EXHIBIT 10.37
EXECUTION COPY
COMMON STOCK PURCHASE AGREEMENT
COMMON STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of December
12, 2001 by and between BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC., a Nevada
corporation (the "Company"), and FUSION CAPITAL FUND II, LLC, an Illinois
limited liability company (the "Buyer"). Capitalized terms used herein and not
otherwise defined herein are defined in Section 10 hereof.
WHEREAS:
Subject to the terms and conditions set forth in this Agreement, the
Company wishes to sell to the Buyer, and the Buyer wishes to buy from the
Company, up to Six Million Dollars ($6,000,000) of the Company's common stock,
par value $0.001 per share (the "Common Stock"). The shares of Common Stock to
be purchased hereunder are referred to herein as the "Purchase Shares."
NOW THEREFORE, the Company and the Buyer hereby agree as follows:
1. PURCHASE OF COMMON STOCK.
Subject to the terms and conditions set forth in Sections 6, 7 and 9
below, the Company hereby agrees to sell to the Buyer, and the Buyer hereby
agrees to purchase from the Company, shares of Common Stock as follows:
(a) Commencement of Purchases of Common Stock. The purchase and sale of
Common Stock hereunder shall commence (the "Commencement") within five (5)
Trading Days following the date of satisfaction (or waiver) of the conditions to
the Commencement set forth in Sections 6 and 7 below (or such later date as is
mutually agreed to by the Company and Buyer) (the date of such Commencement, the
"Commencement Date").
(b) Buyer's Purchase Rights and Obligations. Subject to the Company's
right to suspend purchases under Section 1(d)(ii) hereof, the Buyer shall
purchase shares of Common Stock on each Trading Day during each Monthly Period
equal to the Daily Base Amount at the Purchase Price. Within one (1) Trading Day
of receipt of Purchase Shares, the Buyer shall pay to the Company an amount
equal to the Purchase Amount with respect to such Purchase Shares as full
payment for the purchase of the Purchase Shares so received. The Company shall
not issue any fraction of a share of Common Stock upon any purchase. All shares
of Common Stock (including fractions thereof) issuable upon a purchase under
this Agreement shall be aggregated for purposes of determining whether the
purchase would result in the issuance of a fraction of a share of Common Stock.
If, after the aforementioned aggregation, the issuance would result in the
issuance of a fraction of a share of Common Stock, the Company shall round such
fraction of a share of Common Stock up or down to the nearest whole share. All
payments made under this Agreement shall be made in lawful money of the United
States of America by check or wire transfer of immediately available funds to
such account as the payee may from time to time designate by written notice in
accordance with the provisions of this Agreement. Whenever any amount expressed
to be due by the terms of this Agreement is due on any day which is not a
Trading Day, the same shall instead be due on the next succeeding day which is a
Trading Day.
(c) Company's Right to Decrease or Increase the Daily Base Amount.
(i) Company's Right to Decrease the Daily Base Amount. The Company
shall always have the right at any time to decrease the Daily Base Amount
by delivering written notice (a "Daily Base Amount Decrease Notice") to
the Buyer which notice shall specify the new Daily Base Amount. The
decrease in the Daily Base Amount shall become effective one Trading Day
after receipt by the Buyer of the Daily Base Amount Decrease Notice. Any
purchases by the Buyer which have a Purchase Date on or prior to the first
(1st) Trading Day after receipt by the Buyer of a Daily Base Amount
Decrease Notice must be honored by the Company as otherwise provided
herein. The decrease in the Daily Base Amount shall remain in effect until
the Company delivers to the Buyer a Daily Base Amount Increase Notice (as
defined below).
(ii) Company's Right to Increase the Daily Base Amount. The Company
shall always have the right at any time to increase the Daily Base Amount
up to the Original Daily Base Amount by delivering written notice to the
Buyer stating the new Daily Base Amount (a "Daily Base Amount Increase
Notice"). If the Closing Sale Price of the Common Stock on each of the
five (5) consecutive Trading Days immediately prior to a Daily Base Amount
Increase Notice is at least $3.00, the Company shall have the right to
deliver a Daily Base Amount Increase Notice which increases the amount of
the Daily Base Amount to any amount above the Original Daily Base Amount.
A Daily Base Amount Increase Notice shall be effective one Trading Day
after receipt by the Buyer. Such increase in the Daily Base Amount shall
continue in effect until the delivery to the Buyer of a Daily Base Amount
Decrease Notice. Notwithstanding anything to the contrary, if the Daily
Base Amount then in effect is greater than the Original Daily Base Amount
and the Sale Price of the Common Stock during any Trading Day is less than
$3.00, the amount of the Daily Base Amount for such Trading Day on which
the Sale Price of the Common Stock is less than $3.00 and for each Trading
Day thereafter shall be the Original Daily Base Amount or such lesser
amount as specified by the Company in a Daily Base Amount Decrease Notice.
Thereafter, the Company shall again have the right to increase the Daily
Base Amount to any amount above the Original Daily Base Amount only if the
Closing Sale Price of the Common Stock is at least $3.00 on each of five
(5) consecutive Trading Days.
(d) Limitations on Purchases.
(i) Limitation on Beneficial Ownership. The Company shall not effect
any purchase under this Agreement and the Buyer shall not have the right
to purchase shares of Common Stock under this Agreement to the extent that
after giving effect to such purchase the Buyer together with its
affiliates would beneficially own in excess of 4.9% of the outstanding
shares of the Common Stock following such purchase. For purposes hereof,
the number of shares of Common Stock beneficially owned by the Buyer and
its affiliates or acquired by the Buyer and its affiliates, as the case
may be, shall include the number of shares of Common Stock issuable in
connection with a purchase under this Agreement with respect to which the
determination is being made, but shall exclude the number of shares of
Common Stock which would be issuable upon (1) a purchase of the remaining
Available Amount which has not been submitted for purchase, and (2)
exercise or conversion of the unexercised or unconverted portion of any
other securities of the Company (including, without limitation, any
warrants) subject to a limitation on conversion or exercise analogous to
the limitation contained herein beneficially owned by the Buyer and its
affiliates. If the 4.9% limitation is ever reached the Company shall have
the option to increase such limitation to 9.9% by delivery of written
notice to the Buyer. Thereafter, if the 9.9% limitation is ever reached
this shall not effect or limit the Buyer's obligation to purchase the
Daily Base Amount as otherwise
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provided in this Agreement. For purposes of this Section, in determining
the number of outstanding shares of Common Stock the Buyer may rely on the
number of outstanding shares of Common Stock as reflected in (1) the
Company's most recent Form 10-Q or Form 10-K, as the case may be, (2) a
more recent public announcement by the Company or (3) any other written
communication by the Company or its transfer agent setting forth the
number of shares of Common Stock outstanding. Upon the reasonable written
or oral request of the Buyer, the Company shall promptly confirm orally
and in writing to the Buyer the number of shares of Common Stock then
outstanding. In any case, the number of outstanding shares of Common Stock
shall be determined after giving effect to any purchases under this
Agreement by the Buyer since the date as of which such number of
outstanding shares of Common Stock was reported. Except as otherwise set
forth herein, for purposes of this Section 1(d)(i), beneficial ownership
shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended.
(ii) Company's Right to Suspend Purchases. The Company may, at any
time, give written notice (a "Purchase Suspension Notice") to the Buyer
suspending purchases of Purchase Shares by the Buyer under this Agreement.
The Purchase Suspension Notice shall be effective only for purchases that
have a Purchase Date later than one (1) Trading Day after receipt of the
Purchase Suspension Notice by the Buyer. Any purchase by the Buyer that
has a Purchase Date on or prior to the first (1st) Trading Day after
receipt by the Buyer of a Purchase Suspension Notice from the Company must
be honored by the Company as otherwise provided herein. Such purchase
suspension shall continue in effect until a revocation in writing by the
Company, at its sole discretion. So long as a Purchase Suspension Notice
is in effect, the Buyer shall not be obligated to purchase any Purchase
Shares from the Company under Section 1 of this Agreement.
(iii) Purchase Price Floor. The Buyer shall not have the right or
the obligation to purchase any Purchase Shares under this Agreement in the
event that the Purchase Price for any purchases of Purchase Shares would
be less than the Floor Price. The Company may at any time give written
notice (a "Floor Price Notice") to the Buyer increasing or decreasing the
Floor Price, except that in no case shall the Floor Price be less than
$0.20 without the prior written consent of the Buyer. The Floor Price
Notice shall be effective only for purchases that have a Purchase Date
later than one (1) Trading Day after receipt of the Floor Price Notice by
the Buyer. Any purchase by the Buyer that has a Purchase Date on or prior
to the first Trading Day after receipt of a Floor Price Notice from the
Company must be honored by the Company as otherwise provided herein.
(e) Records of Purchases. The Buyer and the Company shall each maintain
records showing the remaining Available Amount at any given time and the dates
and Purchase Amounts for each purchase or shall use such other method,
reasonably satisfactory to the Buyer and the Company.
(f) Taxes. The Company shall pay any and all transfer, stamp or similar
taxes that may be payable with respect to the issuance and delivery of any
shares of Common Stock to the Buyer made under of this Agreement.
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2. BUYER'S REPRESENTATIONS AND WARRANTIES.
The Buyer represents and warrants to the Company that as of the date
hereof and as of the Commencement Date:
(a) Investment Purpose. The Buyer is entering into this Agreement and
acquiring the Commitment Shares, (as defined in Section 4(f) hereof) (this
Agreement and the Commitment Shares are collectively referred to herein as the
"Securities"), for its own account for investment only and not with a view
towards, or for resale in connection with, the public sale or distribution
thereof; provided however, by making the representations herein, the Buyer does
not agree to hold any of the Securities for any minimum or other specific term.
(b) Accredited Investor Status. The Buyer is an "accredited investor" as
that term is defined in Rule 501(a)(3) of Regulation D.
(c) Reliance on Exemptions. The Buyer understands that the Securities are
being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of, and the
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Securities.
(d) Information. The Buyer has been furnished with all materials relating
to the business, finances and operations of the Company and materials relating
to the offer and sale of the Securities that have been reasonably requested by
the Buyer, including, without limitation, the SEC Documents (as defined in
Section 3(f) hereof). The Buyer understands that its investment in the
Securities involves a high degree of risk. The Buyer (i) is able to bear the
economic risk of an investment in the Securities including a total loss, (ii)
has such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of the proposed investment in the
Securities and (iii) has had an opportunity to ask questions of and receive
answers from the officers of the Company concerning the financial condition and
business of the Company and other matters related to an investment in the
Securities. Neither such inquiries nor any other due diligence investigations
conducted by the Buyer or its representatives shall modify, amend or affect the
Buyer's right to rely on the Company's representations and warranties contained
in Section 3 below. The Buyer has sought such accounting, legal and tax advice
as it has considered necessary to make an informed investment decision with
respect to its acquisition of the Securities.
(e) No Governmental Review. The Buyer understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
(f) Transfer or Resale. The Buyer understands that except as provided in
the Registration Rights Agreement (as defined in Section 6(a) hereof): (i) the
Securities have not been and are not being registered under the 1933 Act or any
state securities laws, and may not be offered for sale, sold, assigned or
transferred unless (A) subsequently registered thereunder or (B) an exemption
exists permitting such Securities to be sold, assigned or transferred without
such registration; (ii) any sale of the Securities made in reliance on Rule 144
may be made only in accordance with the terms of Rule 144 and further, if Rule
144 is not applicable, any resale of the Securities under circumstances in which
the seller (or the person
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through whom the sale is made) may be deemed to be an underwriter (as that term
is defined in the 0000 Xxx) may require compliance with some other exemption
under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii)
neither the Company nor any other person is under any obligation to register the
Securities under the 1933 Act or any state securities laws or to comply with the
terms and conditions of any exemption thereunder.
(g) Validity; Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Buyer and is a valid and
binding agreement of the Buyer enforceable against the Buyer in accordance with
its terms, subject as to enforceability to general principles of equity and to
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
(h) Residency. The Buyer is a resident of the State of Illinois.
(i) No Prior Short Selling. The Buyer represents and warrants to the
Company that at no time prior to the date of this Agreement has any of the
Buyer, its agents, associates, representatives or affiliates engaged in or
effected, in any manner whatsoever, directly or indirectly, any (i) "short sale"
(as such term is defined in Rule 3b-3 of the 0000 Xxx) of the Common Stock or
(ii) hedging transaction, which establishes a net short position with respect to
the Common Stock.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Buyer that as of the date
hereof and as of the Commencement Date:
(a) Organization and Qualification. The Company and its "Subsidiaries"
(which for purposes of this Agreement means any entity in which the Company,
directly or indirectly, owns 50% or more of the voting stock or capital stock or
other similar equity interests) are corporations duly organized and validly
existing in good standing under the laws of the jurisdiction in which they are
incorporated, and have the requisite corporate power and authority to own their
properties and to carry on their business as now being conducted. Each of the
Company and its Subsidiaries is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which its ownership of
property or the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in
good standing could not reasonably be expected to have a Material Adverse
Effect. As used in this Agreement, "Material Adverse Effect" means any material
adverse effect on any of: (i) the business, properties, assets, operations,
results of operations or financial condition of the Company and its
Subsidiaries, if any, taken as a whole, or (ii) the authority or ability of the
Company to perform its obligations under the Transaction Documents (as defined
in Section 3(b) hereof). The Company has no Subsidiaries except as set forth on
Schedule 3(a).
(b) Authorization; Enforcement; Validity. (i) The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Registration Rights Agreement (as defined
in Section 6(a) hereof) and each of the other agreements entered into by the
parties on the Commencement Date and attached hereto as exhibits to this
Agreement (collectively, the "Transaction Documents"), and to issue the
Securities in accordance with the terms hereof and thereof, (ii) the execution
and delivery of the Transaction Documents by the Company and the consummation by
it of the transactions contemplated hereby and thereby, including without
limitation, the issuance of the Commitment Shares and the reservation for
issuance and the issuance of the Purchase Shares issuable
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under this Agreement, have been duly authorized by the Company's Board of
Directors and no further consent or authorization is required by the Company,
its Board of Directors or its shareholders, (iii) this Agreement has been, and
each other Transaction Document shall be on the Commencement Date, duly executed
and delivered by the Company and (iv) this Agreement constitutes, and each other
Transaction Document upon its execution on behalf of the Company, shall
constitute, the valid and binding obligations of the Company enforceable against
the Company in accordance with their terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies.
(c) Capitalization. As of the date hereof, the authorized capital stock of
the Company consists of (i) 75,000,000 shares of Common Stock, of which as of
the date hereof, 45,888,377 shares are issued and outstanding, none are held as
treasury shares, and (ii) 7,500,000 shares of Preferred Stock. All of such
outstanding shares have been, or upon issuance will be, validly issued and are
fully paid and nonassessable. Except as disclosed in Schedule 3(c), (i) no
shares of the Company's capital stock are subject to preemptive rights or any
other similar rights or any liens or encumbrances suffered or permitted by the
Company, (ii) there are no outstanding debt securities, (iii) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its Subsidiaries, (iv) there
are no agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of their securities under
the 1933 Act (except the Registration Rights Agreement), (v) there are no
outstanding securities or instruments of the Company or any of its Subsidiaries
which contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any
of its Subsidiaries, (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities as described in this Agreement and (vii) the Company does not
have any stock appreciation rights or "phantom stock" plans or agreements or any
similar plan or agreement. The Company has furnished to the Buyer true and
correct copies of the Company's Certificate of Incorporation, as amended and as
in effect on the date hereof (the "Certificate of Incorporation"), and the
Company's By-laws, as amended and as in effect on the date hereof (the
"By-laws"), and summaries of the terms of all securities convertible into or
exercisable for Common Stock, if any, and copies of any documents containing the
material rights of the holders thereof in respect thereto.
(d) Issuance of Securities. The Commitment Shares have been duly
authorized and, upon issuance in accordance with the terms hereof, the
Commitment Shares shall be (i) validly issued, fully paid and non-assessable and
(ii) free from all taxes, liens and charges with respect to the issue thereof.
6,000,000 shares of Common Stock have been duly authorized and reserved for
issuance upon purchase under this Agreement. 50,000 shares of Common Stock have
been duly authorized and reserved for issuance as Expense Shares (as defined in
Section 5 hereof) under this Agreement. Upon issuance and payment therefore in
accordance with the terms and conditions of this Agreement, the Purchase Shares
shall be validly issued, fully paid and nonassessable and free from all taxes,
liens and charges with respect to the issue thereof, with the holders being
entitled to all rights accorded to a holder of Common Stock. Upon issuance in
accordance with the terms and conditions of this Agreement, the Expense Shares
shall be
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validly issued, fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issue thereof, with the holders being entitled to
all rights accorded to a holder of Common Stock.
(e) No Conflicts. Except as disclosed in Schedule 3(e), the execution,
delivery and performance of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the reservation for issuance and issuance of the
Purchase Shares) will not (i) result in a violation of the Certificate of
Incorporation, any Certificate of Designations, Preferences and Rights of any
outstanding series of preferred stock of the Company or the By-laws or (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its Subsidiaries is a
party, or result in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations and the
rules and regulations of the Principal Market applicable to the Company or any
of its Subsidiaries) or by which any property or asset of the Company or any of
its Subsidiaries is bound or affected, except in the case of conflicts, defaults
and violations under clause (ii), which could not reasonably be expected to
result in a Material Adverse Effect. Except as disclosed in Schedule 3(e),
neither the Company nor its Subsidiaries is in violation of any term of or in
default under its Certificate of Incorporation, any Certificate of Designation,
Preferences and Rights of any outstanding series of preferred stock of the
Company or By-laws or their organizational charter or by-laws, respectively.
Except as disclosed in Schedule 3(e), neither the Company nor any of its
Subsidiaries is in violation of any term of or is in default under any material
contract, agreement, mortgage, indebtedness, indenture, instrument, judgment,
decree or order or any statute, rule or regulation applicable to the Company or
its Subsidiaries, except for possible conflicts, defaults, terminations or
amendments which could not reasonably be expected to have a Material Adverse
Effect. The business of the Company and its Subsidiaries is not being conducted,
and shall not be conducted, in violation of any law, ordinance, regulation of
any governmental entity, except for possible violations, the sanctions for which
either individually or in the aggregate could not reasonably be expected to have
a Material Adverse Effect. Except as specifically contemplated by this Agreement
and as required under the 1933 Act or applicable state securities laws, the
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency or any
regulatory or self-regulatory agency in order for it to execute, deliver or
perform any of its obligations under or contemplated by the Transaction
Documents in accordance with the terms hereof or thereof. Except as disclosed in
Schedule 3(e), all consents, authorizations, orders, filings and registrations
which the Company is required to obtain pursuant to the preceding sentence shall
be obtained or effected on or prior to the Commencement Date. Except as
disclosed in Schedule 3(e), the Company is not and has not been since January 1,
1999, in violation of the listing requirements of the Principal Market.
(f) SEC Documents; Financial Statements. Except as disclosed in Schedule
3(f), since January 1, 1999, the Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the Securities Exchange Act of
1934, as amended (the "1934 Act") (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements and schedules
thereto and documents incorporated by reference therein being hereinafter
referred to as the "SEC Documents"). As of their respective dates (except as
they have been correctly amended), the SEC Documents complied in all material
respects with the requirements of the 1934 Act and the rules and regulations of
the SEC promulgated thereunder applicable to the SEC Documents, and none of the
SEC Documents, at the time they were filed with the SEC (except as they may have
been properly amended), contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. As of their respective
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dates (except as they have been properly amended), the financial statements of
the Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto or (ii) in
the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(g) Absence of Certain Changes. Except as disclosed in Schedule 3(g),
since September 30, 2000, there has been no material adverse change in the
business, properties, operations, financial condition or results of operations
of the Company or its Subsidiaries. The Company has not taken any steps, and
does not currently expect to take any steps, to seek protection pursuant to any
bankruptcy law nor does the Company or any of its Subsidiaries have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings.
(h) Absence of Litigation. There is no action, suit, proceeding, inquiry
or investigation before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the Company
or any of its Subsidiaries, threatened against or affecting the Company, the
Common Stock or any of the Company's Subsidiaries or any of the Company's or the
Company's Subsidiaries' officers or directors in their capacities as such, which
could reasonably be expected to have a Material Adverse Effect. A description of
each action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body which, as
of the date of this Agreement, is pending or threatened in writing against or
affecting the Company, the Common Stock or any of the Company's Subsidiaries or
any of the Company's or the Company's Subsidiaries' officers or directors in
their capacities as such, is set forth in Schedule 3(h).
(i) Acknowledgment Regarding Buyer's Status. The Company acknowledges and
agrees that the Buyer is acting solely in the capacity of arm's length purchaser
with respect to the Transaction Documents and the transactions contemplated
hereby and thereby. The Company further acknowledges that the Buyer is not
acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to the Transaction Documents and the transactions
contemplated hereby and thereby and any advice given by the Buyer or any of its
representatives or agents in connection with the Transaction Documents and the
transactions contemplated hereby and thereby is merely incidental to the Buyer's
purchase of the Securities. The Company further represents to the Buyer that the
Company's decision to enter into the Transaction Documents has been based solely
on the independent evaluation by the Company and its representatives and
advisors.
(j) No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 0000 Xxx) in connection with the offer or sale of the
Securities.
(k) Dilutive Effect. The Company understands and acknowledges that the
number of Purchase Shares purchasable under this Agreement is not fixed and will
vary depending on the Purchase Price at which such shares are purchased. The
Company further acknowledges that its obligation to issue Purchase Shares under
this Agreement in accordance with the terms and conditions hereof is absolute
and unconditional regardless of the dilutive effect that such issuance may have
on the ownership interests of other shareholders of the Company.
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(l) Intellectual Property Rights. The Company and its Subsidiaries own or
possess adequate rights or licenses to use all material trademarks, trade names,
service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. Except as set forth on Schedule 3(l), none of the
Company's material trademarks, trade names, service marks, service xxxx
registrations, service names, patents, patent rights, copyrights, inventions,
licenses, approvals, government authorizations, trade secrets or other
intellectual property rights have expired or terminated, or, by the terms and
conditions thereof, could expire or terminate within two years from the date of
this Agreement. The Company and its Subsidiaries do not have any knowledge of
any infringement by the Company or its Subsidiaries of any material trademark,
trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service xxxx registrations, trade secret or other
similar rights of others, or of any such development of similar or identical
trade secrets or technical information by others and, except as set forth on
Schedule 3(l), there is no claim, action or proceeding being made or brought
against, or to the Company's knowledge, being threatened against, the Company or
its Subsidiaries regarding trademark, trade name, patents, patent rights,
invention, copyright, license, service names, service marks, service xxxx
registrations, trade secret or other infringement, which could reasonably be
expected to have a Material Adverse Effect.
(m) Environmental Laws. The Company and its Subsidiaries (i) are in
compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where, in each of the
three foregoing clauses, the failure to so comply could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
(n) Title. The Company and its Subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all personal
property owned by them which is material to the business of the Company and its
Subsidiaries, in each case free and clear of all liens, encumbrances and defects
except such as are described in Schedule 3(n) or such as do not materially
affect the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company and any of its Subsidiaries.
Any real property and facilities held under lease by the Company and any of its
Subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
Subsidiaries.
(o) Insurance. The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has been refused any
insurance coverage sought or applied for and neither the Company nor any such
Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the Company
and its Subsidiaries, taken as a whole.
-9-
(p) Regulatory Permits. The Company and its Subsidiaries possess all
material certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company nor any such Subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.
(q) Tax Status. The Company and each of its Subsidiaries has made or filed
all federal and state income and all other material tax returns, reports and
declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
(r) Transactions With Affiliates. Except as set forth on Schedule 3(r) and
other than the grant or exercise of stock options disclosed on Schedule 3(c),
none of the officers, directors, or employees of the Company is presently a
party to any transaction with the Company or any of its Subsidiaries (other than
for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any officer, director, or any such employee has an interest or is an
officer, director, trustee or partner.
(s) Application of Takeover Protections. The Company and its board of
directors have taken or will take prior to the Commencement Date all necessary
action, if any, in order to render inapplicable any control share acquisition,
business combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Certificate of
Incorporation or the laws of the state of its incorporation which is or could
become applicable to the Buyer as a result of the transactions contemplated by
this Agreement, including, without limitation, the Company's issuance of the
Securities and the Buyer's ownership of the Securities.
(t) Foreign Corrupt Practices. Neither the Company, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any of its Subsidiaries has, in the course of its
actions for, or on behalf of, the Company, used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or made any unlawful bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
4. COVENANTS.
(a) Filing of Registration Statement. The Company shall within thirty (30)
Trading Days from the date hereof file a new registration statement covering the
sale of at least 7,020,350 shares of Common Stock. The Buyer and its counsel
shall have a reasonable opportunity to review and comment
-10-
upon such registration statement or amendment to such registration statement and
any related prospectus prior to its filing with the SEC. Buyer shall furnish all
information reasonably requested by the Company for inclusion therein. The
Company shall use its best efforts to have such registration statement or
amendment declared effective by the SEC at the earliest possible date.
(b) Blue Sky. The Company shall, on or before the Commencement Date, take
such action, if any, as the Company shall reasonably determine is necessary in
order to obtain an exemption for or to qualify the Commitment Shares and the
Purchase Shares for sale to the Buyer pursuant to this Agreement under
applicable securities or "Blue Sky" laws of the states of the United States, and
shall provide evidence of any such action so taken to the Buyer on or prior to
the Commencement Date. The Company shall make all filings and reports relating
to the offer and sale of the Commitment Shares and the Purchase Shares required
under applicable securities or "Blue Sky" laws of the states of the United
States following the Commencement Date.
(c) No Variable Priced Financing. Other than pursuant to this Agreement,
the Company agrees that beginning on the date of this Agreement and ending on
the date of termination of this Agreement (as provided in Section 11(k) hereof),
neither the Company nor any of its Subsidiaries shall, without the prior written
consent of the Buyer, contract for any equity financing (including any debt
financing with an equity component) or issue any equity securities of the
Company or any Subsidiary or securities convertible or exchangeable into or for
equity securities of the Company or any Subsidiary (including debt securities
with an equity component) which, in any case (i) are convertible into or
exchangeable for an indeterminate number of shares of common stock, (ii) are
convertible into or exchangeable for Common Stock at a price which varies with
the market price of the Common Stock, (iii) directly or indirectly provide for
any "re-set" or adjustment of the purchase price, conversion rate or exercise
price after the issuance of the security, or (iv) contain any "make-whole"
provision based upon, directly or indirectly, the market price of the Common
Stock after the issuance of the security, in each case, other than reasonable
and customary anti-dilution adjustments for issuance of shares of Common Stock
at a price which is below the market price of the Common Stock.
(d) Listing. The Company shall promptly secure the listing of all of the
Purchase Shares and Commitment Shares upon each national securities exchange and
automated quotation system, if any, upon which shares of Common Stock are then
listed (subject to official notice of issuance) and shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing of all such
securities from time to time issuable under the terms of the Transaction
Documents. The Company shall maintain the Common Stock's authorization for
quotation on the Principal Market. Neither the Company nor any of its
Subsidiaries shall take any action that would be reasonably expected to result
in the delisting or suspension of the Common Stock on the Principal Market. The
Company shall promptly, and in no event later than the following Trading Day,
provide to the Buyer copies of any notices it receives from the Principal Market
regarding the continued eligibility of the Common Stock for listing on such
automated quotation system or securities exchange. The Company shall pay all
fees and expenses in connection with satisfying its obligations under this
Section.
(e) Limitation on Short Sales and Hedging Transactions. The Buyer agrees
that beginning on the date of this Agreement and ending on the date of
termination of this Agreement as provided in Section 11(k), the Buyer and its
agents, representatives and affiliates shall not in any manner whatsoever enter
into or effect, directly or indirectly, any (i) "short sale" (as such term is
defined in Rule 3b-3 of the 0000 Xxx) of the Common Stock or (ii) hedging
transaction, which establishes a net short position with respect to the Common
Stock; provided, however, that such restrictions shall not apply (i) if the
Buyer after a sale of shares of Common Stock by the Buyer, is entitling to
purchase a number of shares of Common Stock at
-11-
least equal to the number of shares so sold or (ii) if an Event of Default has
occurred, including any failure by the Company to timely issue any Purchase
Shares required to be issued pursuant to the terms of this Agreement.
(f) Issuance of Commitment Shares; Limitation on Sales of Commitment
Shares. Immediately upon the execution of this Agreement, the Company shall
issue to the Buyer 970,350 shares of Common Stock (the "Commitment Shares"). The
Commitment Shares shall be issued in certificated form and (subject to Section 5
hereof) shall bear the following restrictive legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS,
OR AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE
SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT."
The Buyer agrees that the Buyer shall not transfer or sell the Commitment
Shares until the earlier of 600 Trading Days (30 Monthly Periods) from the date
hereof or date on which this Agreement has been terminated, provided, however,
that such restrictions shall not apply: (i) in connection with any transfers to
or among affiliates (as defined in the Securities Exchange Act of 1934, as
amended), (ii) in connection with any pledge in connection with a bona fide loan
or margin account, or (iii) if an Event of Default has occurred, or any event
which, after notice and/or lapse of time, would become an Event of Default,
including any failure by the Company to timely issue Purchase Shares under this
Agreement. Notwithstanding the forgoing, the Buyer may transfer Commitment
Shares to a third party in order to settle a sale made by the Buyer where the
Buyer reasonably expects the Company to deliver Purchase Shares to the Buyer
under this Agreement so long as the Buyer maintains ownership of the same
overall number of shares of Common Stock by "replacing" the Commitment Shares so
transferred with Purchase Shares when the Purchase Shares are actually issued by
the Company to the Buyer.
(g) Due Diligence. The Buyer shall have the right, from time to time as
the Buyer may reasonably deem appropriate, to perform reasonable due diligence
on the Company during normal business hours. The Company and its officers and
employees shall reasonably cooperate with the Buyer in connection with any
reasonable request by the Buyer related to the Buyer's due diligence of the
Company.
(h) Expense Reimbursement. As reimbursement of Buyer's expenses in
connection with the transactions contemplated hereby, (i) on or before January
14, 2002 (the "First Payment Date"), the Company agrees to pay to Buyer the sum
of $10,000 and (ii) on or before March 15, 2002 (the "Second Payment Date"), the
Company agrees to pay to Buyer an additional sum of $10,000. In the event the
Company fails to pay to Buyer (i) $10,000 on or before the First Payment Date,
the Company shall issue to the Buyer within five (5) Trading Days of the First
Payment Date, 25,000 shares of Common Stock, and (ii) an additional $10,000 on
or before the Second Payment Date, the Company shall issue to the Buyer within
five (5) Trading Days of the Second Payment Date, 25,000 shares of Common Stock.
-12-
5. TRANSFER AGENT INSTRUCTIONS.
On the Commencement Date, the Company shall cause any restrictive legend
on (i) the Commitment Shares and (ii) any shares of Common Stock issued to Buyer
under Section 4(h) hereof ("Expense Shares") to be removed and all of the
Purchase Shares and Expense Shares to be issued under this Agreement shall be
issued without any restrictive legend. The Company shall issue irrevocable
instructions to the Transfer Agent, and any subsequent transfer agent, to issue
Purchase Shares in the name of the Buyer for the Purchase Shares (the
"Irrevocable Transfer Agent Instructions"). The Company warrants to the Buyer
that no instruction other than the Irrevocable Transfer Agent Instructions
referred to in this Section 5, will be given by the Company to the Transfer
Agent with respect to the Purchase Shares and that the Commitment Shares and the
Purchase Shares shall otherwise be freely transferable on the books and records
of the Company as and to the extent provided in this Agreement and the
Registration Rights Agreement subject to the provisions of Section 4(f) in the
case of the Commitment Shares.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO COMMENCE SALES OF SHARES
OF COMMON STOCK.
The obligation of the Company hereunder to commence sales of the Purchase
Shares is subject to the satisfaction of each of the following conditions on or
before the Commencement Date (the date that sales begin) and once such
conditions have been initially satisfied, there shall not be any ongoing
obligation to satisfy such conditions after the Commencement has occurred;
provided that these conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion by providing the Buyer
with prior written notice thereof:
(a) The Buyer shall have executed each of the Transaction Documents to
which it is a party and delivered the same to the Company including the
Registration Rights Agreement substantially in the form of Exhibit A hereto (the
"Registration Rights Agreement").
(b) Subject to the Company's compliance with Section 4(a), a registration
statement covering the sale of all of the Commitment Shares, Expense Shares, and
at least 6,000,000 Purchase Shares shall have been declared effective under the
1933 Act by the SEC and no stop order with respect to the Registration Statement
shall be pending or threatened by the SEC.
(c) The representations and warranties of the Buyer shall be true and
correct in all material respects as of the date when made and as of the
Commencement Date as though made at that time (except for representations and
warranties that speak as of a specific date), and the Buyer shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Buyer at or prior to the Commencement Date.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO COMMENCE PURCHASES OF SHARES
OF COMMON STOCK.
The obligation of the Buyer to commence purchases of Purchase Shares under
this Agreement is subject to the satisfaction of each of the following
conditions on or before the Commencement Date (the date that sales begin) and
once such conditions have been initially satisfied, there shall not be any
ongoing obligation to satisfy such conditions after the Commencement has
occurred; provided that these conditions
-13-
are for the Buyer's sole benefit and may be waived by the Buyer at any time in
its sole discretion by providing the Company with prior written notice thereof:
(a) The Company shall have executed each of the Transaction Documents and
delivered the same to the Buyer including the Registration Rights Agreement
substantially in the form of Exhibit A hereto.
(b) The Company shall have issued to the Buyer the Commitment Shares and
shall have removed the restrictive transfer legend from the Commitment Shares
and the Expense Shares.
(c) The Common Stock shall be authorized for quotation on the Principal
Market, trading in the Common Stock shall not have been within the last 365 days
suspended by the SEC or the Principal Market and the Purchase Shares and the
Commitment Shares shall be approved for listing upon the Principal Market.
(d) The Buyer shall have received the opinions of the Company's legal
counsel dated as of the Commencement Date in the form of Exhibit B attached
hereto.
(e) The representations and warranties of the Company shall be true and
correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality in Section
3 above, in which case, such representations and warranties shall be true and
correct without further qualification) as of the date when made and as of the
Commencement Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied with the covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by the Company at or prior to the Commencement Date. The Buyer shall have
received a certificate, executed by the CEO, President or CFO of the Company,
dated as of the Commencement Date, to the foregoing effect in the form attached
hereto as Exhibit C.
(f) The Board of Directors of the Company shall have adopted resolutions
in the form attached hereto as Exhibit D which shall be in full force and effect
without any amendment or supplement thereto as of the Commencement Date.
(g) As of the Commencement Date, the Company shall have reserved out of
its authorized and unissued Common Stock, and solely for the purpose of
effecting purchases of Purchase Shares hereunder, at least 6,000,000 shares of
Common Stock.
(h) The Irrevocable Transfer Agent Instructions, in form acceptable to the
Buyer shall have been delivered to and acknowledged in writing by the Company
and the Company's Transfer Agent.
(i) The Company shall have delivered to the Buyer a certificate evidencing
the incorporation and good standing of the Company in the State of Nevada issued
by the Secretary of State of the State of Nevada as of a date within ten (10)
Trading Days of the Commencement Date.
(j) The Company shall have delivered to the Buyer a certified copy of the
Certificate of Incorporation as certified by the Secretary of State of the State
of Nevada within ten (10) Trading Days of the Commencement Date.
-14-
(k) The Company shall have delivered to the Buyer a secretary's
certificate executed by the Secretary of the Company, dated as of the
Commencement Date, in the form attached hereto as Exhibit E.
(l) A registration statement covering the sale of all of the Commitment
Shares, the Expense Shares and at least 6,000,000 Purchase Shares shall have
been declared effective under the 1933 Act by the SEC and no stop order with
respect to the registration statement shall be pending or threatened by the SEC.
The Company shall have prepared and delivered to the Buyer a final form of
prospectus to be used by the Buyer in connection with any sales of any
Commitment Shares, Expense Shares or any Purchase Shares. The Company shall have
made all filings under all applicable federal and state securities laws
necessary to consummate the issuance of the Commitment Shares and the Purchase
Shares pursuant to this Agreement in compliance with such laws.
(m) No Event of Default has occurred, or any event which, after notice
and/or lapse of time, would become an Event of Default has occurred.
(n) On or prior to the Commencement Date, the Company shall take all
necessary action, if any, and such actions as reasonably requested by the Buyer,
in order to render inapplicable any control share acquisition, business
combination, shareholder rights plan or poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under the
Certificate of Incorporation or the laws of the state of its incorporation which
is or could become applicable to the Buyer as a result of the transactions
contemplated by this Agreement, including, without limitation, the Company's
issuance of the Securities and the Buyer's ownership of the Securities.
8. INDEMNIFICATION.
In consideration of the Buyer's execution and delivery of the Transaction
Documents and acquiring the Securities hereunder and in addition to all of the
Company's other obligations under the Transaction Documents, the Company shall
defend, protect, indemnify and hold harmless the Buyer and all of its
affiliates, shareholders, officers, directors, employees and direct or indirect
investors and any of the foregoing person's agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "Indemnitees")
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys' fees and disbursements (the "Indemnified Liabilities"), incurred by
any Indemnitee as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby, or
(c) any cause of action, suit or claim brought or made against such Indemnitee
and arising out of or resulting from the execution, delivery, performance or
enforcement of the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, other than with respect to Indemnified
Liabilities which directly and primarily result from the gross negligence or
willful misconduct of the Indemnitee. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities which is permissible under applicable law.
-15-
9. EVENTS OF DEFAULT.
An "Event of Default" shall be deemed to have occurred at any time as any
of the following events occurs:
(a) while any registration statement is required to be maintained
effective pursuant to the terms of the Registration Rights Agreement, the
effectiveness of such registration statement lapses for any reason (including,
without limitation, the issuance of a stop order) or is unavailable to the Buyer
for sale of all of the Registrable Securities (as defined in the Registration
Rights Agreement) in accordance with the terms of the Registration Rights
Agreement, and such lapse or unavailability continues for a period of ten (10)
consecutive Trading Days or for more than an aggregate of thirty (30) Trading
Days in any 365-day period;
(b) the suspension from trading or failure of the Common Stock to be
listed on the Principal Market for a period of ten (10) consecutive Trading Days
or for more than an aggregate of thirty (30) Trading Days in any 365-day period;
(c) the failure of the Company or the Common Stock to fully meet the
requirements for continued listing on the Principal Market for a period of ten
(10) consecutive Trading Days or for more than an aggregate of thirty (30)
Trading Days in any 365-day period;
(d) the failure for any reason by the Transfer Agent to issue Purchase
Shares to the Buyer within five (5) Trading Days after the applicable Purchase
Date which the Buyer is entitled to receive;
(e) the Company breaches any representation, warranty, covenant or other
term or condition under any Transaction Document if such breach could have a
Material Adverse Effect and except, in the case of a breach of a covenant which
is reasonably curable, only if such breach continues for a period of at least
ten (10) Trading Days;
(f) any payment default under any contract whatsoever or any acceleration
prior to maturity of any mortgage, indenture, contract or instrument under which
there may be issued or by which there may be secured or evidenced any
indebtedness for money borrowed by the Company or for money borrowed the
repayment of which is guaranteed by the Company, whether such indebtedness or
guarantee now exists or shall be created hereafter, which, with respect to any
such payment default or acceleration prior to maturity, is in excess of
$1,000,000;
(g) if any Person commences a proceeding against the Company pursuant to
or within the meaning of any Bankruptcy Law;
(h) if the Company pursuant to or within the meaning of any Bankruptcy
Law; (A) commences a voluntary case, (B) consents to the entry of an order for
relief against it in an involuntary case, (C) consents to the appointment of a
Custodian of it or for all or substantially all of its property, (D) makes a
general assignment for the benefit of its creditors, (E) becomes insolvent, or
(F) is generally unable to pay its debts as the same become due;
(i) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that (A) is for relief against the Company in an involuntary
case, (B) appoints a Custodian of the Company or for all or substantially all of
its property, or (C) orders the liquidation of the Company or any Subsidiary; or
-16-
(j) The Company fails to make any payment or to issue the shares as
required under Section 4(h) of this Agreement.
In addition to any other rights and remedies under applicable law and this
Agreement, including the Buyer termination rights under Section 11(k) hereof, so
long as an Event of Default has occurred and is continuing, or if any event
which, after notice and/or lapse of time, would become an Event of Default, has
occurred and is continuing, or so long as the Purchase Price is below the
Purchase Price Floor, the Buyer shall not be obligated to purchase any shares of
Common Stock under this Agreement. If pursuant to or within the meaning of any
Bankruptcy Law, the Company commences a voluntary case or any Person commences a
proceeding against the Company, a Custodian is appointed for the Company or for
all or substantially all of its property, or the Company makes a general
assignment for the benefit of its creditors, (any of which would be an Event of
Default as described in Sections 9(g), 9(h) and 9(i) hereof) this Agreement
shall automatically terminate without any liability or payment to the Company
without further action or notice by any Person. No such termination of this
Agreement under Section 11(k)(i) shall affect the Company's or the Buyer's
obligations under this Agreement with respect to pending purchases and the
Company and the Buyer shall complete their respective obligations with respect
to any pending purchases under this Agreement.
10. CERTAIN DEFINED TERMS.
For purposes of this Agreement, the following terms shall have the
following meanings:
(a) "1933 Act" means the Securities Act of 1933, as amended.
(b) "Available Amount" means initially Six Million Dollars ($6,000,000) in
the aggregate which amount shall be reduced by the Purchase Amount each time the
Buyer purchases shares of Common Stock pursuant to Section 1 hereof.
(c) "Bankruptcy Law" means Title 11, U.S. Code, or any similar federal or
state law for the relief of debtors.
(d) "Closing Sale Price" means, for any security as of any date, the last
closing trade price for such security on the Principal Market as reported by
Bloomberg, or, if the Principal Market is not the principal securities exchange
or trading market for such security, the last closing trade price of such
security on the principal securities exchange or trading market where such
security is listed or traded as reported by Bloomberg.
(e) "Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
(f) "Daily Base Amount" means initially Ten Thousand Dollars ($10,000) per
Trading Day, which amount may be increased or decreased from time to time
pursuant to Section 1(c) hereof.
(g) "Floor Price" means initially $0.30, which amount may be increased of
decreased from time to time pursuant to Section 1(d)(iii) hereof, except that in
no case shall the Floor Price be less than $0.20 without the prior written
consent of the Buyer.
-17-
(i) "Maturity Date" means the date that is 600 Trading Days (30 Monthly
Periods) from the Commencement Date which such date may be extended by up to an
additional Six (6) Monthly Periods by the Company, in its sole discretion, by
written notice to the Buyer.
(j) "Monthly Base Amount" means Two Hundred Thousand Dollars ($200,000)
per Monthly Period.
(k) "Monthly Period" means each successive 20 Trading Day period
commencing with the Commencement Date.
(l) "Original Daily Base Amount" means Ten Thousand Dollars ($10,000) per
Trading Day.
(m) "Person" means an individual or entity including any limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.
(n) "Principal Market" means The Nasdaq OTC/ Bulletin Board market,
provided, however, that in the event the Company's Common Stock is ever listed
for trading on the Nasdaq National Market, Nasdaq SmallCap Market or the
American Stock Exchange, than the "Principal Market" shall mean such other
market on which the Company's Common Stock is then listed.
(o) "Purchase Amount" means the portion of the Available Amount to be
purchased by the Buyer pursuant to Section 1 hereof.
(p) "Purchase Date" means the actual date that the Buyer is to buy
Purchase Shares pursuant to Section 1 hereof.
(q) "Purchase Price" means, as of any Purchase Date the lower of the (A)
the lowest Sale Price of the Common Stock on the Purchase Date or such other
date of determination and (B) the arithmetic average of the three (3) lowest
Closing Sale Prices for the Common Stock during the twelve (12) consecutive
Trading Days ending on the Trading Day immediately preceding such Purchase Date
or other date of determination (to be appropriately adjusted for any
reorganization, recapitalization, non-cash dividend, stock split or other
similar transaction).
(r) "Sale Price" means, for any security as of any date, any trade price
for such security on the Principal Market as reported by Bloomberg, or, if the
Principal Market is not the principal securities exchange or trading market for
such security, the trade price of such security on the principal securities
exchange or trading market where such security is listed or traded as reported
by Bloomberg.
(s) "SEC" means the United States Securities and Exchange Commission.
(t) "Trading Day" means any day on which the Principal Market is open for
customary trading.
-18-
11. MISCELLANEOUS.
(a) Governing Law; Jurisdiction; Jury Trial. The corporate laws of the
State of Nevada shall govern all issues concerning the relative rights of the
Company and its shareholders. All other questions concerning the construction,
validity, enforcement and interpretation of this Agreement and the other
Transaction Documents shall be governed by the internal laws of the State of
Illinois, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Illinois or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of Illinois. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of Chicago, for
the adjudication of any dispute hereunder or under the other Transaction
Documents or in connection herewith or therewith, or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. 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.
(b) Counterparts. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party; provided that a facsimile signature shall be
considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original, not a facsimile
signature.
(c) Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
(e) Entire Agreement; Amendments. With the exception of the Mutual
Nondisclosure Agreement between the parties dated as of November 8th, this
Agreement supersedes all other prior oral or written agreements between the
Buyer, the Company, their affiliates and persons acting on their behalf with
respect to the matters discussed herein, and this Agreement, the other
Transaction Documents and the instruments referenced herein contain the entire
understanding of the parties with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, neither the
Company nor the Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this Agreement may be
amended other than by an instrument in writing signed by the Company and the
Buyer, and no provision hereof may be waived other than by an instrument in
writing signed by the party against whom enforcement is sought.
-19-
(f) Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Trading Day after deposit with
a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
If to the Company:
BioProgress Technology International, Inc.
0000 Xxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxx X. Xxxxxxxxx
With a copy to:
Xxxxxxxx, Xxxxx & Merlin, LLC
Suite 2150, Tower Place 100
0000 Xxxxxxxxx Xxxx, X.X.
Xxxxxxx, XX 00000-0000
Telephone: 000-000-0000 Ext. 117
Facsimile: 000-000-0000
Attention: Xxxxxxx X. Xxxxxxxx
If to the Buyer:
Fusion Capital Fund II, LLC
000 Xxxxxxxxxxx Xxxx Xxxxx, Xxxxx 0-000
Xxxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxxx X. Xxxxxx
If to the Transfer Agent:
Fidelity Transfer Company
0000 X. Xxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxx Xxxxxxxx, President/C.E.O
or at such other address and/or facsimile number and/or to the attention of such
other person as the recipient party has specified by written notice given to
each other party three (3) Trading Days prior to the effectiveness of such
change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, and recipient facsimile number or (C) provided by a nationally recognized
overnight delivery service, shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from a nationally recognized overnight delivery
service in accordance with clause (i), (ii) or (iii) above, respectively.
-20-
(g) Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their respective successors and assigns. The
Company shall not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Buyer, including by merger or
consolidation. The Buyer may not assign its rights or obligations under this
Agreement.
(h) No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
(i) Publicity. The Buyer shall have the right to approve before issuance
any press releases or any other public disclosure (including any filings with
the SEC) with respect to the transactions contemplated hereby; provided,
however, that the Company shall be entitled, without the prior approval of any
Buyer, to make any press release or other public disclosure (including any
filings with the SEC) with respect to such transactions as is required by
applicable law and regulations (although the Buyer shall be consulted by the
Company in connection with any such press release or other public disclosure
prior to its release and shall be provided with a copy thereof).
(j) Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(k) Termination. This Agreement may be terminated only as follows:
(i) By the Buyer any time an Event of Default exists without any
liability or payment to the Company. However, if pursuant to or within the
meaning of any Bankruptcy Law, the Company commences a voluntary case or
any Person commences a proceeding against the Company, a Custodian is
appointed for the Company or for all or substantially all of its property,
or the Company makes a general assignment for the benefit of its
creditors, (any of which would be an Event of Default as described in
Sections 9(g), 9(h) and 9(i) hereof) this Agreement shall automatically
terminate without any liability or payment to the Company without further
action or notice by any Person. No such termination of this Agreement
under this Section 11(k)(i) shall affect the Company's or the Buyer's
obligations under this Agreement with respect to pending purchases and the
Company and the Buyer shall complete their respective obligations with
respect to any pending purchases under this Agreement.
(ii) In the event that the Commencement shall not have occurred, the
Company shall have the option to terminate this Agreement for any reason
or for no reason without liability of any party to any other party.
(iii) In the event that the Commencement shall not have occurred on
or before February 15, 2002, due to the failure to satisfy the conditions
set forth in Sections 6 and 7 above with respect to the Commencement (and
the nonbreaching party's failure to waive such unsatisfied condition(s)),
the nonbreaching party shall have the option to terminate this Agreement
at the close of business on such date or thereafter without liability of
any party to any other party.
(iv) If by the Maturity Date (including any extension thereof by the
Company pursuant to Section 10(g) hereof), for any reason or for no reason
the full Available Amount under this
-21-
Agreement has not been purchased as provided for in Section 1 of this
Agreement, by the Buyer without any liability or payment to the Company.
(v) At any time after the Commencement Date, the Company shall have
the option to terminate this Agreement for any reason or for no reason by
delivering notice (a "Company Termination Notice") to the Buyer electing
to terminate this Agreement without any liability or payment to the Buyer.
The Company Termination Notice shall not be effective until one (1)
Trading Day after it has been received by the Buyer.
(vi) This Agreement shall automatically terminate on the date that
the Company sells and the Buyer purchases Six Million Dollars ($6,000,000)
as provided herein, without any action or notice on the part of any party.
Except as set forth in Sections 11(k)(i) and 11(k)(vi), any termination of this
Agreement pursuant to this Section 11(k) shall be effected by written notice
from the Company to the Buyer, or the Buyer to the Company, as the case may be,
setting forth the basis for the termination hereof. The representations and
warranties of the Company and the Buyer contained in Sections 2 and 3 hereof,
the indemnification provisions set forth in Section 8 hereof and the agreements
and covenants set forth in Section Section 11, shall survive the Commencement
and any termination of this Agreement. No termination of this Agreement shall
affect the Company's or the Buyer's obligations under this Agreement with
respect to pending purchases and the Company and the Buyer shall complete their
respective obligations with respect to any pending purchases under this
Agreement.
(l) No Financial Advisor, Placement Agent, Broker or Finder. The Company
represents and warrants to the Buyer that it has not engaged any financial
advisor, placement agent, broker or finder in connection with the transactions
contemplated hereby. The Buyer represents and warrants to the Company that it
has not engaged any financial advisor, placement agent, broker or finder in
connection with the transactions contemplated hereby. The Company shall be
responsible for the payment of any fees or commissions, if any, of any financial
advisor, placement agent, broker or finder relating to or arising out of the
transactions contemplated hereby. The Company shall pay, and hold the Buyer
harmless against, any liability, loss or expense (including, without limitation,
attorneys' fees and out of pocket expenses) arising in connection with any such
claim.
(m) No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.
(n) Remedies, Other Obligations, Breaches and Injunctive Relief. The
Buyer's remedies provided in this Agreement shall be cumulative and in addition
to all other remedies available to the Buyer under this Agreement, at law or in
equity (including a decree of specific performance and/or other injunctive
relief), no remedy of the Buyer contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and nothing herein
shall limit the Buyer's right to pursue actual damages for any failure by the
Company to comply with the terms of this Agreement. The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm to
the Buyer and that the remedy at law for any such breach may be inadequate. The
Company therefore agrees that, in the event of any such breach or threatened
breach, the Buyer shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, without the necessity of
showing economic loss and without any bond or other security being required.
-22-
(o) Changes to the Terms of this Agreement. This Agreement and any
provision hereof may only be amended by an instrument in writing signed by the
Company and the Buyer. The term "Agreement" and all reference thereto, as used
throughout this instrument, shall mean this instrument as originally executed,
or if later amended or supplemented, then as so amended or supplemented.
(p) Enforcement Costs. If: (i) this Agreement is placed by the Buyer in
the hands of an attorney for enforcement or is enforced by the Buyer through any
legal proceeding; or (ii) an attorney is retained to represent the Buyer in any
bankruptcy, reorganization, receivership or other proceedings affecting
creditors' rights and involving a claim under this Agreement; or (iii) an
attorney is retained to represent the Buyer in any other proceedings whatsoever
in connection with this Agreement, then the Company shall pay to the Buyer, as
incurred by the Buyer, all reasonable costs and expenses including attorneys'
fees incurred in connection therewith, in addition to all other amounts due
hereunder.
(q) Failure or Indulgence Not Waiver. No failure or delay in the exercise
of any power, right or privilege hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or
privilege.
* * * * *
-23-
IN WITNESS WHEREOF, the Buyer and the Company have caused this Common
Stock Purchase Agreement to be duly executed as of the date first written above.
THE COMPANY:
BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.
By:______________________
Name: Xxxxx X. Xxxxxxxxx
Title: Chief Executive Officer
BUYER:
FUSION CAPITAL FUND II, LLC
BY: FUSION CAPITAL PARTNERS, LLC
BY: SGM HOLDINGS CORP.
By:_______________________
Name: Xxxxxx X. Xxxxxx
Title: President
-24-
SCHEDULES
Schedule 3(a) Subsidiaries
Schedule 3(c) Capitalization
Schedule 3(e) Conflicts
Schedule 3(f) 1934 Act Filings
Schedule 3(g) Material Changes
Schedule 3(h) Litigation
Schedule 3(l) Intellectual Property
Schedule 3(n) Liens
Schedule 3(r) Certain Transactions
EXHIBITS
Exhibit A Form of Registration Rights Agreement
Exhibit B Form of Company Counsel Opinion
Exhibit C Form of Officer's Certificate
Exhibit D Form of Resolutions of Board of Directors of the Company
Exhibit E Form of Secretary's Certificate
DISCLOSURE SCHEDULES
Schedule 3(a) - Subsidiaries
Schedule 3(c) - Capitalization
Schedule 3(e) - No Conflicts
Schedule 3(f) - 1934 Act Filings
Schedule 3(g) - Absence of Certain Changes
Schedule 3(h) - Litigation
Schedule 3(l) - Intellectual Property Rights
Schedule 3(n) - Title
Schedule 3(r) - Transactions with Affiliates
EXHIBIT A
FORM OF REGISTRATION RIGHTS AGREEMENT
[Sent separately]
EXHIBIT B
FORM OF COMPANY COUNSEL OPINION
Capitalized terms used herein but not defined herein, have the meaning set
forth in the Common Stock Purchase Agreement. Based on the foregoing, and
subject to the assumptions and qualifications set forth herein, we are of the
opinion that:
1. The Company is a corporation existing and in good standing under
the laws of the State of _______. The Company is qualified to do business as a
foreign corporation and is in good standing in the States of ________.
2. The Company has the corporate power to execute and deliver, and
perform its obligations under, each Transaction Document to which it is a party.
The Company has the corporate power to conduct its business as, to the best of
our knowledge, it is now conducted, and to own and use the properties owned and
used by it.
3. The execution, delivery and performance by the Company of the
Transaction Documents to which it is a party have been duly authorized by all
necessary corporate action on the part of the Company. The execution and
delivery of the Transaction Documents by the Company, the performance of the
obligations of the Company thereunder and the consummation by it of the
transactions contemplated therein have been duly authorized and approved by the
Company's Board of Directors and no further consent, approval or authorization
of the Company, its Board of Directors or its stockholders is required. The
Transaction Documents to which the Company is a party have been duly executed
and delivered by the Company and are the valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms except
as such enforceability may be limited by general principals of equity or
applicable bankruptcy, insolvency, liquidation or similar laws relating to, or
affecting creditor's rights and remedies.
4. The execution, delivery and performance by the Company of the
Transaction Documents, the consummation by the Company of the transactions
contemplated thereby including the offering, sale and issuance of the Commitment
Shares, and the Purchase Shares in accordance with the terms and conditions of
the Common Stock Purchase Agreement, and fulfillment and compliance with terms
of the Transaction Documents, does not and shall not: (i) conflict with,
constitute a breach of or default (or an event which, with the giving of notice
or lapse of time or both, constitutes or could constitute a breach or a
default), under (a) the Certificate of Incorporation or the Bylaws of the
Company, (b) any material agreement, note, lease, mortgage, deed or other
material instrument to which to our knowledge the Company is a party or by which
the Company or any of its assets are bound, (ii) result in any violation of any
statute, law, rule or regulation applicable to the Company, or (iii) to our
knowledge, violate any order, writ, injunction or decree applicable to the
Company or any of its subsidiaries.
5. The issuance of the Purchase Shares and pursuant to the terms and
conditions of the Transaction Documents has been duly authorized. ________
shares of Common Stock have been properly reserved for issuance under the Common
Stock Purchase Agreement. When issued and paid for in accordance with the Common
Stock Purchase Agreement, the Purchase Shares shall be validly issued, fully
paid and non-assessable, to our knowledge, free of all taxes, liens, charges,
restrictions, rights of first refusal and preemptive rights. 50,000 shares of
Common Stock have been properly reserved for issuance as Expense Shares under
the Common Stock Purchase Agreement. When issued in accordance with the Common
Stock Purchase Agreement, the Expense Shares shall be validly issued,
fully paid and non-assessable, to our knowledge, free of all taxes, liens,
charges, restrictions, rights of first refusal and preemptive rights To our
knowledge, the execution and delivery of the Registration Rights Agreement do
not, and the performance by the Company of its obligations thereunder shall not,
give rise to any rights of any other person for the registration under the
Securities Act of any shares of Common Stock or other securities of the Company
which have not been waived.
6. As of the date hereof, the authorized capital stock of the
Company consists of _______ shares of common stock, par value $______ per share,
of which to our knowledge __________ shares are issued and outstanding. Except
as set forth on Schedule 3(c) of the Common Stock Purchase Agreement, to our
knowledge, there are no outstanding shares of capital stock or other securities
convertible into or exchangeable or exercisable for shares of the capital stock
of the Company.
7. Assuming the accuracy of the representations and your compliance
with the covenants made by you in the Transaction Documents, the offering, sale
and issuance of the Commitment Shares to you pursuant to the Transaction
Documents is exempt from registration under the 1933 Act and the securities laws
and regulations of the State of _________.
8. Other then which has been obtained and completed prior to the
date hereof, no authorization, approval, consent, filing or other order of any
federal or state governmental body, regulatory agency, or stock exchange or
market, or any court, or, to our knowledge, any third party is required to be
obtained by the Company to enter into and perform its obligations under the
Transaction Documents or for the Company to issue and sell the Purchase Shares
as contemplated by the Transaction Documents.
9. The Common Stock is registered pursuant to Section 12(g) of the
Exchange Act. To our knowledge, since January 1, 1999, the Company has been in
compliance with the reporting requirements of the Exchange Act applicable to it.
To our knowledge, since January 1, 1999, the Company has not received any
written notice from the Principal Market stating that the Company has not been
in compliance with any of the rules and regulations (including the requirements
for continued listing) of the Principal Market.
We further advise you that to our knowledge, except as disclosed on
Schedule 3(h) in the Common Stock Purchase Agreement, there is no action, suit,
proceeding, inquiry or investigation before or by any court, public board or
body, any governmental agency, any stock exchange or market, or self-regulatory
organization, which has been threatened in writing or which is currently pending
against the Company, any of its subsidiaries, any officers or directors of the
Company or any of its subsidiaries or any of the properties of the Company or
any of its subsidiaries.
In addition, we have participated in the preparation of the SEC Documents
and the Registration Statement (SEC File #________) covering the sale of the
Purchase Shares and the Commitment Shares including the prospectus dated
____________, contained therein and in conferences with officers and other
representatives of the Company (including the Company's independent auditors)
during which the contents of the SEC Documents, the Registration Statement and
related matters were discussed and reviewed and, although we are not passing
upon and do not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the SEC Documents or the Registration
Statement, on the basis of the information that was developed in the course of
the performance of the services referred to above, considered in the light of
our understanding of the applicable law, nothing came to our attention that
caused us to believe that the SEC Documents or the Registration Statement (other
than the financial statements and schedules and the other financial and
statistical data included therein, as to which we express no belief), as
of their dates, contained any untrue statement of a material fact or omitted to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
EXHIBIT C
FORM OF OFFICER'S CERTIFICATE
This Officer's Certificate ("Certificate") is being delivered pursuant to
Section 7(e) of that certain Common Stock Purchase Agreement dated as of
_________, ("Common Stock Purchase Agreement"), by and between ___________, a
_______ corporation (the "Company"), and FUSION CAPITAL FUND II, LLC (the
"Buyer"). Terms used herein and not otherwise defined shall have the meanings
ascribed to them in the Common Stock Purchase Agreement.
The undersigned, ___________, ______________ of the Company, hereby
certifies as follows:
1. I am the _____________ of the Company and make the statements
contained in this Certificate;
2. The representations and warranties of the Company are true and
correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality in
Section 3 of the Common Stock Purchase Agreement, in which case, such
representations and warranties are true and correct without further
qualification) as of the date when made and as of the Commencement Date as
though made at that time (except for representations and warranties that
speak as of a specific date);
3. The Company has performed, satisfied and complied in all material
respects with covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the
Company at or prior to the Commencement Date.
IN WITNESS WHEREOF, I have hereunder signed my name on this ___ day of
___________.
----------------------
Name:
Title:
The undersigned as Secretary of ________, a ________ corporation, hereby
certifies that ___________ is the duly elected, appointed, qualified and acting
________ of _________ and that the signature appearing above is his genuine
signature.
-----------------------------------
Secretary
EXHIBIT D
FORM OF COMPANY RESOLUTIONS
WHEREAS, there has been presented to the Board of Directors of
________________, (the "Corporation") a draft of the Common Stock Purchase
Agreement (the "Purchase Agreement") by and among the Corporation and Fusion
Capital Fund II, LLC ("Fusion"), providing for the purchase by Fusion of up to
_______ Million Dollars ($_____,000,000) of the Corporation's common stock, par
value $___ (the "Common Stock"); and
WHEREAS, after careful consideration of the Purchase Agreement, the
documents incident thereto and other factors deemed relevant by the Board of
Directors, the Board of Directors has determined that it is advisable and in the
best interests of the Corporation to engage in to transactions contemplated by
the Purchase Agreement.
Transaction Documents
RESOLVED, that the transactions described in the Purchase Agreement are
hereby approved and ____________________________________________ (the
"Authorized Officers") are severally authorized to execute and deliver the
Purchase Agreement, and any other agreements or documents contemplated thereby
including, without limitation, a registration rights agreement (the
"Registration Rights Agreement") providing for the sale of the shares of the
Company's Common Stock issuable in respect of the Purchase Agreement) on behalf
of the Corporation, with such amendments, changes, additions and deletions as
the Authorized Officers may deem to be appropriate and approve on behalf of, the
Corporation, such approval to be conclusively evidenced by the signature of an
Authorized Officer thereon; and
FURTHER RESOLVED, that the terms and provisions of the Registration Rights
Agreement by and among the Corporation and Fusion are hereby approved and the
Authorized Officers are authorized to execute and deliver the Registration
Rights Agreement (pursuant to the terms of the Purchase Agreement), with such
amendments, changes, additions and deletions as the Authorized Officer may deem
appropriate and approve on behalf of, an Corporation, such approval to be
conclusively evidenced by the signature of an Authorized Officer thereon; and
FURTHER RESOLVED, that the terms and provisions of the Form of Transfer
Agent Instructions (the "Instructions") are hereby approved and the Authorized
Officers are authorized to execute and deliver the Instructions (pursuant to the
terms of the Purchase Agreement), with such amendments, changes, additions and
deletions as the Authorized Officers may deem appropriate and approve on behalf
of, the Corporation, such approval to be conclusively evidenced by the signature
of an Authorized Officer thereon; and
Execution of Purchase Agreement
FURTHER RESOLVED, that the Corporation be and it hereby is authorized to
execute the Purchase Agreement providing for the purchase of common stock of the
Corporation having an aggregate value of up to $____________; and
Issuance of Common Stock
FURTHER RESOLVED, that the Corporation is hereby authorized to issue the
Commitment Shares (as defined in the Purchase Agreement) and that, upon issuance
of the Commitment Shares pursuant to the Purchase Agreement, the Commitment
Shares shall be duly authorized, validly issued, fully paid and nonassessable
with no personal liability attaching to the ownership thereof; and
FURTHER RESOLVED, that the Corporation is hereby authorized to issue
shares of Common Stock upon the purchase of shares of Common Stock up to the
available amount under the Purchase Agreement (the "Purchase Shares") in
accordance with the terms of the Purchase Agreement and that, upon issuance of
the Purchase Shares pursuant to the Purchase Agreement, the Purchase Shares will
be duly authorized, validly issued, fully paid and nonassessable with no
personal liability attaching to the ownership thereof; and
FURTHER RESOLVED, that the Corporation shall initially reserve __________
shares of Common Stock for issuance as Purchase Shares under the Purchase
Agreement.
FURTHER RESOLVED, that the Corporation shall initially reserve __________
shares of Common Stock for issuance as Expense Shares under the Purchase
Agreement.
Registration Statement
The management of the Corporation has prepared an initial draft of a
Registration Statement on Form ___ (the "Registration Statement") in order to
register the sale of the Purchase Shares, the Commitment Shares (collectively,
the "Shares"); and
The Board of Directors has determined to approve the Registration
Statement and to authorize the appropriate officers of the Corporation to take
all such actions as they may deem appropriate to effect the offering; and
NOW, THEREFORE, BE IT RESOLVED, that the officers and directors of the
Corporation be, and each of them hereby is, authorized and directed, with the
assistance of counsel and accountants for the Corporation, to prepare, execute
and file with the Securities and Exchange Commission (the "Commission") the
Registration Statement, which Registration Statement shall be filed
substantially in the form presented to the Board of Directors, with such changes
therein as the Chief Executive Officer of the Corporation or any Vice President
of the Corporation shall deem desirable and in the best interest of the
Corporation and its shareholders (such officer's execution thereof including
such changes shall be deemed to evidence conclusively such determination); and
FURTHER RESOLVED, that the officers of the Corporation be, and each of
them hereby is, authorized and directed, with the assistance of counsel and
accountants for the Corporation, to prepare, execute and file with the
Commission all amendments, including post-effective amendments, and supplements
to the Registration Statement, and all certificates, exhibits, schedules,
documents and other instruments relating to the Registration Statement, as such
officers shall deem necessary or appropriate (such officer's execution and
filing thereof shall be deemed to evidence conclusively such determination); and
FURTHER RESOLVED, that the execution of the Registration Statement and of
any amendments and supplements thereto by the officers and directors of the
Corporation be, and the same hereby is, specifically authorized either
personally or by the Authorized Officers as such officer's or director's true
and lawful attorneys-in-fact and agents; and
FURTHER RESOLVED, that the Authorized Officers are hereby is designated as
"Agent for Service" of the Corporation in connection with the Registration
Statement and the filing thereof with the Commission, and the Authorized
Officers hereby are, authorized to receive communications and notices from the
Commission with respect to the Registration Statement; and
FURTHER RESOLVED, that the officers of the Corporation be, and each of
them hereby is, authorized and directed to pay all fees, costs and expenses that
may be incurred by the Corporation in connection with the Registration
Statement; and
FURTHER RESOLVED, that it is desirable and in the best interest of the
Corporation that the Shares be qualified or registered for sale in various
states; that the officers of the Corporation be, and each of them hereby is,
authorized to determine the states in which appropriate action shall be taken to
qualify or register for sale all or such part of the Shares as they may deem
advisable; that said officers be, and each of them hereby is, authorized to
perform on behalf of the Corporation any and all such acts as they may deem
necessary or advisable in order to comply with the applicable laws of any such
states, and in connection therewith to execute and file all requisite papers and
documents, including, but not limited to, applications, reports, surety bonds,
irrevocable consents, appointments of attorneys for service of process and
resolutions; and the execution by such officers of any such paper or document or
the doing by them of any act in connection with the foregoing matters shall
conclusively establish their authority therefor from the Corporation and the
approval and ratification by the Corporation of the papers and documents so
executed and the actions so taken; and
FURTHER RESOLVED, that if, in any state where the securities to be
registered or qualified for sale to the public, or where the Corporation is to
be registered in connection with the public offering of the Shares, a prescribed
form of resolution or resolutions is required to be adopted by the Board of
Directors, each such resolution shall be deemed to have been and hereby is
adopted, and the Secretary is hereby authorized to certify the adoption of all
such resolutions as though such resolutions were now presented to and adopted by
the Board of Directors; and
FURTHER RESOLVED, that the officers of the Corporation with the assistance
of counsel be, and each of them hereby is, authorized and directed to take all
necessary steps and do all other things necessary and appropriate to effect the
listing of the Shares on the Over-The-Counter Bulleting Board.
Approval of Actions
RESOLVED, that, without limiting the foregoing, the Authorized Officers
are, and each of them hereby is, authorized and directed to proceed on behalf of
the Corporation and to take all such steps as deemed necessary or appropriate,
with the advice and assistance of counsel, to cause the Corporation to
consummate the agreements referred to herein and to perform its obligations
under such agreements; and
RESOLVED, that the Authorized Officers be, and each of them hereby is,
authorized, empowered and directed on behalf of and in the name of the
Corporation, to take or cause to be taken all such further actions and to
execute and deliver or cause to be executed and delivered all such further
agreements, amendments, documents, certificates, reports, schedules,
applications, notices, letters and undertakings and
to incur and pay all such fees and expenses as in their judgment shall be
necessary, proper or desirable to carry into effect the purpose and intent of
any and all of the foregoing resolutions, and that all actions heretofore taken
by any officer or director of the Corporation in connection with the
transactions contemplated by the agreements described herein are hereby
approved, ratified and confirmed in all respects.
EXHIBIT E
FORM OF SECRETARY'S CERTIFICATE
This Secretary's Certificate ("Certificate") is being delivered pursuant
to Section 7(k) of that certain Common Stock Purchase Agreement dated as of
__________, ("Common Stock Purchase Agreement"), by and between _______, a
________ corporation (the "Company") and FUSION CAPITAL FUND II, LLC (the
"Buyer"), pursuant to which the Company may sell to the Buyer up to __________
Dollars ($___________) of the Company's Common Stock, par value $_____ per share
(the "Common Stock"). Terms used herein and not otherwise defined shall have the
meanings ascribed to them in the Common Stock Purchase Agreement.
The undersigned, ____________, Secretary of the Company, hereby certifies as
follows:
1. I am the Secretary of the Company and make the statements
contained in this Secretary's Certificate.
2. Attached hereto as Exhibit A and Exhibit B are true, correct and
complete copies of the Company's bylaws ("Bylaws") and Certificate of
Incorporation ("Articles"), in each case, as amended through the date
hereof, and no action has been taken by the Company, its directors,
officers or shareholders, in contemplation of the filing of any further
amendment relating to or affecting the Bylaws or Articles.
3. Attached hereto as Exhibit C are true, correct and complete
copies of the resolutions duly adopted by the Board of Directors of the
Company on _____________, at which a quorum was present and acting
throughout. Such resolutions have not been amended, modified or rescinded
and remain in full force and effect and such resolutions are the only
resolutions adopted by the Company's Board of Directors, or any committee
thereof, or the shareholders of the Company relating to or affecting (i)
the entering into and performance of the Common Stock Purchase Agreement,
or the issuance, offering and sale of the Purchase Shares and the
Commitment Shares and (ii) and the performance of the Company of its
obligation under the Transaction Documents as contemplated therein.
4. As of the date hereof, the authorized, issued and reserved
capital stock of the Company is as set forth on Exhibit D hereto.
IN WITNESS WHEREOF, I have hereunder signed my name on this ___ day
of ____________.
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Secretary
The undersigned as ___________ of __________, a ________ corporation,
hereby certifies that ____________ is the duly elected, appointed, qualified and
acting Secretary of _________, and that the signature appearing above is his
genuine signature.
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