself and for no other Purchaser, represents and warrants to the
Company as follows:
(a) ORGANIZATION; AUTHORITY. Purchaser, if not an individual, is
an entity duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization with the requisite
corporate or partnership power and authority to enter into and to
consummate the transactions contemplated by the Transaction Documents
and otherwise to carry out its obligations thereunder. The purchase by
Purchaser of the Securities hereunder has been duly authorized by all
necessary action on the part of Purchaser. This Agreement has been duly
executed by Purchaser, and when delivered by Purchaser in accordance
with the terms hereof, will constitute the valid and legally binding
obligation of Purchaser, enforceable against it in accordance with its
terms.
(b) INVESTMENT INTENT. Purchaser is acquiring the Securities as
principal for its own account for investment purposes only and not with
a view to or for distributing or reselling such Securities or any part
thereof, without prejudice, however, to Purchaser's right, subject to
the provisions of this Agreement, at all times to sell or otherwise
dispose of all or any part of such Securities pursuant to an effective
registration statement under the Securities Act or under an exemption
from such registration and in compliance with applicable federal and
state securities laws. Nothing contained herein shall be deemed a
representation or warranty by Purchaser to hold Securities for any
period of time. Purchaser is acquiring the Securities hereunder in the
ordinary course of its business. Purchaser does not have any agreement
or understanding, directly or indirectly, with any Person to distribute
any of the Securities.
(c) PURCHASER STATUS. At the time Purchaser was offered the
Securities, it was, and at the date hereof it is, and on each date on
which it exercises any Warrants, an "accredited investor" as defined in
Rule 501(a) under the Securities Act, and has completed an Accredited
Investor Questionnaire in the form attached herein immediately after
the Purchaser's Signature Page. Purchaser has not been formed solely
for the purpose of acquiring the Securities. Purchaser is not a
registered broker-dealer under Section 15 of the Exchange Act.
(d) EXPERIENCE OF SUCH PURCHASER. Purchaser, either alone or
together with its representatives, has such knowledge, sophistication
and experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such
investment. Purchaser is able to bear the economic risk of an
investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.
(e) GENERAL SOLICITATION. Purchaser is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or
presented at any seminar or any other general solicitation or general
advertisement.
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(f) OPEN SHORT POSITION. From the date of this Agreement until the
filing of the Form 8-K described in SECTION 4.7, Purchaser represents
and warrants that it shall not engage in short sales of the Company's
Common Stock, as that term is defined in applicable Commission and NASD
rules.
(g) DISCLOSURE OF INFORMATION; INDEPENDENT INVESTIGATION.
Purchaser has received, read, carefully considered, and fully
understands this Agreement and all documents related to the Company and
its operations required by and furnished to such Purchaser. In making
its decision to invest in the Securities, Purchaser has relied upon the
independent investigations made by Purchaser and by Purchaser's own
professional advisors. Purchaser and its advisors, if any, have been
given the opportunity to obtain information and to examine this
Agreement and certain other information regarding the Company and to
ask questions of, and to receive answers from the Company or any Person
acting on the Company's behalf concerning the Securities, the Company,
and terms and conditions of this investment, and to obtain any
additional information to verify the accuracy of any information
previously furnished. All such questions have been answered to
Purchaser's full satisfaction.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 TRANSFER RESTRICTIONS.
(a) The Securities may only be disposed of in compliance with
state and federal securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration statement,
to the Company or to an Affiliate of a Purchaser, the Company may
require the transferor thereof to provide to the Company an opinion of
counsel selected by the transferor and reasonably acceptable to the
Company, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not
require registration of such transferred Securities under the
Securities Act. As a condition of transfer, any such transferee shall
agree in writing to be bound by the terms of this Agreement and shall
have the rights of a Purchaser under this Agreement.
(b) Purchaser agrees to the imprinting, so long as is required by
this SECTION 4.1(B), of the following legend on any certificate
evidencing Securities:
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [EXERCISABLE] HAVE BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
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REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE
TRANSFEROR REASONABLY ACCEPTABLE TO THE COMPANY TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE
SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
OR OTHER LOAN SECURED BY SUCH SECURITIES.
The Company acknowledges and agrees that a Purchaser may from time
to time pledge pursuant to a bona fide margin agreement or grant a
security interest in some or all of the Securities and, if required
under the terms of such arrangement, such Purchaser may transfer
pledged or secured Securities to the pledgees or secured parties. If
required by the Company's transfer agent in order to effect a pledge,
the Company shall cause its counsel, at no cost to the Purchasers, to
issue an opinion of counsel to the Company's transfer agent. Further,
no notice shall be required of such pledge. At the appropriate
Purchaser's expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Securities
may reasonably request in connection with a pledge or transfer of the
Securities, including the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) of the Securities Act or
other applicable provision of the Securities Act to appropriately amend
the list of Selling Stockholders thereunder.
(c) Certificates evidencing Securities shall not contain any
legend (including the legend set forth in Section 4.1(b) hereof): (i)
while a registration statement (including the Resale Registration
Statement) covering the resale of such security is effective under the
Securities Act, or (ii) following any sale of such Securities pursuant
to Rule 144, or (iii) if such Securities are eligible for sale under
Rule 144(k), or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations
and pronouncements issued by the staff of the Commission); PROVIDED,
HOWEVER, in connection with the issuance of the Securities, each
Purchaser, severally and not jointly with the other Purchasers, hereby
agrees to adhere to and abide by all prospectus delivery requirements
under the Securities Act and rules and regulations of the Commission.
If all or any portion of a Warrant is exercised at a time when there is
an effective registration statement to cover the resale of the Warrant
Shares, or if such Warrant Shares may be sold under Rule 144(k) or if
such legend is not otherwise required under applicable requirements of
the Securities Act (including judicial interpretations thereof) then
such Warrant Shares shall be issued free of all legends. The Company
agrees that following the Effective Date or at such time as such legend
is no longer required under this Section 4.1(c), it will, no later than
five Trading Days following the delivery by a Purchaser to the Company
or the Company's transfer agent of a certificate representing Warrant
Shares issued with a restrictive legend (such fifth Trading Day, the
"LEGEND REMOVAL DATE"), deliver or cause to be delivered to such
Purchaser a certificate representing such shares that is free from all
restrictive and other legends. The Company may not make any notation on
its records or give instructions to any transfer agent of the Company
that enlarge the restrictions on transfer set forth in this Section.
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4.2 ACKNOWLEDGMENT OF DILUTION. The Company acknowledges that the
issuance of the Securities may result in dilution of the outstanding shares of
Common Stock, which dilution may be substantial under certain market conditions.
The Company further acknowledges that its obligations under the Transaction
Documents, including without limitation its obligation to issue the Warrant
Shares pursuant to the Warrants, are unconditional and absolute and not subject
to any right of set off, counterclaim, delay or reduction, regardless of the
effect of any such dilution or any claim the Company may have against any
Purchaser and regardless of the dilutive effect that such issuance may have on
the ownership of the other stockholders of the Company.
4.3 FURNISHING OF INFORMATION. As long as any Purchaser owns
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. Upon the request of any Purchaser, the Company shall deliver to
such Purchaser a written certification of a duly authorized officer as to
whether it has complied with the preceding sentence. As long as any Purchaser
owns Securities, if the Company is not required to file reports pursuant to such
laws, it will prepare and furnish to the Purchasers and make publicly available
in accordance with Rule 144(c) such information as is required for the
Purchasers to sell the Securities under Rule 144. The Company further covenants
that it will take such further action as any holder of Securities may reasonably
request, all to the extent required from time to time to enable such Person to
sell such Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144.
4.4 INTEGRATION. The Company shall not, and shall use its best efforts
to ensure that no Affiliate of the Company shall, sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Purchasers, or
that would be integrated with the offer or sale of the Securities for purposes
of the rules and regulations of any Principal Market.
4.5 RESERVATION AND LISTING OF SECURITIES.
(a) The Company shall maintain a reserve from its duly authorized
shares of Common Stock for issuance pursuant to the exercise of the
Warrants in such amount as may be required to fulfill its obligations
in full under the Warrants.
(b) If, on any date, the number of authorized but unissued (and
otherwise unreserved) shares of Common Stock is less than the number of
shares issuable upon exercise of the outstanding Warrants such date,
then the Board of Directors of the Company shall use commercially
reasonable efforts to amend the Company's certificate or articles of
incorporation to increase the number of authorized but unissued shares
of Common Stock to fulfill its obligations under the outstanding
Warrants, as soon as possible and in any event not later than the 75th
day after such date.
(c) The Company shall, if applicable: (i) in the time and manner
required by the Principal Market, prepare and file with such Principal
Market an additional shares listing application covering a number of
shares of Common Stock at least equal to the
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number of shares issuable upon exercise of the outstanding Warrants
on the date of such application, (ii) take all steps necessary to
cause such shares of Common Stock to be approved for listing on the
Principal Market as soon as possible thereafter, (iii) provide to the
Purchasers evidence of such listing, and (iv) maintain the listing of
such Common Stock on any date at least equal to the number of shares
issuable upon exercise of the outstanding Warrants on such date on
such Principal Market or another Principal Market.
4.6 EXERCISE PROCEDURES. The form of Notice of Exercise included in the
Warrants sets forth the totality of the procedures required of the Purchasers in
order to exercise the Warrants. No additional legal opinion or other information
or instructions shall be required of the Purchasers to exercise their Warrants.
The Company shall honor exercises of the Warrants and shall deliver Warrant
Shares in accordance with the terms, conditions and time periods set forth in
the Warrants.
4.7 SECURITIES LAWS DISCLOSURE; PUBLICITY. The Company shall, by 8:30
a.m. Eastern time on the Trading Day following the Closing Date, issue a press
release or file a Current Report on Form 8-K disclosing all material terms of
the transactions contemplated hereby. The Company and the Purchasers shall
consult with each other in issuing any press releases with respect to the
transactions contemplated hereby. Notwithstanding the foregoing, other than in
any registration statement filed pursuant to Section 4.13 hereof and filings
related thereto, the Company shall not publicly disclose the name of any
Purchaser, or include the name of any Purchaser in any filing with the
Commission or any regulatory agency or Principal Market, without the prior
written consent of such Purchaser, except to the extent such disclosure is
required by law or Principal Market regulations.
4.8 NON-PUBLIC INFORMATION. The Company covenants and agrees that
neither it nor any other Person acting on its behalf will provide any Purchaser
or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto such Purchaser
shall have executed a written agreement regarding the confidentiality and use of
such information. The Company understands and confirms that each Purchaser shall
be relying on the foregoing representations in effecting transactions in
securities of the Company.
4.9 USE OF PROCEEDS. The Company shall use the net proceeds from the
sale of the Securities hereunder for working capital purposes.
4.10 REIMBURSEMENT. If any Purchaser becomes involved in any capacity
in any Proceeding by or against any Person who is a stockholder of the Company,
solely as a result of such Purchaser's acquisition of the Securities under this
Agreement and without causation by any other activity, obligation, condition or
liability on the part of, or pertaining to such Purchaser and not to the
purchase of Securities pursuant to this Agreement, the Company will reimburse
such Purchaser, to the extent such reimbursement is not provided for in Section
4.11, for its reasonable legal and other expenses (including the cost of any
investigation, preparation and travel in connection therewith) incurred in
connection therewith, as such expenses are incurred. The reimbursement
obligations (and limitations thereon) of the Company under this paragraph shall
be in addition to any liability which the Company may otherwise have, shall
extend upon the same terms and conditions to any Affiliates of the Purchasers
who are actually named in such
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action, proceeding or investigation, and partners, directors, agents, employees
and controlling persons (if any), as the case may be, of the Purchasers and any
such Affiliate, and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of the Company, the
Purchasers and any such Affiliate and any such Person. The Company also agrees
that neither the Purchasers nor any such Affiliates, partners, directors,
agents, employees or controlling persons shall have any liability to the Company
or any Person asserting claims on behalf of or in right of the Company solely as
a result of acquiring the Securities under this Agreement except to the extent
any covenant or warranty owing to the Company is breached.
4.11 INDEMNIFICATION OF PURCHASERS. Subject to the provisions of this
Section 4.11, each party (the "INDEMNIFYING Party") will indemnify and hold the
other parties and their directors, officers, shareholders, partners, employees
and agents (each, an "INDEMNIFIED PARTY") harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and reasonable
attorneys' fees and costs of investigation that any such Indemnified Party may
suffer or incur as a result of or relating to any breach of any of the
representations, warranties, covenants or agreements made by the Indemnifying
Party in this Agreement or in the other Transaction Documents. If any action
shall be brought against any Indemnified Party in respect of which indemnity may
be sought pursuant to this Agreement, such Indemnified Party shall promptly
notify the Indemnifying Party in writing, and the Indemnifying Party shall have
the right to assume the defense thereof with counsel of its own choosing. Any
Indemnified Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Party except to the extent
that (i) the employment thereof has been specifically authorized by the
Indemnifying Party in writing, (ii) the Indemnifying Party has failed after a
reasonable period of time to assume such defense and to employ counsel or (iii)
in such action there is, in the reasonable opinion of such separate counsel, a
material conflict on any material issue between the position of the Indemnifying
Party and the position of such Indemnified Party. The Indemnifying Party will
not be liable to any Indemnified Party under this Agreement (i) for any
settlement by an Indemnified Party effected without the Indemnifying Party's
prior written consent, which shall not be unreasonably withheld or delayed; or
(ii) to the extent, but only to the extent that a loss, claim, damage or
liability is attributable to any Indemnified Party's breach of any of the
representations, warranties, covenants or agreements made by the Purchasers in
this Agreement or in the other Transaction Documents. In no event shall the
liability of any Purchaser hereunder be greater in amount than the dollar amount
of the net proceeds received by such Purchaser upon the sale of the Securities.
4.12 SHAREHOLDERS RIGHTS PLAN. In the event that a shareholders rights
plan is adopted by the Company, no claim will be made or enforced by the Company
or any other Person that any Purchaser is an "Acquiring Person" under the plan
or in any way could be deemed to trigger the provisions of such plan by virtue
of receiving Securities under the Transaction Documents.
4.13 REGISTRATION RIGHTS.
(a) On or prior to each Filing Date, the Company shall prepare and
file with the
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Commission a "Shelf" Registration Statement covering the resale of the
Registrable Securities on such Filing Date for an offering to be
made on a continuous basis pursuant to Rule 415. The Registration
Statement shall be on Form S-3 (unless the Company is not then eligible
to register for resale the Registrable Securities on Form S-3, in which
case such registration shall be on another appropriate form in
accordance herewith) and shall contain (unless otherwise directed
by the Holders) substantially the "Plan of Distribution" attached
hereto as ANNEX 1. Subject to the terms of this Agreement, the Company
shall use its best efforts to cause the Registration Statement to be
declared effective under the Securities Act as promptly as possible
after the filing thereof, but in any event prior to the applicable
Effectiveness Date, and shall use its best efforts to keep such
Registration Statement continuously effective under the Securities Act
until all Registrable Securities covered by such Registration
Statement have been sold or may be sold without volume restrictions
pursuant to Rule 144(k) as determined by the counsel to the Company
pursuant to a written opinion letter to such effect, addressed and
acceptable to the Company's transfer agent and the affected Holders
(the "EFFECTIVENESS PERIOD"). The Company shall immediately notify the
Holders via facsimile of the effectiveness of the Registration
Statement on the same day that the Company receives notification of the
effectiveness from the Commission.
(b) If: (i) a Registration Statement is not filed on or prior to
its Filing Date, or (ii) a Registration Statement filed or required to
be filed hereunder is not declared effective by the Commission by its
Effectiveness Date, or (iii) after the Effectiveness Date, a
Registration Statement ceases for any reason to remain continuously
effective as to all Registrable Securities for which it is required to
be effective, or the Holders are not permitted to utilize the
Prospectus therein to resell such Registrable Securities for 15
consecutive Trading Days or an aggregate of 25 Trading Days during any
12-month period (which need not be consecutive Trading Days) (any such
failure or breach being referred to as an "EVENT", and for purposes of
clause (i) or (ii) the date on which such Event occurs, or for purposes
of clause (iii) the date on which such 15 or 25 Trading Day period, as
applicable, is exceeded being referred to as "EVENT DATE"), then, on
each such Event Date and every monthly anniversary thereof until the
applicable Event is cured, the Company shall pay to each Holder an
amount in cash, as liquidated damages and not as a penalty, equal to 1%
of the Subscription Amount per month. If the Company fails to pay any
liquidated damages pursuant to this Section in full within seven days
after the date payable, the Company will pay interest thereon at a rate
of 18% per annum (or such lesser maximum amount that is permitted to be
paid by applicable law) to the Holder, accruing daily from the date
such liquidated damages are due until such amounts, plus all such
interest thereon, are paid in full.
(c) REGISTRATION PROCEDURES. In connection with the Company's
registration obligations hereunder, the Company shall:
(i) Not less than five Trading Days prior to the filing of
each Registration Statement or any related Prospectus or any
amendment or supplement thereto (including any document that would
be incorporated or deemed to be incorporated therein by
reference), the Company shall, (i) furnish to each Holder copies
of all
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such documents proposed to be filed, which documents (other than
those incorporated or deemed to be incorporated by reference) will
be subject to the review of such Holders, and (ii) cause its
officers and directors, counsel and independent certified public
accountants to respond to such inquiries as shall be necessary, in
the reasonable opinion of respective counsel to conduct a
reasonable investigation within the meaning of the Securities Act.
The Company shall not file the Registration Statement or any such
Prospectus or any amendments or supplements thereto to which the
Holders of a majority of the Registrable Securities shall
reasonably and in good faith object, provided, the Company is
notified of such objection in writing no later than 3 Trading Days
after the Holders have been so furnished copies of such documents.
(ii) (i) Prepare and file with the Commission such
amendments, including post-effective amendments, to a Registration
Statement and the Prospectus used in connection therewith as may
be necessary to keep a Registration Statement continuously
effective as to the applicable Registrable Securities for the
Effectiveness Period and prepare and file with the Commission such
additional Registration Statements in order to register for resale
under the Securities Act all of the Registrable Securities; (ii)
cause the related Prospectus to be amended or supplemented by any
required Prospectus supplement (subject to the terms of this
Agreement), and as so supplemented or amended to be filed pursuant
to Rule 424; (iii) respond as promptly as reasonably possible to
any comments received from the Commission with respect to a
Registration Statement or any amendment thereto and as promptly as
reasonably possible provide the Holders true and complete copies
of all correspondence from and to the Commission relating to a
Registration Statement; and (iv) comply in all material respects
with the provisions of the Securities Act and the Exchange Act
with respect to the disposition of all Registrable Securities
covered by a Registration Statement during the applicable period
in accordance (subject to the terms of this Agreement) with the
intended methods of disposition by the Holders thereof set forth
in such Registration Statement as so amended or in such Prospectus
as so supplemented.
(iii) If during the Effectiveness Period, the number of
Registrable Securities at any time exceeds 85% of the number of
shares of Common Stock then registered in a Registration
Statement, then the Company shall file as soon as reasonably
practicable but in any case prior to the applicable Filing Date,
an additional Registration Statement covering the resale by the
Holders of not less than 100% of the number of such Registrable
Securities.
(iv) Notify the Holders of Registrable Securities to be sold
(which notice shall, pursuant to clauses (ii) through (vi) of this
Section 4.13(c)(iv), shall be accompanied by an instruction to
suspend the use of the Prospectus until the requisite changes have
been made) as promptly as reasonably possible (and, in the case of
(i)(A) below, not less than five Trading Days prior to such
filing) and (if requested by any such Person) confirm such notice
in writing no later than one
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Trading Day following the day (i)(A) when a Prospectus or any
Prospectus supplement or post-effective amendment to a
Registration Statement is proposed to be filed; (B) when the
Commission notifies the Company whether there will be a "review"
of such Registration Statement and whenever the Commission
comments in writing on such Registration Statement (the Company
shall provide true and complete copies thereof and all written
responses thereto to each of the Holders); and (C) with respect
to a Registration Statement or any post-effective amendment,
when the same has become effective; (ii) of any request by the
Commission or any other Federal or state governmental authority
for amendments or supplements to a Registration Statement or
Prospectus or for additional information; (iii) of the issuance
by the Commission of any stop order suspending the effectiveness
of a Registration Statement covering any or all of the Registrable
Securities or the initiation of any Proceedings for that purpose;
(iv) of the receipt by the Company 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; (v) of the occurrence of any event
or passage of time that makes the financial statements included
in a Registration Statement ineligible for inclusion therein
or any statement made in a Registration Statement or Prospectus
or any document incorporated or deemed to be incorporated therein
by reference untrue in any material respect or that requires any
revisions to a Registration Statement, Prospectus or other
documents so that, in the case of a Registration Statement or the
Prospectus, as the case may be, 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 light of the circumstances under which they were made,
not misleading; and (vi) the occurrence or existence of any
pending corporate development with respect to the Company that
the Company believes may be material and that, in the
determination of the Company, makes it not in the best interest
of the Company to allow continued availability or the Registration
Statement or Prospectus; provided that any and all of such
information shall remain confidential to each Holder until such
information otherwise becomes public, unless disclosure by a
Holder is required by law; PROVIDED, FURTHER, notwithstanding
each Holder's agreement to keep such information confidential,
the Holders make no acknowledgement that any such information is
material, non-public information.
(v) Promptly deliver to each Holder, without charge, as many
copies of the Prospectus or Prospectuses (including each form of
prospectus) and each amendment or supplement thereto as such
Persons may reasonably request. Subject to the terms of this
Agreement, the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the
selling Holders in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any
amendment or supplement thereto.
(vi) Use commercially reasonable efforts to register or
qualify the resale of such Registrable Securities as required
under applicable securities or Blue Sky
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laws of each State within the United States as any Holder requests
in writing, to keep each such registration or qualification (or
exemption therefrom) effective during the Effectiveness Period;
provided, that the Company shall not be required to qualify
generally to do business in any jurisdiction where it is not then
so qualified or subject the Company to any material tax in any
such jurisdiction where it is not then so subject.
(vii) Cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be delivered to a transferee pursuant to a
Registration Statement, which certificates shall be free, to the
extent permitted by the Purchase Agreement, of all restrictive
legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such Holders may
request.
(viii) Upon the occurrence of any event contemplated by this
Section 4.13(c), as promptly as reasonably possible under the
circumstances taking into account the Company's good faith
assessment of any adverse consequences to the Company and its
stockholders of the premature disclosure of such event, prepare a
supplement or amendment, including a post-effective amendment, to
a Registration Statement or a supplement to the related Prospectus
or any document incorporated or deemed to be incorporated therein
by reference, and file any other required document so that, as
thereafter delivered, neither a Registration Statement nor such
Prospectus will contain an 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. If the
Company notifies the Holders in accordance with clauses (ii)
through (vi) of Section 4.13(c)(iv) above to suspend the use of
the use of any Prospectus until the requisite changes to such
Prospectus have been made, or the Company otherwise notifies the
Holders of its election to suspend the availability of a
Registration Statement and Prospectus pursuant to clause (vi) of
Section 4.13(c)(iv), then the Holders shall suspend use of such
Prospectus. The Company will use its best efforts to ensure that
the use of the Prospectus may be resumed as promptly as is
practicable, except that in the case of suspension of the
availability of a Registration Statement and Prospectus pursuant
to clause (vi) of Section 4.13(c)(iv), the Company shall not be
required to take such action until such time as it shall determine
that the continued availability of the Registration Statement and
Prospectus is no longer not in the best interest of the Company.
Notwithstanding the Company's right to suspend the use of the
prospectus hereunder, the Company shall remain liable to the
Holders pursuant to Section 4.13(b) for any suspensions of the
Registration Statement hereunder which otherwise require payment
thereunder.
(ix) Comply with all applicable rules and regulations of the
Commission.
(x) Use its best efforts to avoid the issuance of, or, if
issued, obtain the
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withdrawal of (i) any order suspending the effectiveness of a
Registration Statement, or (ii) any suspension of the
qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction, at the
earliest practicable moment.
(xi) The Company may require, at any time prior to the third
Trading Day prior to the Filing Date, each Holder to furnish to
the Company a statement as to the number of shares of Common Stock
beneficially owned by such Holder and, if requested by the
Commission, the controlling person thereof, within three Trading
days of the Company's request. During any periods that the Company
is unable to meet its obligations hereunder with respect to the
registration of the Registrable Securities solely because any
Holder fails to furnish such information within three Trading Days
of the Company's request, any liquidated damages that are accruing
at such time shall be tolled and any Event that may otherwise
occur solely because of such delay shall be suspended, until such
information is delivered to the Company.
(d) REGISTRATION EXPENSES. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall
be borne by the Company whether or not any Registrable Securities are
sold pursuant to the Registration Statement. The fees and expenses
referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without
limitation, fees and expenses (A) with respect to filings required to
be made with the Principal Market on which the Common Stock is then
listed for trading, and (B) in compliance with applicable state
securities or Blue Sky laws reasonably agreed to by the Company in
writing (including, without limitation, fees and disbursements of
counsel for the Company in connection with Blue Sky qualifications or
exemptions of the Registrable Securities and determination of the
eligibility of the Registrable Securities for investment under the laws
of such jurisdictions as requested by the Holders), (ii) printing
expenses (including, without limitation, expenses of printing
certificates for Registrable Securities and of printing prospectuses
requested by the Holders), (iii) messenger, telephone and delivery
expenses, (iv) fees and disbursements of counsel for the Company, and
(v) fees and expenses of all other Persons retained by the Company in
connection with the consummation of the transactions contemplated by
this Agreement. In addition, the Company shall be responsible for all
of its internal expenses incurred in connection with the consummation
of the transactions contemplated by this Agreement (including, without
limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit
and the fees and expenses incurred in connection with the listing of
the Registrable Securities on any securities exchange as required
hereunder. In no event shall the Company be responsible for any broker
or similar commissions or, except to the extent provided for in the
Transaction Documents, any legal fees or other costs of the Holders.
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(e) INDEMNIFICATION
(i) INDEMNIFICATION BY THE COMPANY. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold
harmless each Holder, the officers, directors, agents, brokers
(including brokers who offer and sell Registrable Securities as
principal as a result of a pledge or any failure to perform under a
margin call of Common Stock), investment advisors and employees of each
of them, each Person who controls any such Holder (within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act)
and the officers, directors, agents and employees of each such
controlling Person, to the fullest extent permitted by applicable law,
from and against any and all losses, claims, damages, liabilities,
costs (including, without limitation, costs of preparation and
reasonable attorneys' fees) and expenses (collectively, "LOSSES"), as
incurred, arising out of or relating to any untrue or alleged untrue
statement of a material fact contained in a Registration Statement, any
prospectus or any form of prospectus or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or relating
to any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case
of any prospectus or form of prospectus or supplement thereto, in light
of the circumstances under which they were made) not misleading, except
to the extent, but only to the extent, that (1) such untrue statements
or omissions or alleged untrue statements or omissions are based upon
information regarding such Holder furnished in writing to the Company
by such Holder expressly for use therein, or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Holder expressly for use in a Registration
Statement, such prospectus or such form of prospectus or in any
amendment or supplement thereto or (2) in the case of the use by such
Holder of an outdated or defective prospectus after the Company has
notified such Holder in writing that the prospectus is outdated or
defective and prior to the receipt by such Holder of written notice
thereof from the Company. The Company shall notify the Holders promptly
of the institution, threat or assertion of any action, claim, suit,
investigation, or proceeding, whether threatened or commenced (a
"PROCEEDING") arising from or in connection with the transactions
contemplated by this Agreement of which the Company is aware.
(ii) INDEMNIFICATION BY HOLDERS. Each Holder shall, severally and
not jointly, indemnify and hold harmless the Company, its directors,
officers, agents and employees, each Person who controls the Company
(within the meaning of Section 15 of the Securities Act and Section 20
of the Exchange Act), and the directors, officers, agents or employees
of such controlling Persons, to the fullest extent permitted by
applicable law, from and against all Losses (as determined by a court
of competent jurisdiction in a final judgment not subject to appeal or
review) arising out of or based upon any untrue statement of a material
fact contained in any Registration Statement, any prospectus, or any
form of prospectus, or in any amendment or supplement thereto, or
arising solely out of or
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basedsolely upon: (1) such Holder's failure to comply with the
prospectus delivery requirements of the Securities Act or (2) any
omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading to the extent, but only
to the extent, such untrue statement or omission is contained in any
information so furnished in writing by such Holder to the Company
specifically for inclusion in such Registration Statement or such
Prospectus or to the extent that (1) such untrue statements or
omissions are based upon information regarding such Holder furnished
in writing to the Company by such Holder expressly for use therein, or
to the extent such information relates to such Holder or such Holder's
proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for
use in the Registration Statement, such prospectus or such form of
prospectus or in any amendment or supplement thereto or (2) in the case
of an occurrence of an event of the type specified in Sections 4.13(b)
(iv) and 4.13(b)(v), the use by such Holder of an outdated or defective
prospectus after the Company has notified such Holder in writing that
the prospectus is outdated or defective and prior to the receipt by
such Holder of written notice thereof from the Company. In no event
shall the liability of any selling Holder hereunder be greater
in amount than the dollar amount of the net proceeds received by
such Holder upon the sale of the Registrable Securities giving rise
to such indemnification obligation.
(iii) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity
hereunder (an "INDEMNIFIED PARTY"), such Indemnified Party shall
promptly notify the Person from whom indemnity is sought (the
"INDEMNIFYING PARTY") in writing, and the Indemnifying Party shall
assume the defense thereof, including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice
shall not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the extent
that such failure shall have prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party or Parties unless: (1) the
Indemnifying Party has agreed in writing to pay such fees and expenses;
or (2) the Indemnifying Party shall have failed promptly to assume the
defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3)
the named parties to any such Proceeding (including any impleaded
parties) include both such Indemnified Party and the Indemnifying
Party, and such Indemnified Party shall have been advised by counsel
that a material conflict of interest is likely to exist if the same
counsel were to represent such Indemnified Party and the Indemnifying
Party (in which case, if such Indemnified Party notifies the
-26-
Indemnifying Party in writing that it elects to employ separate counsel
at the expense of the Indemnifying Party, the Indemnifying Party shall
not have the right to assume the defense thereof and the expense of one
such counsel for each Holder shall be at the expense of the
Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent,
which consent shall not be unreasonably withheld. No Indemnifying Party
shall, without the prior written consent of the Indemnified Party,
effect any settlement of any pending Proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on
claims that are the subject matter of such Proceeding.
Subject to the terms of this Agreement, all fees and expenses
of the Indemnified Party (including reasonable fees and expenses to the
extent incurred in connection with investigating or preparing to defend
such Proceeding in a manner not inconsistent with this Section) shall
be paid to the Indemnified Party, as incurred, within ten Trading Days
of written notice thereof to the Indemnifying Party (regardless of
whether it is ultimately determined that an Indemnified Party is not
entitled to indemnification hereunder; provided, that the Indemnifying
Party may require such Indemnified Party to undertake to reimburse all
such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to
indemnification hereunder).
(iv) CONTRIBUTION. If a claim for indemnification under Section
4.13(e)(i) or Section 4.13(e)(ii) is unavailable to an Indemnified
Party (by reason of public policy or otherwise), then each Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall contribute
to the amount paid or payable by such Indemnified Party as a result of
such Losses, in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and Indemnified Party in
connection with the actions, statements or omissions that resulted in
such Losses as well as any other relevant equitable considerations. The
relative fault of such Indemnifying Party and Indemnified Party shall
be determined by reference to, among other things, whether any action
in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission of a material fact, has
been taken or made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such action, statement or omission. The amount paid or payable
by a party as a result of any Losses shall be deemed to include,
subject to the limitations set forth in Section 4.13(e)(iii), any
reasonable attorneys' or other reasonable fees or expenses incurred by
such party in connection with any Proceeding to the extent such party
would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such
party in accordance with its terms.
-27-
The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 4.13(e)(iv) were determined by
pro rata allocation or by any other method of allocation that does not
take into account the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this
Section 4.13(e)(iv), no Holder shall be required to contribute, in the
aggregate, any amount in excess of the amount by which the proceeds
actually received by such Holder from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages
that such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties
may have to the Indemnified Parties.
ARTICLE VI
MISCELLANEOUS
5.1 TERMINATION. This Agreement may be terminated by any Purchaser, by
written notice to the other parties, if the Closing has not been consummated on
or before December 31, 2003; provided that no such termination will affect the
right of any party to xxx for any breach by the other party (or parties).
5.2 FEES AND EXPENSES. Except as expressly set forth in the Transaction
Documents to the contrary, each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement. The Company shall pay all transfer
agent fees, stamp taxes and other taxes and duties levied in connection with the
issuance of any Securities.
5.3 ENTIRE AGREEMENT. The Transaction Documents, together with the
exhibits thereto, contain the entire understanding of the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents and exhibits.
5.4 NOTICES. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified on the signature page attached hereto prior to 5:30 p.m. (Miami time)
on a Trading Day and an electronic confirmation of delivery is received by the
sender, (b) the next Trading Day after the date of transmission, if such notice
or communication is delivered via facsimile at the facsimile number specified in
this Section on a day that is not a Trading Day or later than 5:30 p.m. (Miami
time) on any Trading Day, (c) three Trading Days following the date of mailing,
if sent by U.S. nationally recognized overnight courier service, or (d) upon
actual receipt by the party to whom such notice is required to be given. The
addresses for such notices and communications are those set forth on the
signature
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pages hereof, or such other address as may be designated in writing hereafter,
in the same manner, by such Person.
5.5 AMENDMENTS; WAIVERS. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by the Company and each of the Purchasers or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right.
5.6 CONSTRUCTION. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. 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.
5.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Any Purchaser may assign
its rights under this Agreement to any Person to whom such Purchaser assigns or
transfers any Securities.
5.8 NO THIRD-PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Sections 4.11 and 4.12.
5.9 GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. All questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by and construed and enforced in accordance with the
internal laws of the State of Colorado, without regard to the principles of
conflicts of law thereof. 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 via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for 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. The parties hereby waive all rights to a trial
by jury. If either party shall commence an action or proceeding to enforce any
provisions of this Agreement, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its attorneys fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.
5.10 SURVIVAL. The representations, warranties, agreements and
covenants contained herein shall survive the Closing and the delivery and
exercise of the Securities, as applicable for the applicable statue of
limitations.
-29-
5.11 EXECUTION. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
5.12 SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
5.13 RESCISSION AND WITHDRAWAL RIGHT. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights; PROVIDED,
HOWEVER, in the case of a rescission of an exercise of a Warrant, the Purchaser
shall be required to return any shares of Common Stock subject to any such
rescinded exercise notice.
5.14 REPLACEMENT OF SECURITIES. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
5.15 REMEDIES. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
5.16 INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND RIGHTS. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be
-30-
deemed to constitute the Purchasers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser has been represented by its own separate legal counsel
in their review and negotiation of the Transaction Documents. The Company has
elected to provide Purchasers with the same terms and Transaction Documents for
the convenience of the Company and not because it was required or requested to
do so by the Purchasers.
5.17 LIQUIDATED DAMAGES. The Company's obligations to pay any
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
liquidated damages and other amounts have been paid notwithstanding the fact
that the instrument or security pursuant to which such liquidated damages or
other amounts are due and payable shall have been canceled.
***********************
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IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
GALAXY ENERGY CORPORATION
By:
--------------------------------------------
Name: Xxxx X. Xxxxxx
Title: President
ADDRESS FOR NOTICE:
0000 Xxxxxxxx Xxx Xxxxx, Xxxxx 0000
Xxxxx, Xxxxxxx 00000
Attn: Xxxx X. Xxxxxx, President
Tel: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
(which shall not constitute notice) Xxxx Xxxx Xxxx Xxxxxxxxxx & Xxxxxxxxx, P.C.
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxx X. Xxxxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
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PURCHASER'S SIGNATURE PAGE
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Purchaser Name:
-----------------------------------------------------------
Signature:
-----------------------------------------------------------
Name of Signatory:
-----------------------------------------------------------
Title of Signatory:
-----------------------------------------------------------
Subscription Amount: $ for Units
------------------------------ -------------
Address for Notice:
-----------------------------------------------------------
--------------------------------------------------------------------------------
Fax Number:
-----------------------------------------------------------
Telephone Number:
-----------------------------------------------------------
E-Mail Address:
-----------------------------------------------------------
With a copy to:
-----------------------------------------------------------
(which shall not constitute notice)
--------------------------------------------------------------------------------
WIRING INSTRUCTIONS: PAYMENT BY CASHIER'S CHECK:
U.S. Bank National Association Made payable to Galaxy Energy
Corporation
ABA: 000000000 And sent to
A/C: U.S. Bank Trust #180121167365 U.S. Bank National Association
FFC: Galaxy Energy Subscription Escrow 0000 Xxxxx Xxxxxx, 0xx Xxxxx
Attn: Xxxxxxx Xxx (000) 000-0000 Xxxxxxx, XX 00000
Attn: Xxxxxxx Xxx (000) 000-0000
COMPLETED AGREEMENT TO BE SENT TO:
Xxx X. Xxxxxxxxx (000) 000-0000 (direct line)
Xxxx Xxxx Xxxx Xxxxxxxxxx & Xxxxxxxxx, P.C. (000) 000-0000 (fax)
000 Xxxxxxx Xxxxxx, Xxxxx 000 (000) 000-0000 (office)
Xxxxxx, XX 00000
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ACCREDITED INVESTOR QUESTIONNAIRE
The undersigned Investor, in connection with the acquisition of
securities of GALAXY ENERGY CORPORATION (the "Company"), hereby makes the
following representations and warranties:
The Investor understands that the offer and sale of the Company's are
not being registered under the Securities Act of 1933, as amended (the "Act") or
qualified under state securities laws, in reliance upon exemptions from such
registration and qualification requirements for transactions not involving any
public offering. Information supplied through this Questionnaire will be used to
ensure compliance with the requirements of such exemptions.
The undersigned Investor represents and warrants to the Company that:
(a) The information contained herein is complete and accurate and may
be relied upon by the Company; and
(b) Investor will notify the Company immediately of any material
change in any of such information occurring prior to the
acceptance or rejection of the Investor's subscription for
securities of the Company.
ALL INFORMATION WILL BE TREATED CONFIDENTIALLY
The Investor represents and warrants that the Investor falls within the
category (or categories) marked. PLEASE INDICATE EACH CATEGORY OF ACCREDITED
INVESTOR THAT YOU SATISFY, BY PLACING AN "X" ON THE APPROPRIATE LINE BELOW.
_____ Category 1. A bank, as defined in Section 3(a)(2) of the Act,
whether acting in its individual or fiduciary capacity;
or
_____ Category 2. A savings and loan association or other institution as
defined in Section 3(a)(5)(A) of the Act, whether acting
in its individual or fiduciary capacity; or
_____ Category 3. A broker or dealer registered pursuant to Section 15 of
the Securities Exchange Act of 1934; or
_____ Category 4. An insurance company as defined in Section 2(13) of the
Act; or
_____ Category 5. An investment company registered under the Investment
Company Act of 1940; or
_____ Category 6. A business development company as defined in Section
2(a) (48) of the Investment Company Act of 1940; or
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_____ Category 7. A small business investment company licensed by the U.S.
Small Business Administration under Section 301(c) or
(d) of the Small Business Investment Act of 1958; or
_____ Category 8. A plan established and maintained by a state, its
political subdivision or any agency or instrumentality
of a state or its political subdivisions, for the
benefit of its employees, with assets in excess of
US$5,000,000; or
_____ Category 9. An employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974 in which
the investment decision is made by a plan fiduciary, as
defined in Section 3(21) of such Act, which is either a
bank, savings and loan association, insurance company
or registered investment advisor, or an employee benefit
plan with total assets in excess of US$5,000,000 or,
if a self-directed plan, the investment decisions are
made solely by persons who are accredited investors; or
_____ Category 10. A private business development company as defined in
Section 202(a)(22) or the Investment Advisors Act of
1940; or
_____ Category 11. An organization described in Section 501(c)(3) of the
Internal Revenue Code, a corporation, a Massachusetts or
similar business trust, or a partnership, not formed
for the specific purpose of acquiring the Shares, with
total assets in excess of US$5,000,000; or
_____ Category 12. A director, executive officer or general partner of the
Company; or
_____ Category 13. A natural person whose individual net worth, or joint
net worth with that person's spouse, at the time of this
purchase exceeds US$1,000,000; or
_____ Category 14. A natural person who had an individual income in excess
of US$200,000 in each of the two most recent years or
joint income with that person's spouse in excess of
US$300,000 in each of those years and has a reasonable
expectation of reaching the same income level in the
current year; or
_____ Category 15. A trust, with total assets in excess of US$5,000,000,
not formed for the specific purpose of acquiring the
securities offered, whose purchase is directed by a
sophisticated person as described in SEC Rule 506(b)
(2)(ii); or
_____ Category 16. An entity in which all of the equity owners are
accredited investors.
Date:
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(Signature)
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(Print Name)
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