SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "AGREEMENT") is made and
entered into as of December 21, 2004 (the "EXECUTION DATE"), by and among GVI
Security Solutions, Inc. (formerly Thinking Tools, Inc.), a Delaware corporation
(the "COMPANY"), and each of the purchasers listed on Schedule A attached hereto
(collectively, the "PURCHASERS" and individually, a "PURCHASER").
RECITALS
WHEREAS, the Company desires to sell to the Purchasers, and the
Purchasers desire to purchase from the Company, up to an aggregate of 23,333,350
shares of common stock, par value $.001 per share, of the Company ("COMMON
STOCK"), on the terms and conditions set forth in this Agreement; and
WHEREAS, the Company and each Purchaser are executing and delivering
this Agreement in reliance upon exemption from securities registration afforded
by Regulation D ("REGULATION D") as promulgated by the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the
"SECURITIES ACT").
NOW, THEREFORE, in consideration of the foregoing, the mutual promises
hereinafter set forth, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. AGREEMENT TO PURCHASE AND SELL STOCK.
(a) Company Authorization. The Company's Board of Directors
has authorized the issuance and sale, pursuant to the terms and conditions of
this Agreement, of up to 23,333,350 shares of Common Stock (the "PURCHASED
SECURITIES").
(b) Agreement to Purchase and Sell Securities. Subject to the
terms and conditions of this Agreement, each Purchaser, severally and not
jointly, agrees to purchase, and the Company agrees to sell to each Purchaser,
at the Closing (as defined below), that number of Purchased Securities set forth
opposite such Purchaser's name on Schedule A attached hereto. The purchase price
of each of the Purchased Securities shall be $1.50 (the "PER SHARE PRICE") and
shall be payable as hereafter set forth.
(c) Use of Proceeds. The Company intends to use up to $10
million of the net proceeds from the sale of the Purchased Securities to
purchase shares of Common Stock from Xxxxxxx X. Xxxxxxxxxx pursuant to that
certain Settlement Agreement and General Release by and among the Company, GVI
Security, Inc, Xxxxxxx X. Xxxxxxxxxx and Alarmax Distributors, Inc., dated
October 13, 2004 (the "SETTLEMENT AGREEMENT"). The balance of the net proceeds
shall be used for working capital, general corporate purposes and the
acquisitions of businesses or assets as determined by the Company from time to
time.
(d) Obligations Several, Not Joint. The obligations of each
Purchaser under this Agreement are several and not joint with the obligations of
any other Purchaser, and no Purchaser shall be responsible in any way for the
performance of the obligations of any other Purchaser under this Agreement. The
decision of each of the Purchasers to purchase the Purchased Securities pursuant
to this Agreement has been made by such Purchaser independently of any other
Purchaser. Nothing contained herein, and no action taken by any Purchaser
pursuant hereto, shall be deemed to constitute the Purchasers as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by this
Agreement. Each Purchaser shall be entitled to independently protect and enforce
such Purchaser's rights, including, without limitation, the rights arising out
of this Agreement, and it shall not be necessary for any other Purchaser to be
joined as an additional party in any proceeding for such purpose.
2. CLOSING. The purchase and sale of the Purchased Securities shall
take place at the offices of counsel for the Company, at 11:00 a.m. eastern
time, not later than two (2) Business Days (as defined below) following the
Execution Date, or at such other time and place as the Company and Purchasers
representing a majority of the Purchased Securities to be purchased, mutually
agree upon (which time and place are referred to in this Agreement as the
"CLOSING"). At the Closing, against delivery of full payment for the Purchased
Securities sold hereunder by wire transfer of immediately available funds in
accordance with the Company's instructions, the Company shall issue and deliver
to each Purchaser one or more stock certificates registered in the name of each
Purchaser (or in such nominee name(s) as designated by such Purchaser in the
Stock Certificate and Questionnaire, attached hereto as Appendix I, (the "STOCK
CERTIFICATE Questionnaire")), representing the number of Purchased Securities
set forth opposite the appropriate Purchaser's name on Schedule A hereto, and
bearing the legend set forth in Section 4(j) herein; provided, however, the
Company may furnish to each Purchaser a facsimile copy of the stock
certificate(s) representing the Purchased Securities purchased by such Purchaser
no later than the next Business Day following the Closing Date, with the
original stock certificate(s) to be delivered to such Purchaser by overnight
courier no later than the third (3rd) Business Day following the Closing Date.
Closing documents, other than the stock certificates representing the Purchased
Securities, may be delivered by facsimile on the Closing Date, with original
signature pages sent by overnight courier.
For purposes of this Agreement, "CLOSING DATE" means the date of the
Closing, and "BUSINESS DAY" means any day except Saturday, Sunday and any day
which shall be a federal legal holiday or a day on which banking institutions in
the State of New York are authorized or required by law or other governmental
action to close.
3. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF THE COMPANY.
The Company hereby represents and warrants to each Purchaser that, except as set
forth in the SEC Documents (as defined below):
(a) Organization Good Standing and Qualification. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all corporate power and authority required
to (i) own, operate and occupy its properties and to carry on its business as
presently conducted and (ii) enter into this Agreement and the other agreements,
instruments and documents contemplated hereby, and to consummate the
transactions contemplated hereby and thereby. The Company is qualified to do
business and is in good standing in each jurisdiction in which the failure to so
qualify would have a Material Adverse Effect. As used in this Agreement,
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"MATERIAL ADVERSE EFFECT" means a material adverse effect on, or a material
adverse change in, or a group of such effects on or changes in, the business,
operations, financial condition, results of operations, assets or liabilities of
the Company and the Subsidiaries (as defined below), taken as a whole.
(b) Capitalization. The capitalization of the Company is as
follows:
(i) The authorized capital stock of the Company
consists of 75,000,000 shares of Common Stock and 3,000,000 shares of preferred
stock, par value $.001 per share ("PREFERRED STOCK").
(ii) As of November 15, 2004, the issued and
outstanding capital stock of the Company consisted of 30,253,787 shares of
Common Stock and 200 shares of Series B Preferred Stock. The shares of issued
and outstanding capital stock of the Company have been duly authorized and
validly issued, are fully paid and nonassessable and have not been issued in
violation of or are not otherwise subject to any preemptive or other similar
rights.
(iii) As of November 15, 2004, the Company had (a)
5,939,913 shares of Common Stock reserved for issuance upon exercise of
outstanding options granted under the Company's 2004 Long-Term Stock Incentive
Plan (the "OPTION PLAN") and (b) 1,264,076 shares of Common Stock reserved for
issuance upon exercise of outstanding warrants.
(iv) As of November 15, 2004, the Company had 443,461
shares of Common Stock available for future grant under the Option Plan.
(v) As of November 15, 2004, the Company had
outstanding convertible promissory notes convertible into 4,810,430 shares of
Common Stock.
Except as set forth in the Disclosure Letter attached hereto as Exhibit
A (the "Disclosure Letter") and with the exception of the foregoing in this
Section 3(b), there are no outstanding subscriptions, options, warrants,
convertible or exchangeable securities or other rights granted to or by the
Company to purchase shares of Common Stock or other securities of the Company
and there are no commitments, plans or arrangements to issue any shares of
Common Stock or any security convertible into or exchangeable for Common Stock.
(c) Subsidiaries. Except for GVI Securities, Inc. (the "GVIS
SUBSIDIARY") and Rapor, Inc. (the "RAPOR SUBSIDIARY", and together with the GVIS
Subsidiary, the "SUBSIDIARIES"), the Company does not have any subsidiaries, and
the Company does not own any capital stock of, assets comprising the business
of, obligations of, or any other interest (including any equity or partnership
interest) in, any person or entity. The GVIS Subsidiary is duly organized,
validly existing and in good standing under the laws of the State of Delaware.
The Rapor Subsidiary is duly organized, validly existing and in good standing
under the laws of the State of Florida. Each of the Subsidiaries has full power
and authority to own, operate and occupy its properties and to conduct its
business as presently conducted and is registered or qualified to do business
and is in good standing in each jurisdiction in which it owns or leases property
or transacts business and where the failure to be so qualified would have a
Material Adverse Effect.
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(d) Due Authorization. All corporate actions on the part of
the Company necessary for the authorization, execution, delivery of, and the
performance of all obligations of the Company under this Agreement, including
the authorization, issuance, reservation for issuance and delivery of all the
Purchased Securities being sold under this Agreement, have been taken and no
further consent or authorization of the Company, the Company's board of
directors (the "BOARD OF DIRECTORS") or the Company's stockholders is required,
and this Agreement constitutes the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except
(i) as may be limited by (1) applicable bankruptcy, insolvency, reorganization
or other laws of general application relating to or affecting the enforcement of
creditors' rights generally, (2) the effect of rules of law governing the
availability of equitable remedies and (3) the effect of equitable principles in
construing or enforcing any provision of this Agreement and (ii) as rights to
indemnity or contribution may be limited under federal or state securities laws
or by principles of public policy thereunder.
(e) Valid Issuance of the Purchased Securities. The Purchased
Securities will be, upon payment by the Purchasers in accordance with this
Agreement, duly authorized, validly issued, fully paid and non-assessable, free
and clear from all taxes, liens, claims and encumbrances with respect to the
issuance of such Purchased Securities and will not be subject to any pre-emptive
rights or similar rights.
(f) Compliance with Securities Laws. Subject to the accuracy
of the representations made by the Purchasers in Section 4 hereof, the Purchased
Securities will be issued and sold to the Purchasers in compliance with
applicable exemptions from (1) the registration and prospectus delivery
requirements of the Securities Act and (2) the registration and qualification
requirements of all applicable securities laws of the states of the United
States.
(g) Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, or notice to, any federal, state or local governmental authority or
self regulatory agency on the part of the Company is required in connection with
the issuance and sale of the Purchased Securities to the Purchasers by the
Company or the consummation of the other transactions contemplated by this
Agreement, except (i) such filings as have been made prior to the date hereof,
(ii) the filings under applicable securities laws required to comply with the
Company's registration obligations under Sections 5(a) and 5(i) of this
Agreement and (iii) such additional post-Closing filings as may be required to
comply with applicable state and federal securities laws, including, but not
limited to, the filing of a Form D relating to the sale of the Purchased
Securities pursuant to Regulation D.
(h) Non-Contravention. Assuming the accuracy of the
representations and warranties made by the Purchasers in Section 4 hereof, the
execution, delivery and performance of this Agreement by the Company, and the
consummation by the Company of the transactions contemplated hereby (including
the issuance of the Purchased Securities), do not: (i) contravene or conflict
with the certificate of incorporation, as amended (the "CERTIFICATE OF
INCORPORATION") or bylaws, as amended (the "BYLAWS") of the Company or the
Subsidiaries; (ii) constitute a violation of any provision of any federal,
state, local or foreign law, rule, regulation, order or decree applicable to the
Company or the Subsidiaries; or (iii) constitute a default or require any
consent under, give rise to any right of termination, cancellation or
acceleration of, or to a loss of any material benefit to which the Company or
the Subsidiaries are entitled under, or result in the creation or imposition of
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any lien, claim or encumbrance on any asset of the Company or the Subsidiaries
under, any material contract to which the Company or the Subsidiaries are a
party or any material permit, license or similar right relating to the Company
or the Subsidiaries or by which the Company or the Subsidiaries may be bound or
affected, except in the case of clauses (ii) and (iii), for such violations,
breaches or defaults as would not reasonably likely to have a Material Adverse
Effect.
(i) Litigation. There is no action, suit, proceeding, claim,
arbitration or investigation ("ACTION") pending or, to the Company's knowledge,
threatened: (i) against the Company or the Subsidiaries, their activities,
properties or assets, or any officer, director or, to the Company's knowledge,
employee of the Company or the Subsidiaries in connection with such officer's,
director's or employee's relationship with, or actions taken on behalf of, the
Company or the Subsidiaries, that is reasonably likely to have a Material
Adverse Effect, or (ii) that seeks to prevent, enjoin, alter, challenge or delay
the transactions contemplated by this Agreement. The Company is not a party to
nor subject to the provisions of, any order, writ, injunction, judgment or
decree of any court or government agency or instrumentality that is reasonably
expected to prevent, enjoin, alter, challenge or delay the consummation of the
transactions contemplated by this Agreement or is reasonably likely to have a
Material Adverse Effect. No Action is currently pending nor does the Company
currently intend to initiate any Action that is reasonably likely to have a
Material Adverse Effect. The SEC has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the Company
under the Securities Act or the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT").
(j) Compliance with Law and Charter Documents. The Company is
not in violation or default of any provisions of the Certificate of
Incorporation or the Bylaws. The Company has complied and is currently in
compliance with all applicable statutes, laws, rules, regulations and orders of
the United States of America and all states thereof, foreign countries and other
governmental bodies and agencies having jurisdiction over the Company's business
or properties, except for any instance of non-compliance that has not had, and
would not reasonably be expected to have, a Material Adverse Effect. Neither the
Company nor the Subsidiaries are in default (and there exists no condition
which, with or without the passage of time or giving of notice or both, would
constitute a default) in any material respect in the performance of any bond,
debenture, note or any other evidence of indebtedness in any indenture,
mortgage, deed of trust or any other material agreement or instrument to which
the Company or the Subsidiaries are a party or by which the Company or the
Subsidiaries are bound or by which the properties of the Company are bound,
which default would be reasonably likely to have a Material Adverse Effect or
which would be reasonably likely to have a Material Adverse Effect on the
transactions contemplated by this Agreement.
(k) Material Non-Public Information. Except as set forth in
the Disclosure Letter, the Company has not provided, and will not provide, to
the Purchasers any material non-public information other than information
related to the transactions contemplated by this Agreement, all of which
information shall be disclosed by the Company pursuant to Section 9(m) hereof.
(l) SEC Documents.
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(1) Reports. Since January 1, 2003, the Company has
filed all reports, schedules, forms, statements and other documents required to
be filed by it with the Securities and Exchange Commission (the "SEC") pursuant
to the reporting requirements of the Exchange Act and the rules and regulations
promulgated thereunder. The Company has made available to the Purchasers prior
to the date hereof copies of its Annual Report on Form 10-KSB for the fiscal
year ended December 31, 2003, as amended (the "FORM 10-K"), its quarterly
reports on Form 10-QSB for the fiscal quarters ended March 31, 2004, June 30,
2004 and September 30, 2004 (the "FORM 10-QS"), and any Current Report on Form
8-K for events occurring since December 31, 2003 ("FORM 8-KS") filed by the
Company with the SEC (the Form 10-K, the Form 10-Qs and the Form 8-Ks are
collectively referred to herein as the "SEC DOCUMENTS"). Each of the SEC
Documents, as of the respective dates thereof (or, if amended or superseded by a
filing or submission, as the case may be, prior to the Closing Date, then on the
date of such filing or submission, as the case may be), (1) did not contain any
untrue statement of a material fact nor omit to state a material fact necessary
in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading and (2) complied in all material
respects with the requirements of the Exchange Act and the rules and regulations
of the SEC promulgated thereunder applicable to such SEC Document.
(2) Xxxxxxxx-Xxxxx. The chief executive officer and
the chief financial officer of the Company have signed, and the Company has
furnished to the SEC, all certifications required by Sections 302 and 906 of the
Xxxxxxxx-Xxxxx Act of 2002. Such certifications contain no qualifications or
exceptions to the matters certified therein (other than such qualifications or
exceptions that are permitted under the Exchange Act and the rules promulgated
thereunder) and have not been modified or withdrawn; and neither the Company nor
any of its officers has received notice from any governmental entity questioning
or challenging the accuracy, completeness, form or manner of filing or
submission of such certifications. Without limiting the foregoing, the Company
is in compliance with any applicable requirements of the Xxxxxxxx-Xxxxx Act of
2002 and the rules and regulations promulgated thereunder, as amended, that are
currently in effect, except where such noncompliance would not have or
reasonably be expected to result in a Material Adverse Effect or which would not
reasonably be expected to have a Material Adverse Effect on the transactions
contemplated by this Agreement.
(3) Financial Statements. The consolidated financial
statements of the Company included in the SEC Documents (1) comply in all
material respects with the rules and regulations of the SEC with respect thereto
as were in effect at the time of filing and (2) present fairly, in accordance
with United States generally accepted accounting principles ("GAAP"),
consistently applied, the consolidated financial position of the Company as of
the dates indicated therein, and the consolidated results of its operations and
cash flows for the periods therein specified, subject, in the case of unaudited
consolidated financial statements for interim periods, to normal, immaterial
year-end audit adjustments.
(m) Absence of Certain Changes Since the Balance Sheet Date
for the Company and the GVIS Subsidiary. Except as set forth in the Disclosure
Letter or the SEC Documents, since December 31, 2003, the business and
operations of the Company and the GVIS Subsidiary have been conducted in the
ordinary course consistent with past practice, and there has not been:
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(i) any declaration, setting aside or payment of any
dividend or other distribution of the assets of the Company with respect to any
shares of capital stock of the Company or any repurchase, redemption or other
acquisition by the Company or any subsidiary of the Company of any outstanding
shares of the Company's capital stock;
(ii) any damage, destruction or loss to the Company's
or the GVIS Subsidiary's business or assets, whether or not covered by
insurance, except for such occurrences, individually and collectively, that have
not had, and would not reasonably be expected to have, a Material Adverse
Effect;
(iii) any waiver by the Company or the GVIS
Subsidiary of a valuable right or of a material debt owed to it, except for such
waivers, individually and collectively, that have not had, and would not
reasonably be expected to have, a Material Adverse Effect;
(iv) any material change or amendment to, or any
waiver of any material right under a material contract or arrangement by which
the Company, the GVIS Subsidiary or any of their assets or properties is bound
or subject;
(v) any change by the Company in its accounting
principles, methods or practices or in the manner in which it keeps its
accounting books and records, except any such change required by a change in
GAAP or by the SEC; or
(vi) any other event or condition of any character,
except for such events and conditions that have not resulted, and are not
expected to result, either individually or collectively, in a Material Adverse
Effect.
(n) Absence of Certain Changes Since the Balance Sheet Date
for the Rapor Subsidiary. Except as set forth in the Disclosure Letter or the
SEC Documents, since March 31, 2004, the business and operations of the Rapor
Subsidiary have been, to the Company's knowledge, conducted in the ordinary
course consistent with past practice, and there has not been:
(i) any declaration, setting aside or payment of any
dividend or other distribution of the assets of the Rapor Subsidiary with
respect to any shares of capital stock of the Rapor Subsidiary or any
repurchase, redemption or other acquisition by the Rapor Subsidiary or any
subsidiary of the Rapor Subsidiary of any outstanding shares of the Rapor
Subsidiary's capital stock;
(ii) any damage, destruction or loss to the Rapor
Subsidiary's business or assets, whether or not covered by insurance, except for
such occurrences, individually and collectively, that have not had, and would
not reasonably be expected to have, a Material Adverse Effect;
(iii) any waiver by the Rapor Subsidiary of a
valuable right or of a material debt owed to it, except for such waivers,
individually and collectively, that have not had, and would not reasonably be
expected to have, a Material Adverse Effect;
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(iv) any material change or amendment to, or any
waiver of any material right under a material contract or arrangement by which
the Rapor Subsidiary or any of its assets or properties is bound or subject;
(v) any change by the Rapor Subsidiary in its
accounting principles, methods or practices or in the manner in which it keeps
its accounting books and records, except any such change required by a change in
GAAP or by the SEC; or
(vi) any other event or condition of any character,
except for such events and conditions that have not resulted, and are not
expected to result, either individually or collectively, in a Material Adverse
Effect.
(o) Intellectual Property. The Company and the Subsidiaries
own or possess sufficient rights to use all patents, patent rights, inventions,
trade secrets, know-how, trademarks, service marks, trade names, licenses,
copyrights or other information (collectively, "INTELLECTUAL PROPERTY"), which
are necessary to conduct their businesses as currently conducted, except where
the failure to own or possess such sufficient rights would not reasonably be
expected to result, either individually or in the aggregate, in a Material
Adverse Effect. Neither the Company nor the Subsidiaries have received any
written notice of, and has no actual knowledge of, any infringement of or
conflict with asserted rights of others with respect to any Intellectual
Property which, either individually or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would reasonably be expected to have a
Material Adverse Effect, and to the Company's and the Subsidiaries' knowledge,
none of the patent rights owned or licensed by the Company or the Subsidiaries
are unenforceable or invalid.
(p) Registration Rights. Except as provided in Section 5
herein and in the Disclosure Letter, effective upon the Closing, the Company is
not currently subject to any agreement providing any person or entity any rights
(including piggyback registration rights) to have any securities of the Company
registered with the SEC or registered or qualified with any other governmental
authority.
(q) Title to Property and Assets. Except as provided in the
Disclosure Letter, the properties and assets of the Company and the Subsidiaries
are owned by the Company or the Subsidiaries free and clear of all mortgages,
deeds of trust, liens, charges, encumbrances and security interests, except for
(i) statutory liens for the payment of current taxes that are not yet delinquent
and (ii) liens, encumbrances and security interests that arise in the ordinary
course of business and do not in any material respect affect the business of the
Company and the Subsidiaries as currently conducted. With respect to the
property and assets it leases, each of the Company and the Subsidiaries is in
compliance with such leases in all material respects.
(r) Taxes. The Company and the Subsidiaries have filed or have
valid extensions of the time to file all necessary federal, state, and foreign
income and franchise tax returns due prior to the date hereof and has paid or
accrued or will pay prior to the time they become delinquent all taxes shown as
due thereon, and neither the Company nor the Subsidiaries have knowledge of any
material tax deficiency which has been or might be asserted or threatened
against it.
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(s) Insurance. The Company and the Subsidiaries maintain
insurance of the types and in the amounts that the Company reasonably believes
are prudent and adequate for their business, all of which insurance is currently
in effect. To the Company's knowledge, the Company will be able to renew its and
the Subsidiaries' existing insurance coverage as and when such coverage expires
or obtain similar coverage from similar insurers as may be necessary to continue
to conduct its business in substantially the same manner as such business is
currently conducted.
(t) Labor Relations. No material labor dispute exists or, to
the knowledge of the Company or the Subsidiaries, is imminent with respect to
any of the employees of the Company or the Subsidiaries.
(u) Internal Accounting Controls. The Company and the
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(v) Transactions With Officers and Directors. Except as
provided in the Disclosure Letter, none of the officers or directors of the
Company has entered into any transaction with the Company or the Subsidiaries
that would be required to be disclosed pursuant to Item 404(a) and (b) of
Regulation S-B of the SEC.
(w) General Solicitation. Neither the Company nor any other
Person (as defined below) authorized by the Company to act on its behalf has
engaged in a general solicitation or general advertising (within the meaning of
Regulation D) of investors with respect to offers or sales of the Purchased
Securities, however, the Company makes no representation with respect to any
action taken by X.X. Xxxxxxxxx, Towbin, LLC or its Affiliates. For purposes of
this Agreement, "PERSON" means an individual or corporation, trust, incorporated
or unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.
(x) Registration Statement Matters. The Company currently
meets the eligibility requirements for use of a Form SB-2 Registration Statement
for the resale of the Registrable Shares (as defined below) by the Purchasers.
Assuming the completion and timely delivery of the Registration
Statement/Suitability Questionnaire, attached hereto as Appendix II (the
"REGISTRATION STATEMENT QUESTIONNAIRE"), by each Purchaser to the Company, the
Company is not aware of any facts or circumstances that would prohibit or delay
the preparation and filing of a registration statement with respect to the
Registrable Shares.
(y) No Integrated Offering. Neither the Company, nor any
Affiliate (as hereafter defined) of the Company, nor any person acting on its
behalf has, directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that would cause
this offering of the Purchased Securities to be integrated with prior offerings
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by the Company for purposes of the Securities Act, any applicable state
securities laws or any applicable stockholder approval provisions, nor will the
Company take any action or steps that would cause the offering of the Purchased
Securities to be integrated with other offerings.
For the purposes of this Agreement, an "AFFILIATE" of any specified
Person means any other Person directly or indirectly controlling, controlled by
or under direct or indirect common control with such specified Person. For
purposes of this definition, "CONTROL" means the power to direct the management
and policies of such person or firm, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise.
(z) Market. Other than public corporate communications and
filings with the Securities Exchange Commission that do not contain an
intentional misstatement or omission of a material fact, the Company has not
taken and will not take, directly or indirectly, any action designed to or that
might reasonably be expected to cause or result in the stabilization or
manipulation of the price of Common Stock of the Company or facilitate the sale
or resale of the Purchased Securities, however, the Company makes no
representation with respect to any action taken by X.X. Xxxxxxxxx, Towbin, LLC
or its Affiliates
(aa) Investment Company. The Company is not an "investment
company" within the meaning of such term under the Investment Company Act of
1940, as amended, and the rules and regulations of the SEC thereunder.
(bb) Application of Anti-Takeover Provisions. There is no
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision
under the Company's Certificate of Incorporation (or similar charter documents)
that would become applicable to the Purchasers as a result of the issuance of
the Purchased Securities.
(cc) Trading and Registration Matters. The Common Stock of the
Company is eligible for price quotation and trading on the OTC Bulletin Board
Market under the symbol "GVIS". The Company has taken no action designed to
terminate, or likely to have the effect of terminating, the registration of the
Common Stock under the Exchange Act.
(dd) Settlement Agreement. The Settlement Agreement has been
duly and validly authorized, executed and delivered by the Company and the GVIS
Subsidiary and, to the Company's knowledge, the other parties thereto,
constitutes the valid and binding obligation of the Company and the GVIS
Subsidiary and, to the Company's knowledge, the other parties thereto and is
enforceable against the Company and the GVIS Subsidiary and, to the Company's
knowledge, the other parties in accordance with its terms. Neither party to the
Settlement Agreement is in breach of its obligations under the Settlement
Agreement and the Settlement Agreement is in full force and effect.
(ee) Press Releases. The press releases disseminated by the
Company during the twelve months preceding the date of this Agreement taken as a
whole do not contain any untrue statement of a material fact or omit to state a
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material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made and
when made, not misleading.
(ff) Solvency. Based on the financial condition of the Company
as of the Closing Date (and assuming that the Closing shall have occurred), (i)
the Company's fair saleable value of its assets exceeds the amount that will be
required to be paid on or in respect of the Company's existing debts and other
liabilities (including known contingent liabilities) as they mature, (ii) the
Company's assets do not constitute unreasonably small capital to carry on its
business for the current fiscal year as now conducted and as proposed to be
conducted including its capital needs taking into account the particular capital
requirements of the business conducted by the Company, and projected capital
requirements and capital availability thereof, and (iii) the current cash flow
of the Company, together with the proceeds the Company would receive, were it to
liquidate all of its assets, after taking into account all anticipated uses of
the cash, would be sufficient to pay all amounts on or in respect of its debt
when such amounts are required to be paid. The Company does not intend to incur
debts beyond its ability to pay such debts as they mature (taking into account
the timing and amounts of cash to be payable on or in respect of its debt).
(gg) No Additional Agreements. The Company does not have any
agreement or understanding with any Purchaser with respect to the transactions
contemplated by the Agreement other than as specified in the Agreement.
4. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF THE
PURCHASERS. Each Purchaser, severally and not jointly, hereby represents and
warrants to the Company, and agrees that:
(a) Organization. The Purchaser has all corporate, limited
liability company, partnership, trust or individual, as the case may be, power
and authority required to enter into this Agreement and the other agreements,
instruments and documents contemplated hereby, and to consummate the
transactions contemplated hereby and thereby.
(b) Due Authorization. All corporate, limited liability
company, partnership, trust or individual, as the case may be, action on the
part of the Purchaser necessary for the authorization, execution, delivery of
and the performance of all obligations of the Purchaser under this Agreement
have been taken and no further consent or authorization of the Purchaser is
necessary, and this Agreement constitutes the Purchaser's legal, valid and
binding obligation, enforceable in accordance with its terms, except (i) as may
be limited by (1) applicable bankruptcy, insolvency, reorganization or other
laws of general application relating to or affecting the enforcement of
creditors' rights generally and (2) the effect of rules of law governing the
availability of equitable remedies and (ii) as rights to indemnity or
contribution may be limited under federal or state securities laws or by
principles of public policy thereunder.
(c) Litigation. There is no Action pending to which such
Purchaser is a party that is reasonably likely to prevent, enjoin, alter or
delay the transactions contemplated by this Agreement.
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(d) Purchase for Own Account. The Purchased Securities are
being acquired for investment for the Purchaser's own account, not as a nominee
or agent, in the ordinary course of business, and not with a view to the public
resale or distribution thereof within the meaning of the Securities Act. The
Purchaser also represents that it has not been formed for the specific purpose
of acquiring the Purchased Securities. The Purchaser does not have any agreement
or understanding, direct or indirect, with any other Person to sell or otherwise
distribute the Purchased Securities. Notwithstanding the foregoing, the parties
hereto acknowledge the Purchaser's right at all times to sell or otherwise
dispose of all or any part of such securities in compliance with applicable
federal and state securities laws and as otherwise contemplated by this
Agreement.
(e) Investment Experience. The Purchaser understands that the
purchase of the Purchased Securities involves substantial risk. The Purchaser
has experience as an investor in securities of companies and acknowledges that
it can bear the economic risk of its investment in the Purchased Securities is
able to afford a complete loss of its investment and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of this investment in the Purchased Securities and protecting
its own interests in connection with this investment.
(f) Accredited Purchaser Status. The Purchaser is an
"accredited investor" within the meaning of Regulation D.
(g) Reliance Upon Purchaser's Representations. The Purchaser
understands that the sale of the Purchased Securities to it will not be
registered under the Securities Act on the ground that such issuance and sale
will be exempt from registration under the Securities Act, and that the
Company's reliance on such exemption is based on each Purchaser's
representations set forth herein.
(h) Receipt of Information. The Purchaser acknowledges that it
has reviewed the Disclosure Letter and has had an opportunity to ask questions
and receive answers from the Company regarding the terms and conditions of the
sale of the Purchased Securities and the business, properties, prospects and
financial condition of the Company and to obtain any additional information
requested and has received and considered all information it deems relevant to
make an informed decision to purchase the Purchased Securities. Neither such
inquiries nor any other investigation conducted by or on behalf of such
Purchaser or its representatives or counsel shall modify, amend or affect such
Purchaser's right to rely on the truth, accuracy and completeness of such
information and the Company's representations and warranties contained in this
Agreement.
(i) Restricted Securities and Restrictions on Transfer.
(i) The Purchaser understands that the Purchased
Securities have not been registered under the Securities Act and the Purchaser
will not sell, offer to sell, assign, pledge, hypothecate or otherwise transfer
any of the Purchased Securities (except as permitted in Section 4(j) below)
unless (A) pursuant to an effective registration statement under the Securities
Act, (B) the Purchaser provides a legal opinion to the Company, the form and
substance of which must be reasonably acceptable to the Company, to the effect
that a sale, assignment, pledge, hypothecation or other transfer of the
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Purchased Securities may be made without registration under the Securities Act
and the transferee agrees to be bound by the terms and conditions of this
Agreement, (C) the Purchaser provides the Company a "no action" letter from the
SEC to the effect that the transfer of the Purchased Securities without
registration will not result in a recommendation by the Staff of the SEC that
enforcement action by taken with respect thereto, (D) the Purchaser provides the
Company with reasonable assurances (in the form of seller and broker
representation letters) that the Purchased Securities can be sold pursuant to
Rule 144 promulgated under the Securities Act ("RULE 144"), (E) the Purchaser
provides the Company with reasonable assurances (in the form of seller
representation letters) that the Purchased Securities can be sold pursuant to
Rule 144(k) promulgated under the Securities Act following the applicable
holding period or (F) pursuant to any other exception contained in the
Securities Act provided that the Purchaser provides a legal opinion, the form
and substance of which is reasonably acceptable to the Company. Notwithstanding
anything to the contrary contained in this Agreement, including but not limited
to in Section 5(c)(i) below, the Purchaser may transfer the Purchased Securities
to its Affiliates provided that (x) the Purchaser provides the Company with a
legal opinion, the form and substance of which is reasonably acceptable to the
Company, (y) such Affiliate is an "accredited investor" under Regulation D and
(z) each such Affiliate agrees to be bound by the terms and conditions of this
Agreement, and in particular, confirms to the Company that all of the
representations set forth in Section 4 of this Agreement are true and correct as
to such Affiliate as of the date of the transfer to such Affiliate.
(ii) Prior to any proposed transfer pursuant to
clause (B), (C), (D), (E) or (F) in Section 4(i) above, the Purchaser shall give
written notice to the Company of such Purchaser's intention to effect such
transfer. Each such notice shall describe the manner and circumstances of the
proposed transfer in sufficient detail, and shall be accompanied by the
applicable legal opinion, "no action" letter or seller and broker representation
letters.
(iii) Notwithstanding the foregoing provisions of
this Section 4(i), no registration statement, legal opinion or "no action"
letter shall be necessary for a transfer of the Purchased Securities by means of
a distribution (1) by a Purchaser that is a partnership to a partner of such
partnership or a retired partner of such partnership who retires after the date
of this Agreement, (2) by a Purchaser that is a limited liability company to a
member of such limited liability company, (3) by a Purchaser that is a
partnership or limited liability company to the estate of any partner, retired
partner, or member thereof or (4) by any partner or member of a Purchaser that
is a partnership or limited liability company by gift, will or intestate
succession to such partner or member's spouse or to the siblings, lineal
descendants, ancestors of such partner or member or his or her spouse.
(j) Legends.
The Purchaser agrees that, to the extent necessary, the certificates
for the Purchased Securities shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY APPLICABLE STATE SECURITIES LAWS, AND
MAY NOT BE SOLD OR TRANSFERRED UNLESS (I) A REGISTRATION
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STATEMENT COVERING SUCH SECURITIES IS EFFECTIVE UNDER THE
SECURITIES ACT OR (II) THE TRANSACTION IS EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT AND, IF THE COMPANY
REQUESTS, AN OPINION SATISFACTORY TO THE COMPANY TO SUCH
EFFECT HAS BEEN RENDERED BY COUNSEL."
The Company acknowledges and agrees that Purchaser may from time to
time pledge pursuant to a bona fide margin agreement with a registered
broker-dealer or grant a security interest in some or all of the Purchased
Securities to a financial institution that is an "accredited investor" under
Regulation D and who agrees to be bound by the provisions of this Agreement and,
if required under the terms of such arrangement, in accordance with applicable
law such Purchaser may transfer pledged or secured Purchased Securities to the
pledgees or secured parties. Such a pledge or transfer would not be subject to
approval of the Company and no legal opinion of legal counsel of the pledgee,
secured party or pledgor shall be required in connection therewith. Further, no
notice shall be required of such pledge. At the expense of the Purchaser who
shall have pledged or otherwise granted a security interest in its Purchased
Securities, the Company will execute and deliver such reasonable documentation
as a pledgee or secured party of Purchased Securities may reasonably request in
connection with a pledge or transfer of the Purchased Securities, the
preparation and filing of any required prospectus supplement under Rule
424(b)(3) under the Securities Act or other applicable provision of the
Securities Act to appropriately amend the list of selling stockholders
thereunder.
Certificates evidencing the Purchased Securities shall not contain any
legend, (i) following any sale of such Purchased Securities pursuant to a
registration statement (including the Registration Statement) covering such sale
that is effective under the Securities Act, (ii) following any sale of such
Purchased Securities pursuant to Rule 144, (iii) if such Purchased Securities
are eligible for sale under Rule 144(k) or (iv) if such legend is not required
under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the SEC). The Company
shall cause its counsel to issue a legal opinion to the Company's transfer agent
promptly after the date on which the Registration Statement is declared
effective (the "EFFECTIVE DATE") and such legend is no longer required under
this Section 4(j) if such legal opinion is required by the Company's transfer
agent to effect the removal of the legend hereunder. The Company agrees that at
such time as such legend is no longer required under this Section 4(j), it will,
no later than five (5) Business Days following the delivery by a Purchaser to
the Company or to the Company's transfer agent of a certificate representing
Purchased Securities issued with a restrictive legend, provide written
instructions to Company's transfer agent instructing the transfer agent to
deliver to such Purchaser a certificate representing such Purchased Securities
that is free from all restrictive and other legends. Except as may be required
by law, the Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the restrictions
on transfer set forth in Section 4(i) or this Section 4(j).
Each Purchaser, severally and not jointly with the other Purchasers,
agrees that the removal of the restrictive legend from certificates representing
the Purchased Securities as set forth in this Section 4(j) is predicated upon
the Purchaser's covenant that the Purchaser only will sell any Purchased
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Securities pursuant to either the registration requirements of the Securities
Act, including any applicable prospectus delivery requirements, or an exemption
therefrom.
In addition, the Purchaser agrees that the Company may place stop
transfer orders with its transfer agent with respect to such certificates in
order to implement the restrictions on transfer set forth in this Agreement. The
appropriate portion of the legend and the stop transfer orders will be removed
promptly upon delivery to the Company of such satisfactory evidence as
reasonably may be required by the Company that such legend or stop transfer
orders are not required to ensure compliance with the Securities Act.
(k) Questionnaires. The Purchaser has completed or caused to
be completed the Stock Certificate Questionnaire and the Registration Statement
Questionnaire for use in preparation of the Registration Statement (as defined
in Section 5(a) below) or a registration statement with respect to which the
Purchaser has exercised its rights pursuant to Section 5(i) below, and the
answers to such questionnaires are true and correct as of the date of this
Agreement; provided, that the Purchasers shall be entitled to update such
information by providing written notice thereof to the Company before the
effective date of the Registration Statement or a registration statement with
respect to which the Purchaser has exercised its rights pursuant to Section 5(i)
below.
(l) Restrictions on Short Sales. Neither the Purchaser nor any
Affiliate of such Purchaser which (i) had knowledge of the transactions
contemplated hereby, (ii) has or shares discretion relating to such Purchaser's
investments or trading or information concerning such Purchaser's investments,
including in respect of the Purchased Securities, or (iii) is subject to such
Purchaser's review or input concerning such Affiliate's investments or trading,
has or will, directly or indirectly, during the period beginning on the date on
which X.X. Xxxxxxxxx, Towbin, financial advisor to the Company, first contacted
such Purchaser regarding the transactions contemplated by this Agreement until
the time of the filing of the Current Report on Form 8-K required by Section
9(m), engage in (1) any "short sales" (as such term is defined in Rule 3b-3
promulgated under the Exchange Act) of the Common Stock, including, without
limitation, the maintaining of any short position with respect to, establishing
or maintaining a "put equivalent position" (within the meaning of Rule 16a-1(h)
under the Exchange Act) with respect to, entering into any swap, derivative
transaction or other arrangement (whether any such transaction is to be settled
by delivery of Common Stock, other securities, cash or other consideration) that
transfers to another, in whole or in part, any economic consequences or
ownership, or otherwise dispose of, any of the Purchased Securities by the
Purchaser or (2) any hedging transaction which establishes a net short position
with respect to the Purchased Securities (clauses (1) and (2) together, a "SHORT
SALE"); except for (A) Short Sales by the Purchaser or Affiliate of such
Purchaser which was, prior to the date on which such Purchaser was first
contacted by X.X. Xxxxxxxxx, Towbin regarding the transactions contemplated by
this Agreement, a market maker for the Common Stock, provided that such Short
Sales are in the ordinary course of business of such Purchaser or Affiliate of
such Purchaser and are in compliance with the Securities Act, the rules and
regulations of the Securities Act and such other securities laws as may be
applicable, (B) Short Sales by the Purchaser or an Affiliate of such Purchaser
which by virtue of the procedures of such Purchaser are made without knowledge
of the transactions contemplated by this Agreement or (C) Short Sales by the
Purchaser or an Affiliate of such Purchaser to the extent that such Purchaser or
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Affiliate of such Purchaser is acting in the capacity of a broker-dealer
executing unsolicited third-party transactions.
(m) Independent Investment. The Purchaser has not agreed to
act with any other Purchaser for the purpose of acquiring, holding or disposing
of any of the Purchased Securities for purposes of Section 13(d) of the Exchange
Act, and such Purchaser is acting independently with respect to its investment
in the Purchased Securities.
5. FORM D FILING; REGISTRATION; COMPLIANCE WITH THE SECURITIES ACT.
(a) Form D Filing; Registration of the Purchased Securities.
The Company hereby agrees that it shall:
(i) file in a timely manner a Form D relating to the
sale of the Purchased Securities under this Agreement, pursuant to Regulation D;
(ii) prepare and file with the SEC as soon as
practicable and in no event later than thirty (30) days following the Closing
Date the ("REQUIRED FILING DATE"), a registration statement on Form SB-2 or such
other form that is available to the Company under the Securities Act (the
"REGISTRATION STATEMENT"), to enable the resale of the Purchased Securities
(together with any shares of Common Stock issued as a dividend or other
distribution with respect to, or in exchange for, or in replacement of, the
Purchased Securities (the "REGISTRABLE SHARES") by the Purchasers from time to
time. The Company shall use all commercially reasonable efforts to cause the
Registration Statement (x) to be declared effective as promptly as possible
after filing, but in any event, no later than the 100th day following the
Closing Date (the "REQUIRED EFFECTIVE DATE"), or, in the event of a review of
the Registration Statement by the SEC, the Required Effective Date will be no
later than the 120th day following the Closing Date and (y) to remain
continuously effective until the earlier of (1) the second anniversary of the
effective date of the Registration Statement, (2) the date on which all
Registrable Shares purchased by the Purchasers pursuant to this Agreement have
been sold thereunder or (3) the date on which the Registrable Shares can be sold
by nonaffiliates of the Company pursuant to Rule 144(k) promulgated under the
Securities Act (the "REGISTRATION PERIOD"). If the Company receives notification
from the SEC that the Registration Statement will receive no action or review
from the SEC, then the Company will use its commercially reasonable efforts to
cause the Registration Statement become effective as soon as commercially
practicable after the receipt by the Company of such SEC notification. In the
event that, following the Closing Date and prior to the end of the Registration
Period, the Company meets the requirements for the use of Form S-3, the Company
may, in its discretion, convert the Form SB-2 into Form S-3, or file a
replacement registration statement on Form S-3, promptly after the first date on
which it meets such requirements;
(iii) prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement and the Prospectus (as defined below) used in connection therewith as
may be necessary to keep the Registration Statement effective at all times until
the end of the Registration Period;
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(iv) furnish to the Purchasers, with respect to the
Registrable Shares registered under the Registration Statement, such reasonable
number of copies of any prospectus in conformity with the requirements of the
Securities Act and such other documents as the Purchasers may reasonably request
in writing, in order to facilitate the public sale or other disposition of all
or any of the Registrable Shares by the Purchasers;
(v) use its commercially reasonable efforts to file
documents required of the Company for normal blue sky clearance in states
specified in writing by the Purchasers; provided, however, that the Company
shall not be required to qualify to do business or consent to service of process
in any jurisdiction in which it is not now so qualified or has not so consented;
(vi) promptly notify the Purchasers in writing of the
effectiveness of the Registration Statement within one business day of the
Registration Statement being declared effective;
(vii) promptly notify the Purchasers in writing of
the existence of any fact or the happening of any event, during the Registration
Period (but not as to the substance of any such fact or event), that makes any
statement of a material fact made in the Registration Statement, the Prospectus,
any amendment or supplement thereto, or any document incorporated by reference
therein untrue, or that requires the making of any additions to or changes in
the Registration Statement or the Prospectus in order to make such statements
not misleading; provided, however, that no notice by the Company shall be
required pursuant to this subsection (vii) in the event that the Company either
contemporaneously files a prospectus supplement to update the Prospectus or, if
applicable, a Current Report on Form 8-K or other appropriate Exchange Act
report that is incorporated by reference into the Registration Statement, which,
in either case, contains the requisite information with respect to such material
event that results in such Registration Statement no longer containing any such
untrue or misleading statements;
(viii) bear all expenses in connection with the
procedures described in paragraphs (i) through (vii) of this Section 5(a) and
the registration of the Registrable Shares pursuant to the Registration
Statement, other than fees and expenses, if any, of legal counsel or other
advisers to the Purchasers or underwriting discounts, brokerage fees and
commissions incurred by the Purchasers, if any.
It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Section 5(a) with respect to Registrable Shares
held by a Purchaser that such Purchaser shall timely furnish to the Company a
completed Registration Statement Questionnaire on or before the Closing Date and
such other written information regarding such Purchaser, the Registrable Shares
to be sold by such Purchaser and the intended method of disposition of the
Registrable Shares as the Company may deem necessary or advisable to effect the
registration of the Registrable Shares. The Purchasers shall update such
information as and when necessary by written notice to the Company.
(b) Liquidated Damages.
(i) Delay in Filing or Effectiveness of Registration
Statement. In the event that the Registration Statement is not (A) filed by the
Required Filing Date or (B) declared effective by the Required Effective Date,
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the Company shall pay in cash to each Purchaser (except for any Purchaser whose
failure to provide information as required hereunder causes a delay in filing or
obtaining effectiveness) liquidated damages (in addition to the rights and
remedies available to each Purchaser under applicable law and this Agreement),
at a rate equal to one percent (1%) per month (pro rata on a 30-day basis) of
the product of the Per Share Price and the number of Purchased Securities held
by such Purchaser for the period from and including the first day following the
Required Filing Date or the Required Effective Date, as the case may be, until,
but excluding, the date that the Company files the Registration Statement with
the SEC or the date that the SEC declares the Registration Statement effective,
as the case may be. Such liquidated damages shall be payable in cash within ten
(10) days of the end of each one (1) month anniversary of the Required Filing
Date or the Required Effective Date, as the case may be.
(ii) Lapse in Effectiveness of Registration
Statement. In the event that the Registration Statement is filed and declared
effective but, during the Registration Period, the Registration Statement ceases
to be effective or useable or the prospectus included in the Registration
Statement (the "PROSPECTUS", as amended or supplemented by any prospectus
supplement and by all other amendments thereto and all material incorporated by
reference in such Prospectus) ceases to be usable, in either case, in connection
with resales of Registrable Shares, without such lapse being cured within
fifteen (15) Business Days (the "CURE PERIOD") by a post-effective amendment to
the Registration Statement, a supplement to the Prospectus or a report filed
with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
that cures such lapse, then except with respect to "Excluded Events" (defined
below), the Company shall pay in cash to each Purchaser liquidated damages (in
addition to the rights and remedies available to each Purchaser under applicable
law and this Agreement), for the period from and including the first day
following the expiration of the Cure Period until, but excluding, the earlier of
(1) the date on which such failure is cured and (2) the date on which the
Registration Period expires, at a rate equal to one percent (1%) per month (pro
rata on a 30-day basis) of the total product of the Per Share Price and the
number of Purchased Securities held by such Purchaser pursuant to this
Agreement. Such liquidated damages shall be payable in cash within ten (10) days
of the end of each one (1) month anniversary of the expiration of the Cure
Period. Excluded Events shall mean:
(A) as provided in Section 5(c)(ii) or 5(c)(iii) below,
(B) if the Company is involved in a Rule 13e-3 transaction as
defined in Section 13e-3 of the Exchange Act, or
(C) a merger or consolidation of the Company or sale of more than
one-half of the assets of the Company in one or a series of
related transactions, unless following such transaction or
series of transactions, the holders of the Company's
securities prior to the first such transaction continue to
hold at least 50% of the voting rights and equity interests of
the surviving entity or acquirer.
(c) Transfer of Registrable Shares After Registration;
Suspension.
(i) The Purchasers agree that they will not offer to
sell or make any sale, assignment, pledge, hypothecation or other transfer with
respect to the Registrable Shares that would constitute a sale within the
meaning of the Securities Act except pursuant to either (1) the Registration
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Statement in the manner described in the "Plan of Distribution" therein, (2)
Rule 144 of the Securities Act or (3) any other exemption from registration
under the Securities Act, and that they will promptly notify the Company of any
changes in the information set forth in the Registration Statement after it is
prepared regarding the Purchaser or its plan of distribution to the extent
required by applicable law.
(ii) In addition to any suspension rights under
paragraph (iii) below, notwithstanding anything in this Agreement to the
contrary, upon the happening of any pending corporate development, public filing
with the SEC or similar event that, in the judgment of the Board of Directors,
renders it advisable to suspend the use of the Prospectus or upon the request by
an underwriter in connection with an underwritten public offering of the
Company's securities, the Company may for not more than forty-five (45) days
during any 12-month period suspend use of the Prospectus on written notice to
each Purchaser (which notice will not disclose the content of any material
non-public information and will indicate the date of the beginning and end of
the intended period of suspension, if known), in which case each Purchaser shall
discontinue any disposition of Registrable Shares covered by the Registration
Statement or Prospectus until copies of a supplemented or amended Prospectus are
distributed to the Purchasers or until the Purchasers are advised in writing by
the Company that sales of Registrable Shares under the applicable Prospectus may
be resumed and have received copies of any additional or supplemental filings
that are incorporated or deemed incorporated by reference in any such
Prospectus; provided, however, that no single suspension under this Section
5(c)(ii) may last longer than fifteen (15) days. The suspension and notice
thereof described in this Section 5(c)(ii) shall be held by each Purchaser in
strictest confidence and shall not be disclosed by such Purchaser.
(iii) Subject to paragraph (iv) below, in the event
of: (1) any request by the SEC or any other federal or state governmental
authority during the Registration Period for amendments or supplements to a
Registration Statement or related prospectus or for additional information; (2)
the issuance by the SEC or any other federal or state governmental authority of
any stop order suspending the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose; (3) the receipt by the Company
of any notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable Shares for sale in any
jurisdiction or the initiation of any proceeding for such purpose; or (4) any
event or circumstance (other than those described described in Section 5(c)(ii)
above) which necessitates the making of any changes in the Registration
Statement or Prospectus, or any document incorporated or deemed to be
incorporated therein by reference, so that, in the case of the Registration
Statement, it will not contain any untrue statement of a material fact or any
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and that in the case of the
Prospectus, it will not contain any untrue statement of a material fact or any
omission to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading, then the Company shall deliver a certificate in
writing to the Purchasers (the "SUSPENSION NOTICE") to the effect of the
foregoing (which notice will not disclose the content of any material non-public
information and will indicate the date of the beginning and end of the intended
period of suspension, if known), and, upon receipt of such Suspension Notice,
the Purchasers will discontinue disposition of Registrable Shares covered by to
the Registration Statement or Prospectus (a "SUSPENSION") until the Purchasers'
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receipt of copies of a supplemented or amended Prospectus prepared and filed by
the Company, or until the Purchasers are advised in writing by the Company that
the current Prospectus may be used and have received copies of any additional or
supplemental filings that are incorporated or deemed incorporated by reference
in any such prospectus. In the event of any Suspension, the Company will use its
commercially reasonable efforts to cause the use of the Prospectus so suspended
to be resumed as soon as possible after delivery of a Suspension Notice to the
Purchasers. The Suspension and Suspension Notice described in this Section
5(c)(iii) shall be held in strictest confidence by each Purchaser and shall not
be disclosed by such Purchaser.
(iv) Provided that a Suspension is not then in
effect, the Purchasers may sell Registrable Shares under the Registration
Statement, provided that the selling Purchaser arranges for delivery of a
current Prospectus to the transferee of such Registrable Shares to the extent
such delivery is required by applicable law.
(v) In the event of a sale of Registrable Shares by a
Purchaser, such Purchaser must also deliver to the Company's transfer agent,
with a copy to the Company, a certificate of subsequent sale reasonably
satisfactory to the Company, so that ownership of the Registrable Shares may be
properly transferred. The Company will cooperate to facilitate the timely
preparation and delivery of certificates (unless otherwise required by
applicable law) representing Registrable Shares sold.
(d) Indemnification. For the purpose of this Section 5(d), the
term "REGISTRATION STATEMENT" shall include any preliminary or final Prospectus,
exhibit, supplement or amendment included in or relating to the Registration
Statement referred to in Sections 5(a) or 5(i).
(i) Indemnification by the Company. The Company
agrees to indemnify and hold harmless each of the Purchasers, their respective
officers, directors, agents and employees, and each person, if any, who controls
any Purchaser within the meaning of the Securities Act, against any losses,
claims, damages, liabilities or expenses, joint or several, to which such
Purchasers, such officers, directors, agents or employees, or such controlling
persons may become subject, under the Securities Act, the Exchange Act or any
other federal or state statutory law or regulation, or at common law or
otherwise (including in settlement of any litigation, if such settlement is
effected with the written consent of the Company, which consent shall not be
unreasonably withheld), insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof as contemplated below) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, the Prospectus, or any amendment
or supplement to the Registration Statement or Prospectus, or arise out of or
are based upon (i) the omission or alleged omission to state in any of them a
material fact required to be stated therein or necessary to make the statements
in any of them, in light of the circumstances under which they were made, not
misleading or (ii) any inaccuracy in or breach of the representations and
warranties or covenants made by the Company herein, and will reimburse each
Purchaser, each of its respective directors, officers, agents and employees, and
each such controlling person for any reasonable documented out-of-pocket legal
and other expenses incurred by such Purchaser, such directors, officers, agents
or employees, or such controlling persons in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action; provided, however, that the Company will not be
-20-
liable for any such case to the extent that any such loss, claim, damage,
liability, expense or action arises out of or is based upon (1) an untrue
statement or alleged untrue statement or omission or alleged omission in the
Registration Statement, the Prospectus or any amendment to or supplement of the
Registration Statement or the Prospectus made in reliance upon and in conformity
with written information furnished to the Company by or on behalf of the
Purchaser demanding such indemnification expressly for use in the Registration
Statement or the Prospectus, (2) the failure of such Purchaser to comply with
the covenants and agreements contained in this Agreement respecting resale of
the Purchased Securities or (3) the use by the Purchaser of an outdated
Prospectus or any Prospectus containing any untrue statement or omission of a
material fact required to make such statement not misleading after the Company
has notified the Purchaser in writing that the Prospectus is outdated or
contains such untrue statement or omission.
(ii) Indemnification by each Purchaser. Each
Purchaser agrees, severally and not jointly, to indemnify and hold harmless the
Company, each of the Company's directors, officers, agents and employees, and
each person, if any, who controls the Company within the meaning of the
Securities Act, against any losses, claims, damages, liabilities or expenses to
which the Company, the Company's directors, officers, agents or employees, or
any controlling persons may become subject, under the Securities Act, the
Exchange Act, or any other federal or state statutory law or regulation, or at
common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of such Purchaser, which consent
shall not be unreasonably withheld) insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof as contemplated below)
arise out of or are based upon (i) any untrue or alleged untrue statement of any
material fact contained in the Registration Statement, the Prospectus, or any
amendment or supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in the Registration Statement, the Prospectus, or any
amendment or supplement thereto, in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Purchaser expressly
for use therein, or (ii) any inaccuracy in or breach of the representations,
warranties or covenants made by such Purchaser herein, and such Purchaser will
reimburse the Company, each of its directors, officers, agents and employees,
and any controlling persons for any reasonable legal and other expenses incurred
by the Company, its directors, officers, agents or employees, or any controlling
persons in connection with investigating, defending, settling, compromising or
paying any such loss, claim, damage, liability, expense or action; provided,
however, that such Purchaser shall not be liable for any such untrue or alleged
untrue statement or omission or alleged omission with respect to which such
Purchaser has delivered to the Company in writing a correction of such untrue or
alleged untrue statement or omission or alleged omission, before the occurrence
of the event from which such loss, claim, damage, liability or expense was
incurred. Notwithstanding the provisions of this Section 5(d), such Purchaser
shall not be liable for any indemnification obligation under this Agreement in
excess of the aggregate dollar amount of net proceeds received by such Purchaser
from the sale of the Registrable Shares pursuant to the Registration Statement.
(iii) Indemnification Procedure.
-21-
(1) Promptly after receipt by an indemnified
party under this Section 5(d) of notice of the threat or commencement of any
action, such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party under this Section 5(d), promptly notify the
indemnifying party in writing of the claim and provide to the indemnifying party
copies of all written documents relating to such threatened or commenced action;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party for contribution or
otherwise under the indemnity agreement contained in this Section 5(d) or
otherwise, to the extent it is not prejudiced as a result of such failure.
(2) In case any such action is brought
against any indemnified party and such indemnified party seeks or intends to
seek indemnity from an indemnifying party, the indemnifying party will be
entitled to participate in, and, to the extent that it may wish, jointly with
all other indemnifying parties similarly notified, to assume the defense thereof
with counsel reasonably satisfactory to such indemnified party; provided,
however, that if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be a conflict between the positions of the indemnifying
party and the indemnified party in conducting the defense of any such action or
that there may be legal defenses available to it or other indemnified parties
that are different from or additional to those available to the indemnifying
party, the indemnified party or parties shall have the right to select separate
counsel to assume such legal defenses and to otherwise participate in the
defense of such action on behalf of such indemnified party or parties. Upon
receipt of notice from the indemnifying party to such indemnified party of its
election so to assume the defense of such action and approval by the indemnified
party of counsel, the indemnifying party will not be liable to such indemnified
party under this Section 5(d) for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof
unless:
a) the indemnified party shall have
employed such counsel in connection with the assumption of legal defenses in
accordance with the proviso to the preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the expenses of
more than one separate counsel, reasonably approved by such indemnifying party,
representing all of the indemnified parties who are parties to such action); or
b) the indemnifying party shall not
have employed counsel reasonably satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of
commencement of the action against the indemnified party,
in each of which cases the reasonable documented out-of-pocket fees and expenses
of counsel for the indemnified party shall be at the expense of the indemnifying
party.
(iv) Contribution. If the indemnification provided
for in this Section 5(d) is required by its terms but is for any reason held to
be unavailable to, or is otherwise insufficient to hold harmless, an indemnified
party under this Section 5(d) with respect to any losses, claims, damages,
liabilities or expenses referred to in this Agreement, then each indemnifying
party shall contribute to the amount paid or payable by such indemnified party
as a result of any losses, claims, damages, liabilities or expenses referred to
in this Agreement:
-22-
(1) in such proportion as is appropriate to
reflect the relative faults of the Company and the Purchasers in connection with
the statements or omissions or inaccuracies in the representations and
warranties in this Agreement that resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations,
or
(2) if the allocation provided by clause (1)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative faults referred to in clause (1) above but also
the relative benefits received by the Company and the Purchasers from the sale
of the Purchased Securities.
The respective relative benefits received by the Company on the one
hand and each Purchaser on the other shall be deemed to be in the same
proportion as the amount to which the consideration paid by such Purchaser to
the Company pursuant to this Agreement for the Registrable Shares purchased by
such Purchaser that were sold pursuant to the Registration Statement bears to
the difference (the "DIFFERENCE") between the amount such Purchaser paid for the
Registrable Shares that were sold pursuant to the Registration Statement and the
amount received by such Purchaser from such sale. The relative fault of the
Company and each Purchaser shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by such Purchaser and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in Section 5(d)(iii),
any reasonable legal or other fees or expenses incurred by such party in
connection with investigating or defending any such action or claim. The
provisions set forth in Section 5(d)(iii) with respect to the notice of the
threat or commencement of any threat or action shall apply if a claim for
contribution is to be made under this Section 5(d)(iv); provided, however, that
no additional notice shall be required with respect to any threat or action for
which notice has been given under Section 5(d)(iii) for purposes of
indemnification. The Company and each Purchaser agree that it would not be just
and equitable if contribution pursuant to this Section 5(d)(iv) were determined
solely by pro rata allocation (even if the Purchasers were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in this paragraph.
Notwithstanding the provisions of this Section 5(d)(iv), no Purchaser shall be
required to contribute any amount in excess of the amount by which the
Difference exceeds the amount of any damages that such Purchaser has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation. The Purchasers' obligations to contribute pursuant to this
Section 5(d)(iv) are several and not joint.
(e) Rule 144 Information. For two years after the date of this
Agreement, the Company shall file all reports required to be filed by it under
the Securities Act and the Exchange Act and the rules and regulations
promulgated thereunder and shall take such further action to the extent required
to enable the Purchasers to sell the Purchased Securities pursuant to Rule 144
under the Securities Act (as such rule may be amended from time to time).
-23-
(f) Subsequent Registrations. Except with respect to
registration rights previously granted by the Company and described on Schedule
3(p), other than pursuant to the Registration Statement, prior to the Effective
Date, the Company may not file any registration statement (other than on Form
S-8 or any successor form) with the SEC with respect to any securities of the
Company.
(g) Listing of Securities. The Company agrees, (i) if the
Company applies to have the Common Stock traded on any other trading market, it
will include in such application the Purchased Securities, and will take such
other action as is necessary or desirable to cause the Purchased Securities to
be listed on such other trading market as promptly as possible, and (ii) it will
take all action reasonably necessary to continue the listing and trading of its
Common Stock on a trading market and will comply in all material respects with
the Company's reporting, filing and other obligations under the bylaws or rules
of the trading market.
(h) Replacement of Securities. If any certificate or
instrument evidencing any Purchased Securities is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation thereof, or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and
customary and reasonable indemnity, if requested. The applicants for a new
certificate or instrument under such circumstances shall also pay any reasonable
third-party costs associated with the issuance of such replacement Purchased
Securities. If a replacement certificate or instrument evidencing any Purchased
Securities is requested due to a mutilation thereof, the Company may require
delivery of such mutilated certificate or instrument as a condition precedent to
any issuance of a replacement.
(i) Piggy-Back Registrations. If at any time during the
Registration Period there is not an effective Registration Statement covering
all of the Purchased Securities and the Company shall determine to prepare and
file with the SEC a registration statement relating to an offering for its own
account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act or their successor forms) or their then equivalents relating to
equity securities to be issued solely in connection with any acquisition of any
entity or business or equity securities issuable in connection with stock option
or other employee benefit plans, then the Company shall send to each Purchaser
written notice of such determination and, if within fifteen days after receipt
of such notice, any such Purchaser shall so request in writing, the Company
shall include in such registration statement all or any part of such Purchased
Securities such purchaser requests to be registered, subject to customary
underwriter cutbacks applicable to all holders of registration rights.
It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Section 5(i) with respect to Registrable Shares
held by a Purchaser that such Purchaser shall timely furnish to the Company a
completed Registration Statement Questionnaire on or before the Closing Date and
such other written information regarding such Purchaser, the Registrable Shares
to be sold by such Purchaser and the intended method of disposition of the
Registrable Shares as the Company may deem necessary or advisable to effect the
-24-
registration of the Registrable Shares. The Purchasers shall update such
information as and when necessary by written notice to the Company.
6. ADVISORY FEE. The Purchasers acknowledge that the Company intends to
pay to X.X. Xxxxxxxxx, Towbin, as financial advisor, a fee in respect of the
sale of the Purchased Securities. Each of the parties to this Agreement hereby
represents that, on the basis of any actions and agreements by it, there are no
other brokers or finders entitled to compensation in connection with the sale of
the Purchased Securities to the Purchasers. The Company shall indemnify and hold
harmless the Purchasers from and against all fees, commission or other payments
owing by the Company to X.X. Xxxxxxxxx, Towbin or any other Person acting on
behalf of the Company hereunder. Each Purchaser shall, severally and not
jointly, indemnify and hold harmless the Company from and against all fees,
commission or other payments owing by such Purchasers to any Person acting on
behalf of the Purchasers hereunder.
7. CONDITIONS TO THE PURCHASERS' OBLIGATIONS AT CLOSING. The
obligations of the Purchasers to consummate the transactions contemplated herein
are subject to the fulfillment or waiver, on or before the Closing, of each of
the following conditions:
(a) Representations and Warranties True. Each of the
representations and warranties of the Company contained in Section 3 shall be
true and correct in all material respects on and as of the date hereof
(provided, however, that such qualification shall only apply to representations
or warranties not otherwise qualified by materiality) and on and as of the
Closing Date with the same effect as though such representations and warranties
had been made as of the Closing (except for representations and warranties that
speak as of a specific date).
(b) Performance. The Company shall have performed and complied
in all material respects with all agreements, obligations and conditions
contained in this Agreement that are required to be performed or complied with
by it on or before the Closing and shall have obtained all approvals, consents
and qualifications necessary to complete the purchase and sale described herein;
provided, however, as provided in Section 2 hereof, the Company may furnish to
each Purchaser a facsimile copy of the stock certificate(s) representing the
Purchased Securities purchased by such Purchaser no later than the next Business
Day following the Closing Date, with the original stock certificate(s) to be
delivered to such Purchaser by overnight courier no later than the third (3rd)
Business Day following the Closing Date.
(c) Company Compliance Certificate. The Company will have
delivered to the Purchasers a certificate signed on its behalf by its Chief
Executive Officer or Chief Financial Officer, dated as of the Closing Date,
certifying that the conditions specified in Sections 7(a), 7(b) and 7(i) hereof
have been fulfilled.
(d) Agreement. The Company shall have executed and delivered
to the Purchasers this Agreement.
(e) Good Standing Certificate. The Company shall have
delivered to the Purchasers a certificate of the Secretary of State of the State
of Delaware, dated as of a date within five days of the date of the Closing,
with respect to the good standing of the Company.
-25-
(f) Secretary's Certificate. The Company shall have delivered
to the Purchasers a certificate of the Company executed by the Company's
Secretary, dated as of the Closing Date, attaching and certifying to the truth
and correctness of (1) the Certificate of Incorporation, (2) the Bylaws and (3)
the resolutions adopted by the Company's Board of Directors in connection with
the transactions contemplated by this Agreement.
(g) Opinion of Company Counsel. The Purchasers will have
received an opinion on behalf of the Company, dated as of the Closing Date, from
Kronish Xxxx Xxxxxx & Xxxxxxx LLP, counsel to the Company, substantially in the
form attached hereto as Exhibit B.
(h) No Statute or Rule Challenging Transaction. No statute,
rule, regulation, executive order, decree, ruling, injunction, action,
proceeding or interpretation shall have been enacted, entered, promulgated,
endorsed or adopted by any court or governmental authority of competent
jurisdiction or any self-regulatory organization or the staff of any of the
foregoing, having authority over the matters contemplated hereby which questions
the validity of, or challenges or prohibits the consummation of, any of the
transactions contemplated by this Agreement.
(i) Settlement Agreement. As of the Closing Date, the
Settlement Agreement shall be in full force and effect. Each of the parties
thereto shall have performed all of their obligations thereunder required to be
performed as of the date thereof.
(j) Other Actions. The Company shall have executed such
certificates, agreements, instruments and other documents, and taken such other
actions as shall be customary or reasonably requested by the Purchasers in
writing in connection with the transactions contemplated hereby.
8. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations
of the Company to consummate the transactions contemplated herein are subject to
the fulfillment or waiver, on or before the Closing, of each of the following
conditions:
(a) Representations and Warranties True. Each of the
representations and warranties of the Purchasers contained in Section 4 shall be
true and correct in all material respects on and as of the date hereof
(provided, however, that such qualification shall only apply to representations
and warranties not otherwise qualified by materiality) and on and as of the
Closing Date with the same effect as though such representations and warranties
had been made as of the Closing (except for representations and warranties that
speak as of a specific date).
(b) Performance. The Purchasers shall have performed and
complied in all material respects with all agreements, obligations and
conditions contained in this Agreement that are required to be performed or
complied with by them on or before the Closing and shall have obtained all
approvals, consents and qualifications necessary to complete the purchase and
sale described herein.
(c) Agreement. Each Purchaser shall have executed and
delivered to the Company this Agreement (and Appendix I and II hereto).
-26-
(d) Payment of Purchase Price. The Purchasers shall have
delivered to the Company by wire transfer of immediately available funds, full
payment of the purchase price for the Purchased Securities as specified in
Section 1(b).
(e) No Statute or Rule Challenging Transaction. No statute,
rule, regulation, executive order, decree, ruling, injunction, action,
proceeding or interpretation shall have been enacted, entered, promulgated,
endorsed or adopted by any court or governmental authority of competent
jurisdiction or any self-regulatory organization or the staff of any of the
foregoing, having authority over the matters contemplated hereby which questions
the validity of, or challenges or prohibits the consummation of, any of the
transactions contemplated by this Agreement.
9. MISCELLANEOUS.
(a) Successors and Assigns. The terms and conditions of this
Agreement will inure to the benefit of and be binding upon the respective
successors and permitted assigns of the parties. The Company shall not assign
this Agreement or any rights or obligations hereunder without the prior written
consent of the Purchasers holding at least a majority of the total aggregate
number of Purchased Securities then outstanding (excluding any Purchased
Securities sold to the public pursuant to Rule 144 or otherwise). Any Purchaser
may assign its rights under this Agreement (including, but not limited to the
right to receive liquidated damages from the Company pursuant to Section 5(b))
to any person to whom such Purchaser assigns or transfers any of the Purchased
Securities, provided that such transferee agrees in writing to be bound by the
terms and provisions of this Agreement, and such transfer is in compliance with
the terms and provisions of this Agreement and permitted by federal and state
securities laws.
(b) Governing Law. This Agreement will be governed by and
construed and enforced under the internal laws of the State of New York, without
reference to principles of conflict of laws or choice of laws. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
(c) Survival. The representations and warranties of the
Company contained in Section 3 of this Agreement and of the Purchasers contained
in Section 4 of this Agreement shall survive until eighteen (18) months after
the Closing Date.
(d) Counterparts. This Agreement may be executed in two or
more counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
(e) Headings. The headings and captions used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement. All references in this Agreement to sections,
paragraphs, exhibits and schedules will, unless otherwise provided, refer to
sections and paragraphs hereof and exhibits and schedules attached hereto, all
of which exhibits and schedules are incorporated herein by reference.
-27-
(f) Notices. Any notices and other communications required or
permitted under this Agreement shall be in writing and shall be delivered (i)
personally by hand or by courier, (ii) mailed by United States first-class mail,
postage prepaid or (iii) sent by facsimile directed (A) if to any Purchaser, at
such Purchaser's address or facsimile number set forth on Schedule A to this
Agreement, or at such address or facsimile number as such Purchaser may
designate by giving at least ten (10) days' advance written notice to the
Company or (b) if to the Company, to its address or facsimile number set forth
below, or at such other address or facsimile number as the Company may designate
by giving at least ten (10) days' advance written notice to the Purchasers. All
such notices and other communications shall be deemed given upon (i) receipt or
refusal of receipt, if delivered personally, (ii) three days after being placed
in the mail, if mailed, or (iii) confirmation of facsimile transfer, if faxed.
If to the Company:
GVI Security Solutions, Inc.
0000 Xxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxxxxxx X. Xxxxxxxx
with a copy to:
Kronish Xxxx Xxxxxx & Xxxxxxx LLP
1114 Avenue of the Americas
Tel: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxxx Xxxxxx, Esq.
(g) Amendments and Waivers. This Agreement may be amended and
the observance of any term of this Agreement may be waived only with the written
consent of the Company and the Purchasers holding at least a majority of the
total aggregate number of the Purchased Securities then outstanding (excluding
any shares then already sold to the public pursuant to Rule 144 or otherwise).
In addition to the foregoing, any provision may be waived with the written
consent of the party to be charged. Any amendment effected in accordance with
this Section 9(g) will be binding upon the Purchasers, the Company and their
respective successors and assigns.
(h) Severability. If any provision of this Agreement is held
to be unenforceable under applicable law, such provision will be excluded from
this Agreement and the balance of the Agreement will be interpreted as if such
provision were so excluded and will be enforceable in accordance with its terms.
(i) Entire Agreement. This Agreement, together with all
exhibits and schedules hereto, constitute the entire agreement and understanding
of the parties with respect to the subject matter hereof and supersede any and
all prior negotiations, correspondence, agreements, understandings, duties or
obligations between the parties with respect to the subject matter hereof.
-28-
(j) Further Assurances. From and after the date of this
Agreement, upon the request of the Company or the Purchasers, the Company and
the Purchasers will execute and deliver such instruments, documents or other
writings, and take such other actions, as may be reasonably necessary or
desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement.
(k) Meaning of Include and Including. Whenever in this
Agreement the word "include" or "including" is used, it shall be deemed to mean
"include, without limitation" or "including, without limitation," as the case
may be, and the language following "include" or "including" shall not be deemed
to set forth an exhaustive list.
(l) Fees, Costs and Expenses. Except as otherwise provided for
in this Agreement, all fees, costs and expenses (including attorneys' fees and
expenses) incurred by any party hereto in connection with the preparation,
negotiation and execution of this Agreement and the exhibits and schedules
hereto and the consummation of the transactions contemplated hereby and thereby
(including the costs associated with any filings with, or compliance with any of
the requirements of any governmental authorities), shall be the sole and
exclusive responsibility of such party.
(m) 8-K Filing and Publicity. As soon as practicable following
the execution of this Agreement, but in no event later than 8:30 a.m., eastern
time, on the day following the Closing Date, the Company shall file a Current
Report on Form 8-K with the SEC describing the terms of the transactions
contemplated by this Agreement and attaching this Agreement and the press
release referred to below as exhibits to such filing (the "8-K FILING" including
all attachments). Neither the Company nor any Purchaser shall issue any press
releases or any other public statements with respect to the transactions
contemplated by this Agreement; provided, however, that the Company shall be
entitled, without the prior approval of any Purchaser, to issue any press
release or make any other public disclosure (including a press release
(concerning the offering of the Purchased Securities) pursuant to Rule 135(c)
under the Securities Act) with respect to such transactions (i) in substantial
conformity with the 8-K Filing and (ii) as is required by applicable laws and
regulations; and, provided further, that no such release may identify a
Purchaser unless such Purchaser has consented thereto in writing, or as required
by law.
(n) Waivers. No waiver by any party to this Agreement of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of any party to exercise any right hereunder in any manner impair the
exercise of any such right accruing to it thereafter.
(o) Stock Splits, Dividends and other Similar Events. The
provisions of this Agreement shall be appropriately adjusted to reflect any
stock split, stock dividend, reorganization or other similar event that may
occur with respect to the Company after the date hereof.
-29-
(p) Remedies. In addition to being entitled to exercise all
rights provided herein or granted by law, including recovery of damages, each
Purchaser and the Company will be entitled to specific performance under this
Agreement. The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations
described in the foregoing sentence and hereby agrees to waive in any action for
specific performance of any such obligation the defense that a remedy at law
would be adequate.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
GVI SECURITY SOLUTIONS, INC.
By:
----------------------------
Name:
Title:
[PURCHASER SIGNATURE PAGES TO FOLLOW]
-31-
SIGNATURE PAGE TO
SECURITIES PURCHASE AGREEMENT
DATED AS OF _________________, 2004
BY AND AMONG
GVI SECURITY SOLUTIONS, INC.
AND EACH PURCHASER NAMED THEREIN
The undersigned hereby executes and delivers to GVI Security Solutions,
Inc., the Securities Purchase Agreement (the "AGREEMENT") to which this
signature page is attached effective as of the date of the Agreement, which
Agreement and signature page, together with all counterparts of such Agreement
and signature pages of the other Purchasers named in such Agreement, shall
constitute one and the same document in accordance with the terms of such
Agreement.
Number of Purchased Securities Purchased:
------------
------------------------------------------------------
"Purchaser"
Signature:
-------------------------------------------
Name:
------------------------------------------------
Title:
-----------------------------------------------
Address:
---------------------------------------------
------------------------------------------------------
------------------------------------------------------
Telephone:
-------------------------------------------
Facsimile:
------------------------------------------
E-mail:
----------------------------------------------
Tax ID Number:
---------------------------------------
-32-
SCHEDULE A
SCHEDULE OF PURCHASERS
Number of Purchased
Name and Address Securities Total Purchase Price
------------------------------- -------------------- --------------------
-33-
APPENDIX I
STOCK CERTIFICATE QUESTIONNAIRE
Pursuant to Section 4(k) of the Agreement, please provide us with the
following information:
1. The exact name that the Purchaser's Purchased Securities are to be
registered in (this is the name that will appear on your stock certificate(s)
and warrant certificate(s)). A nominee name may be used if appropriate:
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2. The relationship between the Purchaser of the Purchased Securities
and the Registered Holder listed in response to Item 1 above:
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3. The mailing address of the Registered Holder listed in response to
Item 1 above:
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4. The Social Security Number or Tax Identification Number of the
Registered Holder listed in response to Item 1 above:
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APPENDIX II
REGISTRATION STATEMENT/SUITABILITY QUESTIONNAIRE
Pursuant to Section 4(k) of the Agreement, please provide the information below.
All capitalized terms not defined in this Appendix II shall have the meanings
assigned to them in the Agreement.
PART A
In connection with the preparation of the Registration Statement, please provide
us with the following information:
1. Pursuant to the "Selling Stockholder" section of the Registration
Statement, please state the Purchaser's name exactly as it should appear in the
Registration Statement:
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2. Please provide the number of shares of Common Stock and any other
securities that the Purchaser will own immediately after Closing, including
those Purchased Securities purchased by the Purchaser pursuant to the Agreement
and those securities purchased by the Purchaser through other transactions:
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3. Please explain the nature of the beneficial ownership of the shares
of Common Stock owned by the Purchaser, including any shares of Common Stock not
held of record by the Purchaser:
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4. If the Purchaser is not a natural person, please identify each
natural person who will exercise sole or shared voting and/or dispositive power
with respect to the shares of Common Stock beneficially owned by the Purchaser
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immediately after the Closing. Please also specify in what capacity such
person(s) will exercise their voting and/or dispositive power with respect to
such shares.
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NATURAL PERSON(S) RELATIONSHIP TO PURCHASER
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5. Disclose the details of any rights to acquire shares of Common Stock
that the Purchaser may have:
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6. Has the Purchaser had any material relationship within the past
three years with the Company or its affiliates?
Yes |_| No |_|
If yes, please indicate the nature of any such relationships below:
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7. Is the Purchaser a broker-dealer registered with the SEC?
Yes |_| No |_|
8. Is the Purchaser affiliated with any registered broker-dealer?
Yes |_| No |_|
If yes, please identify such broker-dealer and explain the relationship
that such registered broker-dealer has with the Purchaser (including details of
any affiliation or other relationship).
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REGISTERED BROKER-DEALER RELATIONSHIP TO PURCHASER
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PART B
Pursuant to Section 4 of the Agreement, please provide us with the following
information, and we will use the Purchaser's responses to qualify the Purchaser
for purposes of federal and state securities laws:
9. IDENTIFICATION
Name:
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Address of principal place of business:
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State (or Country) of formation or incorporation:
Contact Person:
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Telephone Number:
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Facsimile Number:
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Email Address:
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Type of Entity (corporation, partnership, trust, etc.):
Social Security or Taxpayer or Employer Identification Number:
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10. STATUS AS AN ACCREDITED INVESTOR
Please confirm that the Purchaser is an "accredited investor" as defined under
the Securities Act of 1933, as amended (the "Act"), by checking all applicable
boxes to indicate the exemption qualifying you as an accredited investor, as
provided in Rule 501(a) under the Securities Act of 1933, as amended.
|_| a corporation, organization described in Section 501(c)(3) of the
Internal Revenue Code, a Massachusetts or similar business trust or a
partnership, in each case, not formed for the purpose of this investment, with
total assets in excess of $5,000,000;
|_| a private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940;
|_| a Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958;
|_| an investment company registered under the Investment Company Act
of 1940 or a business development company as defined in Section 2(a)(48) of that
Act;
|_| a bank as defined in Section 3(a)(2) or a savings and loan
association or other institution defined in Section 3(a)(5)(A) of the Act acting
in either an individual or fiduciary capacity;
|_| an insurance company as defined in Section 2(13) of the Securities
Act;
|_| an employee benefit plan within the meaning of Title I of the
Employee Retirement Income Security Act of 1974 whose investment decision is
made by a fiduciary which is either a bank, savings and loan association,
insurance company, or registered investment advisor, or whose total assets
exceed $5,000,000, or, if a self-directed plan, a plan whose investment
decisions are made solely by persons who are accredited investors;
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|_| a director, executive officer or general partner of the issuer of
the securities being offered or sold;
|_| a natural person whose individual net worth, or joint net worth
with your spouse, at the time of purchase exceeds $1,000,000;
|_| a natural person who had an individual income in excess of $200,000
in each of the two most recent years or joint income with your spouse in excess
of $300,000 in each of those years and has a reasonable expectation of reaching
the same income level in the current year;
|_| a trust with total assets in excess of $5,000,000, not formed for
the specific purpose of acquiring the securities offered, purchase is directed
by a sophisticated person as described in Rule 506(b)(2)(ii) of the Securities
Act;
|_| an entity in which all the equity owners are accredited investors;
or
|_| other - Please describe:
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11. RESIDENCE INFORMATION
Please indicate the jurisdiction in which the Purchaser
resides, if the Purchaser is a natural person, or in which the Purchaser is
chartered and the jurisdiction in which it maintains its principal offices:
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12. INVESTMENT REPRESENTATION
Is the Purchaser purchasing the securities offered for its and for
investment purposes only?
Yes |_| No |_|
If no, please state for whom is the Purchaser investing and/or the
reason for investing.
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13. SIGNATURE
The above information is true and correct in all material respects and
the undersigned recognizes that the Company and its counsel are relying
on the truth and accuracy of such information in reliance on the
exemption under the Securities Act. The undersigned agrees to notify
the Company promptly of any changes in the foregoing information which
may occur prior to the investment.
Executed at _______________________,____________ on ___________ , 2004.
Name of Entity:________________________________________________________
By: __________________________________
(Signature)
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(Name and title of signatory)
IF THE INVESTMENT WILL BE MADE BY MORE THAN ONE ENTITY, WHETHER OR NOT
AFFILIATED, PLEASE COMPLETE A COPY OF THIS QUESTIONNAIRE FOR EACH ENTITY.
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EXHIBIT A
DISCLOSURE LETTER
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EXHIBIT B
FORM OF OPINION OF KRONISH XXXX XXXXXX & XXXXXXX LLP
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