INVESTMENT AGREEMENT
INVESTMENT
AGREEMENT (this "AGREEMENT"), dated as of February 25, 2010 by and between
M-Wise, Inc., a Delaware corporation (the "Company"), and Dutchess Opportunity
Fund, II, LP, a Delaware Limited Partnership (the "Investor").
WHEREAS,
the parties desire that, upon the terms and subject to the conditions contained
herein, the Investor shall invest up to Ten million dollars ($10,000,000) to
purchase the Company's Common Stock, $0.0017 par value per share (the
"Common Stock");
WHEREAS,
such investments will be made in reliance upon the provisions of Section 4(2)
under the Securities Act of 1933, as amended (the "1933 Act"), Rule 506 of
Regulation D, and the rules and regulations promulgated thereunder, and/or upon
such other exemption from the registration requirements of the 1933 Act as may
be available with respect to any or all of the investments in Common Stock to be
made hereunder; and
WHEREAS,
contemporaneously with the execution and delivery of this Agreement, the parties
hereto are executing and delivering a Registration Rights Agreement
substantially in the form attached hereto (the "Registration Rights Agreement")
pursuant to which the Company has agreed to provide certain registration rights
under the 1933 Act, and the rules and regulations promulgated thereunder, and
applicable state securities laws.
NOW
THEREFORE, in consideration of the foregoing recitals, which shall be considered
an integral part of this Agreement, the covenants and agreements set forth
hereafter, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and the Investor hereby
agree as follows:
SECTION
1. DEFINITIONS.
As used
in this Agreement, the following terms shall have the following meanings
specified or indicated below, and such meanings shall be equally applicable to
the singular and plural forms of such defined terms.
“1933 Act” shall have
the meaning set forth in the preamble of this agreement.
“1934 Act” shall mean
the Securities Exchange Act of 1934, as it may be amended.
“Affiliate” shall have
the meaning specified in Section 5(H), below.
“Agreement” shall mean
this Investment Agreement.
“Articles of
Incorporation” shall have the meaning
specified in Section 4(C).
“Best Bid” shall mean
the highest posted bid price of the Common Stock at any given time.
“By-laws” shall have the meaning specified in Section
4(C).
“Closing” shall have
the meaning specified in Section 2(G).
“Closing Date” shall
mean no more than ten (10) Trading Days following the Put Notice Date, for each
tranche.
“Common Stock” shall
have the meaning set forth in the preamble of this Agreement.
“Control” or “Controls” shall have
the meaning specified in Section 5(H).
“Effective Date” shall
mean the date the SEC declares effective under the 1933 Act the Registration
Statement covering the Securities.
“Environmental Laws”
shall have the meaning specified in Section 4(M).
“Equity Line Transaction
Documents” shall mean this Agreement and the Registration Rights
Agreement.
“Execution Date” shall
mean the date indicated in the preamble to this Agreement.
“Indemnities” shall
have the meaning specified in Section 11.
“Indemnified
Liabilities” shall have the meaning specified in Section 11.
“Investor” shall have
the meaning indicated in the preamble of this Agreement.
“Material Adverse
Effect” shall have the meaning specified in Section 4(A).
“Maximum Common Stock
Issuance” shall have the meaning specified in Section 2(H).
“Open Market Adjustment
Amount” shall have the meaning specified in Section 2(I).
"Open Market Purchase"
shall have the meaning specified in Section 2(I)
“Open Market Share
Purchase” shall have the meaning specified in Section 2(I).
“Open Period” shall
mean the period beginning on and including the Trading Day immediately following
the Effective Date and ending on the earlier to occur of (i) the date which is sixty
(60) months from the Effective Date; or (ii) termination of the
Agreement in accordance with Section 9, below.
“Pricing Period” shall
mean the period beginning on the Put Notice Date and ending on and including the
date that is five (5) Trading Days after such Put Notice Date.
“Principal Market”
shall mean the Nasdaq Capital Market, the NYSE Amex, the New York Stock
Exchange, the Nasdaq Global Market, the Nasdaq Global Select Market or the OTC
Bulletin Board, whichever is the principal market on which the Common Stock is
listed.
“Prospectus” shall
mean the prospectus, preliminary prospectus and supplemental prospectus used in
connection with the Registration Statement.
“Purchase Amount”
shall mean the total amount being paid by the Investor on a particular Closing
Date to purchase the Securities.
“Purchase Price” shall
mean ninety-three percent (93%) of the closing Best Bid (as defined herein) of
the Common Stock during the Pricing Period.
“Put” shall have the meaning set forth in Section
2(B) hereof.
“Put Amount” shall
have the meaning set forth in Section 2(B) hereof.
“Put Notice” shall
mean a written notice in the form attached hereto as Exhibit C, sent to the
Investor by the Company stating the Put Amount in U.S. dollars the Company
intends to sell to the Investor pursuant to the terms of the Agreement and
stating the current number of Shares issued and outstanding on such
date.
“Put Notice Date”
shall mean the Trading Day, as set forth below, immediately following the day on
which the Investor receives a Put Notice, however a Put Notice shall be deemed
delivered on (a) the
Trading Day it is received by facsimile or otherwise by the Investor if such
notice is received prior to 9:00 am Eastern Time, or (b) the immediately succeeding
Trading Day if it is received by facsimile or otherwise after 9:00 am Eastern
Time on a Trading Day. No Put Notice may be deemed delivered on a day
that is not a Trading Day.
“Put Restriction”
shall mean the days during the Pricing Period. During this time, the
Company shall not be entitled to deliver another Put Notice.
“Put Shares Due” shall
have the meaning specified in Section 2(I).
“Registration Period”
shall have the meaning specified in Section 5(C), below.
“Registration Rights
Agreement” shall have the meaning set forth in the recitals,
above.
“Registration
Statement” means the registration statement of the Company filed under
the 1933 Act covering the resale by the Investor of the Common Stock issuable
hereunder.
“Related Party” shall
have the meaning specified in Section 5(H).
“Resolution” shall
have the meaning specified in Section 8(E).
“SEC” shall mean the
U.S. Securities & Exchange Commission.
“SEC Documents” shall
have the meaning specified in Section 4(F).
“Securities” shall
mean the shares of Common Stock issued pursuant to the terms of the
Agreement.
“Shares” shall mean
the shares of the Company’s Common Stock.
“Subsidiaries” shall
have the meaning specified in Section 4(A).
“Suspension Price”
with respect to any Put shall be the price per share defined by the Company in
the applicable Put Notice.
“Trading Day” shall
mean any day on which the Principal Market for the Common Stock is open for
trading, from the hours of 9:30 am until 4:00 pm.
SECTION
2. PURCHASE AND SALE OF COMMON STOCK.
(A)
PURCHASE AND SALE OF COMMON STOCK. Subject to the terms and conditions set forth
herein, the Company may issue and sell to the Investor, and the Investor shall
purchase from the Company, up to that number of Shares having an aggregate
Purchase Price of Ten million dollars ($10,000,000).
(B)
DELIVERY OF PUT NOTICES. Subject to the terms and conditions of the Equity
Line Transaction Documents, and from time to time during the Open Period, the
Company may, in its sole discretion, deliver a Put Notice to the Investor which
states the dollar amount (designated in U.S. Dollars) (the "Put Amount") of
Shares which the Company intends to sell to the Investor on a Closing Date (the
"Put"). The Put Notice shall be in the form attached hereto as Exhibit C and
incorporated herein by reference. The amount that the Company shall be entitled
to Put to the Investor (the "Put Amount") shall be equal to either 1) two
hundred percent (200%) of the average daily volume (U.S. market only) of the
Common Stock for the three (3) Trading Days prior to the applicable Put
Notice Date, multiplied by the average of the three (3) daily closing prices
immediately preceding the Put Date or 2) up to three hundred thousand dollars
($300,000). During the Open Period, the Company shall not be entitled to submit
a Put Notice until the Pricing Period for the prior Put has been completed. The
Common Stock identified in the Put Notice shall be purchased for a price equal
to the Purchase Price.
(C)
COMPANY’S RIGHT TO SUSPEND. On each Put Notice submitted to the
Investor by the Company, the Company shall have the option to specify a
Suspension Price for that Put. In the event the trading price of the
Common Stock falls below the Suspension Price, the Put shall be temporarily
suspended. The Put shall resume at such time as the trading price of
the Common Stock is above the Suspension Price, provided the dates for the
Pricing Period for that particular Put are still valid. In the
event the Pricing Period has been complete, any shares above the Suspension
Price due to the Investor shall be sold to the Investor by the Company under the
terms of this Agreement. The Suspension Price for a Put may not be changed by
the Company once submitted to the Investor.
(D)
INTENTIONALLY OMITTED
(E)
CONDITIONS TO INVESTOR'S OBLIGATION TO PURCHASE SHARES. Notwithstanding anything
to the contrary in this Agreement, the Company shall not be entitled to deliver
a Put Notice and the Investor shall not be obligated to purchase any Shares at a
Closing (as defined in Section 2(G)) unless each of the following conditions are
satisfied:
(I) a Registration Statement shall have
been declared effective and shall remain effective and available for the resale
of all the Registrable Securities (as defined in the Registration Rights
Agreement) at all times until the Closing with respect to the subject Put
Notice;
(II) at all times during the period
beginning on the related Put Notice Date and ending on and including the related
Closing Date, the Common Stock shall have been listed on the Principal Market
and shall not have been suspended from trading thereon for a period of two (2)
consecutive Trading Days during the Open Period and the Company shall not have
been notified of any pending or threatened proceeding or other action to suspend
the trading of the Common Stock;
(III) the Company has complied with its
obligations and is otherwise not in breach of or in default under, this
Agreement, the Registration Rights Agreement or any other agreement executed in
connection herewith which has not been cured prior to delivery of the Investor’s
Put Notice Date;
(IV) no injunction shall have been
issued and remain in force, or action commenced by a governmental authority
which has not been stayed or abandoned, prohibiting the purchase or the issuance
of the Securities; and
(V) the issuance of the Securities will
not violate any shareholder approval requirements of the Principal
Market.
If any of
the events described in clauses (I) through (V) above occurs during a Pricing
Period, then the Investor shall have no obligation to purchase the Put Amount of
Common Stock set forth in the applicable Put Notice.
(F)
RESERVED
(G)
MECHANICS OF PURCHASE OF SHARES BY INVESTOR. Subject to the satisfaction of the
conditions set forth in Sections 2(E), the closing of the purchase by the
Investor of Shares (a "Closing") shall occur on the date which is no later than
ten (10) Trading Days following the applicable Put Notice Date (each a "Closing
Date"). Prior to each Closing Date, (I) the Company shall deliver to the
Investor pursuant to this Agreement, certificates representing the Shares to be
issued to the Investor on such date and registered in the name of the Investor
within eight (8) days of the Put Notice Date; and (II) the Investor shall
deliver to the Company the Purchase Price to be paid for such Shares, determined
as set forth in Section 2(B). In lieu of delivering physical certificates
representing the Securities and provided that the Company's transfer agent then
is participating in The Depository Trust Company ("DTC") Fast Automated
Securities Transfer ("FAST") program, upon request of the Investor, the Company
shall use all commercially reasonable efforts to cause its transfer agent to
electronically transmit the Securities by crediting the account of the
Investor's prime broker (as specified by the Investor within a reasonable period
in advance of the Investor's notice) with DTC through its Deposit Withdrawal
Agent Commission ("DWAC") system.
The
Company understands that a delay in the issuance of Securities beyond the
Closing Date could result in economic damage to the Investor. After the
Effective Date, as compensation to the Investor for such loss, the Company
agrees to make late payments to the Investor for late issuance of Securities
(delivery of Securities after the applicable Closing Date) in accordance with
the following schedule (where "No. of Days Late" is defined as the number of
trading days beyond the Closing Date, with the Amounts being
cumulative.):
LATE PAYMENT FOR EACH
NO. OF DAYS LATE
The
Company shall make any payments incurred under this Section in immediately
available funds upon demand by the Investor. Nothing herein shall limit the
Investor's right to pursue actual damages for the Company's failure to issue and
deliver the Securities to the Investor, except that such late payments shall
offset any such actual damages incurred by the Investor, and any Open Market
Adjustment Amount, as set forth below.
(H)
OVERALL LIMIT ON COMMON STOCK ISSUABLE. Notwithstanding anything contained
herein to the contrary, if during the Open Period the Company becomes listed on
an exchange that limits the number of shares of Common Stock that may be issued
without shareholder approval, then the number of Shares issuable by the Company
and purchasable by the Investor, shall not exceed that number of the shares of
Common Stock that may be issuable without shareholder approval (the "Maximum
Common Stock Issuance"). If such issuance of shares of Common Stock
could cause a delisting on the Principal Market, then the Maximum Common Stock
Issuance shall first be approved by the Company's shareholders in accordance
with applicable law and the By-laws and Articles of Incorporation of the
Company, as amended, if such issuance of shares of Common Stock could cause a
delisting on the Principal Market. The parties understand and agree that the
Company's failure to seek or obtain such shareholder approval shall in no way
adversely affect the validity and due authorization of the issuance and sale of
Securities or the Investor's obligation in accordance with the terms and
conditions hereof to purchase a number of Shares in the aggregate up to the
Maximum Common Stock Issuance limitation, and that such approval pertains only
to the applicability of the Maximum Common Stock Issuance limitation provided in
this Section 2(H).
(I) If
the Company fails to deliver any portion of the shares of the Put to the
Investor (the "Put Shares Due") and the Investor purchases, in an open market
transaction or otherwise, shares of Common Stock necessary to make delivery of
shares which would have been delivered if the full amount of the shares to be
delivered to the Investor by the Company (the "Open Market Share Purchase"),
then the Company shall pay to the Investor, in addition to any other amounts due
to Investor pursuant to the Put, and not in lieu thereof, the Open Market
Adjustment Amount (as defined below). The "Open Market Adjustment
Amount" is the amount equal to the excess, if any, of (x) the Investor's total
purchase price (including brokerage commissions, if any) for the Open Market
Share Purchase minus (y) the net proceeds (after brokerage commissions, if any)
received by the Investor from the sale of the Put Shares Due. The
Company shall pay the Open Market Adjustment Amount to the Investor in
immediately available funds within five (5) business days of written demand by
the Investor. By way of illustration and not in limitation of the
foregoing, if the Investor purchases shares of Common Stock having a total
purchase price (including brokerage commissions) of $11,000 to cover an Open
Market Purchase with respect to shares of Common Stock it sold for net proceeds
of $10,000, the Open Market Purchase Adjustment Amount which the Company will be
required to pay to the Investor will be $1,000.
(J) LIMITATION
ON AMOUNT OF OWNERSHIP. Notwithstanding anything to the contrary in this
Agreement, in no event shall the Investor be entitled to purchase that number of
Shares, which when added to the sum of the number of shares of Common Stock
beneficially owned (as such term is defined under Section 13(d) and Rule 13d-3
of the 1934 Act), by the Investor, would exceed 4.99% of the number of shares of
Common Stock outstanding on the Closing Date, as determined in accordance with
Rule 13d-1(j) of the 1934 Act.
SECTION
3. INVESTOR'S REPRESENTATIONS, WARRANTIES AND COVENANTS.
The
Investor represents and warrants to the Company, and covenants,
that:
(A)
SOPHISTICATED INVESTOR. The Investor has, by reason of its business and
financial experience, such knowledge, sophistication and experience in financial
and business matters and in making investment decisions of this type that it is
capable of (I) evaluating the merits and risks of an investment in the
Securities and making an informed investment decision; (II) protecting its own
interest; and (III) bearing the economic risk of such investment for an
indefinite period of time.
(B)
AUTHORIZATION; ENFORCEMENT. The Investor has the requisite power and authority
to enter into and perform this Agreement and the Registration Rights
Agreement. The execution and delivery of the Equity Line Transaction
Documents by the Investor and the consummation by it of the transactions
contemplated hereby and thereby have been duly and validly authorized by the
Investor's general partners and no further consent or authorization is required
by the partners. This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Investor and is a valid and binding
agreement of the Investor enforceable against the Investor in accordance with
its terms, subject as to enforceability to general principles of equity and to
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
(C)
SECTION 9 OF THE 1934 ACT. During the term of this Agreement, the Investor will
comply with the provisions of Section 9 of the 1934 Act, and the rules
promulgated thereunder, with respect to transactions involving the Common Stock.
The Investor agrees not to sell the Company's stock short, either directly or
indirectly through its affiliates, principals or advisors, the Company's common
stock during the term of this Agreement.
(D)
ACCREDITED INVESTOR. Investor is an "Accredited Investor" as that term is
defined in Rule 501(a) of Regulation D of the 1933 Act.
(E) NO
CONFLICTS. The execution, delivery and performance of the Transaction Documents
by the Investor and the consummation by the Investor of the transactions
contemplated hereby and thereby will not result in a violation of the
partnership agreement or other organizational documents of the
Investor.
(F)
OPPORTUNITY TO DISCUSS. The Investor has received all materials relating to the
Company's business, finance and operations which it has requested. The Investor
has had an opportunity to discuss the business, management and financial affairs
of the Company with the Company's management.
(G)
INVESTMENT PURPOSES. The Investor is purchasing the Securities for its own
account for investment purposes and not with a view towards distribution and
agrees to resell or otherwise dispose of the Securities solely in accordance
with the registration provisions of the 1933 Act (or pursuant to an exemption
from such registration provisions).
(H) NO
REGISTRATION AS A DEALER. The Investor is not and will not be required to be
registered as a "dealer" under the 1934 Act, either as a result of its execution
and performance of its obligations under this Agreement or
otherwise.
(I) GOOD
STANDING. The Investor is a Limited Partnership, duly organized,
validly existing and in good standing in the state of Delaware.
(J) TAX
LIABILITIES. The Investor understands that it is liable for its own
tax liabilities.
(K)
REGULATION M. The Investor will comply with Regulation M under the
1934 Act, if applicable.
SECTION
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as
set forth in the Schedules attached hereto, or as disclosed in the Company's SEC
Documents, the Company represents and warrants to the Investor
that:
(A)
ORGANIZATION AND QUALIFICATION. The Company is a corporation duly organized and
validly existing in good standing under the laws of the State of
Delaware, USA and has the requisite corporate power and authorization to
own its properties and to carry on its business as now being conducted. Both the
Company and the companies it owns or controls (“Subsidiaries”) are duly
qualified to do business and are in good standing in every jurisdiction in which
its ownership of property or the nature of the business conducted by it makes
such qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect. As
used in this Agreement, "Material Adverse Effect" means any material adverse
effect on (i) the properties, assets, operations, results of operations, or
financial condition of the Company and its Subsidiaries, if any, taken as a
whole, (ii) the transactions contemplated hereby or by the agreements and
instruments to be entered into in connection herewith, or (iii) the authority or
ability of the Company to perform its obligations under the Equity Line
Transaction Documents.
(B)
AUTHORIZATION; ENFORCEMENT; COMPLIANCE WITH OTHER INSTRUMENTS.
(I) The Company has the requisite
corporate power and authority to enter into and perform this Investment
Agreement and the Registration Rights Agreement, and to issue the Securities in
accordance with the terms hereof and thereof.
(II) The execution and delivery of the
Equity Line Transaction Documents by the Company and the consummation by it of
the transactions contemplated hereby and thereby, including without limitation
the reservation for issuance and the issuance of the Securities pursuant to this
Agreement, have been duly and validly authorized by the Company's Board of
Directors and no further consent or authorization is required by the Company,
its Board of Directors, or its shareholders.
(III) The Equity Line Transaction
Documents have been duly and validly executed and delivered by the
Company.
(IV) The Equity Line Transaction
Documents constitute the valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of creditors' rights and
remedies.
(C)
CAPITALIZATION. As of the date hereof, the authorized capital stock of the
Company consists of 310,000,000 shares of Common Stock with $.0017 par
value per share, of which as of the date hereof, 147,392,452 shares are issued
and outstanding.
Except as
disclosed in the Company's publicly available filings with the SEC:
(I)
no shares of the Company's capital stock are subject to preemptive rights or any
other similar rights or any liens or encumbrances suffered or permitted by the
Company; (II) there are no outstanding debt securities; (III) there are no
outstanding shares of capital stock, options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries; (IV) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any of
their securities under the 1933 Act (except the Registration Rights Agreement);
(V) there are no outstanding securities of the Company or any of its
Subsidiaries which contain any redemption or similar provisions, and there are
no contracts, commitments, understandings or arrangements by which the Company
or any of its Subsidiaries is or may become bound to redeem a security of the
Company or any of its Subsidiaries; (VI) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered by the
issuance of the Securities as described in this Agreement; (VII) the Company
does not have any stock appreciation rights or "phantom stock" plans or
agreements or any similar plan or agreement; and (VIII) there is no dispute as
to the classification of any shares of the Company's capital stock.
The
Company has furnished to the Investor, or the Investor has had access through
the SEC’s XXXXX website to, true and correct copies of the Company's Articles of
Incorporation, as amended and in effect on the date hereof (the "Articles of
Incorporation"), and the Company's By-laws, as in effect on the date hereof (the
"By-laws"), and the terms of all securities convertible into or exercisable for
Common Stock and the material rights of the holders thereof in respect
thereto.
(D)
ISSUANCE OF SHARES. The Company has reserved 20,000,000 Shares for
issuance pursuant to this Agreement, which have been duly authorized and
reserved for issuance (subject to adjustment pursuant to the Company's covenant
set forth in Section 5(F) below) pursuant to this Agreement. Upon issuance in
accordance with this Agreement, the Securities will be validly issued, fully
paid for and non-assessable and free from all taxes, liens and charges with
respect to the issue thereof. In the event the Company cannot register a
sufficient number of Shares for issuance pursuant to this Agreement, the Company
will use its best efforts to authorize and reserve for issuance the number of
Shares required for the Company to perform its obligations hereunder as soon as
reasonably practicable.
(E) NO
CONFLICTS. The execution, delivery and performance of the Equity Line
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby will not (I) result in a violation
of the Articles of Incorporation, any Certificate of Designations, Preferences
and Rights of any outstanding series of preferred stock of the Company or the
By-laws; or (II) conflict with, or constitute a material default (or an event
which with notice or lapse of time or both would become a material default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, contract, indenture mortgage,
indebtedness or instrument to which the Company or any of its Subsidiaries is a
party, or to the Company's knowledge result in a violation of any law, rule,
regulation, order, judgment or decree (including United States federal and state
securities laws and regulations and the rules and regulations of the Principal
Market or principal securities exchange or trading market on which the Common
Stock is traded or listed) applicable to the Company or any of its Subsidiaries
or by which any property or asset of the Company or any of its Subsidiaries is
bound or affected. Except as disclosed in Schedule 4(e), neither the Company nor
its Subsidiaries is in violation of any term of, or in default under, the
Articles of Incorporation, any Certificate of Designations, Preferences and
Rights of any outstanding series of preferred stock of the Company or the
By-laws or their organizational charter or by-laws, respectively, or any
contract, agreement, mortgage, indebtedness, indenture, instrument, judgment,
decree or order or any statute, rule or regulation applicable to the Company or
its Subsidiaries, except for possible conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations that would not
individually or in the aggregate have or constitute a Material Adverse Effect.
The business of the Company and its Subsidiaries is not being conducted, and
shall not be conducted, in violation of any law, statute, ordinance, rule, order
or regulation of any governmental authority or agency, regulatory or
self-regulatory agency, or court, except for possible violations the sanctions
for which either individually or in the aggregate would not have a Material
Adverse Effect. Except as specifically contemplated by this Agreement and as
required under the 1933 Act or any securities laws of any states, to the
Company's knowledge, the Company is not required to obtain any consent,
authorization, permit or order of, or make any filing or registration (except
the filing of a registration statement as outlined in the Registration Rights
Agreement between the Parties) with, any court, governmental authority or
agency, regulatory or self-regulatory agency or other third party in order for
it to execute, deliver or perform any of its obligations under, or contemplated
by, the Equity Line Transaction Documents in accordance with the terms hereof or
thereof. All consents, authorizations, permits, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date hereof and are
in full force and effect as of the date hereof. Except as disclosed in Schedule
4(e), the Company and its Subsidiaries are unaware of any facts or circumstances
which might give rise to any violation or default of any of the foregoing. The
Company is not, and will not be, in violation of the listing requirements of the
Principal Market as in effect on the date hereof and on each of the Closing
Dates and is not aware of any facts which would reasonably lead to delisting of
the Common Stock by the Principal Market in the foreseeable future.
(F) SEC
DOCUMENTS; FINANCIAL STATEMENTS. As of the date hereof, the Company has filed
all reports, schedules, forms, statements and other documents required to be
filed by it with the SEC pursuant to the reporting requirements of the 1934 Act
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the "SEC
Documents"). The Company has delivered to the Investor or its representatives,
or they have had access through the SEC’s XXXXX website to, true and complete
copies of the SEC Documents. As of their respective filing dates, the SEC
Documents complied in all material respects with the requirements of the 1934
Act and the rules and regulations of the SEC promulgated thereunder applicable
to the SEC Documents, and none of the SEC Documents, at the time they were filed
with the SEC, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles, by a firm
that is a member of the Public Companies Accounting Oversight Board ("PCAOB")
consistently applied, during the periods involved (except (I) as may be
otherwise indicated in such financial statements or the notes thereto, or (II)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other written information provided by or on behalf of the
Company to the Investor which is not included in the SEC Documents, including,
without limitation, information referred to in Section 4(D) of this Agreement,
contains any untrue statement of a material fact or omits to state any material
fact necessary to make the statements therein, in the light of the circumstance
under which they are or were made, not misleading. Neither the Company nor any
of its Subsidiaries or any of their officers, directors, employees or agents
have provided the Investor with any material, nonpublic information which was
not publicly disclosed prior to the date hereof and any material, nonpublic
information provided to the Investor by the Company or its Subsidiaries or any
of their officers, directors, employees or agents prior to any Closing Date
shall be publicly disclosed by the Company prior to such Closing
Date.
(G)
ABSENCE OF CERTAIN CHANGES. Except as otherwise set forth in the SEC Documents,
the Company does not intend to change the business operations of the Company in
any material way. The Company has not taken any steps, and does not currently
expect to take any steps, to seek protection pursuant to any bankruptcy law nor
does the Company or its Subsidiaries have any knowledge or reason to believe
that its creditors intend to initiate involuntary bankruptcy
proceedings.
(H)
ABSENCE OF LITIGATION AND/OR REGULATORY PROCEEDINGS. Except as set forth in the
SEC Documents, there is no action, suit, proceeding, inquiry or investigation
before or by any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the executive officers of
Company or any of its Subsidiaries, threatened against or affecting the Company,
the Common Stock or any of the Company's Subsidiaries or any of the Company's or
the Company's Subsidiaries' officers or directors in their capacities as such,
in which an adverse decision could have a Material Adverse Effect.
(I)
ACKNOWLEDGMENT REGARDING INVESTOR'S PURCHASE OF SHARES. The Company acknowledges
and agrees that the Investor is acting solely in the capacity of an arm's length
purchaser with respect to the Equity Line Transaction Documents and the
transactions contemplated hereby and thereby. The Company further acknowledges
that the Investor is not acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the Equity Line Transaction
Documents and the transactions contemplated hereby and thereby and any advice
given by the Investor or any of its respective representatives or agents in
connection with the Equity Line Transaction Documents and the transactions
contemplated hereby and thereby is merely incidental to the Investor's purchase
of the Securities, and is not being relied on by the Company. The Company
further represents to the Investor that the Company's decision to enter into the
Equity Line Transaction Documents has been based solely on the independent
evaluation by the Company and its representatives.
(J) NO
UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR CIRCUMSTANCES. Except as set
forth in the SEC Documents, as of the date hereof, no event, liability,
development or circumstance has occurred or exists, or to the Company's
knowledge is contemplated to occur, with respect to the Company or its
Subsidiaries or their respective business, properties, assets, prospects,
operations or financial condition, that would be required to be disclosed by the
Company under applicable securities laws on a registration statement filed with
the SEC relating to an issuance and sale by the Company of its Common Stock and
which has not been publicly announced.
(K)
EMPLOYEE RELATIONS. Neither the Company nor any of its Subsidiaries is involved
in any union labor dispute nor, to the knowledge of the Company or any of its
Subsidiaries, is any such dispute threatened. Neither the Company nor any of its
Subsidiaries is a party to a collective bargaining agreement, and the Company
and its Subsidiaries believe that relations with their employees are good. No
executive officer (as defined in Rule 501(f) of the 0000 Xxx) has notified the
Company that such officer intends to leave the Company's employ or otherwise
terminate such officer's employment with the Company.
(L)
INTELLECTUAL PROPERTY RIGHTS. The Company and its Subsidiaries own or possess
adequate rights or licenses to use all trademarks, trade names, service marks,
service xxxx registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade secrets and
rights necessary to conduct their respective businesses as now conducted. Except
as set forth in the SEC Documents, none of the Company's trademarks, trade
names, service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, government authorizations,
trade secrets or other intellectual property rights necessary to conduct its
business as now or as proposed to be conducted have expired or terminated, or
are expected to expire or terminate within two (2) years from the date of this
Agreement. The Company and its Subsidiaries do not have any knowledge of any
infringement by the Company or its Subsidiaries of trademark, trade name rights,
patents, patent rights, copyrights, inventions, licenses, service names, service
marks, service xxxx registrations, trade secret or other similar rights of
others, or of any such development of similar or identical trade secrets or
technical information by others and, except as set forth in the SEC Documents,
there is no claim, action or proceeding being made or brought against, or to the
Company's knowledge, being threatened against, the Company or its Subsidiaries
regarding trademark, trade name, patents, patent rights, invention, copyright,
license, service names, service marks, service xxxx registrations, trade secret
or other infringement; and the Company and its Subsidiaries are unaware of any
facts or circumstances which might give rise to any of the foregoing. The
Company and its Subsidiaries have taken commercially reasonable security
measures to protect the secrecy, confidentiality and value of all of their
intellectual properties.
(M)
ENVIRONMENTAL LAWS. The Company and its Subsidiaries (I) are, to the knowledge
of the Company and its Subsidiaries, in compliance with any and all applicable
foreign, federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants ("Environmental Laws"); (II)
have, to the knowledge of the Company, received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct their
respective businesses; and (III) are in compliance, to the knowledge of
the Company, with all terms and conditions of any such permit,
license or approval where, in each of the three (3) foregoing cases, the failure
to so comply would have, individually or in the aggregate, a Material Adverse
Effect.
(N)
TITLE. The Company and its Subsidiaries have good and marketable title to all
personal property owned by them which is material to the business of the Company
and its Subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as are described in the SEC Documents or such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company or any of its
Subsidiaries. Any real property and facilities held under lease by the Company
or any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
(O)
INSURANCE. Each of the Company's Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as management of the Company reasonably believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any of its Subsidiaries has been refused any
insurance coverage sought or applied for and neither the Company nor its
Subsidiaries has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect.
(P)
REGULATORY PERMITS. The Company and its Subsidiaries have in full force and
effect all certificates, approvals, authorizations and permits from the
appropriate federal, state, local or foreign regulatory authorities and
comparable foreign regulatory agencies, necessary to own, lease or operate their
respective properties and assets and conduct their respective businesses, and
neither the Company nor any such Subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate,
approval, authorization or permit, except for such certificates, approvals,
authorizations or permits which if not obtained, or such revocations or
modifications which, would not have a Material Adverse Effect.
(Q)
INTERNAL ACCOUNTING CONTROLS. The Company and each of its 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 generally
accepted accounting principles by a firm with membership to the PCAOB 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.
(R) NO
MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Company nor any of its
Subsidiaries is subject to any charter, corporate or other legal restriction, or
any judgment, decree, order, rule or regulation which in the judgment of the
Company's officers has or is expected in the future to have a Material Adverse
Effect. Neither the Company nor any of its Subsidiaries is a party to any
contract or agreement which in the judgment of the Company's officers has or is
expected to have a Material Adverse Effect.
(S) TAX
STATUS. The Company and each of its Subsidiaries has made or filed all United
States federal and state 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 provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
(T)
CERTAIN TRANSACTIONS. Except as set forth in the SEC Documents filed at least
ten (10) days prior to the date hereof and except for arm's length transactions
pursuant to which the Company makes payments in the ordinary course of business
upon terms no less favorable than the Company could obtain from disinterested
third parties and other than the grant of stock options disclosed in the SEC
Documents, none of the officers, directors, or employees of the Company is
presently a party to any transaction with the Company or any of its Subsidiaries
(other than for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any corporation, partnership,
trust or other entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or
partner.
(U)
DILUTIVE EFFECT. The Company understands and acknowledges that the number of
shares of Common Stock issuable upon purchases pursuant to this Agreement will
increase in certain circumstances including, but not necessarily limited to, the
circumstance wherein the trading price of the Common Stock declines during the
period between the Effective Date and the end of the Open Period. The Company's
executive officers and directors have studied and fully understand the nature of
the transactions contemplated by this Agreement and recognize that they have a
potential dilutive effect on the shareholders of the Company. The Board of
Directors of the Company has concluded, in its good faith business judgment, and
with full understanding of the implications, that such issuance is in the best
interests of the Company. The Company specifically acknowledges that, subject to
such limitations as are expressly set forth in the Equity Line Transaction
Documents, its obligation to issue shares of Common Stock upon purchases
pursuant to this Agreement is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
shareholders of the Company.
(V)
LOCK-UP. The Company shall cause its officers and directors to refrain from
selling Common Stock during each Pricing Period.
(W) NO
GENERAL SOLICITATION. Neither the Company, nor any of its affiliates, nor any
person acting on its behalf, has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D) in connection with the
offer or sale of the Common Stock to be offered as set forth in this
Agreement.
(X) NO
BROKERS, FINDERS OR FINANCIAL ADVISORY FEES OR COMMISSIONS. No
brokers, finders or financial advisory fees or commissions will be payable by
the Company, its agents or Subsidiaries, with respect to the transactions
contemplated by this Agreement, except as otherwise disclosed in this
Agreement.
SECTION
5. COVENANTS OF THE COMPANY
(A) BEST
EFFORTS. The Company shall use all commercially reasonable efforts to timely
satisfy each of the conditions set forth in Section 8 of this
Agreement.
(B) BLUE
SKY. The Company shall, at its sole cost and expense, on or before each of the
Closing Dates, take such action as the Company shall reasonably determine is
necessary to qualify the Securities for, or obtain exemption for the Securities
for, sale to the Investor at each of the Closings pursuant to this Agreement
under applicable securities or "Blue Sky" laws of such states of the United
States, as reasonably specified by the Investor, and shall provide evidence of
any such action so taken to the Investor on or prior to the Closing
Date.
(C)
REPORTING STATUS. Until one of the following occurs, the Company shall file all
reports required to be filed with the SEC pursuant to the 1934 Act, and the
Company shall not terminate its status, or take an action or fail to take any
action, which would terminate its status as a reporting company under the 1934
Act: (i) this Agreement terminates pursuant to Section 9, (ii) the date on which
the Investor has sold all the Securities.
(D) USE
OF PROCEEDS. The Company will use the proceeds from the sale of the Securities
(excluding amounts paid by the Company for fees as set forth in the Equity Line
Transaction Documents) for general corporate and working capital purposes and
acquisitions or assets, businesses or operations or for other purposes that the
Board of Directors, in its good xxxxx xxxx to be in the best interest of the
Company.
(E)
FINANCIAL INFORMATION. During the Open Period, the Company agrees to make
available to the Investor via the SEC’s XXXXX website or other electronic means
the following documents and information on the forms set forth: (I) within five
(5) Trading Days after the filing thereof with the SEC, a copy of its Annual
Reports on Form 10-K, its Quarterly Reports on Form 10-Q, any Current Reports on
Form 8-K and any Registration Statements or amendments filed pursuant to the
1933 Act; (II) copies of any notices and other information made available or
given to the shareholders of the Company generally, contemporaneously with the
making available or giving thereof to the shareholders; and (III) within two (2)
calendar days of filing or delivery thereof, copies of all documents filed with,
and all correspondence sent to, the Principal Market, any securities exchange or
market, or the Financial Industry Regulatory Authority, unless such information
is material nonpublic information.
(F)
RESERVATION OF SHARES. The Company shall reserve Twenty Million (20,000,000)
Shares for the issuance of the Securities to the Investor as required hereunder.
In the event that the Company determines that it does not have a sufficient
number of authorized shares of Common Stock to reserve and keep available for
issuance as described in this Section 5(F), the Company shall use all
commercially reasonable efforts to increase the number of authorized shares of
Common Stock by seeking shareholder approval for the authorization of such
additional shares.
(G)
LISTING. The Company shall promptly secure and maintain the listing of all of
the Registrable Securities (as defined in the Registration Rights Agreement) on
the Principal Market and each other national securities exchange and automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance) and shall maintain, such listing of all
Registrable Securities from time to time issuable under the terms of the Equity
Line Transaction Documents. Neither the Company nor any of its Subsidiaries
shall take any action which would be reasonably expected to result in the
delisting or suspension of the Common Stock on the Principal Market (excluding
suspensions of not more than one (1) trading day resulting from business
announcements by the Company). The Company shall promptly provide to the
Investor copies of any notices it receives from the Principal Market regarding
the continued eligibility of the Common Stock for listing on such automated
quotation system or securities exchange. The Company shall pay all fees and
expenses in connection with satisfying its obligations under this Section
5(G).
(H)
TRANSACTIONS WITH AFFILIATES. The Company shall not, and shall cause each of its
Subsidiaries not to, enter into, amend, modify or supplement, or permit any
Subsidiary to enter into, amend, modify or supplement, any agreement,
transaction, commitment or arrangement with any of its or any Subsidiary's
officers, directors, persons who were officers or directors at any time during
the previous two (2) years, shareholders who beneficially own 5% or more of the
Common Stock, or Affiliates or with any individual related by blood, marriage or
adoption to any such individual or with any entity in which any such entity or
individual owns a 5% or more beneficial interest (each a "Related Party"),
except for (I) customary employment arrangements and benefit programs on
reasonable terms, (II) any agreement, transaction, commitment or arrangement on
an arms-length basis on terms no less favorable than terms which would have been
obtainable from a disinterested third party other than such Related Party, or
(III) any agreement, transaction, commitment or arrangement which is approved by
a majority of the disinterested directors of the Company. For purposes hereof,
any director who is also an officer of the Company or any Subsidiary of the
Company shall not be a disinterested director with respect to any such
agreement, transaction, commitment or arrangement. "Affiliate" for purposes
hereof means, with respect to any person or entity, another person or entity
that, directly or indirectly, (I) has a 5% or more equity interest in that
person or entity, (II) has 5% or more common ownership with that person or
entity, (III) controls that person or entity, or (IV) is under common control
with that person or entity. "Control" or "Controls" for purposes hereof means
that a person or entity has the power, directly or indirectly, to conduct or
govern the policies of another person or entity.
(I)
FILING OF FORM 8-K. On or before the date which is four (4) Trading Days after
the Execution Date, the Company shall file a Current Report on Form 8-K with the
SEC describing the terms of the transaction contemplated by the Equity Line
Transaction Documents in the form required by the 1934 Act, if such filing is
required.
(J)
CORPORATE EXISTENCE. The Company shall use all commercially reasonable efforts
to preserve and continue the corporate existence of the Company.
(K)
NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION OF RIGHT TO MAKE A
PUT. The Company shall promptly notify the Investor upon the occurrence of any
of the following events in respect of a Registration Statement or related
prospectus in respect of an offering of the Securities: (I) receipt of any
request for additional information by the SEC or any other federal or state
governmental authority during the period of effectiveness of the Registration
Statement for amendments or supplements to the Registration Statement or related
prospectus; (II) the issuance by the SEC or any other federal or state
governmental authority of any stop order suspending the effectiveness of any
Registration Statement or the initiation of any proceedings for that
purpose; (III) receipt of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Securities for sale in any jurisdiction or the initiation or notice of any
proceeding for such purpose; (IV) the happening of any event that makes any
statement made in such Registration Statement or related prospectus or any
document incorporated or deemed to be incorporated therein by reference untrue
in any material respect or that requires the making of any changes in the
Registration Statement, related prospectus or documents so that, in the case of
a Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case of
the related prospectus, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and (V) the Company's reasonable
determination that a post-effective amendment to the Registration Statement
would be appropriate, and the Company shall promptly make available to Investor
any such supplement or amendment to the related prospectus. The Company shall
not deliver to Investor any Put Notice during the continuation of any of the
foregoing events in this Section 5(K).
(L) REIMBURSEMENT. If
(I) the Investor becomes involved in any capacity in any action, proceeding or
investigation brought by any shareholder of the Company, in connection with or
as a result of the consummation of the transactions contemplated by the Equity
Line Transaction Documents, or if the Investor is impleaded in any such action,
proceeding or investigation by any person (other than as a result of a breach of
the Investor’s representations and warranties set forth in this Agreement); or
(II) the Investor becomes involved in any capacity in any action, proceeding or
investigation brought by the SEC against or involving the Company or in
connection with or as a result of the consummation of the transactions
contemplated by the Equity Line Transaction Documents (other than as a result of
a breach of the Investor’s representations and warranties set forth in this
Agreement), or if this Investor is impleaded in any such action, proceeding or
investigation by any person, then in any such case, the Company will reimburse
the Investor for its reasonable legal and other expenses (including the cost of
any investigation and preparation) incurred in connection therewith, as such
expenses are incurred. In addition, other than with respect to any matter in
which the Investor is a named party, the Company will pay to the Investor the
charges, as reasonably determined by the Investor, for the time of any officers
or employees of the Investor devoted to appearing and preparing to appear as
witnesses, assisting in preparation for hearings, trials or pretrial matters, or
otherwise with respect to inquiries, hearing, trials, and other proceedings
relating to the subject matter of this Agreement. The reimbursement obligations
of the Company under this section 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 Investor that are actually named in such action,
proceeding or investigation, and partners, directors, agents, employees,
attorneys, accountants, auditors and controlling persons (if any), as the case
may be, of Investor and any such affiliate, and shall be binding upon and inure
to the benefit of any successors of the Company, the Investor and any such
affiliate and any such person.
(M)
TRANSFER AGENT. Upon effectiveness of the Registration Statement, and
for so long as the Registration Statement is effective, the Company
shall deliver instructions to its transfer agent to issue Shares to the Investor
that are covered for resale by the Registration Statement free of restrictive
legends.
(N)
ACKNOWLEDGEMENT OF TERMS. The Company hereby represents and warrants
to the Investor that: (i) it is voluntarily entering into this Agreement of its
own freewill, (ii) it is not entering this Agreement under economic duress,
(iii) the terms of this Agreement are reasonable and fair to the Company, and
(iv) the Company has had independent legal counsel of its own choosing review
this Agreement, advise the Company with respect to this Agreement, and represent
the Company in connection with this Agreement.
SECTION
6. INTENTIONALLY OMITTED
SECTION
7. CONDITIONS OF THE COMPANY'S OBLIGATION TO SELL.
The
obligation hereunder of the Company to issue and sell the Securities to the
Investor is further subject to the satisfaction, at or before each Closing Date,
of each of the following conditions set forth below. These conditions are for
the Company's sole benefit and may be waived by the Company at any time in its
sole discretion.
(A) The
Investor shall have executed this Agreement and the Registration Rights
Agreement and delivered the same to the Company.
(B) The
Investor shall have delivered to the Company the Purchase Price for the
Securities being purchased by the Investor between the end of the Pricing Period
and the Closing Date via a Put Settlement Sheet (hereto attached as Exhibit D).
After receipt of confirmation of delivery of such Securities to the Investor,
the Investor, by wire transfer of immediately available funds pursuant to the
wire instructions provided by the Company, will disburse the funds constituting
the Purchase Amount.
(C) The
representations and warranties of the Investor shall be true and correct as of
the date when made and as of the applicable Closing Date as though made at that
time and the Investor shall have performed, satisfied and complied with the
covenants, agreements and conditions required by the Equity Line Transaction
Documents to be performed, satisfied or complied with by the Investor on or
before such Closing Date.
(D) No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction which prohibits the consummation of any of
the transactions contemplated by this Agreement.
SECTION
8. FURTHER CONDITIONS OF THE INVESTOR'S OBLIGATION TO PURCHASE.
The
obligation of the Investor hereunder to purchase Shares is subject to the
satisfaction, on or before each Closing Date, of each of the following
conditions set forth below.
(A) The
Company shall have executed the Equity Line Transaction Documents and delivered
the same to the Investor.
(B) The
Common Stock shall be authorized for quotation on the Principal Market and
trading in the Common Stock shall not have been suspended by the Principal
Market or the SEC, at any time beginning on the date hereof and through and
including the respective Closing Date (excluding suspensions of not more than
one (1) Trading Day resulting from business announcements by the Company,
provided that such suspensions occur prior to the Company's delivery of the Put
Notice related to such Closing).
(C) The
representations and warranties of the Company shall be true and correct as of
the date when made and as of the applicable Closing Date as though made at that
time and the Company shall have performed, satisfied and complied with the
covenants, agreements and conditions required by the Equity Line Transaction
Documents to be performed, satisfied or complied with by the Company on or
before such Closing Date. The Investor may request an update as of such Closing
Date regarding the representation contained in Section 4(C) above.
(D) The
Company shall have executed and delivered to the Investor the certificates
representing, or have executed electronic book-entry transfer of, the Securities
(in such denominations as the Investor shall request) being purchased by the
Investor at such Closing.
(E) The
Board of Directors of the Company shall have adopted resolutions consistent with
Section 4(B)(II) above (the "Resolutions") and such Resolutions shall not have
been amended or rescinded prior to such Closing Date.
(F)
Reserved
(G) No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction which prohibits the consummation of any of
the transactions contemplated by this Agreement.
(H) The
Registration Statement shall be effective on each Closing Date and no stop order
suspending the effectiveness of the Registration statement shall be in effect or
to the Company's knowledge shall be pending or threatened. Furthermore, on each
Closing Date (I) neither the Company nor the Investor shall have received notice
that the SEC has issued or intends to issue a stop order with respect to such
Registration Statement or that the SEC otherwise has suspended or withdrawn the
effectiveness of such Registration Statement, either temporarily or permanently,
or intends or has threatened to do so (unless the SEC's concerns have been
addressed and Investor is reasonably satisfied that the SEC no longer is
considering or intends to take such action), and (II) no other suspension of the
use or withdrawal of the effectiveness of such Registration Statement or related
prospectus shall exist.
(I) At
the time of each Closing, the Registration Statement (including information or
documents incorporated by reference therein) and any amendments or supplements
thereto shall not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading or which would require public disclosure or an
update supplement to the prospectus.
(J) If
applicable, the shareholders of the Company shall have approved the issuance of
any Shares in excess of the Maximum Common Stock Issuance in accordance with
Section 2(H) or the Company shall have obtained appropriate approval pursuant to
the requirements of Delaware law and the Company’s Articles of Incorporation and
By-laws.
(K) The
conditions to such Closing set forth in Section 2(E) shall have been satisfied
on or before such Closing Date.
(L) The
Company shall have certified to the Investor the number of Shares of Common
Stock outstanding when a Put Notice is given to the Investor. The
Company's delivery of a Put Notice to the Investor constitutes the Company's
certification of the existence of the necessary number of shares of Common Stock
reserved for issuance.
SECTION
9. TERMINATION. This Agreement shall terminate upon any of the following
events:
(I) when
the Investor has purchased an aggregate of Ten million dollars ($10,000,000) in
the Common Stock of the Company pursuant to this Agreement; or,
(II) on
the date which is sixty (60) months after the Effective Date; or,
(III)
upon written notice of the Company to the Investor. Any and all
shares, or penalties, if any, due under this Agreement shall be immediately
payable and due upon termination of this Agreement.
SECTION
10. SUSPENSION
The
Company’s right to Put Shares, and the Investor’s obligation to purchase Shares
under this Agreement shall be suspended upon any of the following events, and
shall remain suspended until such event is rectified:
(I) the
trading of the Common Stock is suspended by the SEC, the Principal Market or the
NASD for a period of two (2) consecutive Trading Days during the Open Period;
or,
(II) The
Common Stock ceases to be registered under the 1934 Act or listed or traded on
the Principal Market. Immediately upon the occurrence of one of the
above-described events, the Company shall send written notice of such event to
the Investor.
SECTION
11. INDEMNIFICATION.
In
consideration of the parties mutual obligations set forth in the Transaction
Documents, each of the parties (in such capacity, an "Indemnitor") shall defend,
protect, indemnify and hold harmless the other and all of the other party's
shareholders, officers, directors, employees, counsel, and direct or indirect
investors and any of the foregoing person's agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "Indemnitees")
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and reasonable expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (I)
any material misrepresentation or breach of any representation or warranty made
by the Indemnitor in the Equity Line Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby; (II) any
material breach of any covenant, agreement or obligation of the Indemnitor
contained in the Equity Line Transaction Documents or any other certificate,
instrument or document contemplated hereby or thereby; or (III) any cause of
action, suit or claim brought or made against such Indemnitee by a third party
and arising out of or resulting from the execution, delivery, performance or
enforcement of the Equity Line Transaction Documents or any other certificate,
instrument or document contemplated hereby or thereby, except insofar as any
such misrepresentation, breach or any untrue statement, alleged untrue
statement, omission or alleged omission is made in reliance upon and in
conformity with information furnished to Indemnitor which is specifically
intended for use in the preparation of any such Registration Statement,
preliminary prospectus, prospectus or amendments to the prospectus. To the
extent that the foregoing undertaking by the Indemnitor may be unenforceable for
any reason, the Indemnitor shall make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities which is permissible
under applicable law. The indemnity provisions contained herein shall be in
addition to any cause of action or similar rights Indemnitor may have, and any
liabilities the Indemnitor or the Indemnitees may be subject to.
SECTION
12. GOVERNING LAW; DISPUTES SUBMITTED TO ARBITRATION. All disputes arising
under this agreement shall be governed by and interpreted in accordance with the
laws of the Commonwealth of Massachusetts, without regard to principles of
conflict of laws. The parties to this agreement will submit all
disputes arising under this agreement to arbitration in Boston, Massachusetts
before a single arbitrator of the American Arbitration Association
(“AAA”). The arbitrator shall be selected by application of the rules
of the AAA, or by mutual agreement of the parties, except that such arbitrator
shall be an attorney admitted to practice law in the Commonwealth of
Massachusetts. No party to this Agreement will challenge the
jurisdiction or venue provisions as provided in this section. No
party to this agreement will challenge the jurisdiction or venue provisions as
provided in this section. Nothing contained herein shall prevent the
party from obtaining an injunction.
(B) LEGAL
FEES; AND MISCELLANEOUS FEES. Except as otherwise set forth in the Equity Line
Transaction Documents, each party shall pay the fees and expenses of its
advisers, counsel, the 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. Any attorneys' fees and
expenses incurred by either the Company or the Investor in connection with the
preparation, negotiation, execution and delivery of any amendments to this
Agreement or relating to the enforcement of the rights of any party, after the
occurrence of any breach of the terms of this Agreement by another party or any
default by another party in respect of the transactions contemplated hereunder,
shall be paid on demand by the party which breached the Agreement and/or
defaulted, as the case may be. The Company shall pay all stamp and other taxes
and duties levied in connection with the issuance of any
Securities.
(C)
COUNTERPARTS. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party; provided that a facsimile signature shall be
considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original
signature.
(D)
HEADINGS; SINGULAR/PLURAL. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement. Whenever required by the context of this Agreement, the singular
shall include the plural and masculine shall include the feminine.
(E)
SEVERABILITY. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
(F)
ENTIRE AGREEMENT; AMENDMENTS. This Agreement is the FINAL AGREEMENT between the
Company and the Investor with respect to the terms and conditions set forth
herein, and, the terms of this Agreement may not be contradicted by evidence of
prior, contemporaneous, or subsequent oral agreements of the
Parties. No provision of this Agreement may be amended other than by
an instrument in writing signed by the Company and the Investor, and no
provision hereof may be waived other than by an instrument in writing signed by
the party against whom enforcement is sought. The execution and delivery of the
Equity Line Transaction Documents shall not alter the force and effect of any
other agreements between the Parties, and the obligations under those
agreements.
(G)
NOTICES. Any notices or other communications required or permitted to be given
under the terms of this Agreement must be in writing and will be deemed to have
been delivered (I) upon receipt, when delivered personally; (II) upon receipt,
when sent by facsimile or email with the signed document attached in PDF format
(provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); or (III) one (1) day after
deposit with a nationally recognized overnight delivery service, in each case
properly addressed to the party to receive the same. The addresses and facsimile
numbers for such communications shall be:
If
to the Company:
0 Xxxxx
Xxxxxx
Xxxxxxxxx
Xxxxxxx, XXXXXX 00000
Telephone:
000-00-000-0000
Facsimile:
000-00-0000000
With Copy
to:
Xxxxxx X.
Xxxxxx, Esq.
Xxxxxxx
Savage LLP
000
Xxxxxxxxx Xxxxxx, 0xx
Xxxxx
Xxx Xxxx,
Xxx Xxxx 00000
If
to the Investor:
Dutchess
Opportunity Fund, II, LP
00
Xxxxxxxxxxxx Xxxxxx, Xxxxx 0
Xxxxxx,
XX 00000
Telephone:
000-000-0000
Facsimile:
000-000-0000
Each
party shall provide five (5) days prior written notice to the other party of any
change in address or facsimile number.
(H) NO
ASSIGNMENT. This Agreement may not be assigned.
(I) NO
THIRD PARTY BENEFICIARIES. This Agreement is intended for the benefit of the
parties hereto and is not for the benefit of, nor may any provision hereof be
enforced by, any other person, except that the Company acknowledges that the
rights of the Investor may be enforced by its general partner.
(J)
SURVIVAL. The indemnification provisions set forth in Section 11, shall survive
each of the Closings and the termination of this Agreement.
(K)
PUBLICITY. The Company and the Investor shall consult with each other in issuing
any press releases or otherwise making public statements with respect to the
transactions contemplated hereby and no party shall issue any such press release
or otherwise make any such public statement without the prior consent of the
other party, which consent shall not be unreasonably withheld or delayed, except
that no prior consent shall be required if such disclosure is required by law,
in which such case the disclosing party shall provide the other party with prior
notice of such public statement. The Investor acknowledges that this Agreement
and all or part of the Equity Line Transaction Documents may be deemed to be
"material contracts" as that term is defined by Item 601(b)(10) of Regulation
S-B, and that the Company may therefore be required to file such documents as
exhibits to reports or registration statements filed under the 1933 Act or the
1934 Act. The Investor further agrees that the status of such
documents and materials as material contracts shall be determined solely by the
Company, in consultation with its counsel.
(L)
FURTHER ASSURANCES. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
(M)
RESERVED.
(N) NO
STRICT CONSTRUCTION. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent, and no rules
of strict construction will be applied against any party, as the parties
mutually agree that each has had a full and fair opportunity to review this
Agreement and seek the advice of counsel on it.
(O)
REMEDIES. The Investor shall have all rights and remedies set forth in this
Agreement and the Registration Rights Agreement and all rights and remedies
which such holders have been granted at any time under any other agreement or
contract and all of the rights which the Investor has by law. Any person having
any rights under any provision of this Agreement shall be entitled to enforce
such rights specifically (without posting a bond or other security), to recover
damages by reason of any default or breach of any provision of this Agreement,
including the recovery of reasonable attorneys fees and costs, and to exercise
all other rights granted by law.
(P)
PAYMENT SET ASIDE. To the extent that the Company makes a payment or payments to
the Investor hereunder or under the Registration Rights Agreement or the
Investor enforces or exercises its rights hereunder or 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 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.
(Q)
PRICING OF COMMON STOCK. For purposes of this Agreement, the CLOSING BEST BID of
the Common Stock shall be as reported on Bloomberg.
SECTION
13. NON-DISCLOSURE OF NON-PUBLIC INFORMATION.
(a) The
Company shall not disclose non-public information to the Investor, its advisors,
or its representatives.
(b)
Nothing herein shall require the Company to disclose non-public information to
the Investor or its advisors or representatives, and the Company represents that
it does not disseminate non-public information to any investors who purchase
stock in the Company in a public offering, to money managers or to securities
analysts, provided, however, that notwithstanding anything herein to the
contrary, the Company will, as hereinabove provided, immediately notify the
advisors and representatives of the Investor and, if any, underwriters, of any
event or the existence of any circumstance (without any obligation to disclose
the specific event or circumstance) of which it becomes aware, constituting
non-public information (whether or not requested of the Company specifically or
generally during the course of due diligence by such persons or entities),
which, if not disclosed in the prospectus included in the Registration Statement
would cause such prospectus to include a material misstatement or to omit a
material fact required to be stated therein in order to make the statements,
therein, in light of the circumstances in which they were made, not misleading.
Nothing contained in this Section 13 shall be construed to mean that such
persons or entities other than the Investor (without the written consent of the
Investor prior to disclosure of such information) may not obtain non-public
information in the course of conducting due diligence in accordance with the
terms of this Agreement and nothing herein shall prevent any such persons or
entities from notifying the Company of their opinion that based on such due
diligence by such persons or entities, that the Registration Statement contains
an untrue statement of material fact or omits a material fact required to be
stated in the Registration Statement or necessary to make the statements
contained therein, in light of the circumstances in which they were made, not
misleading.
ARTICLE
14 ACKNOWLEDGEMENTS OF THE PARTIES.
Notwithstanding
anything in this Agreement to the contrary, the parties hereto hereby
acknowledge and agree to the following: (i) the Investor makes no
representations or covenants that it will not engage in trading in the
securities of the Company, other than the Investor will not sell short the
Company's common stock at any time during this Agreement; (ii) the Company
shall, by 8:30 a.m. Boston Time on the fourth Trading Day following the date
hereof, file a current report on Form 8-K disclosing the material terms of the
transactions contemplated hereby and in the other Equity Line Transaction
Documents; (iii) the Company has not and shall not provide material non-public
information to the Investor unless prior thereto the Investor shall have
executed a written agreement regarding the confidentiality and use of such
information; and (iv) the Company understands and confirms that the Investor
will be relying on the acknowledgements set forth in clauses (i) through (iii)
above if the Investor effects any transactions in the securities of the
Company.
SIGNATURE
PAGE OF INVESTMENT AGREEMENT
Your
signature on this Signature Page evidences your agreement to be bound by the
terms and conditions of the Investment Agreement and the Registration Rights
Agreement as of the date first written above.
The
undersigned signatory hereby certifies that he has read and understands the
Investment Agreement, and the representations made by the undersigned in this
Investment Agreement are true and accurate, and agrees to be bound by its
terms.
|
DUTCHESS
OPPORTUNITY FUND, II, LP
|
|
|
By:
|
/s/ Xxxxxxx X. Xxxxxxxx
|
|
Xxxxxxx
X. Xxxxxxxx
|
|
|
Managing
Member of:
|
|
|
Dutchess
Capital Management, II, LLC
|
|
|
General
Partner to:
|
|
|
Dutchess
Opportunity Fund, II, LP
|
|
|
M-WISE,
INC.
|
|
|
By:
|
/s/ Xxxxxxxxx Xxxxxx
|
|
Name:
Xxxxxxxxx Xxxxxx
|
|
|
Title:
Chairman
|
|
|
/s/ Xxxxxxx Xxxxxx
|
|
|
Name:
Xxxxxxx Xxxxxx
|
|
|
Title:
Chief Financial Officer and Principal
|
|
|
Accounting
Officer
|
LIST OF
EXHIBITS
|
EXHIBIT A
|
Registration Rights Agreement
|
|
|
EXHIBIT B
|
Opinion of Company's Counsel
|
|
|
EXHIBIT C
|
Put Notice
|
|
|
EXHIBIT D
|
Put Settlement Sheet
|
LIST OF
SCHEDULES
Schedule
4(a) Subsidiaries
EXHIBIT
A
EXHIBIT B
FORM OF
NOTICE OF EFFECTIVENESS
OF
REGISTRATION STATEMENT
Date:
__________
[TRANSFER
AGENT]
|
|
Re:
|
M-WISE,
INC..
|
Ladies
and Gentlemen:
We are counsel to M-Wise, Inc., a
Delaware corporation (the "Company"), and have represented the Company in
connection with that certain Investment Agreement (the "Investment Agreement")
entered into by and among the Company and Dutchess Opportunity Fund, II, LP (the
"Investor") pursuant to which the Company has agreed to issue to the Investor
shares of the Company's common stock, without par value per share (the "Common
Stock") on the terms and conditions set forth in the Investment Agreement.
Pursuant to the Investment Agreement, the Company also has entered into a
Registration Rights Agreement with the Investor (the "Registration Rights
Agreement") pursuant to which the Company agreed, among other things, to
register the Registrable Securities (as defined in the Registration Rights
Agreement), including the shares of Common Stock issued or issuable under the
Investment Agreement under the Securities Act of 1933, as amended (the "1933
Act"). In connection with the Company's obligations under the Registration
Rights Agreement, on _________, 200_ the Company filed a Registration Statement
on Form S- ___ (File No. 333-________) (the "Registration Statement") with the
Securities and Exchange Commission (the "SEC") relating to the Registrable
Securities which names the Investor as a selling shareholder
thereunder.
In connection with the foregoing, we
advise you that [a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective] [the Registration Statement has become
effective] under the 1933 Act at [enter the time of
effectiveness] on [enter the date of
effectiveness] and to the best of our knowledge, after telephonic inquiry
of a member of the SEC’s staff, no stop order suspending its effectiveness has
been issued and no proceedings for that purpose are pending before, or
threatened by, the SEC and the Registrable Securities are available for resale
under the 1933 Act pursuant to the Registration Statement.
|
Very
truly yours,
|
|
|
[Company
Counsel]
|
EXHIBIT
C
Date:
RE: Put
Notice Number __
Dear Xx.
Xxxxxxxx,
This is
to inform you that as of today, M-Wise, Inc., Inc., a Delaware corporation (the
"Company"), hereby elects to exercise its right pursuant to the Investment
Agreement to require Dutchess Opportunity Fund, II, LP to purchase shares of its
common stock. The Company hereby certifies that:
The
amount of this put is $__________.
The
Pricing Period runs from ________ until _______.
The
Suspension Price is $________
The
current number of shares issued and outstanding as of the Company
are:
____________________________
The
number of shares currently available for issuance on the S-1 for the Equity Line
are:
_________________________
Regards,
|
M-Wise,
Inc.
|
|
Name:
|
|
Title:
|
EXHIBIT
D
PUT
SETTLEMENT SHEET
Date:
Dear
______,
Pursuant
to the Put given by M-Wise, Inc., to Dutchess Opportunity Fund, II, LP on
_________________ 200_, we are now submitting the amount of common shares for
you to issue to Dutchess.
Please
have a certificate bearing no restrictive legend totaling __________ shares
issued to Dutchess Opportunity Fund, II, LP immediately and send via DWAC to the
following account:
XXXXXX
If not
DWAC eligible, please send FedEx Priority Overnight to:
XXXXXX
Once
these shares are received by us, we will have the funds wired to the
Company.
Regards,
Xxxxxxx
X. Xxxxxxxx
DATE. . .
.. . . . . . . . . . . . . . . . . . CLOSING BEST BID
Day 1 –
Day 5
CLOSING
BEST BID
————
PUT
AMOUNT
————
AMOUNT
WIRED TO COMPANY
————
PURCHASE
PRICE (93%)
————
AMOUNT OF
SHARES DUE
————
The
undersigned has completed this Put as of this ___th day of _________,
200_.
|
M-Wise,
Inc.
|
|
Name:
|
|
Title:
|
SCHEDULE
4(c) CAPITALIZATION
SCHEDULE
4(e) CONFLICTS
SCHEDULE 4(g) MATERIAL CHANGES
SCHEDULE 4(h) LITIGATION
SCHEDULE 4(l) INTELLECTUAL PROPERTY
SCHEDULE
4(n) LIENS
SCHEDULE 4(t) CERTAIN TRANSACTIONS
