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EXHIBIT 10.18
COMMON STOCK PURCHASE AGREEMENT
This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated as
of February 20, 2001 by and between x-XxxXxxx.xxx, a Nevada corporation (the
"Company"), and Xxxxxx International Limited (the "Purchaser").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to Purchaser from
time to time as provided herein, and Purchaser shall purchase, up to $50,000,000
of Common Stock (as defined below) and Warrants (as defined below); and
WHEREAS, such investments will be made by the Purchaser as statutory
underwriter of a registered indirect primary offering of such Common Stock by
the Company.
NOW, THEREFORE, in consideration of the foregoing premises, and the
promises and covenants herein contained, the receipt and sufficiency of which
are hereby acknowledged by the parties hereto, the parties, intending to be
legally bound, hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF COMMON STOCK
Section 1.1. Purchase and Sale of Stock. Subject to the terms and
conditions of this Agreement, the Company may sell and issue to the Purchaser
and the Purchaser shall be obligated to purchase from the Company, up to an
aggregate of, $50,000,000 of the Common Stock and the Warrant, subject to the
terms herein.
Section 1.2. Purchase Price and Initial Closing. The Company agrees
to issue and sell to the Purchaser and, in consideration of and in express
reliance upon the representations, warranties, covenants, terms and conditions
of this Agreement, the Purchaser agrees to purchase that number of the Shares to
be issued in connection with each Draw Down. The delivery of executed documents
under this Agreement and the other agreements referred to herein and the payment
of the fees set forth in Article I of the Escrow Agreement, attached as Exhibit
B hereto, (the "Initial Closing") shall take place at the offices of Xxxxxxx
Xxxxxx & Green, P.C., 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (i) within
fifteen (15) days from the date hereof, or (ii) such other time and place or on
such date as the Purchaser and the Company may agree upon (the "Initial Closing
Date"). Each party shall deliver all documents, instruments and writings
required to be delivered by such party pursuant to this Agreement at or prior to
the Initial Closing.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES
Section 2.1. Representation and Warranties of the Company. The
Company hereby makes the following representations and warranties to the
Purchaser as of the date hereof and as of the Initial Closing Date (unless
another date is given hereinbelow, in which case such representation and
warranty shall be as of such other date):
(a) Organization, Good Standing and Power. The Company is a
corporation duly incorporated validly existing and in good standing
under the laws of the State of Nevada and has all requisite corporate
authority to own, lease and operate its properties and assets and to
carry on its business as now being conducted. The Company does not have
any significant subsidiaries (as defined in Regulation S-X) and does not
own more than fifty percent (50%) of or control any other business
entity except as set forth in the SEC Documents or Schedule 2.1(a). The
Company is duly qualified to do business and is in good standing as a
foreign corporation in every jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification
necessary, other than those in which the failure so to qualify would not
have a Material Adverse Effect.
(b) Authorization, Enforcement. (i) The Company has the requisite
corporate power and corporate authority to enter into and perform its
obligations under the Transaction Documents and to issue the Draw Down
Shares pursuant to their respective terms, (ii) the execution and
delivery of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate action and no
further consent or authorization of the Company or its Board of
Directors or stockholders is required, and (iii) the Transaction
Documents have been duly executed and delivered by the Company and at
the Initial Closing shall constitute valid and binding obligations of
the Company enforceable against the Company in accordance with their
terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by other
equitable principles of general application, except that shareholder
approval is required for issuances of shares of Common Stock issued in
connection with this Agreement (including the shares of Common Stock
issuable pursuant to the warrant issued to the Company's investment
banker, Xxxxxxxx Capital Corp.) which in the aggregate exceed 19.99% of
the number of shares of Common Stock outstanding on the Initial Closing
Date. The Company has duly and validly authorized and reserved for
issuance shares of Common Stock sufficient in number for the issuance of
the Draw Down Shares.
(c) Capitalization. The authorized capital stock of the Company
consists of 200,000,000 shares of Common Stock of which 78,123,172
shares were issued and outstanding at the close of business on January
30, 2001, and 5,000,000 shares of preferred stock, of which no shares
are outstanding. All of the outstanding shares of the
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Company's Common Stock have been duly and validly authorized and are
fully paid and non-assessable, except as set forth in the SEC Documents.
Except as set forth in this Agreement and the Registration Rights
Agreement and as set forth in the SEC Documents, or on Schedule 2.1(c)
hereto, no shares of Common Stock are entitled to preemptive rights or
registration rights and there are no outstanding options, warrant,
scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company. Furthermore, except as set forth
in this Agreement and as set forth in the SEC Documents or on Schedule
2.1(c), there are no contracts, commitments, understandings, or
arrangements by which the Company is or may become bound to issue
additional shares of the capital stock of the Company or options,
securities or rights convertible into shares of capital stock of the
Company. Except as set forth on Schedule 2.1(c), the Company is not a
party to, and it has no knowledge of, any agreement restricting the
voting or transfer of any shares of the capital stock of the Company.
Except as set forth in the SEC Documents or on Schedule 2.1(c) hereto,
the offer and sale of all capital stock, convertible securities, rights,
warrants, or options of the Company issued prior to the Initial Closing
complied with all applicable federal and state securities laws, and no
stockholder has a right of rescission or damages with respect thereto
which would have a Material Adverse Effect on the Company's financial
condition or operating results. The Company has made available to the
Purchaser true and correct copies of the Company's articles or
certificate of incorporation as in effect on the date hereof (the
"Charter"), and the Company's bylaws as in effect on the date hereof
(the "Bylaws"). The Company has not received any notice from the
Principal Market questioning or threatening the continued inclusion of
the Common Stock on such market.
(d) Issuance of Shares. The Shares to be issued under this
Agreement have been duly authorized by all necessary corporate action
and, when paid for and issued in accordance with the terms hereof and
the Warrant, the Shares shall be validly issued and outstanding, fully
paid and non-assessable, and the Purchaser shall be entitled to all
rights accorded to a holder of Common Stock, except Shares which,
together with the Common Stock issuable to the Company's investment
banker, Xxxxxxxx Capital Corp. in connection with this transaction,
would result in the issuance of an aggregate number of shares of Common
Stock which exceeds 19.99% of the number of shares of Common Stock
issued and outstanding on the Initial Closing Date.
(e) No Conflicts. Except as set forth on Schedule 2.1(e), the
execution, delivery and performance of this Agreement by the Company and
the consummation by the Company of the transactions contemplated herein
do not and will not (i) violate any provision of the Company's Charter
or Bylaws, (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, mortgage, deed of trust,
indenture, note, bond, license, lease agreement, instrument or
obligation to which the Company is a party, (iii) create or impose a
lien, charge or encumbrance on any property of the Company under any
agreement or any commitment to which the Company is a party or by which
the Company is bound or by which any of its respective properties or
assets are bound, or (iv) result in a violation of
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any federal, state, local or other foreign statute, rule, regulation,
order, judgment or decree (including any federal or state securities
laws and regulations) applicable to the Company or any of its
subsidiaries or by which any property or asset of the Company or any of
its subsidiaries are bound or affected, except, in all cases, for such
conflicts, defaults, termination, amendments, accelerations,
cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect. The business of the Company
and its subsidiaries is not being conducted in violation of any laws,
ordinances or regulations of any governmental entity, except for
possible violations which singularly or in the aggregate do not and will
not have a Material Adverse Effect. The Company is not required under
any federal, state or local law, rule or regulation to obtain any
consent, authorization or order of, or make any filing or registration
with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement, or issue
and sell the Shares in accordance with the terms hereof (other than any
filings which may be required to be made by the Company with the SEC or
state securities administrators subsequent to the Initial Closing and
any registration statement which may be filed pursuant hereto); provided
that, for purpose of the representation made in this sentence, the
Company is assuming and relying upon the accuracy of the relevant
representations and agreements of the Purchaser herein.
(f) SEC Documents, Financial Statements. The Common Stock of the
Company is registered pursuant to Section 12(g) of the Exchange Act,
and, except as disclosed in the SEC Documents or on Schedule 2.1(f)
hereto, the Company has timely filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC
pursuant to the reporting requirements of the Exchange Act, including
material filed pursuant to Section 13(a) or 15(d) of the Exchange Act
(all of the foregoing including filings incorporated by reference
therein being referred to herein as the "SEC Documents"). The Company
has delivered or made available to the Purchaser, through the XXXXX
system or otherwise, true and complete copies of the SEC Documents filed
with the SEC since December 31, 1998. As of their respective filing
dates, the SEC Documents complied in all material respects with the
requirements of the Exchange Act or the Securities Act, as applicable,
and the rules and regulations of the SEC promulgated thereunder
applicable to such documents, and, as of their respective filing dates,
none of the SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents comply as to
form in all material respects with applicable accounting requirements
under GAAP and the published rules and regulations of the SEC or other
applicable rules and regulations with respect thereto. Such financial
statements have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto or
(ii) in the case of unaudited interim statements, to the extent they may
not include footnotes or may be condensed or summary statements), and
fairly present in all material respects the financial position of the
Company and its subsidiaries as of the dates thereof and the results of
operations and
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cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
(g) Subsidiaries. The SEC Documents or Schedule 2.1(g) hereto
sets forth each subsidiary of the Company, showing the jurisdiction of
its incorporation or organization and showing the percentage of the
Company's ownership of the outstanding stock or other interests of such
subsidiary. For the purposes of this Agreement, "subsidiary" shall mean
any corporation or other entity of which at least a majority of the
securities or other ownership interests having ordinary voting power
(absolutely or contingently) for the election of directors or other
persons performing similar functions are at the time owned directly or
indirectly by the Company and/or any of its other subsidiaries. All of
the issued and outstanding shares of capital stock of each subsidiary
have been duly authorized and validly issued, and are fully paid and
non-assessable. There are no outstanding preemptive, conversion or other
rights, options, warrants or agreements granted or issued by or binding
upon any subsidiary for the purchase or acquisition of any shares of
capital stock of any subsidiary or any other securities convertible
into, exchangeable for or evidencing the rights to subscribe for any
shares of such capital stock. Neither the Company nor any subsidiary is
subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of the capital stock of any
subsidiary or any convertible securities, rights, warrants or options of
the type described in the preceding sentence. Neither the Company nor
any subsidiary is a party to, nor has any knowledge of, any agreement
restricting the voting or transfer of any shares of the capital stock of
any subsidiary.
(h) No Material Adverse Effect. Since the date of the financial
statement contained in the most recently filed Form 10-Q (or 10-QSB) or
Form 10-K (or 10-KSB), whichever is most current, no Material Adverse
Effect has occurred or exists with respect to the Company, except as
disclosed in the SEC Documents or on Schedule 2.1(h) hereto.
(i) No Undisclosed Liabilities. Except as disclosed in the SEC
Documents or on Schedule 2.1(i) hereto, neither the Company nor any of
its subsidiaries has any liabilities, obligations, claims or losses
(whether liquidated or unliquidated, secured or unsecured, absolute,
accrued, contingent or otherwise) that would be required to be disclosed
on a balance sheet of the Company or any subsidiary (including the notes
thereto) in conformity with GAAP which are not disclosed in the SEC
Documents, other than those incurred in the ordinary course of the
Company's or its subsidiaries' respective businesses since such date and
which, individually or in the aggregate, do not or would not have a
Material Adverse Effect on the Company or its subsidiaries.
(j) No Undisclosed Events or Circumstances. Since the date of the
financial statement contained in the most recently filed Form 10- Q (or
10-QSB) or Form 10-K (or 10-KSB), whichever is most current, no event or
circumstance has occurred or exists with respect to the Company or its
businesses, properties, prospects, operations or financial condition,
that, under applicable securities law, rule or regulation, requires
public disclosure or announcement prior to the date hereof by the
Company but which has not been so publicly announced or disclosed in the
SEC Documents.
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(k) Indebtedness. The SEC Documents or Schedule 2.1(k) hereto
sets forth as of the date hereof all 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 $250,000 (other than trade accounts payable
incurred in the ordinary course of business), (B) all guaranties,
endorsements and contingent obligations in respect of Indebtedness of
others, whether or not the same are or should be reflected in the
Company's balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business; and (C) the
present value of any lease payments in excess of $250,000 due under
leases required to be capitalized in accordance with GAAP. Neither the
Company nor any subsidiary is in default with respect to any
Indebtedness.
(l) Title to Assets. Each of the Company has good and marketable
title to all of its real and personal property reflected in the SEC
Documents, free of any mortgages, pledges, charges, liens, security
interests or other encumbrances, except for those indicated in the SEC
Documents or on Schedule 2.1(1) hereto or such that do not cause a
Material Adverse Effect. All said leases of the Company are valid and
subsisting and in full force and effect.
(m) Actions Pending. There is no action, suit, claim,
investigation or proceeding pending or, to the knowledge of the Company,
threatened against the Company or any subsidiary which questions the
validity of this Agreement or the transactions contemplated hereby or
any action taken or to be taken pursuant hereto or thereto. Except as
set forth in the SEC Documents or on Schedule 2.1(m) hereto, there is no
action, suit, claim, investigation or proceeding pending or, to the
knowledge of the Company, threatened, against or involving the Company,
any subsidiary or any of their respective properties or assets. There
are no outstanding orders, judgments, injunctions, awards or decrees of
any court, arbitrator or governmental or regulatory body against the
Company or any subsidiary.
(n) Compliance with Law. The Company and each of its subsidiaries
have all franchises, permits, licenses, consents and other governmental
or regulatory authorizations and approvals necessary for the conduct of
their respective businesses as now being conducted by them unless the
failure to possess such franchises, permits, licenses, consents and
other governmental or regulatory authorizations and approvals,
individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.
(o) Taxes. The Company and each subsidiary has filed all Tax
Returns which it is required to file under applicable laws; all such Tax
Returns are true and accurate and have been prepared in compliance with
all applicable laws; the Company has paid all Taxes due and owing by it
or any subsidiary (whether or not such Taxes are required to be shown on
a Tax Return) and has withheld and paid over to the appropriate taxing
authorities all Taxes which it is required to withhold from amounts paid
or owing
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to any employee, stockholder, creditor or other third parties; and since
December 31, 1999, the charges, accruals and reserves for Taxes with
respect to the Company (including any provisions for deferred income
taxes) reflected on the books of the Company are adequate to cover any
Tax liabilities of the Company if its current tax year were treated as
ending on the date hereof.
No claim has been made by a taxing authority in a jurisdiction
where the Company does not file tax returns that the Company or any
subsidiary is or may be subject to taxation by that jurisdiction. There
are no foreign, federal, state or local tax audits or administrative or
judicial proceedings pending or being conducted with respect to the
Company or any subsidiary; no information related to Tax matters has
been requested by any foreign, federal, state or local taxing authority;
and, except as disclosed above, no written notice indicating an intent
to open an audit or other review has been received by the Company or any
subsidiary from any foreign, federal, state or local taxing authority.
There are no material unresolved questions or claims concerning the
Company's Tax liability. The Company (A) has not executed or entered
into a closing agreement pursuant to Section 7121 of the Internal
Revenue Code or any predecessor provision thereof or any similar
provision of state, local or foreign law; and (B) has not agreed to or
is required to make any adjustments pursuant to Section 481 (a) of the
Internal Revenue Code or any similar provision of state, local or
foreign law by reason of a change in accounting method initiated by the
Company or any of its subsidiaries or has any knowledge that the IRS has
proposed any such adjustment or change in accounting method, or has any
application pending with any taxing authority requesting permission for
any changes in accounting methods that relate to the business or
operations of the Company. The Company has not been a United States real
property holding corporation within the meaning of Section 897(c)(2) of
the Internal Revenue Code during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Internal Revenue Code.
The Company has not made an election under Section 341(f) of the
Internal Revenue Code. The Company is not liable for the Taxes of
another person that is not a subsidiary of the Company under (A) Treas.
Reg. Section 1.1502-6 (or comparable provisions of state, local or
foreign law), (B) as a transferee or successor, (C) by contract or
indemnity or (D) otherwise. The Company is not a party to any tax
sharing agreement.
For purposes of this Section 2.1(o):
"IRS" means the United States Internal Revenue Service.
"Tax" or "Taxes" means federal, state, county, local, foreign, or
other income, gross receipts, ad valorem, franchise, profits, sales or
use, transfer, registration, excise, utility, environmental,
communications, real or personal property, capital stock, license,
payroll, wage or other withholding, employment, social security,
severance, stamp, occupation, alternative or add-on minimum, estimated
and other taxes of any kind whatsoever (including, without limitation,
deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.
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"Tax Return" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and including
any amendment thereof.
(p) Certain Fees. Except as set forth on Schedule 2.1(p) hereto,
no brokers, finders or financial advisory fees or commissions will be
payable by the Company or any subsidiary with respect to the
transactions contemplated by this Agreement.
(q) Disclosure. To the best of the Company's knowledge, neither
this Agreement or the Schedules hereto nor any other documents,
certificates or instruments furnished to the Purchaser by or on behalf
of the Company or any subsidiary in connection with the transactions
contemplated by this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary in order to
make the statements made herein or therein, in the light of the
circumstances under which they were made herein or therein, not
misleading.
(r) Operation of Business. The Company and/or its subsidiaries
each own or possess patents, trademarks, service marks, trade names,
copyrights, licenses and authorizations as are set forth in the SEC
Documents or on Schedule 2.1(r), and as are necessary to conduct its
businesses as now conducted, and is not aware of any infringement by it,
or conflict with asserted rights of others that, in any such case, if
determined adversely to the Company or its subsidiaries would,
individually or in the aggregate, have a Material Adverse Effect.
(s) Insurance. Except as disclosed in the SEC Documents or on
Schedule 2.1(s) hereto, the Company carries or will have the benefit of
insurance in such amounts and covering such risks as is adequate for the
conduct of its business and the value of its properties and as is
customary for companies engaging in similar businesses and similar
industries.
(t) Books and Records. The records and documents of the Company
and its subsidiaries accurately reflect in all material respects the
information relating to the business of the Company and the
subsidiaries, the location and collection of their assets, and the
nature of all transactions giving rise to the obligations or accounts
receivable of the Company or any subsidiary.
(u) Material Agreements. Except as set forth in the SEC
Documents, or on Schedule 2.1(u) hereto, neither the Company nor any
subsidiary is a party to any written or oral contract, instrument,
agreement, commitment, obligation, plan or arrangement, a copy of which
would be required to be filed with the SEC as an exhibit to a
registration statement on Form S-1 or other applicable form
(collectively, "Material Agreements") if the Company or any subsidiary
were registering securities under the Securities Act. Except as set
forth on Schedule 2.1(u), the Company and each of its subsidiaries has
in all material respects performed all the obligations required to be
performed by them to date under the foregoing agreements, have received
no notice of default and, to the best of the Company's knowledge are not
in default under any Material
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Agreement now in effect, the result of which could cause a Material
Adverse Effect. Except as set forth in the SEC Documents, no written or
oral contract, instrument, agreement, commitment, obligation, plan or
arrangement of the Company or of any subsidiary limits or shall limit
the payment of dividends on the Company's Common Stock.
(v) Transactions with Affiliates. To our knowledge, except as set
forth in the SEC Documents or on Schedule 2.1(v) hereto, there are no
loans, leases, agreements, contracts, royalty agreements, management
contracts or arrangements or other continuing transactions exceeding
$100,000 between (A) the Company, any subsidiary or any of their
respective customers or suppliers on the one hand, and (B) on the other
hand, any officer, employee, consultant or director of the Company, or
any of its subsidiaries, or any person owning 5% or more of the capital
stock of the Company or any subsidiary or any member of the immediate
family of such officer, employee, consultant, director or stockholder or
any corporation or other entity controlled by such officer, employee,
consultant, director or stockholder, or a member of the immediate family
of such officer, employee, consultant, director or stockholder.
(w) Securities Laws. The Company has complied and will comply
with all applicable federal and state securities laws in connection with
the offer, issuance and sale of the Shares hereunder. Neither the
Company nor anyone acting on its behalf, directly or indirectly, has or
will sell, offer to sell or solicit offers to buy the Shares or similar
securities to, or solicit offers with respect thereto from, or enter
into any preliminary conversations or negotiations relating thereto
with, any person (other than the Purchaser), so as to bring the issuance
and sale of the Shares under the registration provisions of the
Securities Act and applicable state securities laws. Neither the Company
nor any of its affiliates, nor any person acting on its or their behalf,
has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the Securities Act) in
connection with the offer or sale of the Shares.
(x) Employees. Neither the Company nor any subsidiary, except for
a breach which would not, individually or in the aggregate, have a
Material Adverse Effect, has any collective bargaining arrangements or
agreements covering any of its employees. Except as set forth in the SEC
Documents or on Schedule 2.1(x) hereto, neither the Company nor any
subsidiary is in breach of any employment contract, agreement regarding
proprietary information, noncompetition agreement, nonsolicitation
agreement, confidentiality agreement, or any other similar contract or
restrictive covenant, relating to the right of any officer, employee or
consultant to be employed or engaged by the Company or such subsidiary.
Since the date of the December 31, 1999 Form 10-K (or 10-KSB), no
officer, consultant or key employee of the Company or any subsidiary
whose termination, either individually or in the aggregate, could have a
Material Adverse Effect, has terminated or, to the knowledge of the
Company, has any present intention of terminating his or her employment
or engagement with the Company or any subsidiary.
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(y) Absence of Certain Developments. Except as disclosed in SEC
Documents or on Schedule 2.1(y) hereto, since the date of the financial
statement contained in the most recently filed Form 10-Q (or 10-QSB) or
Form 10-K (or 10KSB), whichever is most current, neither the Company nor
any subsidiary has:
(i) issued any stock, bonds or other corporate securities or
any rights, options or warrants with respect thereto;
(ii)borrowed any amount or incurred or become subject to any
liabilities (absolute or contingent) except current liabilities
incurred in the ordinary course of business which are comparable
in nature and amount to the current liabilities incurred in the
ordinary course of business during the comparable portion of its
prior fiscal year, as adjusted to reflect the current nature and
volume of the Company's or such subsidiary's business;
(iii)discharged or satisfied any lien or encumbrance or paid
any obligation or liability (absolute or contingent), other than
current liabilities paid in the ordinary course of business;
(iv)declared or made any payment or distribution of cash or
other property to stockholders with respect to its stock, or
purchased or redeemed, or made any agreements so to purchase or
redeem, any shares of its capital stock;
(v)sold, assigned or transferred any other tangible assets,
or canceled any debts or claims, except in the ordinary course of
business;
(vi)sold, assigned or transferred any patent rights,
trademarks, trade names, copyrights, trade secrets or other
intangible assets or intellectual property rights, or disclosed
any proprietary confidential information to any person except
pursuant to the Company's standard confidentiality agreements, to
customers in the ordinary course of business or to the Purchaser
or its representatives;
(vii)suffered any material losses (except for anticipated
losses consistent with prior quarters) or waived any rights of
material value, whether or not in the ordinary course of
business, or suffered the loss of any material amount of
prospective business;
(viii)made any changes in employee compensation except in the
ordinary course of business and consistent with past practices;
(ix)made capital expenditures or commitments therefor that
aggregate in excess of $500,000;
(x)entered into any other material transaction, whether or
not in the ordinary course of business;
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(xi)suffered any material damage, destruction or casualty
loss, whether or not covered by insurance;
(xii)experienced any material problems with labor or
management in connection with the terms and conditions of their
employment; or
(xiii)effected any two or more events of the foregoing kind
which in the aggregate would be material to the Company or its
subsidiaries.
(z) Governmental Approvals. Except as set forth in the SEC
Documents or on Schedule 2.1(z) hereto, and except for the filing of any
notice prior or subsequent to any Settlement Date that may be required
under applicable federal or state securities laws (which if required,
shall be filed on a timely basis), including the filing of a
registration statement or post-effective amendment pursuant to this
Agreement, no authorization, consent, approval, license, exemption of,
filing or registration with any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign, is or will be necessary for, or in connection with, the
delivery of the Shares, or for the performance by the Company of its
obligations under this Agreement.
(aa) Acknowledgment Regarding Purchaser's Purchase of Shares.
Company acknowledges and agrees that Purchaser is acting solely in the
capacity of arm's length purchaser with respect to this Agreement and
the transactions contemplated hereunder. The Company further
acknowledges that the Purchaser is not acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to
this Agreement and the transactions contemplated hereunder. The Company
further represents to the Purchaser that the Company's decision to enter
into this Agreement has been based solely on (a) the Purchaser's
representations and warranties in Section 3.2, and (b) the independent
evaluation by the Company and its own representatives and counsel.
Section 2.2. Representations and Warranties of the Purchaser. The
Purchaser hereby makes the following representations and warranties to the
Company as of the date hereof and as of the Initial Closing Date:
(a) Organization and Standing of the Purchaser. The Purchaser is
a corporation duly incorporated, validly existing and in good standing
under the laws of the British Virgin Islands and resides at Xxxxxxx
Xxxxx, 0xx Xxxxx, Xxxxxxxxxx Drive, Road Town, Tortola, British Virgin
Islands.
(b) Authorization and Power. The Purchaser has the requisite
power and authority to enter into and perform the Transaction Documents
and to purchase the Shares being sold to it hereunder. The execution,
delivery and performance of the Transaction Documents by Purchaser and
the consummation by it of the transactions contemplated hereby have been
duly authorized by all necessary corporate action and at the Initial
Closing shall constitute valid and binding obligations of the Purchaser
enforceable against the Purchaser in accordance with their terms, except
as such enforceability may be
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limited by applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation, conservatorship, receivership or similar laws
relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general
application
(c) No Conflicts. The execution, delivery and performance of this
Agreement and the consummation by the Purchaser of the transactions
contemplated hereby or relating hereto do not and will not (i) result in
a violation of the Purchaser's charter documents or bylaws or (ii)
conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of
any agreement, indenture or instrument to which the Purchaser is a
party, or result in a violation of any law, rule, or regulation, or any
order, judgment or decree of any court or governmental agency applicable
to the Purchaser or its properties (except for such conflicts, defaults
and violations as would not, individually or in the aggregate, have a
Material Adverse Effect on Purchaser). The Purchaser is not required to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to
execute, deliver or perform any of its obligations under this Agreement
or to purchase the Shares in accordance with the terms hereof.
(d) Financial Risks. The Purchaser acknowledges that it is able
to bear the financial risks associated with an investment in the Shares
and that it has been given full access to such records of the Company
and the subsidiaries and to the officers of the Company and the
subsidiaries as it has deemed necessary or appropriate to conduct its
due diligence investigation. The Purchaser is capable of evaluating the
risks and merits of an investment in the Shares by virtue of its
experience as an investor and its knowledge, experience, and
sophistication in financial and business matters and the Purchaser is
capable of bearing the entire loss of its investment in the Shares.
(e) Accredited Investor. The Purchaser is an "accredited
investor" as defined in Regulation D promulgated under the Securities
Act.
(f) General. The Purchaser understands that the Company is
relying upon the truth and accuracy of the representations, warranties,
agreements, acknowledgments and understandings of the Purchaser set
forth herein in order to determine the suitability of the Purchaser to
acquire the Shares.
ARTICLE 3
COVENANTS
The Company covenants with the Purchaser as follows:
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Section 3.1. The Shares. As of the date of each applicable Draw
Down, the Company will have authorized and reserved, free of preemptive rights
and other similar contractual rights of stockholders, a sufficient number of its
authorized but unissued shares of its Common Stock to cover the Shares to be
issued in connection with such Draw Down requested under this Agreement.
Anything in this Agreement to the contrary notwithstanding, (i) at no time will
the Company request a Draw Down which would result in the issuance of an
aggregate number of shares of Common Stock pursuant to this Agreement which
exceeds 19.9% of the number of shares of Common Stock issued and outstanding on
the Initial Closing Date without obtaining stockholder approval of such excess
issuance, or such other amount as would require stockholder approval under rules
of the Principal Market or otherwise without obtaining stockholder approval of
such excess issuance, and (ii) the Company may not make a Draw Down to the
extent that, after such purchase by the Purchaser, the sum of the number of
shares of Common Stock beneficially owned by the Purchaser and its affiliates
would result in beneficial ownership by the Purchaser and its affiliates of more
than 9.9% of the then outstanding shares of Common Stock. For purposes of the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Exchange Act.
Section 3.2. Securities Compliance. If applicable, the Company shall
notify the Principal Market, in accordance with its rules and regulations, of
the transactions contemplated by this Agreement, and shall take all other
necessary action and proceedings as may be required and permitted by applicable
law, rule and regulation, for the legal and valid issuance of the Shares and the
Warrant to the Purchaser or subsequent holders.
Section 3.3. Registration and Listing. The Company will cause its
Common Stock to continue to be registered under Sections 12(b) or 12(g) of the
Exchange Act, will comply in all respects with its reporting and filing
obligations under the Exchange Act, will comply with all requirements related to
any registration statement filed pursuant to this Agreement, and will not take
any action or file any document (whether or not permitted by the Securities Act
or the Exchange Act or the rules promulgated thereunder) to terminate or suspend
such registration or to terminate or suspend its reporting and filing
obligations under the Exchange Act or Securities Act, except as permitted
herein. The Company will take all action necessary to continue the listing or
trading of its Common Stock on the Principal Market and will comply in all
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of the Principal Market and shall provide the Purchaser with
copies of any correspondence to or from such Principal Market which questions or
threatens delisting of the Common Stock, within three (3) Trading Days of the
Company's receipt thereof, until the Purchaser has disposed of all of the
Shares.
Section 3.4. Escrow Arrangement. The Company and the Purchaser shall
enter into an escrow arrangement with Xxxxxxx Xxxxxx & Green, P.C. (the "Escrow
Agent") in the form of Exhibit B hereto respecting payment against delivery of
the Shares.
Section 3.5. Registration Rights Agreement. The Company and the
Purchaser shall enter into the Registration Rights Agreement in the Form of
Exhibit A hereto. Before the Purchaser shall be obligated to accept a Draw Down
request from the Company, the Company
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shall have caused a sufficient number of shares of Common Stock to be registered
to cover the Shares to be issued in connection with such Draw Down.
Section 3.6. Accuracy of Registration Statement. On each Settlement
Date, the Registration Statement and the prospectus therein shall not contain
any untrue statement of a material fact or omit to state any material fact to be
required to be stated therein or necessary in order to make the statements
therein not misleading in light of the circumstances under which they were made;
and on such Settlement Date or date of filing of the Registration Statement and
the prospectus therein will not include any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, the Company makes no representations or
warranties as to the information contained in or omitted from the Registration
Statement and the prospectus therein in reliance upon and in conformity with the
information furnished in writing to the Company by the Purchaser specifically
for inclusion in the Registration Statement and the prospectus therein.
Section 3.7. Compliance with Laws. The Company shall comply, and
cause each subsidiary to comply, with all applicable laws, rules, regulations
and orders, noncompliance with which could have a Material Adverse Effect.
Section 3.8. Keeping of Records and Books of Account. The Company
shall keep and cause each subsidiary to keep adequate records and books of
account, in which complete entries will be made in accordance with GAAP
consistently applied, reflecting all financial transactions of the Company and
its subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
Section 3.9. Other Agreements. The Company shall not enter into any
agreement the terms of which such agreement would restrict or impair the ability
of the Company to perform its obligations under this Agreement.
Section 3.10. Notice of Certain Events Affecting Registration;
Suspension of Right to Request a Draw Down. THE COMPANY WILL IMMEDIATELY NOTIFY
THE PURCHASER UPON THE OCCURRENCE OF ANY OF THE FOLLOWING EVENTS IN RESPECT OF
THE REGISTRATION STATEMENT OR RELATED PROSPECTUS IN RESPECT OF THE SHARES: (i)
receipt of any request for additional information from the SEC or any other
federal or state governmental authority during the period of effectiveness of
the Registration Statement the response to which would require any amendments or
supplements to the Registration Statement or related prospectus; (ii) the
issuance by the SEC or any other federal or state governmental authority of any
stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose; (iii) receipt of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Shares for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; (iv) the happening
of any event that makes any statement made in the Registration Statement or
related prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or that requires the making
of any changes in the Registration Statement, related prospectus or documents so
that, in
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the case of the Registration Statement, it will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and that in
the case of the related prospectus, it will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and (v) the Company's reasonable
determination that a post-effective amendment to the Registration Statement
would be appropriate. The Company shall not deliver to the Purchaser any Draw
Down Notice during the continuation of any of the foregoing events. The Company
shall promptly make available to the Purchaser any such supplements or
amendments to the related prospectus, at which time, provided that the
registration statement and any supplements and amendments thereto are then
effective, the Company may recommence the delivery of Draw Down Notices.
Section 3.11. Consolidation; Merger. The Company shall not, at any
time after the date hereof, effect any merger or consolidation of the Company
with or into, or a transfer of all or substantially all of the assets of the
Company to, another entity (a "Consolidation Event") unless the resulting
successor or acquiring entity (if not the Company) assumes by written instrument
or by operation of law the obligation to deliver to the Purchaser such shares of
stock and/or securities as the Purchaser is entitled to receive pursuant to this
Agreement.
Section 3.12. Use of Proceeds. The proceeds from the sale of the
Shares will be used by the Company and its subsidiaries for general corporate
purposes.
The Purchaser covenants with the Company as follows:
Section 3.13. Compliance with Law. The Purchaser agrees that its
trading activities with respect to shares of the Company's Common Stock will be
in compliance with all applicable state and federal securities laws, rules and
regulations and rules and regulations of the Principal Market on which the
Company's Common Stock is listed. Without limiting the generality of the
foregoing, the Purchaser agrees that it will, whenever required by federal
securities laws, deliver the prospectus included in the Registration Statement
to any purchaser of Shares from the Purchaser.
Section 3.14. Confidentiality. The Purchaser agrees that it will
keep confidential and will not disclose or divulge any confidential, proprietary
or secret information which it may obtain from the Company pursuant to this
Agreement or the Registration Rights Agreement; provided, however, that the
Purchaser may disclose such information (i) to its attorneys, accountants,
consultants, and other professionals to the extent necessary to obtain their
services in connection with its investment in the Company, or (ii) pursuant to
an order entered by a legal, regulatory or administrative body having the
authority to enter such order; provided, however, that, if practicable, prior to
any such disclosure, the Purchaser shall give the Company prompt notice of such
order so that the Company may seek a protective order to take the other
appropriate legal action to avoid such disclosure.
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ARTICLE 4
CONDITIONS TO INITIAL CLOSING AND DRAW DOWNS
Section 4.1. Conditions Precedent to the Obligation of the Company
to Sell the Shares. The obligation hereunder of the Company to proceed to close
this Agreement and to issue and sell the Shares to the Purchaser is subject to
the satisfaction or waiver, at or before the Initial Closing, and as of each
Settlement Date of each of the conditions set forth below. These conditions are
for the Company's sole benefit and may be waived by the Company at any time in
its sole discretion.
(a) Accuracy of the Purchaser's Representations and Warranties.
The representations and warranties of the Purchaser shall be true and
correct in all material respects as of the date when made and as of the
Initial Closing and as of each Settlement Date as though made at that
time, except for representations and warranties that speak as of a
particular date.
(b) Performance by the Purchaser. The Purchaser shall have
performed, satisfied and complied in all material respects with all
material covenants, agreements and conditions required by this Agreement
to be performed, satisfied or complied with by the Purchaser at or prior
to the Initial Closing and as of each Settlement Date.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of
competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement.
Section 4.2. Conditions Precedent to the Obligation of the Purchaser
to Close. The obligation hereunder of the Purchaser to perform its obligations
under this Agreement and to purchase the Shares is subject to the satisfaction
or waiver, at or before the Initial Closing, of each of the conditions set forth
below. These conditions are for the Purchaser's sole benefit and may be waived
by the Purchaser at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties.
Each of the representations and warranties of the Company shall be true
and correct in all material respects as of the date when made and as of
the Initial Closing as though made at that time (except for
representations and warranties that speak as of a particular date).
(b) Performance by the Company. The Company shall have performed,
satisfied and complied in all respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or
complied with by the Company at or prior to the Initial Closing.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any
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court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by
this Agreement.
(d) No Proceedings or Litigation. No action, suit or proceeding
before any arbitrator or any governmental authority shall have been
commenced, and no investigation by any governmental authority shall have
been threatened, against the Purchaser or the Company or any subsidiary,
or any of the officers, directors or affiliates of the Company or any
subsidiary seeking to restrain, prevent or change the transactions
contemplated by this Agreement, or seeking damages in connection with
such transactions.
(e) Opinion of Counsel, Etc. At the Initial Closing, the
Purchaser shall have received an opinion of counsel to the Company,
dated as of the Initial Closing Date, in the form of Exhibit C hereto.
(f) Warrant. On the Initial Closing Date, the Company shall issue
to the Purchaser a warrant certificate to purchase up to a number of
shares of Common Stock equal to $1,000,000 divided by the average of the
closing bid prices during the fifteen (15) Trading Days immediately
prior to the Initial Closing Date (the "Warrant Base Price"). The
Warrant shall have a term from its initial exercise date of five (5)
years. The exercise price of the Warrant shall be 125% of the Warrant
Base Price. The Common Stock underlying the Warrant will be registered
in the Registration Statement referred to in Section 4.3 hereof. The
Warrant shall be in the form of Exhibit E hereto.
Section 4.3. Conditions Precedent to the Obligation of the Purchaser
to Accept a Draw Down and Purchase the Shares. The obligation hereunder of the
Purchaser to accept a Draw Down request and to acquire and pay for the Shares is
subject to the satisfaction at or before each Settlement Date, of each of the
conditions set forth below.
(a) Satisfaction of Conditions to Initial Closing. The Company
shall have satisfied, or the Purchaser shall have waived at the Initial
Closing, the conditions set forth in Section 5.2 hereof.
(b) Effective Registration Statement. The Registration Statement
registering the Shares shall have been declared effective by the SEC and
shall remain effective on each Settlement Date.
(c) No Suspension. Trading in the Company's Common Stock shall
not have been suspended by the SEC or the Principal Market (except for
any suspension of trading of limited duration agreed to by the Company,
which suspension shall be terminated prior to the delivery of each Draw
Down Notice), and, at any time prior to such Draw Down Notice, trading
in securities generally as reported on the Principal Market shall not
have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported on the Principal
Market unless the general suspension or limitation shall have been
terminated prior to the delivery of such Draw Down Notice.
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(d) Material Adverse Effect. No Material Adverse Effect and no
Consolidation Event where the successor entity has not agreed to perform
the Company's obligations shall have occurred.
(e) Opinion of Counsel. The Purchaser shall have received (i) a
"down-to-date" letter from the Company's counsel, confirming that there
is no change from the counsel's previously delivered opinion, or else
specifying with particularity the reason for any change and an opinion
as to the additional items specified in Exhibit C hereto, and (ii) any
other items set forth in the Escrow Agreement.
ARTICLE 5
DRAW DOWN TERMS
Section 5.1. Draw Down Terms. Subject to the satisfaction of the
conditions set forth in this Agreement, the parties agree as follows:
(a) The Company, may, in its sole discretion, issue and exercise
a draw down (a "Draw Down") during each Draw Down Pricing Period, which
Draw Down the Purchaser shall be obligated to accept during the
Commitment Period.
(b) Only one Draw Down shall be allowed in each Draw Down Pricing
Period. There shall be at least five (5) Trading Days between Draw Down
Pricing Periods. The number of shares of Common Stock purchased by the
Purchaser with respect to each Draw Down shall be determined as set
forth in Section 5.1(e) herein and settled on:
(i) as to the 1st through the 10th Trading Days after a Draw
Down Pricing Period commences, on or before the 12th Trading Day
after a Draw Down Pricing Period commences; and
(ii) as to the 11th through the 20th Trading Days after a
Draw Down Pricing Period commences, on or before the 22nd Trading
Day after a Draw Down Pricing Period (such settlement periods and
such settlement dates in subsection (i) and this subsection (ii)
each referred to as a "Settlement Period" and a "Settlement
Date", respectively).
(c) In connection with each Draw Down Pricing Period, the Company
may set the Threshold Price in the Draw Down Notice.
(d) The minimum Investment Amount for any Draw Down shall be
$250,000 and the maximum Investment Amount as to each Draw Down shall be
8% of the average of the VWAPs for the Common Stock for the sixty (60)
calendar day period immediately prior to the applicable Commencement
Date (defined below) multiplied by
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the total trading volume in respect of the Common Stock for the sixty
(60) calendar day period immediately prior to such Commencement Date.
(e) The number of Shares of Common Stock to be issued on each
Settlement Date shall be a number of shares equal to the sum of the
quotients (for each trading day within the Settlement Period) of (x)
1/20th of the Investment Amount, and (y) the Purchase Price on each
Trading Day within the Settlement Period, subject to the following
adjustments:
(i) if the VWAP on a given Trading Day is less than the
Threshold Price, then the Investment Amount will be reduced by
1/20th and that day shall be withdrawn from the Settlement
Period; and
(ii) if trading of the Common Stock on the Principal Market
is suspended for more than three (3) hours, in the aggregate, on
any Trading Day during the Settlement Period, the Investment
Amount shall be reduced by 1/20th and that day shall be withdrawn
from the applicable Settlement Period; and
(iii) if the Registration Statement is suspended in
accordance with Section 3(j) of the Registration Rights Agreement
for more than three (3) hours, in the aggregate, on any Trading
Day during the applicable Settlement Period, the Investment
Amount shall be reduced by 1/20th and that day shall be withdrawn
from such Settlement Period.
(f) The Company must inform the Purchaser by delivering a draw
down notice, in the form of Exhibit D hereto (the "Draw Down Notice"),
via facsimile transmission in accordance with Section 9.4 as to the
amount of the Draw Down (the "Investment Amount") the Company wishes to
exercise, before the first day of the Draw Down Pricing Period (the
"Commencement Date"). If the Commencement Date is to be the date of the
Draw Down Notice, the Draw Down Notice must be delivered to and receipt
confirmed by the Purchaser at least one hour before trading commences on
such date. At no time shall the Purchaser be required to purchase more
than the maximum Investment Amount for a given Draw Down Pricing Period
so that if the Company chooses not to exercise the maximum Investment
Amount in a given Draw Down Pricing Period the Purchaser is not
obligated to and shall not purchase more than the scheduled maximum
Investment Amount in a subsequent Draw Down Pricing Period.
(g) On or before each Settlement Date, the Shares purchased by
the Purchaser shall be delivered to The Depository Trust Company ("DTC")
account of the Purchaser or its designees via the Deposit Withdrawal
Agent Commission ("DWAC") system upon receipt by the Escrow Agent of
payment for the Draw Down Shares into the Escrow Agent's master escrow
account, as further provided in the Escrow Agreement. The Escrow Agent
shall be directed to pay the Purchase Price to the Company, net of one
thousand dollars ($1,000) per Settlement as escrow expenses to the
Escrow Agent and any additional fees as set forth in the Escrow
Agreement.
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ARTICLE 6
TERMINATION
Section 6.1. Term. The term of this Agreement shall begin on the
date hereof and shall end 18 months from the Effective Date or as otherwise set
forth in Section 6.2.
Section 6.2. Other Termination.
(a) This Agreement shall terminate upon one (1) Trading Day's
notice if (i) an event resulting in a Material Adverse Effect has
occurred and has not been cured for a period of 60 days, (ii) the Common
Stock is de-listed from the Principal Market unless such de-listing is
in connection with the Company's subsequent listing of the Common Stock
on the Nasdaq National Market, Nasdaq SmallCap Market, the American
Stock Exchange or the New York Stock Exchange, or (iii) the Company
files for protection from creditors under any applicable law.
(b) The Company may terminate this Agreement upon one (1) Trading
Day's notice if the Purchaser shall fail to fund one properly noticed
Draw Down within five (5) Trading Days of the end of the applicable
Settlement Period.
Section 6.3. Effect of Termination. In the event of termination by
the Company or the Purchaser, written notice thereof shall forthwith be given to
the other party and the transactions contemplated by this Agreement shall be
terminated without further action by either party. If this Agreement is
terminated as provided in Section 6.1 or 6.2 herein, this Agreement shall become
void and of no further force and effect, except for Sections 8.1 and 8.2, and
Article 7 herein. Nothing in this Section 6.3 shall be deemed to release the
Company or the Purchaser from any liability for any breach under this Agreement,
or to impair the rights of the Company or the Purchaser to compel specific
performance by the other party of its obligations under this Agreement.
ARTICLE 7
INDEMNIFICATION
Section 7.1. General Indemnity.
(a) The Company agrees to indemnify and hold harmless the
Purchaser (and its directors, officers, affiliates, agents, successors
and assigns) from and against any and all losses, liabilities,
deficiencies, costs, damages and expenses (including, without
limitation, reasonable attorneys' fees, charges and disbursements)
incurred by the Purchaser as a result of any material inaccuracy in or
breach of the representations, warranties or covenants made by the
Company herein.
(b) The Purchaser agrees to indemnify and hold harmless the
Company and its directors, officers, affiliates, agents, successors and
assigns from and against any
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and all losses, liabilities, deficiencies, costs, damages and expenses
(including, without limitation, reasonable attorneys' fees, charges and
disbursements) incurred by the Company as result of any material
inaccuracy in or breach of the representations, warranties or covenants
made by the Purchaser herein. Notwithstanding anything to the contrary
herein, the Purchaser shall be liable under this Section 7.1(b) for only
that amount as does not exceed the net proceeds to the Purchaser as a
result of the sale of the Shares.
Section 7.2. Indemnification Procedure. Any party entitled to
indemnification under this Article 7 (an "Indemnified Party") will give written
notice to the indemnifying party of any matters giving rise to a claim for
indemnification; provided, that the failure of any party entitled to
indemnification hereunder to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Article 7 except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any action, proceeding or claim is brought against an
Indemnified Party in respect of which indemnification is sought hereunder, the
indemnifying party shall be entitled to participate in and, unless in the
reasonable judgment of counsel to the Indemnified Party a conflict of interest
between it and the indemnifying party may exist with respect of such action,
proceeding or claim, to assume the defense thereof with counsel reasonably
satisfactory to the Indemnified Party. In the event that the indemnifying party
advises an Indemnified Party that it will contest such a claim for
indemnification hereunder, or fails, within thirty (30) days of receipt of any
indemnification notice to notify, in writing, such person of its election to
defend, settle or compromise, at its sole cost and expense, any action,
proceeding or claim (or discontinues its defense at any time after it commences
such defense), then the Indemnified Party may, at its option, defend, settle or
otherwise compromise or pay such action or claim. In any event, unless and until
the indemnifying party elects in writing to assume and does so assume the
defense of any such claim, proceeding or action, the Indemnified Party's costs
(including reasonable attorneys' fees, charges and disbursements) and expenses
arising out of the defense, settlement or compromise of any such action, claim
or proceeding shall be losses subject to indemnification hereunder. The
Indemnified Party shall cooperate fully with the indemnifying party in
connection with any settlement negotiations or defense of any such action or
claim by the indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the Indemnified Party, which relates to such
action or claim. The indemnifying party shall keep the Indemnified Party fully
apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the Indemnified Party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense. The indemnifying party shall not be liable for any settlement of any
action, claim or proceeding effected without its prior written consent, which
shall not be unreasonably withheld. Notwithstanding anything in this Article 7
to the contrary, the indemnifying party shall not, without the Indemnified
Party's prior written consent, settle or compromise any claim or consent to
entry of any judgment in respect thereof which imposes any future obligation on
the Indemnified Party or which does not include, as an unconditional term
thereof, the giving by the claimant or the plaintiff to the Indemnified Party of
a release from all liability in respect of such claim. The indemnification
required by this Article 7 shall be made by periodic payments of the amount
thereof during the course of investigation or defense, as and
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when bills are received or expense, loss, damage or liability is incurred,
within ten (10) Trading Days of written notice thereof to the indemnifying party
so long as the Indemnified Party irrevocably agrees to refund such moneys, with
interest, if it is ultimately determined by a court of competent jurisdiction
that such party was not entitled to indemnification. The indemnity agreements
contained herein shall be in addition to (a) any cause of action or similar
rights of the Indemnified Party against the indemnifying party or others, and
(b) any liabilities to which the indemnifying party may be subject.
ARTICLE 8
MISCELLANEOUS
Section 8.1. Fees and Expenses. Each of the parties to this
Agreement shall pay its own fees and expenses related to the transactions
contemplated by this Agreement; except that, the Company shall pay, at the
Initial Closing, a non-accountable expense allowance of $35,000 for the
Purchaser's legal and administrative costs and expenses, including fees and
expenses relating to the registration of the Shares and transactional costs
associated with the Draw Downs (except the escrow fee). In addition, the Company
shall pay all reasonable fees and expenses incurred by the Purchaser in
connection with any subsequent amendments, modifications or waivers of this
Agreement, the Escrow Agreement or the Registration Rights Agreement or incurred
in connection with the enforcement of this Agreement, the Escrow Agreement and
the Registration Rights Agreement, including, without limitation, all reasonable
attorneys' fees and expenses if such subsequent amendment, modification or
waiver is at the request of the Company. The Company shall pay all stamp or
other similar taxes and duties levied in connection with issuance of the Shares
pursuant hereto.
Section 8.2. Specific Enforcement. The Company and the Purchaser
acknowledge and agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof or thereof, this being in addition to any other
remedy to which any of them may be entitled by law or equity.
Section 8.3. Entire Agreement; Amendment. The Transaction Documents
contain the entire understanding of the parties with respect to the matters
covered in the Transaction Documents. No provision of this Agreement may be
waived or amended other than by a written instrument signed by the party against
whom enforcement of any such amendment or waiver is sought and no condition to
closing any Draw Down in favor of the Purchaser may be waived by the Purchaser.
Section 8.4. Notices. Except with respect to any Draw Down Notices,
which shall be effective only in accordance with subsection (a) below, any
notice, demand, request, waiver or other communication required or permitted to
be given hereunder shall be in writing and shall be effective (a) upon hand
delivery or facsimile at the address or number designated
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below (if delivered on a business day during normal business hours where such
notice is to be received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours where such
notice is to be received), or (b) on the second business day following the date
of mailing by express internationally recognized courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be:
If to the Company: 0000 Xxxxx Xxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxxxxx, XX 00000
Attn: Xxxx Xxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
With copies to: Manatt, Xxxxxx & Xxxxxxxx, LLP
(which shall not constitute 00000 Xxxxxxx Xxxx.
xxxxxx) Xxx Xxxxxxx, XX 00000
Attn: Xxxxxx Xxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
If to Purchaser: x/x Xxxxxx Xxxxxxx Xxxxxxxxxx
Xxxxxxx Xxxxx, 0xx Floor
Waterfront Drive
Road Town, Tortola
British Virgin Islands
Attn: Xxxxx Xxxx
Fax: (000) 000-0000
with copies to: Xxxxxxx Xxxxxx & Green P.C.
(which shall not constitute 000 Xxxx Xxxxxx
xxxxxx) Xxx Xxxx, XX 00000-0000
Tel: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx
Any party hereto may from time to time change its address for
notices by giving written notice of such changed address to the other party
hereto in accordance herewith.
Section 8.5. Waivers. No waiver by either party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provisions, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
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Section 8.6. Headings. The article, section and subsection headings
in this Agreement are for convenience only and shall not constitute a part of
this Agreement for any other purpose and shall not be deemed to limit or affect
any of the provisions hereof.
Section 8.7. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns.
The parties hereto may not amend this Agreement or any rights or obligations
hereunder without the prior written consent of the Company and each Purchaser to
be affected by the amendment. After Initial Closing, the assignment by a party
to this Agreement of any rights hereunder shall not affect the obligations of
such party under this Agreement.
Section 8.8. No Third Party Beneficiaries.This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
Section 8.9. Governing Law/Arbitration. This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
California, without giving effect to the choice of law provisions. The Company
and the Purchaser agree to submit themselves to the in personam jurisdiction of
the state and federal courts situated within the the State of California with
regard to any controversy arising out of or relating to this Agreement. Any
dispute under this Agreement or any Exhibit attached hereto shall be submitted
to arbitration under the commercial rules of the American Arbitration
Association (the "AAA") in San Francisco, California, and shall be finally and
conclusively determined by the decision of a board of arbitration consisting of
three (3) members (hereinafter referred to as the "Board of Arbitration")
selected as according to the rules governing the AAA. The Board of Arbitration
shall meet on consecutive business days in San Francisco, California, and shall
reach and render a decision in writing (concurred in by a majority of the
members of the Board of Arbitration) with respect to the amount, if any, which
the losing party is required to pay to the other party in respect of a claim
filed. In connection with rendering its decisions, the Board of Arbitration
shall adopt and follow the laws of the State of California. To the extent
practical, decisions of the Board of Arbitration shall be rendered no more than
thirty (30) calendar days following commencement of proceedings with respect
thereto. The Board of Arbitration shall cause its written decision to be
delivered to all parties involved in the dispute. The Board of Arbitration shall
be authorized and is directed to enter a default judgment against any party
refusing to participate in the arbitration proceeding within thirty days of any
deadline for such participation. Any decision made by the Board of Arbitration
(either prior to or after the expiration of such thirty (30) calendar day
period) shall be final, binding and conclusive on the parties to the dispute,
and entitled to be enforced to the fullest extent permitted by law and entered
in any court of competent jurisdiction. The prevailing party shall be awarded
its costs, including attorneys' fees, from the non-prevailing party as part of
the arbitration award. Any party shall have the right to seek injunctive relief
from any court of competent jurisdiction in any case where such relief is
available. The prevailing party in such injunctive action shall be awarded its
costs, including reasonable attorneys' fees, from the non-prevailing party.
Section 8.10. Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and shall become effective when counterparts have been signed by
each party and delivered to the other
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parties hereto, it being understood that all parties need not sign the same
counterpart. Execution may be made by delivery by facsimile.
Section 8.11. Publicity. Neither the Company nor the Purchaser shall
issue any press release or otherwise make any public statement or announcement
with respect to this Agreement or the transactions contemplated hereby or the
existence of this Agreement. After the Initial Closing, the Company may issue a
press release or otherwise make a public statement or announcement with respect
to this Agreement or the transactions contemplated hereby or the existence of
this Agreement; provided, however, that prior to issuing any such press release,
making any such public statement or announcement, the Company obtains the prior
consent of the Purchaser, which consent shall not be unreasonably withheld or
delayed.
Section 8.12. Severability. The provisions of this Agreement are
severable and, in the event that The Board of Arbitration or any court or
officials of any regulatory agency of competent jurisdiction shall determine
that any one or more of the provisions or part of the provisions contained in
this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision or part of a provision of this Agreement
and this Agreement shall be reformed and construed as if such invalid or illegal
or unenforceable provision, or part of such provision, had never been contained
herein, so that such provisions would be valid, legal and enforceable to the
maximum extent possible, so long as such construction does not materially
adversely effect the economic rights of either party hereto.
Section 8.13. Further Assurances. From and after the date of this
Agreement, upon the request of the Purchaser or the Company, each of the Company
and the Purchaser shall execute and deliver such instruments, documents and
other writings as may be reasonably necessary or desirable to confirm and carry
out and to effectuate fully the intent and purposes of this Agreement.
Section 8.14. Effectiveness of Agreement. This Agreement shall
become effective only upon satisfaction of the conditions precedent to the
Initial Closing set forth in Article I of the Escrow Agreement.
ARTICLE 9
DEFINITIONS
Section 9.1. Certain Definitions.
(a) "Commitment Amount" shall have the meaning assigned to such
term in Section 1.1 hereof.
(b) "Commitment Period" shall mean the period of 18 consecutive
months commencing immediately after the Effective Date.
(c) "Common Stock" shall mean the Company's common stock, $0.001
par value per share.
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(d) "Draw Down" shall have the meaning assigned to such term in
Section 5.1(a) hereof.
(e) "Draw Down Notice" shall have the meaning assigned to such
term in Section 5.1(f) hereof.
(f) "Draw Down Pricing Period" shall mean a period of twenty (20)
consecutive Trading Days beginning on the date specified in the Draw
Down Notice (as defined in Section 5.1(f) herein); provided, however,
the Draw Down Pricing Period shall not begin before the day on which
receipt of such notice is confirmed by the Purchaser.
(g) "Effective Date" shall mean the date the Registration
Statement of the Company covering the Shares being subscribed for hereby
is declared effective by the Securities and Exchange Commission (the
"SEC").
(h) "Exchange Act" shall mean the Securities and Exchange Act of
1934, as amended.
(i) "GAAP" shall mean the United States Generally Accepted
Accounting Principles as those conventions, rules and procedures are
determined by the Financial Accounting Standards Board and its
predecessor agencies.
(j) "Initial Closing" shall have the meaning assigned to such
term in Section 1.2 hereof.
(k) "Initial Closing Date" shall have the meaning assigned to
such term in Section 1.2 hereof.
(l) "Investment Amount" shall have the meaning assigned to such
term in Section 5.1(f) hereof.
(m) "Material Adverse Effect" shall mean any adverse effect on
the business, operations, properties, prospects or financial condition
of the Company that is material and adverse to the Company and its
subsidiaries and affiliates, taken as a whole and/or any condition,
circumstance, or situation that would prohibit or otherwise materially
interfere with the ability of the Company to perform any of its material
obligations under this Agreement or the Registration Rights Agreement or
to perform its obligations under any other Material Agreement (as
defined in Section 2.1(u)).
(g) "Principal Market" shall mean initially the American Stock
Exchange and shall include the Nasdaq National Market, the Nasdaq
Small-Cap Market and the New York Stock Exchange if the Company becomes
listed and trades on such market or exchange after the date hereof.
(h) "Purchase Price" shall mean, with respect to Shares purchased
during each applicable Settlement Period, 92.5% (the "Purchase Price
Percentage") of the VWAP on the date in question; except that, for each
$50,000,000 increase in the
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Company's average market cap (calculated by multiplying the number of
shares of Common Stock issued and outstanding by the VWAP of the Common
Stock (the "Market Cap")) above $150,000,000 during the applicable
Market Cap Period (as defined below), the Purchase Price Percentage
shall be increased by 0.5% on the date in question until the Purchase
Price Percentage equals 94.5%; provided, however, each increase in the
Purchase Price Percentage shall only occur if the corresponding increase
in the Market Cap is maintained for at least twenty (20) consecutive
Trading Days immediately prior to the date the applicable Settlement
Period commences (the "Market Cap Period"). By way of example, if the
Market Cap is between $1 and $199,999,999 during the Market Cap Period,
the Purchase Price Percentage shall be 92.5%. If the Market Cap is
between $200,000,000 and $249,999,999 during the entire Market Cap
Period, the Purchase Price Percentage shall be 93%.
(i) "Registration Statement" shall mean the registration
statement under the Securities Act of 1933, as amended (the "Securities
Act"), to be filed with the Securities and Exchange Commission for the
registration of the Shares pursuant to the Registration Rights Agreement
attached hereto as Exhibit A (the "Registration Rights Agreement).
(j) "SEC Documents" shall mean the Company's latest Form 10-K or
Form 10-KSB as of the time in question, all Forms 10-Q or 10-QSB and 8-K
filed thereafter, and the Proxy Statement for its latest fiscal year as
of the time in question until such time as the Company no longer has an
obligation to maintain the effectiveness of a Registration Statement as
set forth in the Registration Rights Agreement.
(n) "Settlement" shall mean the delivery of the Shares into the
Purchaser's DTC account in exchange for payment therefor.
(k) "Settlement Date" shall have the meaning assigned to such
term in Section 5.1(b).
(l) "Settlement Period" shall have the meaning assigned to such
term in Section 5.1(b).
(m) "Shares" shall mean, collectively, the shares of Common Stock
of the Company being subscribed for hereunder (the "Draw Down Shares")
and those shares of Common Stock issuable to the Purchaser upon exercise
of the Warrant (the "Warrant Shares").
(n) "Threshold Price" shall mean the price per Share designated
by the Company as the lowest VWAP during any Draw Down Pricing Period at
which the Company will sell its Common Stock in accordance with this
Agreement.
(o) "Trading Day" shall mean any day on which the Principal
Market is open for business.
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(o) "Transaction Documents" shall mean this Agreement, the
Registration Rights Agreement and the Escrow Agreement.
(p) "VWAP" shall mean the daily volume weighted average price of
the Company's Common Stock on the Principal Market 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) using the VAP function on the date in
question.
(q) "Warrant" shall have the meaning assigned to such term in
Section 4.2(f) hereof.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorize officer as of this 20th day of
February, 2001.
X-XXXXXXX.XXX
By:/s/ Xxxx Xxxxxxx
--------------------------------------
Xxxx Xxxxxxx, President & CEO
XXXXXX INTERNATIONAL LIMITED
By:/s/ Xxxxx Xxxx
--------------------------------------
Xxxxx Xxxx, Authorized Signatory
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