EXHIBIT 10.16
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of
March 8, 2004, by and among North American Technologies Group, Inc., a Delaware
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 (as defined below),
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: (a) capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Certificate of Designation (as defined
herein), and (b) the following terms have the meanings indicated in this Section
1.1:
"Action" shall have the meaning ascribed to such term in
Section 3.1(j).
"Actual Minimum" means, as of any date, the maximum aggregate
number of shares of Common Stock then issued or potentially issuable in
the future pursuant to the Transaction Documents, including any
Underlying Shares issuable upon exercise or conversion in full of all
Warrants and shares of Preferred Stock, ignoring any conversion or
exercise limits set forth therein, and assuming that any previously
unconverted shares of Preferred Stock are held until the third
anniversary of the Closing Date and all dividends are paid in shares of
Common Stock until such third anniversary, subject to the limitation on
the number of shares of Common Stock issuable hereunder set forth in
Section 5(a)(iii) of the Certificate of Designation.
"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. With respect to a
Purchaser, any investment fund or managed account that is managed on a
discretionary basis by the same investment manager as such Purchaser
will be deemed to be an Affiliate of such Purchaser.
"Certificate of Designation" means the Certificate of
Designation to be filed prior to the Closing by the Company with the
Secretary of State of Delaware, in the form of Exhibit A attached
hereto.
"Closing" means the closing of the purchase and sale of the
Securities pursuant to Section 2.1.
"Closing Date" means the Trading Day when all of the
Transaction Documents have been executed and delivered by the
applicable parties thereto, and all conditions precedent to (i) each
Purchaser's obligations to pay the Subscription Amount have been
satisfied or waived (ii) and the Company's obligations to deliver the
Securities have been satisfied or waived.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, par
value $0.001 per share, and any securities into which such common stock
shall hereinafter been reclassified into.
"Common Stock Equivalents" means any securities of the Company
or the Subsidiaries which would entitle the holder thereof to acquire
at any time Common Stock, including without limitation, any debt,
preferred stock, rights, options, warrants or other instrument that is
at any time convertible into or exchangeable for, or otherwise entitles
the holder thereof to receive, Common Stock.
"Company Counsel" means Levenfeld Xxxxxxxxxx, with offices
located at 0 Xxxxx XxXxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxx, Xxxxxxxx 00000.
"Disclosure Schedules" means the Disclosure Schedules of the
Company delivered concurrently herewith.
"Effective Date" means the date that the Registration
Statement is first declared effective by the Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exempt Issuance" the issuance of (a) shares of Common Stock
or options to employees, officers or directors of the Company pursuant
to any stock or option plan duly adopted by a majority of the
non-employee members of the Board of Directors of the Company or a
majority of the members of a committee of non-employee directors
established for such purpose, (b) securities upon the exercise of or
conversion of any securities issued hereunder, convertible securities,
options or warrants issued and outstanding on the date of this
Agreement, provided that such securities have not been amended since
the date of this Agreement to increase the number of such securities.
"FW" means Xxxxxxx Xxxxxxxxx LLP with offices located at 000
Xxxxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000-0000.
-2-
"GAAP" shall have the meaning ascribed to such term in
Section 3.1(h).
"Liens" means a lien, charge, security interest, encumbrance,
right of first refusal, preemptive right or other restriction.
"Losses" means any and all losses, claims, damages,
liabilities, settlement costs and expenses, including without
limitation costs of preparation and reasonable attorneys' fees.
"Market Price" shall mean the average of the 10 VWAPs
immediately prior to the date hereof.
"Material Adverse Effect" shall have the meaning assigned to
such term in Section 3.1(b).
"Material Permits" shall have the meaning ascribed to such
term in Section 3.1(m).
"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.
"Preferred Stock" means the up to 7,000 shares of the
Company's 6% Series AA Convertible Preferred Stock issued hereunder
having the rights, preferences and privileges set forth in the
Certificate of Designation.
"Principal Market" initially means the NASDAQ Small-Cap Market
and shall also include the American Stock Exchange, the New York Stock
Exchange, 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.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated the date hereof, among the Company and each Purchaser,
in the form of Exhibit B.
"Registration Statement" means a registration statement
meeting the requirements set forth in the Registration Rights Agreement
and covering the resale by the Purchasers of the Underlying Shares.
"Required Approvals" shall have the meaning ascribed to such
term in Section 3.1(e).
"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
-3-
regulation hereafter adopted by the Commission having substantially
the same effect as such Rule.
"SEC Reports" shall have the meaning ascribed to such term in
Section 3.1(h).
"Securities" means the Preferred Stock, the Warrants and the
Underlying Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Set Price" shall have the meaning ascribed to such term in
the Certificate of Designations.
"Shareholder Approval" means such approval as may be required
by the applicable rules and regulations of the Principal Market (or any
successor entity) from the shareholders of the Company with respect to
the transactions contemplated by the Transaction Documents, including
the issuance of all of the Underlying Shares and shares of Common Stock
issuable upon exercise of the Warrants in excess of 19.9% of the
Company's issued and outstanding Common Stock on the Closing Date.
"Stated Value" means $1,000 per share of Preferred Stock.
"Subscription Amount" shall mean, as to each Purchaser, the
amount to be paid for the Preferred Stock purchased hereunder as
specified below such Purchaser's name on the signature page of this
Agreement, in United States Dollars.
"Subsidiary" means any subsidiary of the Company that is
required to be listed in Schedule 3.1(a).
"Trading Day" means any day during which the Principal Market
shall be open for business.
"Transaction Documents" means this Agreement, the Certificate
of Designation, the Warrants, the Registration Rights Agreement and any
other documents or agreements executed in connection with the
transactions contemplated hereunder.
"Underlying Shares" means the shares of Common Stock issuable
upon conversion of the Preferred Stock, upon exercise of the Warrants
and issued and issuable in lieu of the cash payment of dividends on the
Preferred 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 Principal Market, the daily volume weighted
average price of the Common Stock for such date (or the nearest
preceding date) on the Principal 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 Principal
Market and if prices for the Common Stock are then quoted on the OTC
Bulletin Board, the volume weighted average price of the Common
-4-
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 (c) 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 the Common Stock Purchase Warrants, in the
form of Exhibit C, delivered to the Purchasers at the Closing in
accordance with Section 2.2 hereof, which warrants shall be exercisable
immediately upon issuance for a term of 4 1/2 years
"Warrant Shares" means the shares of Common Stock issuable
upon exercise of the Warrants.
ARTICLE II
PURCHASE AND SALE
2.1 Closing. On the Closing Date, each Purchaser shall purchase from
the Company, severally and not jointly with the other Purchasers, and the
Company shall issue and sell to each Purchaser, (a) shares of Preferred Stock
with an aggregate Stated Value equal to such Purchaser's Subscription Amount;
and (b) the Warrants as determined pursuant to Section 2.2(a). The aggregate
number of shares of Preferred Stock issued hereunder shall be up to 7,000. Upon
satisfaction of the conditions set forth in Section 2.2, the Closing shall occur
at the offices of FW or such other location as the parties shall mutually agree.
2.2 Conditions to Closing. The Closing is subject to the satisfaction
or waiver by the party to be benefited thereby of the following conditions:
(a) The Company shall have delivered or caused to be delivered
to each Purchaser the following:
(i) this Agreement duly executed by the Company;
(ii) a certificate evidencing a number of shares of
Preferred Stock equal to such Purchaser's Subscription Amount
divided by the Stated Value, registered in the name of such
Purchaser;
(iii) a Warrant registered in the name of such Purchaser
to purchase up to a number of shares of Common Stock equal to
20% of such Purchaser's Subscription Amount divided by the
Market Price on the date hereof, with an exercise price equal
to $1.18, subject to adjustment therein;
(iv) a Warrant registered in the name of such Purchaser
to purchase up
-5-
to a number of shares of Common Stock equal to 20% of such
Purchaser's Subscription Amount divided by the Market Price
on the date hereof, with an exercise price equal to $1.23,
subject to adjustment therein;
(v) a legal opinion of Company Counsel, in the form of
Exhibit D attached hereto, addressed to each Purchaser;
(vi) the written voting agreement, in the form of
Exhibit F attached hereto, of all of the officers, directors
and shareholders holding more than 10% of the issued and
outstanding shares of Common Stock on the date hereof to vote
all Common Stock owned by each of such shareholders as of the
record date for the annual meeting of shareholders of the
Company in favor of Shareholder Approval amounting to, in the
aggregate, at least 51% of the issued and outstanding Common
Stock; and
(vii) the Registration Rights Agreement duly executed by
the Company.
(b) At the Closing, each Purchaser shall have delivered or
caused to be delivered to the Company the following:
(i) this Agreement duly executed by such Purchaser;
(ii) such Purchaser's Subscription Amount by wire
transfer to the account as specified in writing by the
Company; and
(iii) the Registration Rights Agreement duly executed
by such Purchaser.
(c) 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.
(d) 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 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 any 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
each Purchaser, makes it impracticable or inadvisable to purchase the
shares of Preferred Stock at the Closing.
-6-
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. Except as set forth
in the SEC Reports or under the corresponding section of the Disclosure
Schedules which Disclosure Schedules shall be deemed a part hereof, the Company
hereby makes the representations and warranties set forth below to each
Purchaser:
(a) Subsidiaries. All of the direct and indirect subsidiaries
of the Company are set forth on Schedule 3.1(a). The Company owns,
directly or indirectly, all of the capital stock or other equity
interests of each Subsidiary free and clear of any 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 to subscribe for or purchase securities.
If the Company has no subsidiaries, then references in the Transaction
Documents to the Subsidiaries will be disregarded.
(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 or default 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 conduct
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 have or reasonably be expected to result in
(i) a material adverse effect on the legality, validity or
enforceability of any Transaction Document, (ii) a material adverse
effect on the results of operations, assets, business, prospects or
financial condition of the Company and the Subsidiaries, taken as a
whole, or (iii) a material adverse effect on the Company's ability to
perform in any material respect on a timely basis its obligations
under any Transaction Document (any of (i), (ii) or (iii), a "Material
Adverse Effect") and no Proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke,
limit or curtail such power and authority or qualification.
(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
-7-
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 except where such violation could not, individually
or in the aggregate, constitute a Material Adverse Effect.
(d) No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company, the issuance and sale of the
Securities and the consummation by the Company of the other
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) conflict with, or
constitute a default (or an event that with notice or lapse of time or
both would become a default) under, result in the creation of any Lien
upon any of the properties or assets of the Company or any Subsidiary,
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) subject to the Required Approvals, conflict with or
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,
or (iv) conflict with or violate the terms of any agreement by which
the Company or any Subsidiary is bound or to which any property or
asset of the Company or any Subsidiary is bound or affected; except in
the case of each of clauses (ii) and (iii), such as could not have or
reasonably be expected to 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 4.9, (ii) the filing with
the Commission of the Registration Statement, (iii) the application(s)
to each applicable Principal Market for the listing of the Underlying
Shares for trading thereon in the time and manner required thereby,
(iv) the filing with the Commission of a Form D pursuant to Commission
Regulation D, and (v) 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 nonassessable, free and clear of all Liens. The Company
has reserved from its duly authorized capital stock a number of shares
of
-8-
Common Stock for issuance of the Underlying Shares at least equal
to the Actual Minimum on the date hereof.
(g) Capitalization. The capitalization of the Company is as
described in the Company's most recent periodic report filed with the
Commission. The Company has not issued any capital stock since such
filing other than pursuant to the exercise of employee stock options
under the Company's stock option plans, the issuance of shares of
Common Stock to employees pursuant to the Company's employee stock
purchase plan and pursuant to the conversion or exercise of
outstanding Common Stock Equivalents outstanding. 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 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 issue 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.
All of the outstanding shares of capital stock of the Company are
validly issued, fully paid and nonassessable, have been issued in
compliance with all federal and state securities laws, and none of
such outstanding shares was issued in violation of any preemptive
rights or similar rights to subscribe for or purchase securities. No
further approval or authorization of any stockholder, the Board of
Directors of the Company or others is required for the issuance and
sale of the shares of Preferred Stock. Except as disclosed in the SEC
Reports, there are no stockholders agreements, voting agreements or
other similar agreements with respect to the Company's capital stock
to which the Company is a party or, to the knowledge of the Company,
between or among any of the Company's stockholders.
(h) SEC Reports; Financial Statements. The Company has filed
all reports required to be filed by it under the Securities Act and 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, including the exhibits thereto, 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, except for a
Form 8-K filed February 5, 2004 which was filed one day late. 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 required to be stated therein or necessary in order to make the
statements therein, in light
-9-
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 United States 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 except that unaudited
financial statements may not contain all footnotes required by GAAP,
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 reasonably
be expected to 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, (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 plans. The Company does not
have pending before the Commission any request for confidential
treatment of information.
(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, 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. 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.
-10-
(k) 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 which could reasonably be expected to result
in a Material Adverse Effect.
(l) 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, including without limitation all foreign,
federal, state and local laws applicable to its business except in
each case as could not have a Material Adverse Effect.
(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 and Liens for the payment
of federal, state or other taxes, the payment of which is neither
delinquent nor subject to penalties. Any real property and facilities
held under lease by the Company and the Subsidiaries are held by them
under valid, subsisting and enforceable leases of which the Company
and the Subsidiaries are in compliance.
(o) Patents and Trademarks. The Company and the Subsidiaries
have, or have rights to use, all patents, patent applications,
trademarks, trademark applications, service marks, trade names,
copyrights, licenses and other similar rights that are necessary or
material for use in connection with their respective businesses as
described in the SEC Reports and which the failure to so have could
have a Material Adverse Effect (collectively, the "Intellectual
Property Rights"). Neither the Company nor any Subsidiary has received
a written notice that the Intellectual Property Rights used by the
Company or any Subsidiary violates or infringes upon the rights of any
Person. To the knowledge of the Company, all such Intellectual
Property Rights are enforceable and
-11-
there is no existing infringement by another Person of any of the
Intellectual Property Rights of others.
(p) 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 that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue
its business without a significant increase in cost.
(q) Transactions With Affiliates and Employees. Except as set
forth in the SEC Reports, none of the officers or directors of the
Company and, to the 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, in each case in excess of $60,000 other
than (i) for payment of salary or consulting fees for services
rendered, (ii) reimbursement for expenses incurred on behalf of the
Company and (iii) for other employee benefits, including stock option
agreements under any stock option plan of the Company.
(r) Xxxxxxxx-Xxxxx; Internal Accounting Controls. The Company
is in material compliance with all provisions of the Xxxxxxxx-Xxxxx Act
of 2002 which are applicable to it as of the Closing Date. 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-15(e) and 15d-15(e)) for the Company and
designed such disclosure 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 most recently filed periodic report under the Exchange Act,
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 the date prior to the filing date of the most
recently filed periodic report under the Exchange Act (such date, the
"Evaluation Date"). The Company presented in its most recently filed
periodic report under the Exchange Act the
-12-
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, to the Company's knowledge, in other factors that could
significantly affect the Company's internal controls.
(s) Certain Fees. Except for the brokerage fees payable by the
Company to Pacific Summit, no brokerage or finder's fees or
commissions are or will be payable by the Company to any broker,
financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions
contemplated by this Agreement. The Purchasers shall have no
obligation with respect to any fees or with respect to any claims made
by or on behalf of other Persons for fees of a type contemplated in
this Section that may be due in connection with the transactions
contemplated by this Agreement.
(t) Private Placement. Assuming the accuracy of the Purchasers
representations and warranties set forth in Section 3.2, no
registration under the Securities Act is required for the offer and
sale of the Securities by the Company to the Purchasers as
contemplated hereby. The issuance and sale of the Securities hereunder
does not contravene the rules and regulations of the Principal Market.
(u) Investment Company. The Company is not, and is not an
Affiliate of, and immediately after receipt of payment for the shares
of Preferred Stock, will not be or be an Affiliate of, an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended. The Company shall conduct its business in a manner so that it
will not become subject to the Investment Company Act.
(v) Registration Rights. Except as set forth in the SEC
Reports, no Person has any right to cause the Company to effect the
registration under the Securities Act of any securities of the Company.
(w) Listing and Maintenance Requirements. The Company's
Common Stock is registered pursuant to Section 12(g) of the Exchange
Act, and the Company has taken no action designed to, or which to its
knowledge is likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act nor has the
Company received any notification that the Commission is contemplating
terminating such registration. 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.
(x) Application of Takeover Protections. The Company and its
Board of Directors have taken all necessary action, if any, in order
to render inapplicable any
-13-
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 the Company's issuance of the
Securities and the Purchasers' ownership of the Securities.
(y) Disclosure. The Company confirms that, neither the
Company 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, non-public information. The
Company understands and confirms that the Purchasers will rely on the
foregoing representations and covenants in effecting transactions in
securities of the Company. All disclosure provided to the Purchasers
regarding the Company, its business and the transactions contemplated
hereby, including the Schedules to this Agreement, 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.
(z) No Integrated Offering. Neither the Company, nor any of
its Affiliates, nor any Person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that
would cause this offering of the Securities to be integrated with
prior offerings by the Company for purposes of the Securities Act or
which could violate any applicable shareholder approval provisions,
including, without limitation, under the rules and regulations of the
Principal Market.
(aa) Solvency/Indebtedness. Based on the financial condition
of the Company as of the Closing Date: (i) the fair saleable market
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;
(ii) the Company's assets do not constitute unreasonably small capital
to carry on its business for the current fiscal year as now conducted
and as proposed to be conducted including its capital needs taking
into account the particular capital requirements of the business
conducted by the Company, and projected capital requirements and
capital availability thereof; and (iii) 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
-14-
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
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, endorsements and other
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 $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.
(bb) Intentionally Omitted.
(cc) 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.
(dd) 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 Preferred Stock or the Warrants, 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 Preferred Stock,
the Underlying Shares or the Warrants under the Securities Act or made
any "directed selling efforts" as defined in Rule 902 of Regulation S.
(ee) Foreign Corrupt Practices. Neither the Company, nor to
the knowledge of the Company, any agent or other person acting on
behalf of the Company, has (i) directly or indirectly, used any
corrupt funds for unlawful contributions, gifts, entertainment or
-15-
other unlawful expenses related to foreign or domestic political
activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic
political parties or campaigns from corporate funds, (iii) failed to
disclose fully any contribution made by the Company (or made by any
person acting on its behalf of which the Company is aware) which is in
violation of law, or (iv) violated in any material respect any
provision of the Foreign Corrupt Practices Act of 1977, as amended.
(ff) 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 no Purchaser is acting as a
financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions
contemplated hereby and 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.
(gg) Seniority. As of the date of this Agreement, no other
equity of the Company is senior to the Preferred Stock in right of
payment, whether with respect to interest or upon liquidation or
dissolution, or otherwise.
3.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows:
(a) Organization; Authority. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with full right, 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 execution, delivery and
performance by such Purchaser of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate or
similar action on the part of such Purchaser. Each Transaction Document
to which it is party has been duly executed by such Purchaser, and when
delivered by such Purchaser in accordance with the terms hereof, will
constitute the valid and legally binding obligation of such Purchaser,
enforceable against it in accordance with its terms, except (i) as
limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally, (ii)
as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and (iii)
insofar as indemnification and contribution provisions may be limited
by applicable law.
-16-
(b) Investment Intent. Such Purchaser understands that the
Securities are "restricted securities" and have not been registered
under the Securities Act or any applicable state securities law and 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, has no present intention
of distributing any of such Securities and has no arrangement or
understanding with any other persons regarding the distribution of such
Securities (this representation and warranty not limiting such
Purchaser's right to sell the Securities pursuant to the Registration
Statement or otherwise in compliance with applicable federal and state
securities laws). Such Purchaser is acquiring the Securities hereunder
in the ordinary course of its business. Such 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 such Purchaser was offered
the Securities, it was, and at the date hereof it is, and on each date
on which it exercises any Warrants, it will be either: (i) an
"accredited investor" as defined in Rule 501(a)(1), (a)(2), (a)(3),
(a)(7) or (a)(8) under the Securities Act or (ii) a "qualified
institutional buyer" as defined in Rule 144A(a) under the Securities
Act. Such Purchaser is not required to be registered as a broker-dealer
under Section 15 of the Exchange Act.
(d) Experience of such Purchaser. Such 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. Such 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. Such 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.
(f) Open Short Position. As of March 8, 2004, each Purchaser,
for itself only, represents and warrants that neither it, nor any
person or entity acting at the direction of such Purchaser, holds an
open short position in the Company's Common Stock.
The Company acknowledges and agrees that each Purchaser does
not make or has not made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in this
Section 3.2.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
-17-
(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
or Rule 144, to the Company or to an Affiliate of a Purchaser or in
connection with a pledge as contemplated in Section 4.1(b), 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 and 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
and the Registration Rights Agreement.
(b) Each 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] [CONVERTIBLE]] 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 REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF
COUNSEL TO THE TRANSFEROR 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 with a
registered broker-dealer or grant a security interest in some or all of
the Securities to a financial institution that is an "accredited
investor" as defined in Rule 501(a) under the Securities Act and who
agrees to be bound by the provisions of this Agreement and the
Registration rights Agreement and, if required under the terms of such
arrangement, such Purchaser may transfer pledged or secured Securities
to the pledgees or secured parties. Such a pledge or transfer would not
be subject to approval of the Company and no legal opinion of legal
counsel of the pledgee, secured party or pledgor shall be required in
connection therewith. 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, if the Securities are
-18-
subject to registration pursuant to the Registration Rights Agreement,
the preparation and filing of any required prospectus supplement under
Rule 424(b)(3) under the Securities Act or other applicable provision
of the Securities Act to appropriately amend the list of Selling
Stockholders thereunder.
(c) Certificates evidencing Underlying Shares shall not
contain any legend (including the legend set forth in Section 4.1(b)):
(i) while a registration statement (including the Registration
Statement) covering the resale of such Underlying Shares is effective
under the Securities Act, or (ii) following any sale of such Underlying
Shares 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). The Company shall cause its counsel to issue a legal
opinion to the Company's transfer agent promptly after the Effective
Date if required by the Company's transfer agent to effect the removal
of the legend hereunder. If all or any shares of Preferred Stock or any
portion of a Warrant is converted or exercised (as applicable) at a
time when there is an effective registration statement to cover the
resale of the Underlying Shares, or if such Underlying 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 Underlying 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 three Trading Days following the
delivery by a Purchaser to the Company or the Company's transfer agent
of a certificate representing Securities issued with a restrictive
legend (such date, the "Legend Removal Date"), deliver or cause to be
delivered to such Purchaser a certificate representing such Underlying
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.
(d) In addition to such Purchaser's other available remedies,
the Company shall pay to a Purchaser, in cash, as partial liquidated
damages and not as a penalty, for each $1,000 of Underlying Shares
(based on the VWAP on the date such Securities are submitted to the
Company's transfer agent) delivered for removal of the restrictive
legend and subject to this Section 4.1(c), $10 per Trading Day
(increasing to $20 per Trading Day five (5) Trading Days after such
damages have begun to accrue) for each Trading Day after the Legend
Removal Date until such certificate is delivered. Nothing herein shall
limit such Purchaser's right to pursue actual damages for the Company's
failure to deliver certificates representing any Securities as required
by the Transaction Documents, and such Purchaser shall have the right
to pursue all remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or injunctive
relief.
(e) Each Purchaser, severally and not jointly with the other
Purchasers, agrees that the removal of the restrictive legend from
certificates representing Securities as set forth in this Section 4.1
is predicated upon the Company's reliance that the
-19-
Purchaser will sell any Securities pursuant to either the registration
requirements of the Securities Act, including any applicable
prospectus delivery requirements, or an exemption therefrom.
4.2 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 each Purchaser and make publicly available
in accordance with Rule 144(c) such information as is required for each
Purchaser 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.
4.3 Integration. The Company shall not 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 such that it would require shareholder
approval prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent transaction.
4.4 Securities Laws Disclosure; Publicity. The Company shall, by 8:30
a.m. Eastern time on the Trading Day following the date hereof, issue a press
release or file a Current Report on Form 8-K, in each case reasonably acceptable
to each Purchaser disclosing the material terms of the transactions contemplated
hereby. The Company and each Purchaser shall consult with each other in issuing
any press releases with respect to the transactions contemplated hereby, and
neither the Company nor any Purchaser shall issue any such press release or
otherwise make any such public statement without the prior consent of the
Company, with respect to any press release of any Purchaser, or without the
prior consent of each Purchaser, with respect to any press release of the
Company, which consent shall not unreasonably be withheld, except if such
disclosure is required by law, in which case the disclosing party shall promptly
provide the other party with prior notice of such public statement or
communication. Notwithstanding the foregoing, 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 (i) as required by federal
securities law in connection with the registration statement contemplated by the
Registration Rights Agreement and (ii) to the extent such disclosure is required
by law or Principal Market regulations, in which case the Company shall provide
the Purchasers with prior notice of such disclosure permitted under subclause
(i) or (ii).
-20-
4.5 Shareholders Rights Plan. No claim will be made or enforced by the
Company or, to the knowledge of the Company, any other Person that any Purchaser
is an "Acquiring Person" under any shareholders rights plan or similar plan or
arrangement in effect or hereafter adopted by the Company, or that any Purchaser
could be deemed to trigger the provisions of any such plan or arrangement, by
virtue of receiving Securities under the Transaction Documents or under any
other agreement between the Company and the Purchasers. The Company shall
conduct its business in a manner so that it will not become subject to the
Investment Company Act.
4.6 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.
4.7 Use of Proceeds. The Company shall use the net proceeds from the
sale of the Securities hereunder for working capital purposes and not for the
satisfaction of any portion of the Company's debt (other than payment of trade
payables, capital lease obligations, and accrued expenses in the ordinary course
of the Company's business and prior practices), to redeem any Company equity or
equity-equivalent securities or to settle any outstanding litigation. Prior to
the receipt of Shareholder Approval, the Company shall not declare or pay any
cash dividend on its shares of Common Stock while any shares of Preferred Stock
remain outstanding.
4.8 Reimbursement. If any Purchaser becomes involved in any capacity in
any Proceeding by or against any Person who is a stockholder of the Company
(except as a result of sales, pledges, margin sales and similar transactions by
such Purchaser to or with any current stockholder), solely as a result of such
Purchaser's acquisition of the Securities under this Agreement, the Company will
reimburse such Purchaser 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 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 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.
4.9 Indemnification of Purchasers. Subject to the provisions of this
Section 4.9, the Company will indemnify and hold the Purchasers and their
directors, officers, shareholders, partners, employees and agents (each, a
"Purchaser 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
-21-
investigation that any such Purchaser Party may suffer or incur as a result of
or relating to (a) any breach of any of the representations, warranties,
covenants or agreements made by the Company in this Agreement or in the other
Transaction Documents or (b) any action instituted against a Purchaser, or any
of them or their respective Affiliates, by any stockholder of the Company who is
not an Affiliate of such Purchaser, with respect to any of the transactions
contemplated by the Transaction Documents (unless such action is based upon a
breach of such Purchaser's representation, warranties or covenants under the
Transaction Documents or any agreements or understandings such Purchaser may
have with any such stockholder or any violations by the Purchaser of state or
federal securities laws or any conduct by such Purchaser which constitutes
fraud, gross negligence, willful misconduct or malfeasance). If any action shall
be brought against any Purchaser Party in respect of which indemnity may be
sought pursuant to this Agreement, such Purchaser Party shall promptly notify
the Company in writing, and the Company shall have the right to assume the
defense thereof with counsel of its own choosing. Any Purchaser 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 Purchaser Party except to the extent that (i) the employment
thereof has been specifically authorized by the Company in writing, (ii) the
Company 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 Company and the position of such Purchaser Party. The Company
will not be liable to any Purchaser Party under this Agreement (i) for any
settlement by an Purchaser Party effected without the Company'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 Purchaser 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.
4.10 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
Transaction Documents in such amount as may be required to fulfill its
obligations in full under the Transaction Documents.
(b) If, on any date, the number of authorized but unissued
(and otherwise unreserved) shares of Common Stock is less than 130% of
(i) the Actual Minimum on such date, minus (ii) the number of shares of
Common Stock previously issued pursuant to the Transaction Documents,
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 at least the Actual Minimum at such time (minus the
number of shares of Common Stock previously issued pursuant to the
Transaction Documents), as soon as possible and in any event not later
than the 75th day after such date; provided that the Company will not
be required at any time to authorize a number of shares of Common Stock
greater than the maximum remaining number of shares of Common Stock
that could possibly be issued after such time pursuant to the
Transaction Documents.
-22-
(c) The Company shall: (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 Actual Minimum 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 each Purchaser evidence of
such listing, and (iv) use reasonable efforts to maintain the listing
of such Common Stock on such Principal Market or another Principal
Market. In addition, the Company shall hold a special meeting of
shareholders (which may also be at the annual meeting of shareholders)
at the earliest practical date, but in no event later than July 31,
2004, for the purpose of obtaining Shareholder Approval, with the
recommendation of the Company's Board of Directors that such proposal
be approved, and the Company shall solicit proxies from its
shareholders in connection therewith in the same manner as all other
management proposals in such proxy statement and all
management-appointed proxyholders shall vote their proxies in favor of
such proposal.
(d) If, on any date, the Company is listed on a different
Principal Market, then the Company shall take the necessary actions to
list all of the Underlying Shares and Warrant Shares on such Principal
Market as soon as reasonably possible.
4.11 Conversion and Exercise Procedures. The form of Election to
Purchase included in the Warrants and the forms of Conversion Notice included in
the Certificate of Designation set forth the totality of the procedures required
in order to exercise the Warrants or convert the Preferred Stock. No additional
legal opinion or other information or instructions shall be necessary to enable
each Purchaser to exercise their Warrants or convert their Preferred Stock. The
Company shall honor exercises of the Warrants and conversions of the Preferred
Stock and shall deliver Underlying Shares in accordance with the terms,
conditions and time periods set forth in the Transaction Documents. 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 its obligation to issue the
Underlying Shares pursuant to the Transaction Documents, 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.
4.12 Equal Treatment of Purchasers. No consideration shall be offered
or paid to any person to amend or consent to a waiver or modification of any
provision of any of the Transaction Documents unless the same consideration is
also offered to all of the parties to the Transaction Documents. For
clarification purposes, this provision constitutes a separate right granted to
each Purchaser by the Company and negotiated separately by each Purchaser, and
is intended to treat for the Company the Purchasers as a class and shall not in
any way be construed as the Purchasers acting in concert or as a group with
respect to the purchase, disposition or voting of Securities or otherwise.
-23-
4.13 Participation in Future Financing. For as long as the Preferred
Stock remains outstanding, upon any financing by the Company of its Common Stock
or Common Stock Equivalents (a "Subsequent Financing"), each Purchaser shall
have the right to participate in up to 100% of such Subsequent Financing. At
least 10 Trading Days prior to the closing of the Subsequent Financing, the
Company shall deliver to each Purchaser a written notice of its intention to
effect a Subsequent Financing ("Pre-Notice"), which Pre-Notice shall ask such
Purchaser if it wants to review the details of such financing (such additional
notice, a "Subsequent Financing Notice"). Upon the request of a Purchaser, and
only upon a request by such Purchaser, for a Subsequent Financing Notice, the
Company shall promptly, but no later than 1 Trading Day after such request,
deliver a Subsequent Financing Notice to such Purchaser. The Subsequent
Financing Notice shall describe in reasonable detail the proposed terms of such
Subsequent Financing, the amount of proceeds intended to be raised thereunder,
the Person with whom such Subsequent Financing is proposed to be effected, and
attached to which shall be a term sheet or similar document relating thereto. If
by 6:30 p.m. (New York City time) on the 10th Trading Day after all of the
Purchasers have received the Pre-Notice, notifications of the Purchasers of
their willingness to participate in the Subsequent Financing (or to cause their
designees to provide) is, in the aggregate, less than the total amount of the
Subsequent Financing, then the Company may effect the remaining portion of such
Subsequent Financing on the terms and to the Persons set forth in the Subsequent
Financing Notice. If the Company receives no notice from a Purchaser as of such
10th Trading Day, such Purchaser shall be deemed to have notified the Company
that it does not elect to participate. The Company must provide the Purchasers
with a second Subsequent Financing Notice, and the Purchasers will again have
the right of participation set forth above in this Section 4.13, if the
Subsequent Financing subject to the initial Subsequent Financing Notice is not
consummated for any reason on the terms set forth in such Subsequent Financing
Notice within 60 Trading Days after the date of the initial Subsequent Financing
Notice. In the event the Company receives responses to Subsequent Financing
Notices from Purchasers seeking to purchase more than the aggregate amount of
the Subsequent Financing, each such Purchaser shall have the right to purchase
their Pro Rata Portion (as defined below) of the Subsequent Financing. "Pro Rata
Portion" is the ratio of (x) the Subscription Amount of a participating
Purchaser and (y) the sum of the aggregate Subscription Amount of all
participating Purchasers. Notwithstanding the foregoing, this Section 4.13 shall
not apply in respect of an Exempt Issuance.
4.14 Future Financings. From the date hereof until 45 days after the
Effective Date, other than as contemplated by this Agreement, neither the
Company nor any Subsidiary (with respect to Common Stock Equivalents) shall
issue or sell any Common Stock or Common Stock Equivalents entitling any Person
to acquire shares of Common Stock. Notwithstanding anything herein to the
contrary, the 90 day period set forth in this Section 4.14 shall be extended for
the number of Trading Days during such period in which (i) trading in the Common
Stock is suspended by any Principal Market, or (ii) following the Effective
Date, the Registration Statement is not effective or the prospectus included in
the Registration Statement may not be used by each Purchaser for the resale of
the Underlying Shares. Notwithstanding anything to the contrary herein, this
Section 4.14 shall not apply in respect of an Exempt Issuance. In addition to
the limitations set forth herein, from the date hereof until such time as no
Purchaser holds any of the Securities, the Company shall be prohibited from
effecting or enter into an agreement to effect any Subsequent Financing
involving a "Variable Rate Transaction" or an "MFN
-24-
Transaction" (each as defined below). The term "Variable Rate Transaction" shall
mean a transaction in which the Company issues or sells (i) any debt or equity
securities that are convertible into, exchangeable or exercisable for, or
include the right to receive additional shares of Common Stock either (A) at a
conversion, exercise or exchange rate or other price that is based upon and/or
varies with the trading prices of or quotations for the shares of Common Stock
at any time after the initial issuance of such debt or equity securities, or (B)
with a conversion, exercise or exchange price that is subject to being reset at
some future date after the initial issuance of such debt or equity security or
upon the occurrence of specified or contingent events directly or indirectly
related to the business of the Company or the market for the Common Stock. The
term "MFN Transaction" shall mean a transaction in which the Company issues or
sells any securities in a capital raising transaction or series of related
transactions which grants to an investor the right to receive additional shares
based upon future transactions of the Company on terms more favorable than those
granted to such investor in such offering. In addition, unless Shareholder
Approval has been obtained and deemed effective in accordance with Section
4.10(c), the Company shall not make any issuance whatsoever of Common Stock or
Common Stock Equivalents which would cause any adjustment of the Set Price to
the extent the holders of Preferred Stock would not be permitted, pursuant to
Section 5(a)(iii) of the Certificate of Designations, to convert their
respective outstanding Preferred Stock and Warrants in full.
4.15 Additional Investment Option. From the Effective Date until
December 31, 2004, ("Company Exercise Period"), if (a) each VWAP during any 10
consecutive Trading Days during the Company Exercise Period is at least $2.00,
subject to adjustment for reverse and forward stock splits, stock dividends,
stock combinations and other similar transactions of the Common Stock that occur
after the date of this Agreement and (b) no Triggering Event under the
Certificate of Designations shall have occurred since the Closing Date, then the
Company may, in its sole determination and by notice to the Purchasers within 2
Trading Days' of the end of any Company Exercise Period cause each Purchaser to
purchase, in the ratio of such Purchaser's Subscription Amount on the Closing
Date to the aggregate Subscription Amounts of all Purchasers on the Closing
Date, additional shares of Preferred Stock for an aggregate purchase price among
all Purchasers of up to $7,000,000. Any additional investment will be on terms,
conditions and prices (as set on the Closing Date) identical those set forth in
the Transaction Documents, mutatis mutandis. Notwithstanding the foregoing, for
clarification, the Warrant exercise prices and the conversion price for any
additional shares of Preferred Stock issued in accordance with this Section 4.15
shall be based upon the then current VWAP which is at least $2.00. In order to
effectuate a purchase and sale of the additional shares of Preferred Stock, the
Company and the Purchasers shall enter into the following agreements: (x) a
securities purchase agreement identical to this Agreement, mutatis mutandis and
shall include updated disclosure schedules and (y) a registration rights
agreement identical to the Registration Rights Agreement, mutatis mutandis and
shall include updated disclosure schedules. Any such additional Investment shall
close within 5 Trading Days of notice to the Purchasers by the Company that the
Company elects to exercise its rights hereunder. The Company's right hereunder
shall be applied ratably to all Purchasers as set forth above. The Purchasers
shall not be obligated to purchase such securities, notwithstanding this right,
if a Material Adverse Effect has occurred during the period from the Closing
Date to the date of such exercise or if a Purchaser reasonably
-25-
believes that, based on the information contained in the disclosure schedules, a
Material Adverse Effect will occur.
ARTICLE V
MISCELLANEOUS
5.1 Fees and Expenses. At the Closing, the Company shall reimburse (a)
Midsummer Capital, LLC ("Midsummer") $5,000 for its legal fees and expenses and
(b) Crestview Capital Funds $5,000 for its legal fees and expenses. Except as
otherwise set forth in this Agreement, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company
shall pay all stamp and other taxes and duties levied in connection with the
sale of the Securities. For further clarity, the Company shall not be obligated
to reimburse Midsummer or Crestview for any legal fees or expenses in connection
with any Closing pursuant to Section 4.15.
5.2 Entire Agreement. The Transaction Documents, together with the
exhibits and schedules 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, exhibits and schedules.
5.3 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 prior to 5:30 p.m. (New York City 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. (New
York City 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 pages hereof, or such other address as may be designated in writing
hereafter, in the same manner, by such Person.
5.4 Amendments; Waivers. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by the Company and each Purchaser or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any 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.
5.5 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.
-26-
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.
5.6 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 each Purchaser. Any Purchaser may assign
any or all of its rights under this Agreement to any Person to whom such
Purchaser assigns or transfers any Securities, provided such transferee agrees
in writing to be bound, with respect to the transferred Securities, by the
provisions hereof that apply to the "Purchasers".
5.7 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 Section 4.9.
5.8 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof, except
that questions relating to the Preferred Stock and the Warrants shall be
governed by the laws of the State of Delaware. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
the City of New York, borough of Manhattan for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, that such suit, action or proceeding is
improper or inconvenient venue for such proceeding. 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 the Transaction Documents,
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.
5.9 Survival. The representations and warranties contained herein shall
survive the Closing and the delivery, exercise and/or conversion of the
Securities, as applicable.
5.10 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
-27-
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.
5.11 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.
5.12 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 a conversion of the Preferred Stock or
exercise of the Warrant, the Purchaser shall be required to return any shares of
Common Stock subject to such conversion or exercise notice.
5.13 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.
5.14 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of each
Purchaser 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.
5.15 Payment Set Aside. To the extent that the Company makes a payment
or payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof
-28-
originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.
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 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. For reasons of
administrative convenience only, Purchasers and their respective counsel have
chosen to communicate with the Company through FW. FW does not represent all of
the Purchasers but only Midsummer. The Company has elected to provide all
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 partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been canceled.
[SIGNATURE PAGE FOLLOWS]
-29-
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.
NORTH AMERICAN TECHNOLOGIES GROUP, INC. Address for Notice:
-------------------
By: /s/ Xxxxx X. Xxxxxx 14315 West Hardy Road
----------------------------------------------- Xxxxxxx, XX 00000
Name: Xxxxx X. Xxxxxx
Title: CEO
With a copy to (which shall not constitute notice):
Levenfeld Xxxxxxxxxx
0 Xxxxx Xxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxx, XX 00000
Attn: Xxxxxx Xxxxx
Wire Instructions:
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
-30-
[PURCHASER SIGNATURE PAGES TO NATK SECURITIES PURCHASE AGREEMENT]
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.
Name of Investing Entity: Crestview Capital Master LLC
----------------------------
Signature of Authorized Signatory of Investing Entity: /s/ Xxxxxxx Xxxx
----------------
Name of Authorized Signatory: Xxxxxxx Xxxx
------------
Title of Authorized Signatory: Managing Partner
----------------
Email Address of Authorized Signatory: xxxxxxx@xxxxxxxxxxxx.xxx
------------------------
Address for Notice of Investing Entity: 00 Xxxxxx Xxxxx, Xxx X
Xxxxxxxxxx, XX 00000
Address for Delivery of Securities for Investing Entity (if not same as above):
Subscription Amount: 1,000,000
Shares of Preferred Stock: 1,000
Warrant Shares: 462,963
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
[SIGNATURE PAGES CONTINUE]
-31-
[PURCHASER SIGNATURE PAGES TO NATK SECURITIES PURCHASE AGREEMENT]
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.
Name of Investing Entity: Rooster L.P.
----------------------------
Signature of Authorized Signatory of Investing Entity: /s/ Xxxxxxx X. Xxxxxx
---------------------
Name of Authorized Signatory: Xxxxxxx X. Xxxxxx
-----------------
Title of Authorized Signatory: for the GP
----------
Email Address of Authorized Signatory: xxxxxxx@xxxxxxxx.xxx
--------------------
Address for Notice of Investing Entity: 000 Xxxxxxx Xxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Address for Delivery of Securities for Investing Entity (if not same as above):
Subscription Amount: 1,500,000
Shares of Preferred Stock: 1,500
Warrant Shares:
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
[SIGNATURE PAGES CONTINUE]
-32-
[PURCHASER SIGNATURE PAGES TO NATK SECURITIES PURCHASE AGREEMENT]
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.
Name of Investing Entity: Midsummer Investment, Ltd.
--------------------------
Signature of Authorized Signatory of Investing Entity: /s/ Xxxxxxx X. Amselesm
-----------------------
Name of Authorized Signatory: Xxxxxxx X. Amselesm
-------------------
Title of Authorized Signatory: Director
--------
Email Address of Authorized Signatory: xx@xxxxxxxxxxxxxxxx.xxx
-----------------------
Address for Notice of Investing Entity: 000 Xxxxxxx Xxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Address for Delivery of Securities for Investing Entity (if not same as above):
Subscription Amount: 4,000,000
Shares of Preferred Stock: 4,000
Warrant Shares:
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
[SIGNATURE PAGES CONTINUE]
-33-
[PURCHASER SIGNATURE PAGES TO NATK SECURITIES PURCHASE AGREEMENT]
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.
Name of Investing Entity: Xxxxxxx X. Xxxxxxx
------------------
Signature of Authorized Signatory of Investing Entity: /s/ Xxxxxxx X. Xxxxxxx
----------------------
Name of Authorized Signatory: Xxxxxxx X. Xxxxxxx
------------------
Title of Authorized Signatory:
---------------------
Email Address of Authorized Signatory: xxxxxxxx@xxxxxxxxxxxx.xxx
-------------------------
Address for Notice of Investing Entity: Xxxxxxx Xxxxx & Co
000 X. Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Address for Delivery of Securities for Investing Entity (if not same as above):
Subscription Amount: 250,000
Shares of Preferred Stock: 250
Warrant Shares:
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
[SIGNATURE PAGES CONTINUE]
-34-
