EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of
August ___, 2005, among Euroseas Ltd., a Xxxxxxxx Islands corporation (the
"Company"), and each purchaser identified on the signature pages hereto (each,
including its successors and assigns, a "Purchaser" and collectively the
"Purchasers").
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended
(the "Securities Act") and Rule 506 promulgated thereunder, the Company desires
to issue and sell to each Purchaser, and each Purchaser, severally and not
jointly, desires to purchase from the Company, securities of the Company as more
fully described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agree
as follows:
DEFINITIONS
Definitions. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, 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).
"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.
"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) the
Purchasers' obligations to pay the Subscription Amount and (ii) the
Company's obligations to deliver the Securities have been satisfied or
waived.
"Closing Price" means on any particular date (a) the last
reported closing bid price per share of Common Stock on such date on
the Trading Market (as reported by Bloomberg L.P. at 4:15 PM (New York
time)), or (b) if there is no such price on such date, then the closing
bid price on the Trading Market on the date nearest preceding such date
(as reported by Bloomberg L.P. at 4:15 PM (New York time)), or (c) if
the Common Stock is not then listed or quoted on the Trading Market and
if prices for the Common Stock are then reported in the "pink sheets"
published by the National Quotation Bureau Incorporated (or a similar
organization or agency succeeding to its functions of reporting
prices), the most recent bid price per share of the Common Stock so
reported, or (d) if the shares of Common Stock are not then publicly
traded the fair market value of a share of Common Stock as determined
by an appraiser selected in good faith by the Purchasers of a majority
in interest of the Shares then outstanding.
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"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, par
value $0.01 per share, and any other class of securities into which
such securities may hereafter have been reclassified or changed 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 exercisable or exchangeable for, or
otherwise entitles the holder thereof to receive, Common Stock.
"Company Counsel" means Xxxxxx & Xxxxxx LLP.
"Disclosure Schedules" means the Disclosure Schedules of the
Company delivered concurrently herewith.
"Effective Date" means the date that the Registration
Statement filed by the Company pursuant to the Registration Rights
Agreement is first declared effective by the Commission.
"Escrow Agent" shall mean Xxxxx Fargo Bank, N.A.
"Escrow Agreement" means the Escrow Agreement in substantially
the form of Exhibit C hereto executed and delivered contemporaneously
with this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Exempt Issuance" means 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 issued upon the exercise
or exchange of or conversion of any Securities issued hereunder and/or
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securities exercisable or exchangeable for or convertible into shares
of Common Stock 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 or to decrease
the exercise, exchange or conversion price of any such securities, and
(c) securities issued pursuant to acquisitions or strategic
transactions, provided any such issuance shall only be to a Person
which is, itself or through its subsidiaries, an operating company in a
business synergistic with the business of the Company and in which the
Company receives benefits in addition to the investment of funds, but
shall not include a transaction in which the Company is issuing
securities primarily for the purpose of raising capital or to an entity
whose primary business is investing in securities.
"FW" means Xxxxxxx Xxxxxxxxx LLP with offices located at 000
Xxxxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000-0000.
"GAAP" shall have the meaning ascribed to such term in Section
3.1(h).
"Intellectual Property Rights" shall have the meaning
ascribed to such term in Section 3.1(o).
"Legend Removal Date" shall have the meaning ascribed to such
term in Section 4.1(c).
"Liens" means a lien, charge, security interest, encumbrance,
right of first refusal, preemptive right or other restriction.
"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).
"Per Share Purchase Price" equals $3.00, 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 prior to the Closing Date.
"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.
"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.
"Purchaser Party" shall have the meaning ascribed to such term
in Section 4.9.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated the date hereof, among the Company and the Purchasers,
in the form of Exhibit A attached hereto.
"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 Shares and the Warrant
Shares.
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"Required Approvals" shall have the meaning ascribed to such
term in Section 3.1(e).
"Roll-Up Transactions" means those certain transactions
whereby the prior owners of all of the shares in each of the
Subsidiaries exchanged all of their shares (the "Sub Shares") for
shares in Friends Investment Company Inc., a Xxxxxxxx Islands company
("Friends"), thus becoming the owners of Friends and whereby Friends
then exchanged all of the Sub Shares for shares in the Company, thus
becoming the sole owner of the Company.
"Rule 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time
to time, or any similar rule or regulation hereafter adopted by the
Commission having substantially the same effect as such Rule.
"Securities" means the Shares, the Warrants and the Warrant
Shares.
"Securities Act" means the Securities Act of 1933, as
amended.
"Shares" means the shares of Common Stock issued or issuable
to each Purchaser pursuant to this Agreement.
"Short Sales" shall include all "short sales" as defined in
Rule 200 of Regulation SHO under the Exchange Act.
"Subscription Amount" means, as to each Purchaser, the
aggregate amount to be paid for Shares and Warrants purchased hereunder
as specified below such Purchaser's name on the signature page of this
Agreement and next to the heading "Subscription Amount", in United
States Dollars and in immediately available funds.
"Subsidiary" means Xxxxx Trading Ltd., a company organized
under the laws of the Republic of the Xxxxxxxx Islands, Alterwall
Business Inc., a company organized under the laws of the Republic of
Panama, Allendale Investments S.A., a company organized under the laws
of the Republic of Panama, Alcinoe Shipping Limited, a company
organized under the laws of the Republic of Cyprus, Searoute Maritime
Limited, a company organized under the laws of the Republic of Cyprus,
OceanPride Shipping Limited, a company organized under the laws of the
Republic of Cyprus and OceanOpera Shipping Limited, a company organized
under the laws of the Republic of Cyprus.
"Trading Day" means a day on which any Trading Market is
open.
"Trading Market" means the following markets or exchanges on
which the Common Stock is listed or quoted for trading on the date in
question: the Nasdaq SmallCap Market, the American Stock Exchange, the
New York Stock Exchange, the Nasdaq National Market or the OTC Bulletin
Board.
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"Transaction Documents" means this Agreement, the Registration
Rights Agreement, the Escrow Agreement and any other documents or
agreements executed in connection with the transactions contemplated
hereunder.
"Warrants" means collectively the Common Stock purchase
warrants, in the form of Exhibit D delivered to the Purchasers at the
Closing in accordance with Section 2.2(a) hereof, which Warrants shall
be exercisable immediately and have a term of exercise equal to 5
years.
"Warrant Shares" means the shares of Common Stock issuable
upon exercise of the Warrants.
PURCHASE AND SALE
CLOSING. ON THE CLOSING DATE, UPON THE TERMS AND SUBJECT TO THE
CONDITIONS SET FORTH HEREIN, CONCURRENT WITH THE EXECUTION AND DELIVERY OF THIS
AGREEMENT BY THE PARTIES HERETO, THE COMPANY AGREES TO SELL, AND EACH PURCHASER
AGREES TO PURCHASE IN THE AGGREGATE, SEVERALLY AND NOT JOINTLY, UP TO
$50,000,000 OF SHARES AND WARRANTS. EACH PURCHASER SHALL DELIVER TO THE ESCROW
AGENT VIA WIRE TRANSFER OR A CERTIFIED CHECK IMMEDIATELY AVAILABLE FUNDS EQUAL
TO THEIR SUBSCRIPTION AMOUNT AND THE COMPANY SHALL DELIVER TO EACH PURCHASER
THEIR RESPECTIVE SHARES AND WARRANTS AS DETERMINED PURSUANT TO SECTION 2.2(A)
AND THE OTHER ITEMS SET FORTH IN SECTION 2.2 ISSUABLE AT THE CLOSING. UPON
SATISFACTION OF THE CONDITIONS SET FORTH IN SECTIONS 2.2 AND 2.3, THE CLOSING
SHALL XXXXX XX XXX XXXXXXX XX XX, XX SUCH OTHER LOCATION AS THE PARTIES SHALL
MUTUALLY AGREE.
Deliveries.
On the Closing Date, the Company shall deliver or cause to be
delivered to each Purchaser (as applicable) and FW the following:
this Agreement duly executed by the Company;
a legal opinion of Company Counsel, in the form of
Exhibit B attached hereto;
as to each Purchaser, a stock certificate evidencing
a number of Shares equal to such Purchaser's Subscription
Amount divided by the Per Share Purchase Price, registered in
the name of such Purchaser;
a Warrant registered in the name of such Purchaser to
purchase up to a number of shares of Common Stock equal to 25%
of the Shares purchased by such Purchaser hereunder, with an
exercise price equal to 120% of the Per Share Purchase Price,
subject to adjustment therein;
the Escrow Agreement duly executed by the Company;
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a lock-up agreement, in the form attached hereto as
Exhibit E, pursuant to which Friends shall agree not to
dispose of any Common Stock or Common Stock Equivalents until
the six month anniversary of the Effective Date; and
the Registration Rights Agreement duly executed by
the Company.
On the Closing Date, each Purchaser shall deliver or cause to
be delivered to the Company (except as noted) the following:
this Agreement duly executed by such Purchaser;
the Escrow Agreement duly executed by such Purchaser;
such Purchaser's Subscription Amount by wire
transfer to the Escrow Agent to the account specified in the Escrow
Agreement; and
the Registration Rights Agreement duly executed by
such Purchaser.
CLOSING CONDITIONS.
(A) THE OBLIGATIONS OF THE COMPANY HEREUNDER IN CONNECTION
WITH THE CLOSING ARE SUBJECT TO THE FOLLOWING CONDITIONS BEING MET:
the accuracy in all material respects when made and
on the Closing Date of the representations and warranties of
the Purchasers contained herein;
all obligations, covenants and agreements of the
Purchasers required to be performed at or prior to the Closing
Date shall have been performed; and
the delivery by the Purchasers of the items set
forth in Section 2.2(b) of this Agreement.
The respective obligations of the Purchasers hereunder in
connection with the Closing are subject to the following conditions
being met:
the accuracy in all material respects on the Closing
Date of the representations and warranties of the Company
contained herein;
all obligations, covenants and agreements of the
Company required to be performed at or prior to the Closing
Date shall have been performed;
the delivery by the Company of the items set forth in
Section 2.2(a) of this Agreement;
the Company, [Shellco, Inc.] ("Shellco") and all
other parties thereto shall have entered into and delivered
that certain Agreement and Plan of Merger of even date
herewith pursuant to which Shellco will merge with and into a
subsidiary of the Company (the "Merger") which agreement (the
"Merger Agreement") shall be subject to no conditions to
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closing other than customary closing conditions, other than
the need for Commission approval of a Form F-1 or F-4,
obtaining a listing of the Common Stock on the relevant
Trading Market, the related shareholder vote of Shellco
approving the Merger, and the execution of a stock pledge by
certain holders of Shellco stock pledging a portion of such
stock as security for, inter alia, any breaches of
representations and warranties of the principal stockholders
of Shellco under the Merger Agreement, which agreement shall
not include any fully discretionary right to terminate or due
diligence or similar conditions with respect to any party to
the Merger, but may include a closing condition that there
shall have been no material adverse change in the Company or
Shellco, as applicable, from the date of signing such
agreement until the closing of the Merger;
the Company shall have acquired the capital stock of
each Subsidiary, free and clear of all Liens (except that each
such company and/or the vessel it owns is subject to, among
other things, one or more of the following: mortgage;
assignment of earnings; assignment of insurances; assignment
of requisition compensation; charter party assignment;
accounts pledge; pledge of capital stock (collectively,
"Permitted Liens")) and all conditions to the acquisitions
thereof shall have been satisfied;
there shall have been no Material Adverse Effect with
respect to the Company since the date hereof;
all consents from each of the lenders to each
Subsidiary in connection with the Roll Up Transactions shall
have been obtained; and
Fortis Bank (Nederland) N.V., EFG Eurobank Ergasias
and HSBC Bank, PLC shall have executed and delivered consents
and waivers, in form and substance satisfactory to the
Purchasers, consenting to the Company's payment of future
dividends and waiving any provision under their agreements
with the Company and its Subsidiaries that would prohibit the
payment of dividends on the Common Stock, subject to the terms
and conditions of such consents and waivers, copies of which
are attached hereto as Schedule 2.3(b)(viii);
there shall be no agreement between the Company (or
any of its Subsidiaries) and any third party that prohibits
the payment of dividends on the Common Stock other than
agreements with the banks that have delivered consents and
waivers attached hereto as Schedule 2.3(b)(viii); and
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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 Trading Market,
nor shall a banking moratorium have been declared either by
the United States of America 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 at the Closing.
REPRESENTATIONS AND WARRANTIES
REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth
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:
Subsidiaries. The Subsidiaries constitute all of the
direct and indirect subsidiaries of the Company and 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 (other than Permitted 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.
Organization and Qualification. The Company and each of 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 condition (financial or
otherwise) 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.
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 and thereunder. The
execution and delivery of each of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated
thereby have been duly authorized by all necessary action on the part
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of the Company and no further action is required by the Company, its
board of directors or its stockholders in connection therewith other
than in connection with the Required Approvals. Each Transaction
Document has been (or upon delivery will have been) duly executed by
the Company and, when delivered in accordance with the terms hereof and
thereof, will constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms
except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights generally and (ii) as
limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies.
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 hereby and 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 foreign,
federal and state securities laws and regulations), or by which any
property or asset of the Company or a Subsidiary is bound or affected;
except in the case of each of clauses (ii) and (iii), such as could not
have or reasonably be expected to result in a Material Adverse Effect.
Filings, Consents and Approvals. The Company is not
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 foreign, 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) filings
required pursuant to Section 4.4 of this Agreement, (ii) the filing
with the Commission of the Registration Statement, (iii) application(s)
to each applicable Trading Market for the listing of the Shares and
Warrant Shares for trading thereon in the time and manner required
thereby, and (iv) the filing of Form D with the Commission and such
filings as are required to be made under applicable state securities
laws (collectively, the "Required Approvals").
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 imposed by
the Company other than restrictions on transfer provided for in the
Transaction Documents. The Warrant Shares, when issued in accordance
with the terms of the Transaction Documents, will be validly issued,
fully paid and nonassessable, free and clear of all Liens imposed by
the Company. The Company has reserved from its duly authorized capital
stock the maximum number of shares of Common Stock issuable pursuant to
this Agreement and the Warrants.
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Capitalization. The authorized and outstanding capitalization
of the Company is as set forth on Schedule 3.1(g). The Company has not
issued any capital stock or Common Stock Equivalents except as set
forth on Schedule 3.1(g). 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
exercisable 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 Common Stock Equivalents. The issuance and sale of the
Securities will not obligate the Company to issue shares of Common
Stock or other securities to any Person (other than the Purchasers) and
will not result in a right of any holder of Company securities to
adjust the exercise, conversion, exchange or reset price under such
securities. 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 foreign, 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 Securities. 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.
Financial Statements. The audited financial statements of the
Company and its Subsidiaries for their last two fiscal years and
unaudited statements for the most recent fiscal quarter have been
delivered to each Purchaser. 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 condition 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.
Material Changes. Since the date of the Company's
latest audited financial statements (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
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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 other than as set forth on Schedule 3.1(i)
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.
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 foreign, 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.
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.
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.
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 presently conducted and
contemplated to be conducted in the near future, except where the
failure to possess such permits could not 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.
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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 foreign,
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 with which the Company
and the Subsidiaries are in compliance.
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 necessary or material for use in
connection with their respective businesses 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 there is no existing
infringement by another Person of any of the Intellectual Property
Rights of the Company or any of the Subsidiaries.
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 knowledge of the Company, 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.
Transactions With Affiliates and Employees. Other than as set
forth on Schedule 3.1(q), 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.
106
Internal Accounting Controls. The Company and the
Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only
in accordance with management's general or specific authorization, and
(iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
Certain Fees. Except with respect to Xxxx Capital LLC
and Poseidon Capital Corp., 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 the Transaction Documents. 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 the Transaction Documents.
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.
Investment Company. The Company is not, and is not an
Affiliate of, and immediately after receipt of payment for the
Securities, 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.
Registration Rights. Other than each of the Purchasers, no
Person has any right to cause the Company to effect the registration
under the Securities Act of any securities of the Company.
Application of Takeover Protections. The Company and its Board
of Directors have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Company's
Certificate of Incorporation (or similar charter documents) or the laws
of its state of incorporation that is or could become applicable to the
Purchasers as a result of the Purchasers and the Company fulfilling
their obligations or exercising their rights under the Transaction
Documents, including without limitation as a result of the Company's
issuance of the Securities and the Purchasers' ownership of the
Securities.
107
Disclosure. All disclosure provided to the Purchasers
regarding the Company, its business and the transactions contemplated
hereby, including the Disclosure 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 in all material respects
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.
No Integrated Offering. Assuming the accuracy of the
Purchasers' representations and warranties set forth in Section 3.2,
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.
Solvency. Based on the financial condition of the
Company as of the Closing Date after giving effect to the receipt by
the Company of the proceeds from the sale of the Securities hereunder,
(i) the Company's fair saleable value of its 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 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
financial statements delivered to the Purchasers 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.
108
Tax Status. Except for matters that would not, individually or
in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect, the Company and each Subsidiary has filed all
necessary federal, state and foreign income and franchise tax returns
and has paid or accrued all taxes shown as due thereon, and the Company
has no knowledge of a tax deficiency which has been asserted or
threatened against the Company or any Subsidiary.
No General Solicitation. Neither the Company nor any person
acting on behalf of the Company has offered or sold any of the
Securities by any form of general solicitation or general advertising.
The Company has offered the Securities for sale only to the Purchasers
and certain other "accredited investors" within the meaning of Rule 501
under the Securities Act.
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 funds for
unlawful contributions, gifts, entertainment or 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.
Accountants. The Company's accountants are Deloitte & Touche.
To the knowledge of the Company, such accountants, who the Company
expects will express their opinion with respect to the financial
statements to be included in the Company's registration statement on
Form F-1 or F-4 to be filed in connection with the Merger, are a
registered public accounting firm as required by the Securities Act.
Acknowledgment Regarding Purchasers' Purchase of Securities.
The Company acknowledges and agrees that each of the Purchasers is
acting solely in the capacity of an arm's length purchaser with respect
to the Transaction Documents 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 advice given by any Purchaser or any of
their respective representatives or agents in connection with this
Agreement and the transactions contemplated hereby 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 transactions contemplated hereby by the Company and its
representatives.
109
Acknowledgement Regarding Purchasers' Trading Activity.
Anything in this Agreement or elsewhere herein to the contrary
notwithstanding (except for Section 4.14 hereof), it is understood and
agreed by the Company (i) that none of the Purchasers have been asked
to agree, nor has any Purchaser agreed, to desist from purchasing or
selling, long and/or short, securities of the Company, or "derivative"
securities based on securities issued by the Company or to hold the
Securities for any specified term; (ii) that future open market or
other transactions by any Purchaser, including Short Sales, and
specifically including, without limitation, Short Sales or "derivative"
transactions, after the closing of this or future private placement
transactions, may negatively impact the market price of the Company's
publicly-traded securities; (iii) that any Purchaser, and counter
parties in "derivative" transactions to which any such Purchaser is a
party, directly or indirectly, may create a "short" position in the
Common Stock, and (iv) that each Purchaser shall not be deemed to have
any affiliation with or control over any arm's length counter-party in
any "derivative" transaction. The Company further understands and
acknowledges that (a) one or more Purchasers may engage in hedging
activities at various times during the period that the Securities are
outstanding and (b) such hedging activities (if any) could reduce the
value of the existing stockholders' equity interests in the Company at
and after the time that the hedging activities are being conducted. The
Company acknowledges that such aforementioned hedging activities do not
constitute a breach of any of the Transaction Documents.
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:
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 hereunder and 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 a 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.
Own Account. 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 and not with a view to
or for distributing or reselling such Securities or any part thereof in
violation of the Securities Act or any applicable state securities law,
has no present intention of distributing any of such Securities in
violation of the Securities Act or any applicable state securities law
and has no arrangement or understanding with any other Persons
regarding the distribution of such Securities (this representation and
110
warranty not limiting such Purchaser's right to sell the Securities
pursuant to the Registration Statement or otherwise in compliance with
applicable foreign, federal and state securities laws) in violation of
the Securities Act or any applicable state securities law. 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.
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.
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.
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.
Certain Trading Activities. Such Purchaser has not
directly or indirectly, nor has any Person acting on behalf of or
pursuant to any understanding with such Purchaser, engaged in any
transactions in the securities of the Company or Shellco (collectively
for purposes hereof, the "Company") (including, without limitations,
any Short Sales involving the Company's securities) since the time that
such Purchaser was first contacted by the Company, Xxxx Capital
Partners, LLC or any other Person regarding an investment in the
Company (as to each Purchaser, the "Contact Date"). Such Purchaser
covenants that neither it nor any Person acting on its behalf or
pursuant to any understanding with it will engage in any transactions
in the securities of the Company (including Short Sales) prior to the
time that the transactions contemplated by this Agreement are publicly
disclosed by the Company. Such Purchaser has maintained, and covenants
that until such time as the transactions contemplated by this Agreement
are publicly disclosed by the Company such Purchaser will maintain, the
confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this transaction).
Notwithstanding the foregoing, in the case of a Purchaser that is a
multi-managed investment vehicle whereby separate portfolio managers
111
manage separate portions of such Purchaser's assets and the portfolio
managers have no direct knowledge of the investment decisions made by
the portfolio managers managing other portions of such Purchaser's
assets, the representation set forth above shall only apply with
respect to the portion of assets managed by the portfolio manager that
made the investment decision to purchase the Securities covered by this
Agreement. Other than to other Persons party to this Agreement, such
Purchaser has maintained the confidentiality of all disclosures made to
it in connection with this transaction (including the existence and
terms of this transaction).
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.
OTHER AGREEMENTS OF THE PARTIES
Transfer Restrictions.
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 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.
The Purchasers agree to the imprinting, so long as is required
by this Section 4.1(b), of a legend on any of the Securities in the
following form:
THESE SECURITIES HAVE NOT 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 MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL
INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN
RULE 501(a) UNDER THE SECURITIES ACT.
112
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
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.
Certificates evidencing the Shares and the Warrant 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 security is effective under the
Securities Act, or (ii) following any sale of such Shares or Warrant
Shares pursuant to Rule 144, or (iii) if such Shares or Warrant Shares
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 portion of a Warrant is
exercised at a time when there is an effective registration statement
to cover the resale of the Warrant Shares, such Warrant Shares shall be
issued free of all legends. The Company agrees that following the
Effective Date or at such time as such legend is no longer required
under this Section 4.1(c), it will, no later than three Trading Days
following the delivery by a Purchaser to the Company or the Company's
transfer agent of a certificate representing Shares or Warrant Shares,
as the case may be, issued with a restrictive legend (such third
Trading Day, the "Legend Removal Date"), deliver or cause to be
delivered to such Purchaser a certificate representing such shares that
is free from all restrictive and other legends. The Company may not
make any notation on its records or give instructions to any transfer
113
agent of the Company that enlarge the restrictions on transfer set
forth in this Section. Certificates for Securities subject to legend
removal hereunder shall be transmitted by the transfer agent of the
Company to the Purchasers by crediting the account of the Purchaser's
prime broker with the Depository Trust Company System.
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 Shares or Warrant
Shares (based on the Closing Price of the Common Stock on the date such
Securities are submitted to the Company's transfer agent) delivered for
removal of the restrictive legend and subject to 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
without a legend. 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.
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 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.
Furnishing of Information/Exchange Act Registration. The Company hereby
agrees to file a registration statement on Form 8-A registering its Common Stock
under the Exchange Act contemporaneously with its filing of a request with the
Commission to accelerate effectiveness of its registration statement on Form F-1
or F-4. 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. As long as any Purchaser owns
Securities, if the Company is not required to file reports pursuant to the
Exchange Act, it will prepare and furnish to the Purchasers and make publicly
available in accordance with Rule 144(c) such information as is required for the
Purchasers to sell the Securities under Rule 144. The Company further covenants
that it will take such further action as any holder of Securities may reasonably
request, all to the extent required from time to time to enable such Person to
sell such Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144.
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 Trading 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.
114
SECURITIES LAWS DISCLOSURE; PUBLICITY. THE COMPANY SHALL USE ITS
COMMERCIALLY REASONABLE EFFORTS TO CAUSE SHELLCO, WITHIN FOUR TRADING DAYS
FOLLOWING THE DATE OF EXECUTION OF THE MERGER AGREEMENT, TO ISSUE A CURRENT
REPORT ON FORM 8-K DISCLOSING THE MATERIAL TERMS OF THE TRANSACTIONS
CONTEMPLATED HEREBY AND ATTACHING THE TRANSACTION DOCUMENTS AND THE MERGER
AGREEMENT AND ALL OTHER MATERIAL DOCUMENTS EXECUTED AND DELIVERED IN CONNECTION
WITH THE MERGER THERETO. THE COMPANY AND FW 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 FW, WITH RESPECT TO ANY PRESS RELEASE OF THE COMPANY, WHICH
CONSENT SHALL NOT UNREASONABLY BE WITHHELD OR DELAYED, 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 TRADING 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
TRADING MARKET REGULATIONS, IN WHICH CASE THE COMPANY SHALL PROVIDE THE
PURCHASERS WITH PRIOR NOTICE OF SUCH DISCLOSURE PERMITTED UNDER SUBCLAUSE (I) OR
(II).
SHAREHOLDER 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 SHAREHOLDER 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.
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 AFTER THE DATE HEREOF, UNLESS PRIOR THERETO SUCH
PURCHASER SHALL HAVE EXECUTED A WRITTEN AGREEMENT REGARDING THE CONFIDENTIALITY
AND USE OF SUCH INFORMATION (IT BEING EXPRESSLY ACKNOWLEDGED AND AGREED BY THE
COMPANY THAT NO PURCHASER SHALL HAVE ANY MATERIAL NON-PUBLIC INFORMATION
REGARDING THE COMPANY OR ANY OF ITS SUBSIDIARIES IMMEDIATELY AFTER THE FIRST
PUBLIC DISCLOSURE (AS DESCRIBED IN SECTION 4.4) OF THE TRANSACTIONS CONTEMPLATED
BY THIS AGREEMENT). THE COMPANY UNDERSTANDS AND CONFIRMS THAT EACH PURCHASER
SHALL BE RELYING ON THE FOREGOING REPRESENTATIONS IN EFFECTING TRANSACTIONS IN
SECURITIES OF THE COMPANY.
USE OF PROCEEDS. EXCEPT AS SET FORTH ON SCHEDULE 4.7 ATTACHED HERETO
WITH RESPECT TO THE PAYMENT OF DEBT ON VESSELS OWNED BY THE SUBSIDIARIES, 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 IN THE ORDINARY COURSE OF
THE COMPANY'S BUSINESS AND PRIOR PRACTICES), TO REDEEM ANY COMMON STOCK OR
COMMON STOCK EQUIVALENTS OR TO SETTLE ANY OUTSTANDING LITIGATION.
115
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 ANY OF THE PURCHASERS
WHO ARE ACTUALLY NAMED IN SUCH PROCEEDING, AND PARTNERS, DIRECTORS, MANAGERS,
MEMBERS, 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, MANAGERS, MEMBERS, 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.
INDEMNIFICATION OF PURCHASERS. SUBJECT TO THE PROVISIONS OF THIS
SECTION 4.9, THE COMPANY WILL INDEMNIFY AND HOLD THE PURCHASERS AND THEIR
RESPECTIVE DIRECTORS, OFFICERS, SHAREHOLDERS, MANAGERS, MEMBERS, 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 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
REPRESENTATIONS, 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 FOREIGN, STATE OR FEDERAL SECURITIES LAWS
OR ANY CONDUCT BY SUCH PURCHASER WHICH CONSTITUTES FRAUD, GROSS NEGLIGENCE,
WILLFUL MISCONDUCT OR MALFEASANCE). THE FOREGOING INDEMNITIES SHALL NOT APPLY TO
ANY PURCHASER WHO IS A PRINCIPAL OF SHELLCO. 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 A 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.
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RESERVATION OF COMMON STOCK. AS OF THE DATE HEREOF, THE COMPANY HAS
RESERVED AND THE COMPANY SHALL CONTINUE TO RESERVE AND KEEP AVAILABLE AT ALL
TIMES, FREE OF PREEMPTIVE RIGHTS, A SUFFICIENT NUMBER OF SHARES OF COMMON STOCK
FOR THE PURPOSE OF ENABLING THE COMPANY TO ISSUE SHARES PURSUANT TO THIS
AGREEMENT AND WARRANT SHARES PURSUANT TO ANY EXERCISE OF THE WARRANTS.
LISTING OF COMMON STOCK. THE COMPANY HEREBY AGREES TO FILE AN
APPLICATION FOR THE LISTING OF THE COMMON STOCK ON EITHER THE NEW YORK STOCK
EXCHANGE OR THE NASDAQ NATIONAL MARKET WITHIN 15 DAYS FOLLOWING THE DATE THAT IT
FILES THE REGISTRATION STATEMENT AND TO USE ITS COMMERCIALLY REASONABLE EFFORTS
TO OBTAIN A LISTING OF THE COMMON STOCK THEREON. THE COMPANY FURTHER AGREES TO
USE BEST EFFORTS TO OBTAIN AND MAINTAIN THE LISTING OF THE COMMON STOCK ON A
TRADING MARKET, AND AS SOON AS REASONABLY PRACTICABLE FOLLOWING THE CLOSING (BUT
NOT LATER THAN THE FIRST ANNIVERSARY OF THE CLOSING DATE) TO LIST ALL OF THE
SHARES AND WARRANT SHARES ON SUCH TRADING MARKET. THE COMPANY FURTHER AGREES, IF
THE COMPANY APPLIES TO HAVE THE COMMON STOCK TRADED ON ANY OTHER TRADING MARKET,
IT WILL INCLUDE IN SUCH APPLICATION ALL OF THE SHARES AND WARRANT SHARES, AND
WILL TAKE SUCH OTHER ACTION AS IS NECESSARY TO CAUSE ALL OF THE SHARES AND
WARRANT SHARES TO BE LISTED ON SUCH OTHER TRADING MARKET AS PROMPTLY AS
POSSIBLE. THE COMPANY WILL TAKE ALL ACTION REASONABLY NECESSARY TO OBTAIN AND
CONTINUE THE LISTING AND TRADING OF ITS COMMON STOCK ON A TRADING MARKET AND
WILL COMPLY IN ALL RESPECTS WITH THE COMPANY'S REPORTING, FILING AND OTHER
OBLIGATIONS UNDER THE BYLAWS OR RULES OF THE TRADING MARKET.
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 FOR THE COMPANY TO TREAT 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.
SUBSEQUENT EQUITY SALES.
From the date hereof until two years from the Closing
Date, the Company shall be prohibited from effecting or entering into
an agreement to effect any financing by the Company or any of its
Subsidiaries of Common Stock or Common Stock Equivalents involving a
"Variable Rate Transaction". 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
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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 or (ii) enters into any agreement,
including, but not limited to, an equity line of credit, whereby the
Company may sell securities at a future determined price. Any Purchaser
shall be entitled to obtain injunctive relief against the Company to
preclude any such issuance, which remedy shall be in addition to any
right to collect damages.
Notwithstanding the foregoing, this Section 4.13 shall not
apply in respect of an Exempt Issuance, except that no Variable Rate
Transaction shall be an Exempt Issuance.
SHORT SALES AND CONFIDENTIALITY AFTER THE DATE HEREOF. EACH PURCHASER
SEVERALLY AND NOT JOINTLY WITH THE OTHER PURCHASERS COVENANTS THAT NEITHER IT
NOR ANY AFFILIATES ACTING ON ITS BEHALF OR PURSUANT TO ANY UNDERSTANDING WITH IT
WILL EXECUTE ANY SHORT SALES DURING THE PERIOD COMMENCING FROM THE CONTACT DATE
AND ENDING AT THE TIME THAT THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT ARE
FIRST PUBLICLY ANNOUNCED AS DESCRIBED IN SECTION 4.4. EACH PURCHASER, SEVERALLY
AND NOT JOINTLY WITH THE OTHER PURCHASERS, COVENANTS THAT UNTIL SUCH TIME AS THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT ARE PUBLICLY DISCLOSED BY THE
COMPANY AS DESCRIBED IN SECTION 4.4, SUCH PURCHASER WILL MAINTAIN, THE
CONFIDENTIALITY OF ALL DISCLOSURES MADE TO IT IN CONNECTION WITH THIS
TRANSACTION (INCLUDING THE EXISTENCE AND TERMS OF THIS TRANSACTION). EACH
PURCHASER UNDERSTANDS AND ACKNOWLEDGES, SEVERALLY AND NOT JOINTLY WITH ANY OTHER
PURCHASER, THAT THE COMMISSION CURRENTLY TAKES THE POSITION THAT COVERAGE OF
SHORT SALES OF SHARES OF THE COMMON STOCK "AGAINST THE BOX" PRIOR TO THE
EFFECTIVE DATE OF THE REGISTRATION STATEMENT WITH THE SECURITIES IS A VIOLATION
OF SECTION 5 OF THE SECURITIES ACT, AS SET FORTH IN ITEM 65, SECTION 5 UNDER
SECTION A, OF THE MANUAL OF PUBLICLY AVAILABLE TELEPHONE INTERPRETATIONS, DATED
JULY 1997, COMPILED BY THE OFFICE OF CHIEF COUNSEL, DIVISION OF CORPORATION
FINANCE. NOTWITHSTANDING THE FOREGOING, NO PURCHASER MAKES ANY REPRESENTATION,
WARRANTY OR COVENANT HEREBY THAT IT WILL NOT ENGAGE IN SHORT SALES IN THE
SECURITIES OF THE COMPANY AFTER THE TIME THAT THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT ARE FIRST PUBLICLY ANNOUNCED AS DESCRIBED IN SECTION 4.4.
NOTWITHSTANDING THE FOREGOING, IN THE CASE OF A PURCHASER THAT IS A
MULTI-MANAGED INVESTMENT VEHICLE WHEREBY SEPARATE PORTFOLIO MANAGERS MANAGE
SEPARATE PORTIONS OF SUCH PURCHASER'S ASSETS AND THE PORTFOLIO MANAGERS HAVE NO
DIRECT KNOWLEDGE OF THE INVESTMENT DECISIONS MADE BY THE PORTFOLIO MANAGERS
MANAGING OTHER PORTIONS OF SUCH PURCHASER'S ASSETS, THE COVENANT SET FORTH ABOVE
SHALL ONLY APPLY WITH RESPECT TO THE PORTION OF ASSETS MANAGED BY THE PORTFOLIO
MANAGER THAT MADE THE INVESTMENT DECISION TO PURCHASE THE SECURITIES COVERED BY
THIS AGREEMENT.
DELIVERY OF SECURITIES AFTER CLOSING. THE COMPANY SHALL DELIVER, OR
CAUSE TO BE DELIVERED, THE RESPECTIVE SECURITIES PURCHASED BY EACH PURCHASER TO
SUCH PURCHASER WITHIN 3 TRADING DAYS OF THE CLOSING DATE.
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MISCELLANEOUS
TERMINATION. THIS AGREEMENT MAY BE TERMINATED BY ANY PURCHASER, AS TO
SUCH PURCHASER'S OBLIGATIONS HEREUNDER ONLY AND WITHOUT ANY EFFECT WHATSOEVER ON
THE OBLIGATIONS BETWEEN THE COMPANY AND THE OTHER PURCHASERS, BY WRITTEN NOTICE
TO THE OTHER PARTIES, IF THE CLOSING HAS NOT BEEN CONSUMMATED ON OR BEFORE
AUGUST 15, 2005; PROVIDED, HOWEVER, THAT NO SUCH TERMINATION WILL AFFECT THE
RIGHT OF ANY PARTY TO XXX FOR ANY BREACH BY THE OTHER PARTY (OR PARTIES).
FEES AND EXPENSES. AT THE CLOSING, THE COMPANY HAS AGREED TO REIMBURSE
BONANZA MASTER FUND LTD. ("BONANZA") THE NON-ACCOUNTABLE SUM OF $20,000, FOR ITS
ACTUAL, REASONABLE, OUT-OF-POCKET LEGAL FEES AND EXPENSES. ACCORDINGLY, IN LIEU
OF THE FOREGOING PAYMENTS, THE AGGREGATE AMOUNT THAT BONANZA IS TO PAY FOR THE
SECURITIES AT THE CLOSING SHALL BE REDUCED BY $20,000 IN LIEU THEREOF. THE
COMPANY SHALL DELIVER, PRIOR TO THE CLOSING, A COMPLETED AND EXECUTED COPY OF
THE CLOSING STATEMENT, ATTACHED HERETO AS ANNEX A. EXCEPT AS EXPRESSLY SET FORTH
IN THE TRANSACTION DOCUMENTS TO THE CONTRARY, EACH PARTY SHALL PAY THE FEES AND
EXPENSES OF ITS ADVISERS, COUNSEL, ACCOUNTANTS AND OTHER EXPERTS, IF ANY, AND
ALL OTHER EXPENSES INCURRED BY SUCH PARTY INCIDENT TO THE NEGOTIATION,
PREPARATION, EXECUTION, DELIVERY AND PERFORMANCE OF THIS AGREEMENT. THE COMPANY
SHALL PAY ALL TRANSFER AGENT FEES, STAMP TAXES AND OTHER TAXES AND DUTIES LEVIED
IN CONNECTION WITH THE ISSUANCE AND DELIVERY OF ANY SECURITIES EXCEPT FOR
TRANSFER TAXES IN CONNECTION WITH THE TRANSFER OF THE SECURITIES TO ANY PERSON
OTHER THAN THE PURCHASERS HERETO.
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.
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 CONFIRMED FACSIMILE AT THE
FACSIMILE NUMBER SET FORTH ON THE SIGNATURE PAGES ATTACHED HERETO PRIOR TO 5:30
P.M. (NEW YORK CITY TIME) ON A TRADING DAY, (B) THE NEXT TRADING DAY AFTER THE
DATE OF TRANSMISSION, IF SUCH NOTICE OR COMMUNICATION IS DELIVERED VIA CONFIRMED
FACSIMILE AT THE FACSIMILE NUMBER SET FORTH ON THE SIGNATURE PAGES ATTACHED
HERETO 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) THE 2ND TRADING DAY 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
ADDRESS FOR SUCH NOTICES AND COMMUNICATIONS SHALL BE AS SET FORTH ON THE
SIGNATURE PAGES ATTACHED HERETO.
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.
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HEADINGS. THE HEADINGS HEREIN ARE FOR CONVENIENCE ONLY, DO NOT
CONSTITUTE A PART OF THIS AGREEMENT AND SHALL NOT BE DEEMED TO LIMIT OR AFFECT
ANY OF THE PROVISIONS HEREOF. THE LANGUAGE USED IN THIS AGREEMENT WILL BE DEEMED
TO BE THE LANGUAGE CHOSEN BY THE PARTIES TO EXPRESS THEIR MUTUAL INTENT, AND NO
RULES OF STRICT CONSTRUCTION WILL BE APPLIED AGAINST ANY PARTY.
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".
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.
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. EACH
PARTY AGREES THAT ALL LEGAL PROCEEDINGS CONCERNING THE INTERPRETATIONS,
ENFORCEMENT AND DEFENSE OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND
ANY OTHER TRANSACTION DOCUMENTS (WHETHER BROUGHT AGAINST A PARTY HERETO OR ITS
RESPECTIVE AFFILIATES, DIRECTORS, OFFICERS, SHAREHOLDERS, EMPLOYEES OR AGENTS)
SHALL BE COMMENCED EXCLUSIVELY IN THE STATE AND FEDERAL COURTS SITTING IN THE
CITY OF NEW YORK. 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. WITHOUT LIMITING ANY OTHER PROVISION OF THIS
AGREEMENT, 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 REASONABLE
ATTORNEYS' FEES AND OTHER COSTS AND EXPENSES INCURRED WITH THE INVESTIGATION,
PREPARATION AND PROSECUTION OF SUCH ACTION OR PROCEEDING.
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SURVIVAL. THE REPRESENTATIONS AND WARRANTIES CONTAINED HEREIN SHALL
SURVIVE THE CLOSING AND THE DELIVERY OF THE SHARES AND WARRANT SHARES FOR A
PERIOD EQUAL TO THE APPLICABLE STATUTE OF LIMITATIONS.
EXECUTION. THIS AGREEMENT MAY BE EXECUTED IN TWO OR MORE COUNTERPARTS,
ALL OF WHICH WHEN TAKEN TOGETHER SHALL BE CONSIDERED ONE AND THE SAME AGREEMENT
AND SHALL BECOME EFFECTIVE WHEN COUNTERPARTS HAVE BEEN SIGNED BY EACH PARTY AND
DELIVERED TO THE OTHER PARTY, IT BEING UNDERSTOOD THAT BOTH PARTIES NEED NOT
SIGN THE SAME COUNTERPART. IN THE EVENT THAT ANY SIGNATURE IS DELIVERED BY
FACSIMILE TRANSMISSION, SUCH SIGNATURE SHALL CREATE A VALID AND BINDING
OBLIGATION OF THE PARTY EXECUTING (OR ON WHOSE BEHALF SUCH SIGNATURE IS
EXECUTED) WITH THE SAME FORCE AND EFFECT AS IF SUCH FACSIMILE SIGNATURE PAGE
WERE AN ORIGINAL THEREOF.
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.
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.
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.
REMEDIES. IN ADDITION TO BEING ENTITLED TO EXERCISE ALL RIGHTS PROVIDED
HEREIN OR GRANTED BY LAW, INCLUDING RECOVERY OF DAMAGES, EACH OF THE PURCHASERS
AND THE COMPANY WILL BE ENTITLED TO SPECIFIC PERFORMANCE UNDER THE TRANSACTION
DOCUMENTS. THE PARTIES AGREE THAT MONETARY DAMAGES MAY NOT BE ADEQUATE
COMPENSATION FOR ANY LOSS INCURRED BY REASON OF ANY BREACH OF OBLIGATIONS
DESCRIBED IN THE FOREGOING SENTENCE AND HEREBY AGREES TO WAIVE IN ANY ACTION FOR
SPECIFIC PERFORMANCE OF ANY SUCH OBLIGATION THE DEFENSE THAT A REMEDY AT LAW
WOULD BE ADEQUATE.
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 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.
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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 DOCUMENTS. 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 BONANZA. 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.
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.
CONSTRUCTION. THE PARTIES AGREE THAT EACH OF THEM AND/OR THEIR
RESPECTIVE COUNSEL HAS REVIEWED AND HAD AN OPPORTUNITY TO REVISE THE TRANSACTION
DOCUMENTS AND, THEREFORE, THE NORMAL RULE OF CONSTRUCTION TO THE EFFECT THAT ANY
AMBIGUITIES ARE TO BE RESOLVED AGAINST THE DRAFTING PARTY SHALL NOT BE EMPLOYED
IN THE INTERPRETATION OF THE TRANSACTION DOCUMENTS OR ANY AMENDMENTS HERETO.
(SIGNATURE PAGES FOLLOW)
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IN WITNESS WHEREOF, the parties hereto have caused this
Securities Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
EUROSEAS LTD. Address for Notice:
-------------------
By:__________________________________________
Name:
Title:
With a copy to (which shall not constitute notice):
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
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[PURCHASER SIGNATURE PAGES TO EUROSEAS 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 Purchaser: ________________________________________________________
Signature of Authorized Signatory of Purchaser: ___________________________
Name of Authorized Signatory: _____________________________________________
Title of Authorized Signatory: ____________________________________________
Email Address of Purchaser:________________________________________________
Address for Notice of Purchaser:
Address for Delivery of Securities for Purchaser (if not same as above):
Subscription Amount:
Shares:
Warrant Shares:
EIN Number: [PROVIDE THIS UNDER SEPARATE COVER]
[SIGNATURE PAGES CONTINUE]
124
Annex A
CLOSING STATEMENT
Pursuant to the attached Securities Purchase Agreement, dated as of the date
hereto, the purchasers shall purchase up to $50,000,000 of Common Stock from
Euroseas Ltd. (the "Company"). All funds will be wired into an escrow account
maintained by Xxxxx Fargo Bank, N.A.. All funds will be disbursed in accordance
with this Closing Statement.
Disbursement Date: August ___, 2005
I. PURCHASE PRICE
Gross Proceeds to be Received in Escrow $
II. DISBURSEMENTS
$
$
$
$
$
Total Amount Disbursed: $
WIRE INSTRUCTIONS:
To: _____________________________________
To: _____________________________________
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