Exhibit 99.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of August 27, 2007
(this "Agreement"), is entered into by and between WATER CHEF, INC., a Delaware
corporation with headquarters located at 00 Xxxxx Xxxxxxx Xxxx, Xxxxx 000,
Xxxxxxxx, XX 00000 (the "Company"), and each individual or entity named on an
executed counterpart of the signature page hereto (each such signatory is
referred to as a "Buyer") (each agreement with a Buyer being deemed a separate
and independent agreement between the Company and such Buyer, except that each
Buyer acknowledges and consents to the rights granted to each other Buyer [each,
an "Other Buyer"] under such agreement and the Transaction Agreements, as
defined below, referred to therein).
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration for offers
and sales to accredited investors afforded, INTER ALIA, by Rule 506 under
Regulation D ("Regulation D") as promulgated by the United States Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "1933 Act"), and/or Section 4(2) of the 1933 Act; and
WHEREAS, the Buyer wishes to lend to the Company, subject to and
upon the terms and conditions of this Agreement and acceptance of this Agreement
by the Company, the Purchase Price (as defined below), the repayment of which
will be represented by 10% Convertible Promissory Notes Series 07-01 of the
Company (the "Convertible Notes"), which Convertible Notes will be convertible
into shares of Common Stock, $0.001 par value per share, of the Company (the
"Common Stock"), upon the terms and subject to the conditions of such
Convertible Notes, together with the Warrants (as defined below) exercisable for
the purchase of shares of Common Stock;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. PURCHASE.
(i) Subject to the terms and conditions of this Agreement and the other
Transaction Agreements, the undersigned Buyer hereby agrees to loan to the
Company the principal amount set forth on the Buyer's signature page of this
Agreement (the "Aggregate Purchase Price"), out of the aggregate amount being
loaned by all Buyers of $400,000 (the "Total Purchase Price").
(ii) The Aggregate Purchase Price shall be payable by the Buyer to the
Company as follows: (a) sixty-two and one-half percent (62.5%) of the Aggregate
Purchase Price (the "Initial Purchase Price") shall be deposited by the Buyer
with the Escrow Agent on or before the Initial Closing Date (as defined below),
and such Initial Purchase Price shall be released to the Company, subject to the
terms of the Joint Escrow Instructions (as defined below), on the Initial
Closing Date and (b) the balance of the Aggregate Purchase Price (the
"Additional Purchase Price") shall be deposited with the Buyer as provided in
Section 6 below and released to the Company, subject to the terms of the Joint
Escrow Instructions, on the Additional Closing Date (as defined below). The
applicable portion of the Aggregate Purchase Price paid on the relevant Closing
Date (as defined below) is referred to as the "Purchase Price" for such Closing
Date.
(iii) The obligation to repay the loan of the relevant Purchase Price from
the Buyer shall be evidenced by the Company's issuance of one or more
Convertible Notes to the Buyer in such principal amount (the Convertible Notes
issued to the Buyer, the "Notes"). Each Note (a) shall provide for a Conversion
Price (as that term is defined in the Notes), which price may be adjusted from
time to as provided in the Note, and (b) shall have the terms and conditions of,
and be substantially in the form attached hereto as, ANNEX I.
(iv) Prior to each Closing Date (as defined below), the relevant Purchase
Price shall be paid by the Buyer to the Escrow Agent and the Company will
deliver the relevant Certificates (as defined below) to the Escrow Agent, as
provided in Section 1(c) hereof.
(v) The loan to be made by the Buyer and the issuance of the Notes and
the Warrants (collectively, the "Purchased Securities") to the Buyer are
sometimes referred to herein and in the other Transaction Agreements as the
purchase and sale of the Notes and the Warrants.
b. CERTAIN DEFINITIONS. As used herein, each of the following terms has
the meaning set forth below, unless the context otherwise requires:
"Additional Closing Date" means the date of the closing of the purchase
and sale of the Additional Notes and the Additional Warrants, as provided
herein.
"Additional Notes" means the Notes issued on the Additional Closing Date.
"Additional Warrants" means the Warrants issued on the Additional Closing
Date.
"Affiliate" means, with respect to a specific Person referred to in the
relevant provision, another Person who or which controls or is controlled by or
is under common control with such specified Person.
"Buyer Control Person" means each director, executive officer, promoter,
and such other Persons as may be deemed in control of the Buyer pursuant to Rule
405 under the 1933 Act or Section 20 of the 1934 Act (as defined below).
"Buyer's Allocable Share" means the fraction, of which (i) the numerator
is the Buyer's Aggregate Purchase Price and (ii) the denominator is the Total
Purchase Price.
"Certificate of Incorporation" means the certificate of incorporation,
articles of incorporation or other charter document (howsoever denominated) of
the Company, as amended to date.
"Certificates" means the (x) the relevant original manually-signed Notes
and (y) the relevant original manually-signed Warrants, each duly executed by
the Company and issued on the relevant Closing Date in the name of the Buyer.
"Closing Date" means the relevant Initial Closing Date or the Additional
Closing Date.
"Closing Price" means the 4:00 P.M. closing bid price of the Common Stock
on the Principal Trading Market on the relevant Trading Day(s), as reported by
the Reporting Service for the relevant date.
"Company Control Person" means each director, executive officer,
promoter, and such other Persons as may be deemed in control of the Company
pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934 Act.
"Company Counsel" means Xxxxxx Xxxxxxxx Frome Xxxxxxxxxx & Xxxxxxx LLP
"Company's SEC Documents" means the Company's filings on the SEC's XXXXX
system which are listed on ANNEX VII annexed hereto, to the extent available on
XXXXX or otherwise provided to the Buyer as indicated on said Annex VII.
"Conversion Certificates" means certificates representing the Conversion
Shares or the Warrant Shares, as the case may be.
"Conversion Date" means the date a Holder submits a Notice of Conversion,
as provided in the Notes.
"Conversion Shares" means the shares of Common Stock issuable upon
conversion of the Notes and/or in payment of accrued interest, as contemplated
in the Notes.
"Converting Holder" means the Holder of Notes or Warrants, as the case may
be, who or which has submitted a Notice of Conversion (as contemplated by the
Notes) or a Notice of Exercise (as contemplated by the Warrants).
"Delivery Date" has the meaning ascribed to it, as may be relevant, (w) in
the Notes (with respect to Conversion Shares), or (x) in the Warrants (with
respect to Warrant Shares).
"Disclosure Annex" means ANNEX VI to this Agreement; provided, however,
that the Disclosure Annex shall be arranged in sections corresponding to the
identified Sections of this Agreement, but the disclosure in any such section of
the Disclosure Annex shall qualify other provisions in this Agreement to the
extent that it would be readily apparent to an informed reader from a reading of
such section of the Disclosure Annex that it is also relevant to other
provisions of this Agreement.
"Effective Date" means the date the Registration Statement covering the
Registrable Securities is declared effective by the SEC.
"Escrow Agent" means Xxxxxxx & Prager LLP, the escrow agent identified in
the Joint Escrow Instructions attached hereto as ANNEX II (the "Joint Escrow
Instructions").
"Escrow Funds" means, with respect to each Closing Date, the relevant
Purchase Price delivered to the Escrow Agent as contemplated by Sections 1(c)
and (d) hereof.
"Escrow Property" means, with respect to each Closing Date, the relevant
Escrow Funds and the relevant Certificates delivered to the Escrow Agent, as
contemplated by Section 1(c) hereof.
"Exercise Price" means the per share exercise price of the relevant
Warrant.
"Holder" means the Person holding the relevant Securities at the relevant
time.
"Initial Closing Date" means the date of the closing of the purchase and
sale of the Initial Notes and Initial Warrants.
"Initial Notes" means the Notes issued on the Initial Closing Date.
"Initial Warrants" means the Warrants issued on the Initial Closing Date.
"Issue Date Conversion Share" means, with respect to the relevant Closing
Date, the number of shares of Common Stock equal to (x) the Purchase Price paid
by the Buyer on such Closing Date, divided by (y) the amount which would have
been the Conversion Price on such Closing Date, were such date a Conversion Date
(without regard to whether or not the Notes were convertible on such date in
accordance with their terms).
"Last Audited Date" means December 31, 2006.
"Majority in Interest of the Holders" means one or more Holders whose
respective outstanding principal amounts of the Notes held by each of them, as
of the relevant date, aggregate more than sixty-six and 67/100 percent (66.67%)
of the aggregate outstanding principal amounts of the outstanding Notes held by
the Buyer and all Other Buyers on that date.
"Material Adverse Effect" means an event or combination of events, which
individually or in the aggregate, would reasonably be expected to (x) adversely
affect the legality, validity or enforceability of the Purchased Securities or
any of the Transaction Agreements, (y) have or result in a material adverse
effect on the results of operations, assets, or financial condition of the
Company and its subsidiaries, taken as a whole, or (z) adversely impair the
Company's ability to perform fully on a timely basis its material obligations
under any of the Transaction Agreements or the transactions contemplated
thereby.
"Maturity Date" has the meaning ascribed to it in the Notes.
"New Common Stock" means shares of Common Stock and/or securities
convertible into, and/or other rights exercisable for, Common Stock, which are
sold or issued in a New Transaction.
"New Investor" means the third party investor, purchaser or lender
(howsoever denominated) or, where relevant, an Existing Securityholder (as
defined below) in a New Transaction.
"New Transaction" means, unless consented to by a Majority in Interest of
the Holders (which consent is in the sole discretion of the Holders and may be
withheld for any reason or for no reason whatsoever),
(i) the offer or sale of New Common Stock by or on behalf of the Company
to a New Investor in connection with a transaction which will provide
funds to the Company, and/or
(ii) the grant of a security interest in, or the pledge of, shares of the
Company's Common Stock or securities convertible into or exercisable for
the Company's Common Stock to any other party, or the pledge of such
shares or securities to any other party, whether such grant or pledge is
made by the Company or any other holder thereof, in connection with a
transaction in which the Company borrows or is otherwise obligated to pay
funds to a third party, and/or
(iii) the sale or issuance to existing holders of any securities of the
Company (each, an "Existing Securityholder") of additional New Common
Stock or the effectuation by the Company, or the other agreement of the
Company to provide, more beneficial terms with respect to any existing
securities of the Company held by an Existing Securityholder in exchange
for the forbearance, modification or relinquishment of any rights such
Existing Securityholder may have against the Company, and/or,
(iv) the effectuation by the Company, or the other agreement of the
Company to provide, to any Existing Securityholder of a reduction in the
conversion price of any security convertible into Common Stock or a
reduction in the exercise price of any right exercisable for the issuance
of Common Stock
in a transaction consummated after the date hereof; provided, however, that it
is specifically understood that the term "New Transaction" (1) unless consented
to otherwise by a Majority in Interest of the Holders (which consent is in the
sole discretion of the Holders and may be withheld for any reason or for no
reason whatsoever), includes, but is not limited to, a sale of Common Stock or
of a security convertible into Common Stock or an equity or credit line
transaction other than the Permitted Transaction (as defined below), but (2)
does not include (a) the sale of the Purchased Securities to the Buyer and the
Other Buyers, (b) the issuance of Common Stock upon the exercise or conversion
of options, warrants or convertible securities outstanding on the date hereof,
or in respect of any other financing agreements as in effect on the date hereof
and identified in the Disclosure Annex (provided the same is not amended after
the date hereof) or in the Company's SEC Documents (provided the same is not
amended after the date hereof), (c) the issuance of an Employee Stock Option
Plan (an "ESOP") of the Company, such ESOP having been properly approved by the
shareholders of the Company, (d) the issuance of a non-employee director stock
option plan of the Company, (e) the issuance of Common Stock upon the exercise
of any rights, options or warrants referred to in the preceding clauses of this
paragraph (provided the same is not amended after the date hereof), (f) the
issuance of Common Stock pursuant to an equity line agreement entered into
within ten (10) Trading Days of the Initial Closing Date, which provides for the
issuance of Common Stock for not more than $5,000,000 (the "Permitted
Transaction"), (g) the issuance of up to $100,000 of securities of the Company
per annum to one or more investors in satisfaction of bona fide obligations of
the Company, or (h) the issuance of up to 2,500,000 shares of the Company's
Common Stock, representing a portion of the settlement of the Company's note
payable to Occidental Engineering Consultants.
"Person" means any living person or any entity, such as, but not
necessarily limited to, a corporation, partnership or trust.
"Principal Trading Market" means the Over the Counter Bulletin Board or
such other market on which the Common Stock is principally traded at the
relevant time, but shall not include the "pink sheets."
"Registrable Securities" has the meaning ascribed to it in the
Registration Rights Agreement.
"Registration Rights Agreement" means the Registration Rights Agreement in
the form annexed hereto as ANNEX IV as executed by the Buyer and the Company
simultaneously with the execution of this Agreement.
"Registration Statement" means an effective registration statement
covering the Registrable Securities.
"Regular Trading Day" means the regular trading hours of a Trading Day on
the Principal Trading Market shall be open for business (as of the date of this
Agreement, such hours are, for most Trading Days, approximately 9:00 or 9:30AM
to approximately 4PM Eastern Time; provided, however, that certain Trading Days
may have shorter regular trading hours; and provided, further, that the regular
trading hours may be subsequently changed for the Principal Trading Market).
"Reporting Service" means Bloomberg LP or if that service is not then
reporting the relevant information regarding the Common Stock, a comparable
reporting service of national reputation selected by a Majority in Interest of
the Holders and reasonably acceptable to the Company.
"Rule 144" means (i) Rule 144 promulgated under the 1933 Act or (ii) any
other similar rule or regulation of the SEC that may at any time permit Holder
to sell securities of the Company to the public without registration under the
1933 Act..
"Securities" means the Purchased Securities and the Shares.
"Shares" means the shares of Common Stock representing any or all of the
Conversion Shares and the Warrant Shares
"State of Incorporation" means Delaware.
"Subsidiary" means, as of the relevant date, any subsidiary of the Company
(whether or not included in the Company's SEC Documents) whether now existing or
hereafter acquired or created.
"Trading Day" means any day during which the Principal Trading Market
shall be open for business.
"Transaction Agreements" means this Agreement, the Notes, the Joint Escrow
Instructions, the Registration Rights Agreement, the Warrants, and the
Disclosure Annex and includes all ancillary documents referred to in those
agreements.
"Transfer Agent" means, at any time, the transfer agent for the Company's
Common Stock.
"Warrants" means the warrants referred to in Section 4 hereof.
"Warrant Shares" means the shares of Common Stock issuable upon exercise
of the Warrants.
"Wire Instructions" means the Purchase Price wire instructions provided
separately by the Escrow Agent to the Buyer.
c. FORM OF PAYMENT; DELIVERY OF CERTIFICATES.
(i) The Buyer shall pay the relevant Purchase Price by delivering
immediately available good funds in United States Dollars to the Escrow Agent no
later than the date prior to the relevant Closing Date.
(ii) No later than the Initial Closing Date, but in any event promptly
following payment by the Buyer to the Escrow Agent of the Initial Purchase
Price, the Company shall deliver the Certificates for the Initial Notes and the
Initial Warrants, each duly executed on behalf of the Company and issued in the
name of the Buyer, to the Escrow Agent. The Company will deliver the
Certificates for the Additional Notes and the Additional Warrants to the Escrow
Agent as provided in Section 6 hereof.
(iii) Such Escrow Property shall be held in escrow by the Escrow Agent
until released as provided in the Joint Escrow Instructions.
(iv) By signing this Agreement, each of the Buyer and the Company,
subject to acceptance by the Escrow Agent, agrees to all of the terms and
conditions of, and becomes a party to, the Joint Escrow Instructions, all of the
provisions of which are incorporated herein by this reference as if set forth in
full.
d. METHOD OF PAYMENT. Payment into escrow of the Purchase Price shall
be made to the Escrow Agent as provided in the Wire Instructions.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees with, the
Company, as of the date hereof and as of the Initial Closing Date, as follows:
a. Without limiting Buyer's right to sell the Securities pursuant to an
effective registration statement or otherwise in compliance with the 1933 Act,
the Buyer is purchasing the Securities for its own account for investment only
and not with a view towards the public sale or distribution thereof and not with
a view to or for sale in connection with any distribution thereof.
b. The Buyer is (i) an "accredited investor" as that term is defined in
Rule 501 of the General Rules and Regulations under the 1933 Act, (ii)
experienced in making investments of the kind described in this Agreement and
the other Transaction Agreements, (iii) able, by reason of the business and
financial experience of its officers (if an entity) and professional advisors
(who are not affiliated with or compensated in any way by the Company or any of
its Affiliates or selling agents), to protect its own interests in connection
with the transactions described in this Agreement and the other Transaction
Agreements, and to evaluate the merits and risks of an investment in the
Securities, and (iv) able to afford the entire loss of its investment in the
Securities.
c. All subsequent offers and sales of the Securities by the Buyer shall
be made pursuant to registration of the relevant Securities under the 1933 Act
or pursuant to an exemption from such registration.
d. The Buyer understands that the Securities are being offered and sold
to it in reliance on specific exemptions from the registration requirements of
the 1933 Act and state securities laws and that the Company is relying upon the
truth and accuracy of, and the Buyer's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Buyer set
forth herein in order to determine the availability of such exemptions and the
eligibility of the Buyer to acquire the Securities.
e. The Buyer and its advisors, if any, have been furnished with or have
been given access to all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Purchased Securities which have been requested by the Buyer, including those set
forth in any annex attached hereto. The Buyer and its advisors, if any, have
been afforded the opportunity to ask questions of the Company and its management
and have received complete and satisfactory answers to any such inquiries.
Without limiting the generality of the foregoing, the Buyer has also had the
opportunity to obtain and to review the Company's SEC Documents.
f. The Buyer understands that its investment in the Securities involves
a high degree of risk.
g. If the Buyer is not a United States person (as defined by Section
7701(a)(30) of the Internal Revenue Code, as currently in effect), such Buyer
hereby represents that it has satisfied itself as to the full observance of the
laws of its jurisdiction in connection with any invitation to subscribe for the
Purchased Securities or any use of this Agreement, including (i) the legal
requirements within its jurisdiction for the purchase of the Purchased
Securities, (ii) any foreign exchange restrictions applicable to such purchase,
(iii) any governmental or other consents that may need to be obtained, and (iv)
the income tax and other tax consequences, if any, that may be relevant to the
purchase, holding, redemption, sale, or transfer of the Securities. The Buyer's
subscription and payment for and continued beneficial ownership, if any, of the
Securities will not violate any applicable securities or other laws of the
Buyer's jurisdiction.
h. If the Buyer is an individual, then the Buyer resides in the state
or province identified in the address of the Buyer set forth on the Buyer's
signature page to this Agreement. If the Buyer is a partnership, corporation,
limited liability company or other entity, then the office or offices of the
Buyer in which its principal place of business is the address or addresses of
the Buyer set forth on the Buyer's signature page to this Agreement.
i. The Buyer hereby represents that, in connection with the Buyer's
investment or the Buyer's decision to purchase the Securities, the Buyer has not
relied on any statement or representation of any Person, including any such
statement or representation by the Company or any of its controlling Persons,
officers, directors, partners, agents and employees or any of their respective
attorneys, except as specifically set forth herein. In furtherance of the
foregoing, and not in limitation thereof, the Buyer acknowledges that the Buyer
is not relying upon any Person, other than the Company and its controlling
Persons, officers and directors, as and to the extent specifically set forth
herein, in making such investment. The Buyer agrees that none of (i) any Other
Buyer, (ii) any controlling Persons, officers, directors, partners, agents, or
employees of each respective Other Buyer or (iii) any of their respective
attorneys shall be liable to the Buyer for any action heretofore or hereafter
taken or omitted to be taken by any of them in connection with the purchase of
the Purchased Securities or in connection with the Securities. Each Other Buyer
and each of their respective controlling Persons, officers, directors, partners,
agents and employees and each of their respective attorneys is a third party
beneficiary of this provision.
j. The Buyer understands that no United States federal or state agency
or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities.
k. This Agreement and each of the other Transaction Agreements to which
the Buyer is a party, and the transactions contemplated hereby and thereby, have
been duly and validly authorized by the Buyer. This Agreement has been executed
and delivered by the Buyer, and this Agreement is, and each of the other
Transaction Agreements to which the Buyer is a party, when executed and
delivered by the Buyer (if necessary), will be valid and binding obligations of
the Buyer enforceable in accordance with their respective terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally.
3. COMPANY REPRESENTATIONS, ETC. The Company represents and warrants to
the Buyer as of the date hereof and as of the Initial Closing Date that, except
as otherwise provided in the Disclosure Annex or in the Company's SEC Documents:
a. RIGHTS OF OTHERS AFFECTING THE TRANSACTIONS. There are no preemptive
rights of any stockholder of the Company, as such, to acquire the Purchased
Securities or the Shares. No other party has a currently exercisable right of
first refusal which would be applicable to any or all of the transactions
contemplated by the Transaction Agreements.
b. STATUS. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Incorporation and
has the requisite corporate power to own its properties and to carry on its
business as now being conducted. The Company is duly qualified as a foreign
corporation to do business and is in good standing in each jurisdiction where
the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have or result in a Material Adverse Effect. The Company
has registered its stock and is obligated to file reports pursuant to Section 12
or Section 15(d) of the Securities and Exchange Act of 1934, as amended (the
"1934 Act"). The Common Stock is quoted on the Principal Trading Market. The
Company has received no notice, either oral or written, with respect to the
continued eligibility of the Common Stock for quotation on the Principal Trading
Market, and the Company has maintained all requirements on its part for the
continuation of such quotation.
c. AUTHORIZED SHARES.
(i) The authorized capital stock of the Company consists of (x)
340,000,000 shares of Common Stock, $0.001 par value per share, of which
approximately 190,191,843 shares are outstanding as of August 7, 2007, and (y)
10,000,000 shares of Preferred Stock, $.001 par value, of which (1) 400,000
shares of the Series A Preferred Stock, par value $.001 per share and having a
Stated Value of $10.00 per share, are authorized and approximately 52,500 shares
are outstanding as of such date; (2) 400,000 shares of the Series D Preferred
Stock, par value $.001 per share are authorized and approximately 93,000 shares
are outstanding as of such date; and (3) 1,000,000 shares of the Series F
Convertible Preferred Stock, par value $.001 per share are authorized and
approximately 40,319 shares, convertible into 1,612,760 shares of Common Stock,
are outstanding as of such date. Of the outstanding shares of Common Stock,
approximately 3,881,700 shares are, to the best knowledge of the Company,
beneficially owned by Affiliates of the Company.
(ii) There are no outstanding securities which are convertible into
shares of Common Stock, whether such conversion is currently exercisable or
exercisable only upon some future date or the occurrence of some event in the
future. If any such securities are listed on the Disclosure Annex, the number or
amount of each such outstanding convertible security and the conversion terms
are set forth in said Disclosure Annex.
(iii) All issued and outstanding shares of Common Stock have been duly
authorized and validly issued and are fully paid and non-assessable. The Company
has sufficient authorized and unissued shares of Common Stock as may be
necessary to effect the issuance of the Shares on the Initial Closing Date, were
the Initial Notes and the Additional Notes issued and fully converted and were
the Initial Warrants and the Additional Warrants issued and fully exercised on
that date.
(iv) The Shares have been duly authorized by all necessary corporate
action on the part of the Company, and, when issued on conversion of, or in
payment of interest on, the Notes or upon exercise of the Warrants, in each case
in accordance with their respective terms, will have been duly and validly
issued, fully paid and non-assessable and will not subject the Holder thereof to
personal liability by reason of being such Holder.
d. TRANSACTION AGREEMENTS AND STOCK. This Agreement and each of the
other Transaction Agreements, and the transactions contemplated hereby and
thereby, have been duly and validly authorized by the Company. This Agreement
has been duly executed and delivered by the Company and this Agreement is, and
the Notes, the Warrants and each of the other Transaction Agreements, when
executed and delivered by the Company (if necessary), will be, valid and binding
obligations of the Company enforceable in accordance with their respective
terms, subject as to enforceability to general principles of equity and to
bankruptcy, insolvency, moratorium, and other similar laws affecting the
enforcement of creditors' rights generally.
e. NON-CONTRAVENTION. The execution and delivery of this Agreement and
each of the other Transaction Agreements by the Company, the issuance of the
Securities in accordance with the terms hereof, and the consummation by the
Company of the other transactions contemplated by this Agreement, the Notes, the
Warrants and the other Transaction Agreements do not and will not conflict with
or result in a breach by the Company of any of the terms or provisions of, or
constitute a default under (i) the Certificate of Incorporation or by-laws of
the Company, each as currently in effect, (ii) any indenture, mortgage, deed of
trust, or other material agreement or instrument to which the Company is a party
or by which it or any of its properties or assets are bound, including any
listing agreement for the Common Stock except as herein set forth, or (iii) to
its knowledge, any existing applicable law, rule, or regulation or any
applicable decree, judgment, or order of any court, United States federal or
state regulatory body, administrative agency, or other governmental body having
jurisdiction over the Company or any of its properties or assets, except such
conflict, breach or default which would not have or result in a Material Adverse
Effect.
f. APPROVALS. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the stockholders of the Company is required to be obtained
by the Company for the issuance and sale of the Securities to the Buyer as
contemplated by this Agreement, except such authorizations, approvals and
consents that have been obtained.
g. FILINGS. None of the Company's SEC Documents contained, at the time
they were filed, any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were made, not
misleading. Since July 1, 2006, the Company has filed all annual and quarterly
reports required to be filed by the Company with the SEC under Section 13(a) or
15(d) of the 1934 Act.
h. ABSENCE OF CERTAIN CHANGES. Since the Last Audited Date, there has
been no Material Adverse Effect, except as disclosed in the Company's SEC
Documents. Since the Last Audited Date, except as provided in the Company's SEC
Documents, the Company has not (i) incurred or become subject to any material
liabilities (absolute or contingent) except liabilities incurred in the ordinary
course of business consistent with past practices; (ii) discharged or satisfied
any material lien or encumbrance or paid any material obligation or liability
(absolute or contingent), other than current liabilities paid in the ordinary
course of business consistent with past practices; (iii) declared or made any
payment or distribution of cash or other property to stockholders with respect
to its capital stock, or purchased or redeemed, or made any agreements to
purchase or redeem, any shares of its capital stock; (iv) sold, assigned or
transferred any other material tangible assets, or canceled any material debts
owed to the Company by any third party or material claims of the Company against
any third party, except in the ordinary course of business consistent with past
practices; (v) waived any rights of material value, whether or not in the
ordinary course of business, or suffered the loss of any material amount of
existing business; (vi) made any increases in employee compensation, except in
the ordinary course of business consistent with past practices; or (vii)
experienced any material problems with labor or management in connection with
the terms and conditions of their employment.
i. FULL DISCLOSURE. There is no fact known to the Company (other than
conditions known to the public generally or as disclosed in the Company's SEC
Documents) that has not been disclosed in writing to the Buyer that would
reasonably be expected to have or result in a Material Adverse Effect.
j. ABSENCE OF LITIGATION. There is no action, suit, proceeding, inquiry
or investigation before or by any court, public board or body pending or, to the
knowledge of the Company, threatened against or affecting the Company before or
by any governmental authority or non-governmental department, commission, board,
bureau, agency or instrumentality or any other person, wherein an unfavorable
decision, ruling or finding would have a Material Adverse Effect or which would
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under, any of the Transaction
Agreements. The Company is not aware of any valid basis for any such claim that
(either individually or in the aggregate with all other such events and
circumstances) could reasonably be expected to have a Material Adverse Effect.
There are no outstanding or unsatisfied judgments, orders, decrees, writs,
injunctions or stipulations to which the Company is a party or by which it or
any of its properties is bound, that involve the transaction contemplated herein
or that, alone or in the aggregate, could reasonably be expect to have a
Material Adverse Effect.
k. ABSENCE OF EVENTS OF DEFAULT. Except as set forth in Section 3(e)
hereof, no Event of Default (or its equivalent term), as defined in the
respective agreement to which the Company or its Subsidiary is a party, and no
event which, with the giving of notice or the passage of time or both, would
become an Event of Default (or its equivalent term) (as so defined in such
agreement), has occurred and is continuing, which would have a Material Adverse
Effect.
l. ABSENCE OF CERTAIN COMPANY CONTROL PERSON ACTIONS OR EVENTS. To the
Company's knowledge, none of the following has occurred during the past five (5)
years with respect to a Company Control Person:
(1) A petition under the federal bankruptcy laws or any state insolvency
law was filed by or against, or a receiver, fiscal agent or similar
officer was appointed by a court for the business or property of such
Company Control Person, or any partnership in which he was a general
partner at or within two years before the time of such filing, or any
corporation or business association of which he was an executive officer
at or within two years before the time of such filing;
(2) Such Company Control Person was convicted in a criminal proceeding or
is a named subject of a pending criminal proceeding (excluding traffic
violations and other minor offenses);
(3) Such Company Control Person was the subject of any order, judgment or
decree, not subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining him from, or
otherwise limiting, the following activities:
(i) acting, as an investment advisor, underwriter, broker or dealer
in securities, or as an affiliated person, director or employee of
any investment company, bank, savings and loan association or
insurance company, as a futures commission merchant, introducing
broker, commodity trading advisor, commodity pool operator, floor
broker, any other Person regulated by the Commodity Futures Trading
Commission ("CFTC") or engaging in or continuing any conduct or
practice in connection with such activity;
(ii) engaging in any type of business practice; or
(iii) engaging in any activity in connection with the purchase or
sale of any security or commodity or in connection with any
violation of federal or state securities laws or federal commodities
laws;
(4) Such Company Control Person was the subject of any order, judgment or
decree, not subsequently reversed, suspended or vacated, of any federal or
state authority barring, suspending or otherwise limiting for more than 60
days the right of such Company Control Person to engage in any activity
described in paragraph (3) of this item, or to be associated with Persons
engaged in any such activity; or
(5) Such Company Control Person was found by a court of competent
jurisdiction in a civil action or by the CFTC or SEC to have violated any
federal or state securities law, and the judgment in such civil action or
finding by the CFTC or SEC has not been subsequently reversed, suspended,
or vacated.
m. NO UNDISCLOSED LIABILITIES OR EVENTS. The Company has no liabilities
or obligations other than those disclosed in the Transaction Agreements or the
Company's SEC Documents or those incurred in the ordinary course of the
Company's business since the Last Audited Date, or which individually or in the
aggregate, do not or would not have a Material Adverse Effect. No event or
circumstance has occurred or exists with respect to the Company or its
properties, business, operations, condition (financial or otherwise), or results
of operations, which, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which has
not been so publicly announced or disclosed. There are no proposals currently
under consideration or currently anticipated to be under consideration by the
Board of Directors or the executive officers of the Company which proposal would
(x) change the Certificate of Incorporation or by-laws of the Company, each as
currently in effect, with or without stockholder approval, which change would
reduce or otherwise adversely affect the rights and powers of the stockholder
8/23/07 s of the Common Stock or (y) materially or substantially change the
business, assets or capital of the Company, including its interests in
subsidiaries.
n. NO INTEGRATED OFFERING. Neither the Company nor any of its
Affiliates nor any Person acting on its or their behalf has, directly or
indirectly, at any time since February 1, 2007, made any offer or sales of any
security or solicited any offers to buy any security under circumstances that
would eliminate the availability of the exemption from registration under
Regulation D in connection with the offer and sale of the Securities as
contemplated hereby.
o. DILUTION. Each of the Company and its executive officers and
directors is aware that the number of shares issuable on conversion of the
Notes, upon exercise of the Warrants or pursuant to the other terms of the
Transaction Agreements may have a dilutive effect on the ownership interests of
the other stockholders (and Persons having the right to become stockholders) of
the Company. The Company specifically acknowledges that its obligation to issue
the Conversion Shares upon conversion of the Notes and the Warrant Shares upon
exercise of the Warrants is binding upon the Company and enforceable regardless
of the dilution such issuance may have on the ownership interests of other
stockholders of the Company, and the Company will honor such obligations,
including honoring every Notice of Conversion (as contemplated by the Notes) and
every Notice of Exercise (as contemplated by the Warrants), unless the Company
is subject to an injunction (which injunction was not sought by the Company)
prohibiting the Company from doing so.
p. FEES TO BROKERS, PLACEMENT AGENTS AND OTHERS. The Company has taken
no action which would give rise to any claim by any Person for brokerage
commission, placement agent or finder's fees or similar payments by Buyer
relating to this Agreement or the transactions contemplated hereby. Except for
such fees arising as a result of any agreement or arrangement entered into by
the Buyer without the knowledge of the Company (a "Buyer's Fee"), Buyer shall
have no obligation with respect to such fees or with respect to any claims made
by or on behalf of other Persons for fees of a type contemplated in this
paragraph that may be due in connection with the transactions contemplated
hereby. The Company shall indemnify and hold harmless each of Buyer, its
employees, officers, directors, agents, and partners, and their respective
Affiliates, from and against all claims, losses, damages, costs (including the
costs of preparation and attorney's fees) and expenses suffered in respect of
any such claimed or existing fees (other than a Buyer's Fee).
q. DISCLOSURE. All information relating to or concerning the Company
set forth in the Transaction Agreements or in the Company's public filings with
the SEC is true and correct in all material respects and the Company has not
omitted to state any material fact necessary in order to make the statements
made, in light of the circumstances under which they were made, not misleading.
No event or circumstance has occurred or exists with respect to the Company or
its business, properties, prospects, operations or financial conditions, which
under applicable law, rule or regulation, requires public disclosure or
announcement by the Company.
r. CONFIRMATION. The Company agrees that, if, to the knowledge of the
Company, any events occur or circumstances exist prior to the release of the
Escrow Funds to the Company which would make any of the Company's
representations or warranties set forth herein materially untrue or materially
inaccurate as of such date, the Company shall immediately notify the Buyer and
the Escrow Agent in writing prior to such date of such fact, specifying which
representation, warranty or covenant is affected and the reasons therefor.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. TRANSFER RESTRICTIONS. The Buyer acknowledges that (1) the
Securities have not been and are not being registered under the provisions of
the 1933 Act and, except as provided in the Registration Rights Agreement or
otherwise included in an effective registration statement, the Shares have not
been and are not being registered under the 1933 Act, and may not be transferred
unless (A) subsequently registered thereunder or (B) the Buyer shall have
delivered to the Company an opinion of counsel, reasonably satisfactory in form,
scope and substance to the Company, to the effect that the Securities to be sold
or transferred may be sold or transferred pursuant to an exemption from such
registration; (2) any sale of the Securities made in reliance on Rule 144 may be
made only in accordance with the terms of said Rule and further, if said Rule is
not applicable, any resale of such Securities under circumstances in which the
seller, or the Person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the SEC
thereunder; and (3) neither the Company nor any other Person is under any
obligation to register the Securities (other than pursuant to the Registration
Rights Agreement) under the 1933 Act or to comply with the terms and conditions
of any exemption thereunder.
b. RESTRICTIVE LEGEND. The Buyer acknowledges and agrees that, until
such time as the relevant Shares have been registered under the 1933 Act, as
contemplated by the Registration Rights Agreement, and may be sold in accordance
with an effective Registration Statement or otherwise in accordance with another
effective registration statement, or until such Shares can otherwise be sold
without restriction, whichever is earlier, the certificates and other
instruments representing any of the Securities shall bear a restrictive legend
in substantially the following form (and a stop-transfer order may be placed
against transfer of any such Securities):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT
BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL
OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED.
c. FILINGS. The Company undertakes and agrees to make all filings
required to be made by it in connection with the sale of the Securities to the
Buyer under the 1933 Act, the 1934 Act or any United States state securities
laws and regulations thereof applicable to the Company or by the rules and
regulations of the Principal Trading Market, and, unless such filing is publicly
available on the SEC's XXXXX system (via the SEC's web site at no additional
charge), to provide a copy thereof to the Buyer promptly after such filing.
Reference is made to the Section titled "Publicity, Filings, Releases, Etc."
below.
d. REPORTING STATUS. So long as the Buyer beneficially owns any of the
Purchased Securities and for at least twenty (20) Trading Days thereafter, the
Company shall file all reports required to be filed with the SEC pursuant to
Section 13 or 15(d) of the 1934 Act, shall take all reasonable action under its
control to ensure that adequate current public information with respect to the
Company, as required in accordance with Rule 144(c)(2) of the 1933 Act, is
publicly available, and shall not terminate its status as an issuer required to
file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would permit such termination. The Company will take all
reasonable action under its control to maintain the continued listing and
quotation and trading of its Common Stock (including, without limitation, all
Registrable Securities) on the Principal Trading Market or a listing on the
NASDAQ Capital, Global or Global Select Markets or AMEX and, to the extent
applicable to it, will comply in all material respects with the Company's
reporting, filing and other obligations under the by-laws or rules of the
Principal Trading Market and/or the National Association of Securities Dealers,
Inc., as the case may be, applicable to it at least through the date which is
sixty (60) days after the later of the date on which (x) all of the Notes have
been converted or have been paid in full or (y) all of the Warrants have been
exercised or have expired.
e. USE OF PROCEEDS. The Company will use the net proceeds received
hereunder (excluding amounts paid as contemplated by the Joint Escrow
Instructions) for general corporate purposes; provided however, the Company will
not use such proceeds to pay fees payable (x) to any broker or finder relating
to the offer and sale of the Purchased Securities or (y) to any other party
relating to any financing transaction effected prior to the Closing Date.
f. WARRANTS. The Company agrees to issue to the Buyer on each Closing
Date transferable warrants (the "Warrants"), with cashless exercise rights and
automatic exercise provisions, for the purchase of the number of shares equal to
(x) thirty-seven and one-half percent (37/5%) of (y) the number of Issue Date
Conversion Shares for such Closing Date. The exercise price of the Warrants
issued on each Closing Date will be equal to one hundred twenty percent (120%)
of the Closing Price for the Trading Day immediately preceding such Closing
Date, which price is subject to adjustment as provided in the Warrant. The
Warrants will expire on the last day of the calendar month in which the third
annual anniversary of the relevant Closing Date occurs. Each of the Warrants
shall generally be in the form annexed hereto as ANNEX V. The Warrant Shares
shall be subject to the provisions of the Registration Rights Agreement.
g. CERTAIN AGREEMENTS.
(i) For purposes of this Agreement, the following terms shall have
meanings indicated:
(A) "New Transaction Period" means the period commencing on the Initial
Closing Date and continuing through and including the Final Lock-up Date.
(B) "Final Lock-up Date" means the date which is ninety-two (92) days
after the Effective Date, but not counting for such purposes the days, if
any, during which sale of Registrable Securities was suspended after the
Effective Date.(1)
(C) "New Transaction Price" means the Basic New Transaction Price (as
defined below) except that if the New Transaction Exercise Price is lower
than the Basic New Transaction Price, it means the New Transaction
Exercise Price.
(D) "Basic New Transaction Price" means, as may be applicable, on a per
share basis, the lower of (1) the lowest fixed purchase price of any
shares of the New Common Stock contemplated in the New Transaction, or (2)
the lowest conversion price or put or call price which would be applicable
under the terms of the New Transaction; in each such case, whether such
purchase or conversion price or put or call price is stated or otherwise
------------
(1) By way of illustration: If the sale of Registrable Securities was
suspended for ten (10) days in the interim, the applicable Final Lock-up Date
will be one hundred two (102) days after the Effective Date. If on the 98th day
after the Effective Date, the sale of Registrable Securities was suspended again
for five (5) days, the Final Lock-up Date will be one hundred seven (107) days
after the Effective Date.
specified or is determined on the closing date of the New Transaction by
the application of a formula set in the documents reflecting the New
Transaction or does result from adjustments or revisions contemplated in
the relevant agreements for the New Transaction (and the Company hereby
covenants that it will provide written notice to the Buyer of any such
adjustment or revision within five (5) Trading Days after an event
reflecting such adjustment or revision and, if there was a conversion of
any portion of the Buyer's Note after such adjustment or revision and
before Buyer's receipt of such notice, the Company will issue additional
shares to Buyer based on such adjusted conversion price) and whenever such
adjustment or revision would be applicable; and provided, further, that,
if the securities issued in the New Transaction are issued at a Face Value
Discount (as defined below), the New Transaction Price shall be adjusted
to reflect such discount.(2)
(E) "New Transaction Exercise Price" means the lowest exercise price per
share applicable to the warrants, option or similar instrument (howsoever
denominated; collectively, "New Transaction Warrants") included in such
New Transaction, whether such exercise price is stated or could result
from adjustments or revisions contemplated in the relevant agreements for
the New Transaction (and the Company hereby covenants that it will provide
written notice to the Buyer of any such adjustment or revision within five
(5) Trading Days after an event reflecting such adjustment or revision)
and whenever such exercise price would be applicable.
(F) "Face Value Discount" means consideration less than, as the case may
be, (x) the number of shares being issued multiplied by the stated
purchase price, (y) the stated principal amount of a debenture, note or
similar instrument or (z) the stated value of the shares of convertible
stock.
(ii) The Company agrees that if, during the New Transaction Period, it
enters into a New Transaction, the Conversion Price for any conversion of Notes
effected thereafter may be the New Transaction Price, if such New Transaction
Price, as of the relevant Conversion Date, is lower than the Conversion Price
determined in the absence of such New Transaction Price.
(iii) The Company covenants and agrees that, any of the foregoing
provisions of this Section 4(g) or any other provision of this Agreement or any
of the other Transaction Agreements to the contrary notwithstanding, the Company
will not, without the prior written consent of a Majority in Interest of the
Holders in each instance (which consent is in the sole discretion of the Holders
and may be withheld for any reason or for no reason whatsoever),
(A) during the New Transaction Period, issue any shares pursuant to a
registration statement on Form S-8, and
(B) during the period commencing on the Closing Date and continuing
through the Effective Date, enter into any New Transaction whatsoever.
The Company acknowledges that each of the foregoing provisions is independent of
the others and that a breach of any of the foregoing provisions might result in
adjustments referred to in other provisions of this Section 4(g) and, in
addition (and not in lieu of such adjustments, if any) shall constitute an event
of default under the Note and the other Transaction Agreements. The Company is
aware that if such event of default occurs, a Holder of a Note will have certain
redemption rights contemplated by the Note.
------------
(2) By way of illustration, if convertible preferred shares having a stated
value of $1 million and a fixed conversion price of $0.05 were sold for a
purchase price of $800,000, the effective New Transaction Price would be $0.04.
(iv) Nothing in the foregoing provisions reflects either an obligation on the
part of any Buyer to participate in any New Transaction or a limitation on any
Buyer from participating in any New Transaction.
(v) Any of the foregoing provisions of this Section 4(g) or any other
provision of this Agreement or any of the other Transaction Agreements to the
contrary notwithstanding, the Company shall not engage in any offers, sales or
other transactions of its securities which would adversely affect the exemption
from registration available for the transactions contemplated by the Transaction
Agreements.
(vi) The Company agrees that, prior to the Effective Date, it will not
file any registration statement for the sale of shares by the Company or any
other stockholder other than (x) the Registration Statement contemplated by the
Registration Rights Agreement (or amendments to such Registration Statement) or
(y) a post-effective registration statement with respect to any registration
statement which was declared effective prior to the Initial Closing Date.
h. AVAILABLE SHARES.
(i) The Company shall have at all times authorized and reserved for
issuance, free from preemptive rights, a number of shares (the "Reserved
Amount") at least equal to the sum of (x) (1) until the Final Lock-up Date, one
hundred fifty percent (150%), and thereafter one hundred percent (100%), of the
number of shares of Common Stock issuable as may be required, at any time, to
satisfy the conversion rights of the Holders of principal on all outstanding
Convertible Notes plus the sum of all accrued interest thereon and all interest
would accrue through the Maturity Date (assuming for such purposes that interest
is paid in shares at the Conversion Price in effect on the Reserved Share
Determination Date, as defined below), plus (y) the number of shares issuable
upon exercise of all outstanding Warrants held by all Holders (in each case,
whether any of such outstanding Convertible Notes or Warrants were originally
issued to the Holder, the Buyer or to any other party and without regard to any
restrictions which might limit any Holder's right to convert any of the Notes or
to exercise any of the Warrants held by any Holder).
(ii) The Reserved Amount shall be determined on the Closing Date and,
until the Final Lock-up Date, after each New Transaction Closing Date, and
thereafter on the first Trading Day after the end of each subsequent calendar
quarter (each such determination date, a "Reserved Share Determination Date"),
and the number of shares to be reserved shall be based on (q) all outstanding
Notes and the Conversion Price which would have been applicable as of such
Reserved Share Determination Date and (r) all unexercised Warrants as of such
date. The Reserved Amount determined on such date shall remain the Reserved
Amount until the next New Transaction Closing Date or quarterly determination,
as the case may be. The Company shall give written instructions to the Transfer
Agent to reserve for issuance to the Buyer the number of shares equal to the
Reserved Amount. The Company will, at the request of the Buyer, provide written
confirmation, certified by an executive officer of the Company, of the number of
shares then reserved for the Buyer and that the instructions referred to in the
preceding sentence have been given to the Transfer Agent.
i. PUBLICITY, FILINGS, RELEASES, ETC. Each of the parties agrees
that it will not disseminate any information relating to the Transaction
Agreements or the transactions contemplated thereby, including issuing any press
releases, holding any press conferences or other forums, or filing any reports
(collectively, "Publicity"), without giving the other party reasonable advance
notice and an opportunity to comment on the contents thereof. Neither party will
include in any such Publicity any statement or statements or other material to
which the other party reasonably objects, unless in the reasonable opinion of
counsel to the party proposing such statement, such statement is legally
required to be included. In furtherance of the foregoing, the Company will
provide to the Investor's Counsel (as defined in the Registration Rights
Agreement) drafts of the applicable text the first filing of a Current Report on
Form 8-K or a Quarterly or Annual Report on Form 10-Q or 10-K (or equivalent SB
forms), as the case may be, intended to be made with the SEC which refers to the
Transaction Agreements or the transactions contemplated thereby as soon as
practicable (but at least two (2) Trading Days before such filing will be made)
and will not include in such filing (or any other filing filed before then) any
statement or statements or other material to which the other party reasonably
objects, unless in the reasonable opinion of counsel to the party proposing such
statement, such statement is legally required to be included. Notwithstanding
the foregoing, each of the parties hereby consents to the inclusion of the text
of the Transaction Agreements in filings made with the SEC (but any descriptive
text accompanying or part of such filing shall be subject to the other
provisions of this paragraph). Notwithstanding, but subject to, the foregoing
provisions of this provision, the Company will, after the Closing Date, promptly
issue a press release and file a Current Report on Form 8-K or, if appropriate,
a quarterly or annual report on the appropriate form, referring to the
transactions contemplated by the Transaction Agreements.
j. INDEPENDENT NATURE OF BUYERS' OBLIGATIONS AND RIGHTS. The
obligations of each Buyer under the Transaction Agreements are several and not
joint with the obligations of any other Buyer, and no Buyer shall be responsible
in any way for the performance of the obligations of any Other Buyer under any
one or more of the Transaction Agreements. The decision of each Buyer or Other
Buyer to purchase Purchased Securities pursuant to the Transaction Agreements
has been made by such Buyer independently of any Other Buyer and independently
of any information, materials, statements or opinions as to the business,
affairs, operations, assets, properties, liabilities, results of operations,
condition (financial or otherwise) or prospects of the Company or of its
subsidiaries, if any, which may been made or given by any Other Buyer or any of
their respective officers, directors, principals, employees, agents, counsel or
representatives (collectively, including the Buyer, the "Buyer
Representatives"). No Buyer Representative shall have any liability to any Other
Buyer or the Company relating to or arising from any such information,
materials, statements or opinions, if any. Each Buyer acknowledges that no Other
Buyer has acted as agent for such Buyer in connection with making its investment
hereunder and that no Buyer will be acting as agent of such Other Buyer in
connection with monitoring its investment in the Purchased Securities or
enforcing its rights under the Transaction Agreements. Each Buyer 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 Agreements, and it shall not be necessary for any Other Buyer to be
joined as an additional party in any proceeding for such purpose. The Company
acknowledges that, for reasons of administrative convenience, (x) the
Transaction Agreements have been prepared by counsel for one of the Buyers and
such counsel does not represent all of the Buyers with respect to the
transactions contemplated hereby, and each other Buyer has retained its own
counsel (or had the opportunity to do so) with respect to such transactions, and
(y) the Company has elected to provide each of the Buyers with the same
Transaction Agreements for the purpose of closing a transaction with multiple
Buyers and not because it was required or requested to do so by any Buyer. In
furtherance of the foregoing, and n 8/23/07 ot in limitation thereof, the
Company acknowledges that nothing contained in this Agreement or in any
Transaction Agreement, and no action taken by any Buyer pursuant thereto, shall
be deemed to constitute any two or more Buyers as a partnership, an association,
a joint venture or any other kind of entity, or create a presumption that the
Buyers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Agreements.
k. EQUAL TREATMENT OF BUYERS. 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 Agreements unless the same consideration is also
offered to all of the parties to the Transaction Agreements.
l. INDEPENDENT INVESTMENT DECISION. No Buyer has agreed to act with any
Other Buyer for the purpose of acquiring, holding, voting or disposing of the
Securities purchased hereunder for purposes of Section 13(d) under the Exchange
Act, and each Buyer is acting independently with respect to its investment in
the Securities. The decision of each Buyer to purchase Purchased Securities
pursuant to this Agreement has been made by such Buyer independently of any
other purchase and independently of any information, materials, statements or
opinions as to the business, affairs, operations, assets, properties,
liabilities, results of operations, condition (financial or otherwise) or
prospects of the Company or its subsidiaries which may have made or given by any
Other Buyer or by any agent or employee of any Other Buyer, and no Buyer or any
of its agents or employees shall have any liability to any Other Buyer (or any
other person) relating to or arising from any such information, materials,
statements or opinions.
m. NASD RULE 2710. The Company is aware that the Corporate Financing
Rule 2710 ("NASD Rule 2710") of the National Association of Securities Dealers
("NASD") is or may become applicable to the transactions contemplated by the
Transaction Agreements or to the sale by a Holder of any of the Securities. If
NASD Rule 2710 is so applicable, the Company shall, to the extent required by
such rule, timely make any filings and cooperate with any broker or selling
stockholder in respect of any consents, authorizations or approvals that may be
necessary for the NASD to timely and expeditiously permit the stockholder to
sell the securities.
n. KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The Company shall keep and
cause each Subsidiary, if any, to keep adequate records and books of account, in
which complete entries will be made in accordance with GAAP consistently
applied, reflecting all financial transactions of the Company and such
subsidiaries, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
5. TRANSFER AGENT INSTRUCTIONS.
a. The Company warrants that, with respect to the Securities, other
than the stop transfer instructions to give effect to Section 4(a) hereof, it
will give the Transfer Agent no instructions inconsistent with instructions to
issue Common Stock from time to time upon conversion of the Notes or, the
exercise of the Warrants, as may be applicable from time to time, in such
amounts as specified from time to time by the Company to the Transfer Agent,
bearing the restrictive legend specified in Section 4(b) of this Agreement prior
to registration of the Shares under the 1933 Act, registered in the name of the
Buyer or its nominee and in such denominations to be specified by the Holder in
connection therewith. Except as so provided, the Shares shall otherwise be
freely transferable on the books and records of the Company as and to the extent
provided in this Agreement and the other Transaction Agreements. Nothing in this
Section shall affect in any way the Buyer's obligations and agreement to comply
with all applicable securities laws upon resale of the Securities. If the Buyer
provides the Company with an opinion of counsel reasonably satisfactory to the
Company that registration of a resale by the Buyer of any of the Securities in
accordance with clause (1)(B) of Section 4(a) of this Agreement is not required
under the 1933 Act or upon request from a Holder while the Registration
Statement is effective, the Company shall (except as provided in clause (2) of
Section 4(a) of this Agreement) permit the transfer of the Securities and, in
the case of the Conversion Shares or the Warrant Shares, as may be applicable,
promptly instruct the Transfer Agent to issue one or more certificates for
Common Stock without legend in such name and in such denominations as specified
by the Buyer.
b. (i) The Company understands that a delay in the delivery of
Conversion Certificates, whether on conversion of the Note and/or in payment of
accrued interest or on exercise of the Warrants, beyond the relevant Delivery
Date (as defined in the Note or Warrant, as the case may be) could result in
economic loss to the Holder. As compensation to the Holder for such loss, in
addition to any other available remedies at law, the Company agrees to pay late
payments to the Holder for late issuance of the Conversion Certificates in
accordance with the following schedule (where "No. Business Days Late" is
defined as the number of Trading Days beyond four (4) Trading Days after the
Delivery Date):(3)
Late Payment For Each $10,000
of Principal or Interest Being Converted or
No. Business Days Late of Exercise Price of Warrant Being Exercised
---------------------- --------------------------------------------
1 $ 100
2 $ 200
3 $ 300
4 $ 400
5 $ 500
6 $ 600
7 $ 700
8 $ 800
9 $ 900
10 $1,000
>10 $1,000 + $200 for each Business
Day Late beyond 10 days
The Company shall pay any payments incurred under this Section in immediately
available funds upon demand. Nothing herein shall limit the Holder's right to
pursue actual damages for the Company's failure to issue and deliver the
Conversion Certificates to the Holder within a reasonable time. Furthermore, in
addition to any other remedies which may be available to a Holder, in the event
that the Company fails for any reason to effect delivery of such Conversion
Certificates within two (2) Trading Days after the Delivery Date, the Converting
Holder will be entitled to revoke the relevant Notice of Conversion or Notice of
Exercise by delivering a notice to such effect to the Company prior to the
Converting Holder's receipt of the relevant Conversion Certificates, whereupon
the Company and the Converting Holder shall each be restored to their respective
positions immediately prior to delivery of such Notice of Conversion or Notice
of Exercise, as the case may be; PROVIDED, HOWEVER, that any payments
contemplated by this Section 5(b) of this Agreement which have accrued through
the date of such revocation notice shall remain due and owing to the Converting
Holder notwithstanding such revocation.
------------
(3) Example: Notice of Conversion or Notice of Exercise is delivered on
Monday, December 3, 2007. The Delivery Date would be Thursday, December 6 (the
third Trading Day after such delivery). If the certificate is delivered by
Wednesday, December 12 (4 Trading Days after the Delivery Date), no payment
under this provision is due. If the certificates are delivered on December 13,
that is 1 "Trading Day Late" in the table below; if delivered on December 20,
that is 6 "Trading Days Late" in the table.
(ii) If, by the tenth Trading Day after the relevant Delivery Date,
the Company fails for any reason to deliver the Conversion Certificates, but at
any time after the Delivery Date, the Converting Holder purchases, in an
arm's-length open market transaction or otherwise, shares of Common Stock (the
"Covering Shares") in order to make delivery in satisfaction of a sale of Common
Stock by the Converting Holder (the "Sold Shares"), which delivery such
Converting Holder anticipated to make using the shares to be issued upon such
conversion (a "Buy-In"), the Converting Holder shall have the right to require
the Company to pay to the Converting Holder, in addition to and not in lieu of
the amounts contemplated in other provisions of the Transaction Agreements,
including, but not limited to, the provisions of the immediately preceding
Section 5(b)(i)), the Buy-In Adjustment Amount (as defined below). The "Buy-In
Adjustment Amount" is the amount equal to the number of Sold Shares multiplied
by the excess, if any, of (x) the Holder's total purchase price per share
(including brokerage commissions, if any) for the Covering Shares over (y) the
net proceeds per share (after brokerage commissions, if any) received by the
Holder from the sale of the Sold Shares. The Company shall pay the Buy-In
Adjustment Amount to the Holder in immediately available funds immediately upon
demand by the Converting Holder. By way of illustration and not in limitation of
the foregoing, if the Holder purchases shares of Common Stock having a total
purchase price (including brokerage commissions) of $11,000 to cover a Buy-In
with respect to shares of Common Stock it sold for net proceeds of $10,000, the
Buy-In Adjustment Amount which Company will be required to pay to the Holder
will be $1,000.
c. In lieu of delivering physical certificates representing the Common
Stock issuable upon conversion of the Note or exercise of a Warrant or at the
request of the Holder with respect to any Shares previously issued, provided the
Transfer Agent is participating in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer program, upon request of the Holder and the
Holder's compliance with the provisions contained in this paragraph, so long as
the certificates therefor do not bear a legend and the Holder thereof is not
obligated to return such certificate for the placement of a legend thereon, the
Company shall use its best efforts to cause the Transfer Agent to electronically
transmit to the Holder the Common Stock issuable upon conversion of the Note or
exercise of the Warrant or in replacement of any Shares previously issued by
crediting the account of Holder's Prime Broker with DTC through its Deposit
Withdrawal Agent Commission system. The Company specifically acknowledges that,
as of the date hereof and as of the Closing Date, the Transfer Agent is
participating in the DTC program and the Company is not aware of any plans of
the Transfer Agent to terminate such participation. While any Holder holds
Registrable Securities, the Company will not appoint any transfer agent which
does not participate in the DTC program.
d. The Company shall assume any fees or charges of the Transfer Agent
or Company counsel regarding (i) the removal of a legend or stop transfer
instructions with respect to Registrable Securities, and (ii) the issuance of
certificates or DTC registration to or in the name of the Holder or the Holder's
designee or to a transferee as contemplated by an effective Registration
Statement. Notwithstanding the foregoing, it shall be the Holder's
responsibility to obtain all needed formal requirements (specifically: medallion
guarantee and prospectus delivery compliance) in connection with any electronic
issuance of shares of Common Stock.
e. The Holder of a Note or a Warrant shall be entitled to exercise its
conversion or exercise privilege with respect to the Note or the Warrant, as the
case may be, notwithstanding the commencement of any case under 11 U.S.C. ss.101
ET SEQ. (the "Bankruptcy Code"). In the event the Company is a debtor under the
Bankruptcy Code, the Company hereby waives, to the fullest extent permitted, any
rights to relief it may have under 11 U.S.C. ss.362 in respect of such holder's
exercise privilege. The Company hereby waives, to the fullest extent permitted,
any rights to relief it may have under 11 U.S.C. ss.362 in respect of the
conversion of the Note or the exercise of the Warrant. The Company agrees,
without cost or expense to such Holder, to take or to consent to any and all
action necessary to effectuate relief under 11 U.S.C. ss.362.
6. CLOSING DATE.
a. The Initial Closing Date shall occur on the date which is the first
Trading Day after each of the conditions contemplated by Sections 7 and 8 hereof
shall have either been satisfied or been waived by the party in whose favor such
conditions run.
b. (i) Subject to the provisions of subparagraph (iv) of this Section
6(b), the Additional Closing Date shall be the date specified in the Additional
Closing Date Notice (as defined below).
(ii) Subject to the other provisions of this Section 6(b), the term
"Additional Closing Date Notice" means a written notice given by the Company to
the Buyer and to the Escrow Agent by fax transmission or hand delivery no later
than one (1) business day after the Company submits the Effectiveness Request
(as defined below; a copy of the Effectiveness Request shall be attached to the
Additional Closing Date Notice).
(iii) It also shall be a condition to the giving of an Additional
Closing Date Notice that the representations and warranties of the Company
contained in Section 3 hereof shall be true and correct in all material respects
and there shall have been no Material Adverse Effect from the Initial Closing
Date through and including the date the Company gives the Additional Closing
Date Notice to the Buyer (and the Company's issuance of the Additional Closing
Date Notice shall constitute the Company's making each such representation and
warranty as of such date).
(iv) The Company also shall give written notice (an "Effectiveness
Notice") to the Buyer and the Escrow Agent both (x) by fax transmission or hand
delivery and (y) by telephone communication of the actual Effective Date
declared by the SEC no later than noon on the first business day after such
Effective Date; provided, however, that an Effectiveness Notice may be given
only if the Effective Date is on or before the first anniversary of the Initial
Closing Date (such first anniversary date, the "Latest Effectiveness Date"). The
fifth (5th) day after the actual Effective Date, which may be later than the
date requested in the Effectiveness Request, shall be the Additional Closing
Date.
(v) The Company shall execute the Certificates for the Additional
Notes and the Additional Warrants and deliver them to the Escrow Agent at least
one Trading Day prior to the Additional Closing Date. The "Issue Date"
identified in such Additional Notes and the Exercise Price and the Expiration
Date identified in such Additional Warrants shall be left blank and the Company
will authorize the Escrow Agent, upon their release to the Buyer, to fill in (x)
the date of the Additional Closing Date as the Issue Date in such Additional
Notes and (y) the Exercise Price and the Expiration Date (in each case as
contemplated by the form of Warrant attached as Annex IV hereto) in the
Additional Warrants.
(vi) The term "Effectiveness Request" means the Company's written
request to the SEC that the SEC declare the Registration Statement effective on
a specified date; provided, however, that the Effectiveness Request shall be
given only after the SEC has advised the Company informally, in writing or
otherwise that it will respond favorably to such request.
(vii) Except as provided in this Section 6(b) and Section 8, the
closing for the Additional Notes and the Additional Warrants shall be conducted
upon the same terms and conditions as those applicable to the Initial Notes and
Initial Warrants.
(viii)The Company hereby covenants and agrees that the Company will
issue each of the Additional Closing Date Notice and the Effectiveness Notice to
the Buyer and the Escrow Agent on a timely basis.
(ix) If the Effective Date does not occur by the close of business
(Eastern time) on the Latest Effectiveness Date, the obligations of the Buyers
to purchase the Additional Notes and the Additional Warrants and the obligations
of the Company to issue the Additional Notes and the Additional Warrants shall
automatically terminate (an "Additional Closing Date Termination"). Such
Additional Closing Date Termination shall not affect the obligations of the
Company or the Buyer under any of the other Transaction Agreements, including,
without limitation, the Registration Rights Agreement, except that the
Transaction Agreements shall be deemed to refer only to the Initial Notes and
the Initial Warrants and the transactions relating thereto.
c. Each closing of the purchase and issuance of Notes and Warrants
shall occur on the relevant Closing Date at the offices of the Escrow Agent and
shall take place no later than 3:00 P.M., Eastern Time, on such day or such
other time as is mutually agreed upon by the Company and the Buyer.
d. Notwithstanding anything to the contrary contained herein, the
Escrow Agent will be authorized to release the Escrow Funds to the Company and
to others and to release the other Escrow Property on the relevant Closing Date
upon satisfaction of the conditions set forth in Sections 7 and 8 hereof and as
provided in the Joint Escrow Instructions.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell the relevant
Purchased Securities to the Buyer pursuant to this Agreement on the relevant
Closing Date is conditioned upon:
a. The execution and delivery of this Agreement and, where indicated,
the other Transaction Agreements by the Buyer on or before such Closing Date;
b. Delivery by the Buyer to the Escrow Agent by the relevant Closing
Date of good funds as payment in full of an amount equal to the relevant
Purchase Price in accordance with this Agreement;
c. The accuracy on such Closing Date of the representations and
warranties of the Buyer contained in this Agreement, each as if made on such
date, and the performance by the Buyer on or before such date of all covenants
and agreements of the Buyer required to be performed on or before such date; and
d. There shall not be in effect any law, rule or regulation prohibiting
or restricting the transactions contemplated hereby, or requiring any consent or
approval which shall not have been obtained.
8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the
relevant Purchased Securities on the relevant Closing Date is conditioned upon:
a. The execution and delivery of this Agreement and the other
Transaction Agreements by the Company on or before such Closing Date;
b. The delivery by the Company to the Escrow Agent of the relevant
Certificates in accordance with this Agreement;
c. On such Closing Date, each of the Transaction Agreements executed by
the Company on or before such date shall be in full force and effect and the
Company shall not be in default thereunder;
d. The accuracy in all material respects on such Closing Date of the
representations and warranties of the Company contained in this Agreement, each
as if made on such date, and the performance by the Company on or before such
date of all covenants and agreements of the Company required to be performed on
or before such date;
e. The delivery to the Escrow Agent of an opinion of counsel for the
Company, dated such Closing Date, addressed to the Buyer and the Other Buyers,
in form, scope and substance reasonably satisfactory to the Buyer, substantially
to the effect set forth in ANNEX III attached hereto;
f. There shall not be in effect any law, rule or regulation prohibiting
or restricting the transactions contemplated hereby, or requiring any consent or
approval which shall not have been obtained;
h. From and after the date hereof to and including such Closing Date,
each of the following conditions will remain in effect: (i) the trading of the
Common Stock shall not have been suspended by the SEC or on the Principal
Trading Market; (ii) trading in securities generally on the Principal Trading
Market shall not have been suspended or limited; (iii), no minimum prices shall
been established for securities traded on the Principal Trading Market; and (iv)
there shall not have been any material adverse change in any financial market;
and
i. With respect to the Additional Closing Date,
(i) an Additional Closing Date Notice and an Effectiveness Notice shall
have been duly and timely given as provided in the relevant provisions of
Section 6(b);
(ii) the Registration Statement to cover all Registrable Securities as
contemplated by the Registration Rights Agreement shall have been declared
effective by the SEC five (5) days prior to such Additional Closing Date, but in
no event later than the close of business (Eastern time) on the Latest Effective
Date; and
(iii) the representations and warranties of the Company contained in
Section 3 hereof shall be true and correct in all material respects as if made
on the Additional Closing Date (rather than the Initial Closing Date) and there
shall have been no Material Adverse Effect from the Initial Closing Date through
and including the Additional Closing Date (and an executive officer of the
Company(4) shall issue an certificate substantially in the form of ANNEX VIII
hereto with respect thereto (the "Officer's Certificate"); provided, however,
that such Officer's Certificate may update certain information, such as the
number of shares of the Company's stock outstanding, included in Section 3).
9. INDEMNIFICATION AND REIMBURSEMENT.
a. (i) The Company agrees to indemnify and hold harmless the Buyer
and its officers, directors, employees, and agents, and each Buyer Control
Person from and against any losses, claims, damages, liabilities or expenses
incurred (collectively, "Damages"), joint or several, and any action in respect
thereof to which the Buyer, its partners, Affiliates, officers, directors,
employees, and duly authorized agents, and any such Buyer Control Person becomes
subject to, resulting from, arising out of or relating to any misrepresentation,
breach of warranty or nonfulfillment of or failure to perform any covenant or
agreement on the part of Company contained in this Agreement, as such Damages
are incurred, except to the extent such Damages result primarily from Buyer's
failure to perform any covenant or agreement contained in this Agreement or the
Buyer's or its officer's, director's, employee's, agent's or Buyer Control
Person's illegal or willful misconduct, gross negligence, recklessness or bad
faith (in each case, as determined by a non-appealable judgment to such effect)
in performing its obligations under this Agreement.
(ii) The Company hereby agrees that, if the Buyer, other than by
reason of its gross negligence or willful misconduct (in each case, as
determined by a non-appealable judgment to such effect), (x) becomes involved in
any capacity in any action, proceeding or investigation brought by any
stockholder of the Company, in connection with or as a result of the
consummation of the transactions contemplated by this Agreement or the other
Transaction Agreements, or if the Buyer is impleaded in any such action,
proceeding or investigation by any Person, or (y) becomes involved in any
capacity in any action, proceeding or investigation brought by the SEC, any
self-regulatory organization or other body having jurisd 8/23/07 iction, against
or involving the Company or in connection with or as a result of the
consummation of the transactions contemplated by this Agreement or the other
Transaction Agreements, or (z) is impleaded in any such action, proceeding or
investigation by any Person, then in any such case, the Company shall indemnify,
defend and hold harmless the Buyer from and against and in respect of all
------------
(4) "Executive officer" means one or more of the following: president,
chairman of the board, chief executive officer, chief financial officer
losses, claims, liabilities, damages or expenses resulting from, imposed upon or
incurred by the Buyer, directly or indirectly, and reimburse such Buyer for its
reasonable legal and other expenses (including the cost of any investigation and
preparation) incurred in connection therewith, as such expenses are incurred.
The indemnification and reimbursement obligations of the Company under this
paragraph shall be in addition to any liability which the Company may otherwise
have, shall extend upon the same terms and conditions to any Affiliates of the
Buyer who are actually named in such action, proceeding or investigation, and
partners, directors, agents, employees and Buyer Control Persons (if any), as
the case may be, of the Buyer 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 Buyer, any such Affiliate and any such
Person. The Company also agrees that neither the Buyer nor any such Affiliate,
partner, director, agent, employee or Buyer Control Person shall have any
liability to the Company or any Person asserting claims on behalf of or in right
of the Company in connection with or as a result of the consummation of this
Agreement or the other Transaction Agreements, except as may be expressly and
specifically provided in or contemplated by this Agreement.
b. All claims for indemnification by any Indemnified Party (as defined
below) under this Section shall be asserted and resolved as follows:
(i) In the event any claim or demand in respect of which any
Person claiming indemnification under any provision of this Section (an
"Indemnified Party") might seek indemnity under paragraph (a) of this Section is
asserted against or sought to be collected from such Indemnified Party by a
Person other than a party hereto or an Affiliate thereof (a "Third Party
Claim"), the Indemnified Party shall deliver a written notification, enclosing a
copy of all papers served, if any, and specifying the nature of and basis for
such Third Party Claim and for the Indemnified Party's claim for indemnification
that is being asserted under any provision of this Section against any Person
(the "Indemnifying Party"), together with the amount or, if not then reasonably
ascertainable, the estimated amount, determined in good faith, of such Third
Party Claim (a "Claim Notice") with reasonable promptness to the Indemnifying
Party. If the Indemnified Party fails to provide the Claim Notice with
reasonable promptness after the Indemnified Party receives notice of such Third
Party Claim, the Indemnifying Party shall not be obligated to indemnify the
Indemnified Party with respect to such Third Party Claim to the extent that the
Indemnifying Party's ability to defend has been prejudiced by such failure of
the Indemnified Party. The Indemnifying Party shall notify the Indemnified Party
as soon as practicable within the period ending thirty (30) calendar days
following receipt by the Indemnifying Party of either a Claim Notice or an
Indemnity Notice (as defined below) (the "Dispute Period") whether the
Indemnifying Party disputes its liability or the amount of its liability to the
Indemnified Party under this Section and whether the Indemnifying Party desires,
at its sole cost and expense, to defend the Indemnified Party against such Third
Party Claim. The following provisions shall also apply.
(x) If the Indemnifying Party notifies the Indemnified Party within the
Dispute Period that the Indemnifying Party desires to defend the
Indemnified Party with respect to the Third Party Claim pursuant to this
paragraph (b) of this Section, then the Indemnifying Party shall have the
right to defend, with counsel reasonably satisfactory to the Indemnified
Party, at the sole cost and expense of the Indemnifying Party, such Third
Party Claim by all appropriate proceedings, which proceedings shall be
vigorously and diligently prosecuted by the Indemnifying Party to a final
conclusion or will be settled at the discretion of the Indemnifying Party
(but only with the consent of the Indemnified Party in the case of any
settlement that provides for any relief other than the payment of monetary
damages or that provides for the payment of monetary damages as to which
the Indemnified Party shall not be indemnified in full pursuant to
paragraph (a) of this Section). The Indemnifying Party shall have full
control of such defense and proceedings, including any compromise or
settlement thereof; provided, however, that the Indemnified Party may, at
the sole cost and expense of the Indemnified Party, at any time prior to
the Indemnifying Party's delivery of the notice referred to in the first
sentence of this subparagraph (x), file any motion, answer or other
pleadings or take any other action that the Indemnified Party reasonably
believes to be necessary or appropriate protect its interests; and
provided further, that if requested by the Indemnifying Party, the
Indemnified Party will, at the sole cost and expense of the Indemnifying
Party, provide reasonable cooperation to the Indemnifying Party in
contesting any Third Party Claim that the Indemnifying Party elects to
contest. The Indemnified Party may participate in, but not control, any
defense or settlement of any Third Party Claim controlled by the
Indemnifying Party pursuant to this subparagraph (x), and except as
provided in the preceding sentence, the Indemnified Party shall bear its
own costs and expenses with respect to such participation. Notwithstanding
the foregoing, the Indemnified Party may take over the control of the
defense or settlement of a Third Party Claim at any time if it irrevocably
waives its right to indemnity under paragraph (a) of this Section with
respect to such Third Party Claim.
(y) If the Indemnifying Party fails to notify the Indemnified Party within
the Dispute Period that the Indemnifying Party desires to defend the Third
Party Claim pursuant to paragraph (b) of this Section, or if the
Indemnifying Party gives such notice but fails to prosecute vigorously and
diligently or settle the Third Party Claim, each in a reasonable manner,
or if the Indemnifying Party fails to give any notice whatsoever within
the Dispute Period, then the Indemnified Party shall have the right to
defend, at the sole cost and expense of the Indemnifying Party, the Third
Party Claim by all appropriate proceedings, which proceedings shall be
prosecuted by the Indemnified Party in a reasonable manner and in good
faith or will be settled at the discretion of the Indemnified Party (with
the consent of the Indemnifying Party, which consent will not be
unreasonably withheld). The Indemnified Party will have full control of
such defense and proceedings, including any compromise or settlement
thereof; provided, however, that if requested by the Indemnified Party,
the Indemnifying Party will, at the sole cost and expense of the
Indemnifying Party, provide reasonable cooperation to the Indemnified
Party and its counsel in contesting any Third Party Claim which the
Indemnified Party is contesting. Notwithstanding the foregoing provisions
of this subparagraph (y), if the Indemnifying Party has notified the
Indemnified Party within the Dispute Period that the Indemnifying Party
disputes its liability or the amount of its liability hereunder to the
Indemnified Party with respect to such Third Party Claim and if such
dispute is resolved in favor of the Indemnifying Party in the manner
provided in subparagraph(z) below, the Indemnifying Party will not be
required to bear the costs and expenses of the Indemnified Party's defense
pursuant to this subparagraph (y) or of the Indemnifying Party's
participation therein at the Indemnified Party's request, and the
Indemnified Party shall reimburse the Indemnifying Party in full for all
reasonable costs and expenses incurred by the Indemnifying Party in
connection with such litigation. The Indemnifying Party may participate
in, but not control, any defense or settlement controlled by the
Indemnified Party pursuant to this subparagraph (y), and the Indemnifying
Party shall bear its own costs and expenses with respect to such
participation.
(z) If the Indemnifying Party notifies the Indemnified Party that it does
not dispute its liability or the amount of its liability to the
Indemnified Party with respect to the Third Party Claim under paragraph
(a) of this Section or fails to notify the Indemnified Party within the
Dispute Period whether the Indemnifying Party disputes its liability or
the amount of its liability to the Indemnified Party with respect to such
Third Party Claim, the amount of Damages specified in the Claim Notice
shall be conclusively deemed a liability of the Indemnifying Party under
paragraph (a) of this Section and the Indemnifying Party shall pay the
amount of such Damages to the Indemnified Party on demand. If the
Indemnifying Party has timely disputed its liability or the amount of its
liability with respect to such claim, the Indemnifying Party and the
Indemnified Party shall proceed in good faith to negotiate a resolution of
such dispute; provided, however, that if the dispute is not resolved
within thirty (30) days after the Claim Notice, the Indemnifying Party
shall be entitled to institute such legal action as it deems appropriate.
(ii) In the event any Indemnified Party should have a claim under
paragraph (a) of this Section against the Indemnifying Party that does not
involve a Third Party Claim, the Indemnified Party shall deliver a written
notification of a claim for indemnity under paragraph (a) of this Section
specifying the nature of and basis for such claim, together with the amount or,
if not then reasonably ascertainable, the estimated amount, determined in good
faith, of such claim (an "Indemnity Notice") with reasonable promptness to the
Indemnifying Party. The failure by any Indemnified Party to give the Indemnity
Notice shall not impair such party's rights hereunder except to the extent that
the Indemnifying Party demonstrates that it has been irreparably prejudiced
thereby. If the Indemnifying Party notifies the Indemnified Party that it does
not dispute the claim or the amount of the claim described in such Indemnity
Notice or fails to notify the Indemnified Party within the Dispute Period
whether the Indemnifying Party disputes the claim or the amount of the claim
described in such Indemnity Notice, the amount of Damages specified in the
Indemnity Notice will be conclusively deemed a liability of the Indemnifying
Party under paragraph (a) of this Section and the Indemnifying Party shall pay
the amount of such Damages to the Indemnified Party on demand. If the
Indemnifying Party has timely disputed its liability or the amount of its
liability with respect to such claim, the Indemnifying Party and the Indemnified
Party shall proceed in good faith to negotiate a resolution of such dispute;
provided, however, that if the dispute is not resolved within thirty (30) days
after the Claim Notice, the Indemnifying Party shall be entitled to institute
such legal action as it deems appropriate.
c. The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar rights of the indemnified party against the
indemnifying party or others, and (ii) any liabilities the indemnifying party
may be subject to.
10. JURY TRIAL WAIVER. The Company and the Buyer hereby waive a trial by
jury in any action, proceeding or counterclaim brought by either of the Parties
hereto against the other in respect of any matter arising out or in connection
with the Transaction Agreements.
11. SPECIFIC PERFORMANCE. The Company and the Buyer acknowledge and
agree that irreparable damage would occur in the event that any provision of
this Agreement or any of the other Transaction Agreements were not performed in
accordance with its specific terms or were otherwise breached. It is accordingly
agreed that the parties (including any Holder) shall be entitled to an
injunction or injunctions, without (except as specified below) the necessity to
post a bond, to prevent or cure breaches of the provisions of this Agreement or
such other Transaction Agreement and to enforce specifically the terms and
provisions hereof or thereof, this being in addition to any other remedy to
which any of them may be entitled by law or equity; provided, however that the
Company, upon receipt of a Notice of Conversion or a Notice of Exercise, may not
fail or refuse to deliver the stock certificates and the related legal opinions,
if any, or if there is a claim for a breach by the Company of any other
provision of this Agreement or any of the other Transaction Agreements, the
Company shall not raise as a legal defense, based on any claim that the Holder
or anyone associated or affiliated with the Holder has violated any provision
hereof or any other Transaction Agreement, has engaged in any violation of law
or for any other reason, unless the Company has first posted a bond for one
hundred fifty percent (150%) of the principal amount and, if relevant, then
obtained a court order specifically directing it not to deliver said stock
certificates to the Holder. The proceeds of such bond shall be payable to the
Holder to the extent that the Holder obtains judgment or its defense is
recognized. Such bond shall remain in effect until the completion of the
relevant proceeding and, if the Holder appeals therefrom, until all such appeals
are exhausted. This provision is deemed incorporated by reference into each of
the Transaction Agreements as if set forth therein in full.
12. GOVERNING LAW: MISCELLANEOUS.
a. This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York for contracts to be wholly performed in
such state and without giving effect to the principles thereof regarding the
conflict of laws. Each of the parties consents to the exclusive jurisdiction of
the federal courts whose districts encompass any part of the County of New York
or the state courts of the State of New York sitting in the County of New York
in connection with any dispute arising under this Agreement or any of the other
Transaction Agreements and hereby waives, to the maximum extent permitted by
law, any objection, including any objection based on FORUM NON CONVENIENS, to
the bringing of any such proceeding in such jurisdictions or to any claim that
such venue of the suit, action or proceeding is improper. To the extent
determined by such court, the Company shall reimburse the Buyer for any
reasonable legal fees and disbursements incurred by the Buyer in enforcement of
or protection of any of its rights under any of the Transaction Agreements.
Nothing in this Section shall affect or limit any right to serve process in any
other manner permitted by law.
b. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
c. This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto.
d. All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
e. This Agreement may be signed in one or more counterparts, each of
which shall be deemed an original
f. A facsimile or other electronic transmission of this signed
Agreement shall be legal and binding on the transmitting party.
g. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.
h. If any provision of this Agreement shall be invalid or unenforceable
in any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.
i. This Agreement may be amended only by an instrument in writing
signed by the party to be charged with enforcement thereof.
j. This Agreement supersedes all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof.
k. All dollar amounts referred to or contemplated by this Agreement or
any other Transaction Agreement shall be deemed to refer to US Dollars, unless
otherwise explicitly stated to the contrary.
13. NOTICES. Any notice required or permitted hereunder shall be given
in writing (unless otherwise specified herein) and shall be deemed effectively
given on the earliest of
(a) the date delivered, if delivered by personal delivery as against
written receipt therefor or by confirmed facsimile transmission,
(b) the fifth Trading Day after deposit, postage prepaid, in the United
States Postal Service by registered or certified mail, or
(c) the third Trading Day after mailing by domestic or international
express courier, with delivery costs and fees prepaid,
in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate by
ten (10) days' advance written notice similarly given to each of the other
parties hereto):
COMPANY: At the address set forth at the head of this Agreement.
Attn: President
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxxx Frome Xxxxxxxxxx & Xxxxxxx LLP
Attn: Xxxxx Xxxxxxxxx, Esq.
Park Avenue Tower
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
BUYER: At the address set forth on the signature page of this Agreement.
with a copy to:
Xxxxxxx & Xxxxxx LLP, Esqs.
00 Xxxxxxxx
Xxxxx 000
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
ESCROW AGENT: Xxxxxxx & Xxxxxx LLP, Esqs.
00 Xxxxxxxx
Xxxxx 000
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
14. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's and the
Buyer's representations and warranties herein shall survive the execution and
delivery of this Agreement and the delivery of the Certificates and the payment
of the Purchase Price, for a period of three (3) years after the Closing Date
and shall inure to the benefit of the Buyer and the Company and their respective
successors and assigns.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK.]
[SECURITIES PURCHASE AGREEMENT SIGNATURE PAGE]
IN WITNESS WHEREOF, with respect to the Aggregate Purchase Price specified
below, each of the undersigned represents that the foregoing statements made by
it above are true and correct and that it has caused this Agreement to be duly
executed on its behalf (if an entity, by one of its officers thereunto duly
authorized) as of the date first above written.
AGGREGATE PURCHASE PRICE: $320,000
BUYER:
------
00 Xxxxx Xxxxxx, Xxxxx 000 XXXXXXXXXX PARTNERS, LP
----------------------------- ------------------------------------
Address Printed Name of Buyer
Xxxxxxxxxx, XX 00000
-----------------------------
By: /s/ Xxxxxxx X. Xxxxx
---------------------------------
Telecopier No. 203-431-8300 (Signature of Authorized Person)
--------------
Xxxxxxx X. Xxxxx
-------------------------------------
Delaware Printed Name and Title
-----------------------------
Jurisdiction of Incorporation
or Organization
IF THE ABOVE NOTICE ADDRESS IS NOT THE RESIDENCE (FOR INDIVIDUAL BUYER) OR
PRINCIPAL PLACE OF BUSINESS (FOR BUYER WHICH IS NOT AN INDIVIDUAL), such
Residence or Principal Place of Business is:
-----------------------------
-----------------------------
-----------------------------
COMPANY:
--------
WATER CHEF, INC.
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------
Title: President and Chief Executive Officer
-------------------------------------
[SECURITIES PURCHASE AGREEMENT SIGNATURE PAGE]
IN WITNESS WHEREOF, with respect to the Aggregate Purchase Price specified
below, each of the undersigned represents that the foregoing statements made by
it above are true and correct and that it has caused this Agreement to be duly
executed on its behalf (if an entity, by one of its officers thereunto duly
authorized) as of the date first above written.
AGGREGATE PURCHASE PRICE: $80,000
BUYER:
------
X.X. Xxx 00000 X.X.X.
Xxxxxxx, 0xx Xxxxx
Xxxxxxx Xxxxx, Xxxxxx Xxxx XXXXXXXXXX CAPITAL FUND, LTD.
----------------------------- ------------------------------------
Address Printed Name of Buyer
Grand Cayman, Cayman Isl.
-----------------------------
By: /s/ Xxxxxx Xxxxxxxx & Xxxxxxx Xxxxx
-----------------------------------
Telecopier No. 000-000-0000 (Signature of Authorized Person)
--------------
Navigator Management Ltd., Director
---------------------------------------
Cayman Islands Printed Name and Title
-----------------------------
Jurisdiction of Incorporation
or Organization
IF THE ABOVE NOTICE ADDRESS IS NOT THE RESIDENCE (FOR INDIVIDUAL BUYER) OR
PRINCIPAL PLACE OF BUSINESS (FOR BUYER WHICH IS NOT AN INDIVIDUAL), such
Residence or Principal Place of Business is:
-----------------------------
-----------------------------
-----------------------------
COMPANY:
--------
WATER CHEF, INC.
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------
Title: President and Chief Executive Officer
-------------------------------------
ANNEX I FORM OF NOTE
ANNEX II JOINT ESCROW INSTRUCTIONS
ANNEX III OPINION OF COUNSEL
ANNEX IV REGISTRATION RIGHTS AGREEMENT
ANNEX V FORM OF WARRANT
ANNEX VI COMPANY DISCLOSURE
ANNEX VII COMPANY'S SEC DOCUMENTS AVAILABLE ON XXXXX
ANNEX VIII OFFICER'S CERTIFICATE
