EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of
September 5, 2003, is made by and among Xxxxxxxxx Resources, Inc., a corporation
organized under the laws of British Columbia, Canada (the "COMPANY"), and each
of the purchasers (individually, a "PURCHASER" and collectively the
"PURCHASERS") set forth on the execution pages hereof (each, an "EXECUTION PAGE"
and collectively the "EXECUTION PAGES").
BACKGROUND
A. The Company and each Purchaser are executing and delivering
this Agreement in reliance upon the exemption from securities registration
afforded by the provisions of Regulation D ("REGULATION D"), as promulgated by
the United States Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "SECURITIES ACT").
B. Upon the terms and conditions stated in this Agreement, the
Company desires to issue and sell to the Purchasers, and each Purchaser desires
to purchase, units (the "UNITS"), each Unit consisting of (i) a convertible
promissory note, in the form attached hereto as Exhibit A (collectively,
including any PIK Notes (as such term is defined in such convertible promissory
notes) issued in respect thereof, the "NOTES"), in the principal face amount of
$1,000.00, which Notes shall be initially convertible into approximately 222.22
shares of the Company's common stock, no par value per share (the "COMMON
STOCK"), per $1,000.00 of principal face amount of Notes (as may be adjusted
from time to time), and (ii) a warrant, in the form attached hereto as Exhibit B
(the "WARRANTS"), to acquire initially approximately 44.44 shares of Common
Stock. The shares of Common Stock issuable upon conversion of or otherwise
pursuant to the Notes are referred to herein as the "CONVERSION SHARES" and the
shares of Common Stock issuable upon exercise of or otherwise pursuant to the
Warrants are referred to herein as the "WARRANT SHARES." The Notes, the
Warrants, the Conversion Shares and the Warrant Shares are collectively
referenced herein as the "SECURITIES" and each of them may individually be
referred to herein as a "SECURITY."
C. Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement, in the form attached hereto as Exhibit C (the "REGISTRATION RIGHTS
AGREEMENT"), pursuant to which the Company has agreed to provide certain
registration rights under the Securities Act and the rules and regulations
promulgated thereunder, and applicable state securities laws. This Agreement,
the Notes, the Warrants and the Registration Rights Agreement are collectively
referred to herein as the "TRANSACTION DOCUMENTS."
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Purchasers,
intending to be legally bound, hereby agree as follows:
1. PURCHASE AND SALE OF SECURITIES.
(a) Purchase and Sale of Securities. Subject to the terms and
conditions hereof, at the Closing (as defined in Section 1(b) below), the
Company shall issue and sell to each Purchaser, and each Purchaser, severally
and not jointly, shall purchase from the Company, such number of Units as is set
forth on such Purchaser's Execution Page, for a purchase price (as to each
Purchaser, the "PURCHASE PRICE") per Unit equal to One Thousand Dollars
($1,000.00). The aggregate amount of Units to be issued and sold by the Company
to all Purchasers pursuant to this Agreement shall not exceed Five Million
Dollars ($5,000,000.00).
(b) The Closing. Subject to the satisfaction (or waiver) of the
conditions set forth in Sections 6 and 7 below, the closing of the transactions
contemplated hereby (the "CLOSING") shall take place at the offices of Drinker
Xxxxxx & Xxxxx LLP at One Xxxxx Square, 00xx & Xxxxxx Xxxxxxx, Xxxxxxxxxxxx,
Xxxxxxxxxxxx 00000 at 10:00 a.m., Philadelphia, Pennsylvania time, on the date
hereof, or at such other time or place as the Company and the Purchasers may
mutually agree (the "CLOSING DATE").
2. PURCHASER'S REPRESENTATIONS AND WARRANTIES.
Each Purchaser severally, but not jointly, represents and warrants to
the Company as follows:
(a) Purchase for Own Account, Etc. Such Purchaser is purchasing
the Securities for such Purchaser's own account for investment purposes only and
not with a present view towards the public sale or distribution thereof, except
pursuant to sales that are exempt from the registration requirements of the
Securities Act and/or sales registered under the Securities Act. Such Purchaser
understands that such Purchaser must bear the economic risk of this investment
indefinitely, unless the Securities are registered pursuant to the Securities
Act and any applicable state securities or blue sky laws or an exemption from
such registration is available, and that the Company has no present intention of
registering the resale of any such Securities other than as contemplated by the
Registration Rights Agreement. Notwithstanding anything in this Section 2(a) to
the contrary, by making the representations herein, such Purchaser does not
agree to hold the Securities for any minimum or other specific term and reserves
the right to dispose of the Securities at any time in accordance with or
pursuant to a registration statement or an exemption from the registration
requirements under the Securities Act.
(b) Accredited Investor Status. Such Purchaser is an "Accredited
Investor" as that term is defined in Rule 501(a) of Regulation D.
(c) Reliance on Exemptions. Such Purchaser understands that the
Securities are being offered and sold to such Purchaser in reliance upon
specific exemptions from the registration requirements of United States federal
and state securities laws and that the Company is relying upon the truth and
accuracy of, and such Purchaser's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of such Purchaser set
forth herein in order to determine the availability of such exemptions and the
eligibility of such Purchaser to acquire the Securities.
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(d) Information. Such Purchaser and its counsel, if any, have been
furnished all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Securities which
have been specifically requested by such Purchaser or its counsel. Neither such
inquiries nor any other investigation conducted by such Purchaser or its counsel
or any of its representatives shall modify, amend or affect such Purchaser's
right to rely on the Company's representations and warranties contained in
Section 3 below. Such Purchaser understands that such Purchaser's investment in
the Securities involves a high degree of risk.
(e) Governmental Review. Such Purchaser understands that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.
(f) Authorization; Enforcement. This Agreement and the
Registration Rights Agreement have been duly and validly authorized, executed
and delivered on behalf of such Purchaser and are valid and binding agreements
of such Purchaser enforceable against such Purchaser in accordance with their
respective terms.
(g) Residency. Such Purchaser is a resident of the jurisdiction
set forth under such Purchaser's name on the Execution Page hereto executed by
such Purchaser.
(h) Transactions in the Company's Common Stock. Such Purchaser has
not effected any purchases or sales of the Company's Common Stock during the
five trading days (as hereinafter defined) prior to the date hereof. For
purposes of this subsection (h), the term "trading day" means any day on which
the SmallCap Market is open for trading.
(i) Relationship to June Investors. Such Purchaser is not an
"affiliate" (as defined in Rule 144 under the Securities Act (including any
successor rule, "RULE 144")) of any of the following: Crestview Capital Fund I,
Crestview Capital Fund II, Crestview Capital Offshore Fund, Inc., Cranshire
Capital L.P., or Baystar Capital II, LP (collectively, the "JUNE INVESTORS").
Each Purchaser's representations and warranties made in this Article 2
are made solely for the purpose of permitting the Company to make a
determination that the offer and sale of the Securities pursuant to this
Agreement comply with applicable U.S. federal and state securities laws and not
for any other purpose. Accordingly, the Company may not rely on such
representations and warranties for any other purpose. No Purchaser has made or
hereby makes any other representations or warranties, express or implied, to the
Company in connection with the transactions contemplated hereby.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth on a Disclosure Schedule executed and delivered by
the Company to each Purchaser dated the date hereof (the "DISCLOSURE SCHEDULE"),
the Company represents and warrants to each Purchaser as follows:
(a) Organization and Qualification. The Company and each of its
direct and indirect subsidiaries (collectively, the "SUBSIDIARIES") is a
corporation duly organized and existing in
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good standing under the laws of the jurisdiction in which it is incorporated or
organized, and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company and each of its
Subsidiaries is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which the nature of the business
conducted by it makes such qualification necessary and where the failure so to
qualify or be in good standing would have a Material Adverse Effect. For
purposes of this Agreement, "MATERIAL ADVERSE EFFECT" means any effect which,
individually or in the aggregate with all other effects, reasonably would be
expected to be materially adverse to (i) the Securities, (ii) the ability of the
Company to perform its obligations under this Agreement or the other Transaction
Documents or (iii) the business, operations, properties, prospects, financial
condition or results of operations of the Company and its Subsidiaries, taken as
a whole.
(b) Authorization; Enforcement. (i) The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement and the other Transaction Documents, to issue and sell the Units
in accordance with the terms hereof, to issue the Conversion Shares upon
conversion of the Notes in accordance with the terms thereof and to issue the
Warrant Shares upon exercise of the Warrants in accordance with the terms
thereof; (ii) the execution, delivery and performance of this Agreement and the
other Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance of the Units and the issuance and reservation for issuance of the
Conversion Shares and Warrant Shares) have been duly authorized by the Company's
Board of Directors and no further consent or authorization of the Company, its
Board of Directors, or any committee of the Board of Directors is required, and
(iii) this Agreement constitutes, and, upon execution and delivery by the
Company of the other Transaction Documents, such Transaction Documents will
constitute, valid and binding obligations of the Company enforceable against the
Company in accordance with their respective terms. Neither the execution,
delivery or performance by the Company of its obligations under this Agreement
or the other Transaction Documents, nor the consummation by it of the
transactions contemplated hereby or thereby (including, without limitation, the
issuance of the Units or the issuance or reservation for issuance of the
Conversion Shares or Warrant Shares) requires any consent or authorization of
the Company's stockholders (including, without limitation, any consent under
Rule 4350(i) of the National Association of Securities Dealers, Inc.).
(c) Capitalization. The capitalization of the Company as of the
date hereof, including the authorized capital stock, the number of shares issued
and outstanding, the number of shares issuable and reserved for issuance
pursuant to the Company's stock option plans, the number of shares issuable and
reserved for issuance pursuant to securities (other than the Notes and the
Warrants) exercisable or exchangeable for, or convertible into, any shares of
capital stock and the number of shares to be reserved for issuance upon
conversion of the Notes and exercise of the Warrants is set forth in Section
3(c) of the Disclosure Schedule. All of such outstanding shares of capital stock
have been, or upon issuance in accordance with the terms of any such
exercisable, exchangeable or convertible securities will be, validly issued,
fully paid and non-assessable. No shares of capital stock of the Company
(including the Conversion Shares and the Warrant Shares) are subject to
preemptive rights or any other similar rights of the stockholders of the Company
or any liens or encumbrances. Except for the Securities and as set forth in
Section 3(c) of the Disclosure Schedule, (i) there are no outstanding options,
warrants, scrip, rights to
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subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into or exercisable or exchangeable for, 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, nor are any such issuances,
contracts, commitments, understandings or arrangements contemplated, (ii) there
are no contracts, commitments, understandings or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any of
its or their securities under the Securities Act (except the Registration Rights
Agreement); (iii) 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 or otherwise acquire any security of the Company or any of its
Subsidiaries; and (iv) the Company does not have any shareholder rights plan,
"poison pill" or other anti-takeover plans or similar arrangements. Section 3(c)
of the Disclosure Schedule sets forth all of the securities or instruments
issued by the Company or any of its Subsidiaries that contain anti-dilution or
similar provisions, and, except as and to the extent set forth thereon, the sale
and issuance of the Securities will not trigger any anti-dilution adjustments to
any such securities or instruments. The Company has furnished to each Purchaser
true and correct copies of the Company's organizational documents
("ORGANIZATIONAL DOCUMENTS") as in effect on the date hereof and all other
instruments and agreements governing securities convertible into or exercisable
or exchangeable for capital stock of the Company, all of which instruments and
agreements are set forth in Section 3(c) of the Disclosure Schedule. The Company
or one of its Subsidiaries has the unrestricted right to vote, and (subject to
limitations imposed by applicable law) to receive dividends and distributions
on, all capital securities of its Subsidiaries as owned by the Company or any
such Subsidiary.
(d) Issuance of Securities. The Units are duly authorized and,
upon issuance in accordance with the terms of this Agreement, (i) will be
validly issued, fully paid and non-assessable and free from all taxes, liens,
claims and encumbrances, (ii) will not be subject to preemptive rights, rights
of first refusal or other similar rights of stockholders of the Company or any
other person and (iii) will not impose personal liability on the holder thereof.
The Conversion Shares and Warrant Shares are duly authorized and reserved for
issuance, and, upon conversion of the Notes and exercise of the Warrants in
accordance with the terms thereof, (I) will be validly issued, fully paid and
non-assessable, and free from all taxes, liens, claims and encumbrances, (II)
will not be subject to preemptive rights, rights of first refusal or other
similar rights of stockholders of the Company or any other person and (III) will
not impose personal liability upon the holder thereof.
(e) No Conflicts. The execution, delivery and performance of this
Agreement and the other Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the issuance of the Units and the issuance and
reservation for issuance of the Conversion Shares and Warrant Shares) will not
(i) result in a violation of the Organizational Documents, (ii) conflict with,
or constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment (including, without limitation, the triggering of any anti-dilution
provisions), acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its Subsidiaries is a party, or (iii)
result
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in a violation of any law, rule, regulation, order, judgment or decree
(including United States federal and state securities laws, rules and
regulations and rules and regulations of any self-regulatory organizations to
which either the Company or its securities are subject) 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, with respect to
clauses (ii) and (iii), for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations that would not, individually or in
the aggregate, have a Material Adverse Effect).
(f) Compliance. The Company is not in violation of the
Organizational Documents, and no Subsidiary is in violation of its
organizational documents. Neither the Company nor any of its Subsidiaries is in
default (and no event has occurred that with notice or lapse of time or both
would put the Company or any of its Subsidiaries in default) under, nor has
there occurred any event giving others (with notice or lapse of time or both)
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 (including, without limitation, the Contracts (as
defined in Section 3(g) below)), except for actual or possible violations,
defaults or rights that would not, individually or in the aggregate, have a
Material Adverse Effect. The businesses of the Company and its Subsidiaries are
not being conducted, and shall not be conducted so long as any Purchaser owns
any of the Securities, in violation of any law, ordinance or regulation of any
governmental entity, except for possible violations the sanctions for which
either individually or in the aggregate have not had and would not have a
Material Adverse Effect. 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 Subsidiary has, in the course of his actions for, or on behalf
of, the Company or any Subsidiary, 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,
or made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee. The Company
and its Subsidiaries possess all certificates, authorizations and permits issued
by the appropriate federal, state, provincial or foreign regulatory authorities
that are material to the conduct of its business, and neither the Company nor
any of its Subsidiaries has received any notice of proceeding relating to the
revocation or modification of any such certificate, authorization or permit.
Except (i) as may be required under the Securities Act in connection with the
performance of the Company's obligations under the Registration Rights
Agreement, (ii) for the filing of a Form D with the SEC, (iii) as may be
required for compliance with applicable state securities or "blue sky" laws, or
(iv) as otherwise set forth in Section 3(f) of the Disclosure Schedule, the
Company is not required to obtain any consent, approval, authorization or order
of, or make any filing or registration with, any court or governmental agency or
any regulatory or self-regulatory agency or other third party in order for it to
execute, deliver or perform any of its obligations under this Agreement or any
of the other Transaction Documents.
(g) SEC Documents, Financial Statements. Since December 31, 1997,
the Company has timely filed (within applicable extension periods) 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 "EXCHANGE ACT") (all of the foregoing filed prior to the
date hereof and all exhibits included therein and financial
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statements and schedules thereto and documents incorporated by reference
therein, the "SEC DOCUMENTS"). The Company has delivered to each Purchaser true
and complete copies of the SEC Documents. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Exchange Act or the Securities Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. None of the statements made in any such SEC Documents is, or has
been, required to be amended or updated under applicable law (except for such
statements as have been amended or updated in subsequent filings made prior to
the date hereof). As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC applicable with respect thereto. Such financial
statements have been prepared in accordance with U.S. generally accepted
accounting principles ("GAAP"), consistently applied, during the periods
involved (except as may be otherwise indicated in such financial statements or
the notes thereto or, in the case of unaudited interim statements, to the extent
they may not include footnotes or may be condensed or summary statements) and
fairly present in all material respects the consolidated financial position of
the Company and its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal, immaterial
year-end audit adjustments). Except as set forth in the financial statements of
the Company included in the Select SEC Documents (as defined below), the Company
has no liabilities, contingent or otherwise, other than (i) liabilities incurred
in the ordinary course of business subsequent to the date of such financial
statements and (ii) obligations under contracts and commitments incurred in the
ordinary course of business and not required under GAAP to be reflected in such
financial statements, which liabilities and obligations referred to in clauses
(i) and (ii), individually or in the aggregate, are not material to the
financial condition or operating results of the Company. To the extent required
by the rules and regulations of the SEC applicable thereto, the Select SEC
Documents contain a complete and accurate list of all material undischarged
written or oral contracts, agreements, leases or other instruments to which the
Company or any Subsidiary is a party or by which the Company or any Subsidiary
is bound or to which any of the properties or assets of the Company or any
Subsidiary is subject (each, a "CONTRACT"). Except as set forth in the Select
SEC Documents, none of the Company, its Subsidiaries or, to the best knowledge
of the Company, any of the other parties thereto is in breach or violation of
any Contract, which breach or violation would have a Material Adverse Effect.
For purposes of this Agreement, "SELECT SEC DOCUMENTS" means the Company's (A)
Proxy Statement for its 2003 Annual Meeting, (B) Annual Report on Form 10-K for
the fiscal year ended December 31, 2002 (the "2002 ANNUAL REPORT"), (C)
Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2003 and
June 30, 2003, and (D) Current Reports on Form 8-K filed since December 31,
2002.
(h) Internal Accounting Controls. The Company and each of its
Subsidiaries maintains a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii) access to
assets is permitted
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only in accordance with management's general or specific authorization, and (iv)
the recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. The Company has established disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and designed
such disclosures controls and procedures to ensure that material information
relating to the Company, including its Subsidiaries, is made known to the
certifying officers by others within those entities, particularly during the
period in which the Company's Annual Report on Form 10-K or Quarterly Report on
Form 10-Q, as the case may be, is being prepared. The Company's certifying
officers have evaluated the effectiveness of the Company's controls and
procedures as of a date within 90 days prior to the filing date of the 2002
Annual Report and the Company's most recently filed Quarterly Report on Form
10-Q (each such date, an "EVALUATION DATE"). The Company presented in the 2002
Annual Report and its most recently filed Quarterly Report on Form 10-Q the
conclusions of the certifying officers about the effectiveness of the disclosure
controls and procedures based on their evaluations as of the respective
Evaluation Date. Since the Evaluation Date for the 2002 Annual Report, there
have been no significant changes in the Company's internal controls (as such
term is defined in Item 307(b) of Regulation S-K under the Exchange Act) or, to
the Company's knowledge, in other factors that could significantly affect the
Company's internal controls.
(i) Absence of Certain Changes. Except as set forth in the Select
SEC Documents, since December 31, 2002, there has been no material adverse
change and no material adverse development in the business, properties,
operations, prospects, financial condition or results of operations of the
Company and its Subsidiaries, taken as a whole. The Company has not taken any
steps, and does not currently expect to take any steps, to seek protection
pursuant to any bankruptcy or receivership 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 with respect to the
Company or any of its Subsidiaries.
(j) Transactions With Affiliates. Except as set forth in the
Select SEC Documents, none of the officers, directors, or employees of the
Company or any of its Subsidiaries is presently a party to any transaction with
the Company or any of its Subsidiaries (other than for ordinary course services
solely in their capacity as officers, directors or employees), 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 such officer, director or
employee or any corporation, partnership, trust or other entity in which any
such officer, director, or employee has an ownership interest of five percent or
more or is an officer, director, trustee or partner.
(k) Absence of Litigation. Except as disclosed in the Select SEC
Documents, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board, government agency, self-regulatory organization
or body (including, without limitation, the SEC) pending or, to the knowledge of
the Company or any of its Subsidiaries, threatened against or affecting the
Company, any of its Subsidiaries, or any of their respective directors or
officers in their capacities as such. There are no facts which, if known by a
potential claimant or governmental authority, could give rise to a claim or
proceeding which, if asserted or conducted with results unfavorable to the
Company or any of its Subsidiaries, could reasonably be expected to have a
Material Adverse Effect. The SEC has not issued any stop order or other order
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suspending the effectiveness of any registration statement filed by the Company
or any Subsidiary under the Securities Act or the Exchange Act.
(l) Intellectual Property. Each of the Company and its
Subsidiaries owns or is duly licensed (and, in such event, has the unfettered
right to grant sublicenses) to use all patents, patent applications, trademarks,
trademark applications, trade names, service marks, copyrights, copyright
applications, licenses, permits, inventions, discoveries, processes, scientific,
technical, engineering and marketing data, object and source codes, know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) and other similar rights and
proprietary knowledge (collectively, "INTANGIBLES") necessary for the conduct of
its business as now being conducted and as presently contemplated to be
conducted in the future. Section 3(l) of the Disclosure Schedule sets forth a
list of all Intangibles owned and/or used by the Company in its business. To the
knowledge of the Company and its Subsidiaries, neither the Company nor any
Subsidiary of the Company infringes or is in conflict with any right of any
other person with respect to any third party Intangibles. Neither the Company
nor any of its Subsidiaries has received written notice of any pending conflict
with or infringement upon such third party Intangibles. Neither the Company nor
any of its Subsidiaries has entered into any consent agreement, indemnification
agreement, forbearance to xxx or settlement agreement with respect to the
validity of the Company's or its Subsidiaries' ownership of or right to use its
Intangibles and there is no reasonable basis for any such claim to be
successful. The Intangibles are valid and enforceable and no registration
relating thereto has lapsed, expired or been abandoned or canceled or is the
subject of cancellation or other adversarial proceedings, and all applications
therefor are pending and in good standing. The Company and its Subsidiaries have
complied, in all material respects, with their respective contractual
obligations relating to the protection of the Intangibles used pursuant to
licenses. No person is infringing on or violating the Intangibles owned or used
by the Company or its Subsidiaries.
(m) Title. The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good and merchantable
title to all personal property owned by them that 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 do not materially affect the value of
such property and do not materially interfere with the use made and proposed to
be made of such property by the Company and its Subsidiaries. Any real property
and facilities held under lease by the Company and its Subsidiaries are held by
them under valid, subsisting and enforceable leases with such exceptions as are
not material and do not materially interfere with the use made and proposed to
be made of such property and buildings by the Company and its Subsidiaries.
(n) Tax Status. Except as set forth in the Select SEC Documents,
the Company and each of its Subsidiaries has made or filed all foreign, U.S.
federal, state, provincial and local income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provisions reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or
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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. The Company has not executed a
waiver with respect to any statute of limitations relating to the assessment or
collection of any foreign, federal, state, provincial or local tax. None of the
Company's tax returns is presently being audited by any taxing authority.
(o) Key Employees. Each of the Company's directors and officers
and any Key Employee (as defined below) is currently serving the Company in the
capacity disclosed in the Select SEC Documents. No Key Employee is, or is now
expected to be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each Key Employee does not subject the
Company or any of its Subsidiaries to any material liability with respect to any
of the foregoing matters. No Key Employee has, to the knowledge of the Company
and its Subsidiaries, any intention to terminate or limit his employment with,
or services to, the Company or any of its Subsidiaries, nor is any such Key
Employee subject to any constraints which would cause such employee to be unable
to devote his full time and attention to such employment or services. For
purposes of this Agreement, "KEY EMPLOYEE" means the persons listed in Section
3(o) of the Disclosure Schedule and any individual who assumes or performs any
of the duties of a Key Employee.
(p) Employee Relations. (i) Neither the Company nor any of its
Subsidiaries is involved in any material union labor dispute nor, to the
knowledge of the Company or any of its Subsidiaries, is any such dispute
threatened. The Company and its Subsidiaries believe that their relations with
their employees are good; (ii) no executive officer (as defined in Rule 501(f)
of the Securities Act) has notified the Company that such officer intends to
leave the Company or otherwise terminate such officer's employment with the
Company; and (iii) the Company and its Subsidiaries are in compliance with all
federal, state, local and foreign laws and regulations respecting employment and
employment practices, terms and conditions of employment and wages and hours,
except where failure to be in compliance would not, either individually or in
the aggregate, result in a Material Adverse Effect.
(q) Insurance. The Company and each of its Subsidiaries has in
force fire, casualty, product liability and other insurance policies, with
extended coverage, sufficient in amount to allow it to replace any of its
material properties or assets which might be damaged or destroyed or sufficient
to cover liabilities to which the Company may reasonably become subject, and
such types and amounts of other insurance with respect to its business and
properties, on both a per occurrence and an aggregate basis, as are customarily
carried by persons engaged in the same or similar business as the Company. No
default or event has occurred that could give rise to a default under any such
policy.
(r) Environmental Matters. There is no environmental litigation or
other environmental proceeding pending or, to the knowledge of the Company or
any of its Subsidiaries, threatened by any governmental regulatory authority or
others with respect to the current or any former business of the Company or any
of its Subsidiaries or any partnership or joint venture currently or at any time
affiliated with the Company or any of its Subsidiaries. No state of facts exists
as to environmental matters or Hazardous Substances (as defined below) that
involves the reasonable likelihood of a material capital expenditure by the
Company or any of its
- 10 -
Subsidiaries that may otherwise have a Material Adverse Effect. No Hazardous
Substances have been treated, stored or disposed of, or otherwise deposited, in
or on the properties owned or leased by the Company or any of its Subsidiaries
or by any partnership or joint venture currently or at any time affiliated with
the Company or any of its Subsidiaries in violation of any applicable
environmental laws. The environmental compliance programs of the Company and
each of its Subsidiaries comply in all respects with all environmental laws,
whether foreign, federal, state, provincial or local, currently in effect. For
purposes of this Agreement, "HAZARDOUS SUBSTANCES" means any substance, waste,
contaminant, pollutant or material that has been determined by any governmental
authority to be capable of posing a risk of injury to health, safety, property
or the environment.
(s) Solvency. Based on the financial condition of the Company as
of the Closing Date, (i) the Company's fair saleable value of its assets exceeds
the amount that will be required to be paid on or in respect of the Company's
existing debts and other liabilities (including known contingent liabilities) as
they mature; (ii) the Company's assets do not constitute unreasonably small
capital to carry on its business for the current fiscal year as now conducted
and as proposed to be conducted including its capital needs taking into account
the particular capital requirements of the business conducted by the Company,
and projected capital requirements and capital availability thereof; and (iii)
the current cash flow of the Company, together with the proceeds the Company
would receive, were it to liquidate all of its assets, after taking into account
all anticipated uses of the cash, would be sufficient to pay all amounts on or
in respect of its debt when such amounts are required to be paid. The Company
does not intend to incur debts beyond its ability to pay such debts as they
mature (taking into account the timing and amounts of cash to be payable on or
in respect of its debt).
(t) Listing. The Common Stock is currently listed for trading on
the Nasdaq SmallCap Market (the "SMALLCAP MARKET"). The Company is not in
violation of the listing requirements of the SmallCap Market, does not
reasonably anticipate that the Common Stock will be delisted by the SmallCap
Market for the foreseeable future, and has not received any notice regarding the
possible delisting of the Common Stock from the SmallCap Market. The Company has
secured the listing of the Conversion Shares and Warrant Shares on the SmallCap
Market and on each other national securities exchange, automated quotation
system or over-the-counter market upon which shares of Common Stock are
currently listed (subject to official notice of issuance).
(u) Form S-3 Eligibility. The Company is eligible to register the
resale of its Common Stock on a registration statement on Form S-3 under the
Securities Act. There exist no facts or circumstances that would prohibit or
delay the preparation and filing of a registration statement on Form S-3 with
respect to the Registrable Securities (as defined in the Registration Rights
Agreement). The Company has no basis to believe that its past or present
independent public auditors will withhold their consent to the inclusion, or
incorporation by reference, of their audit opinion concerning the Company's
financial statements which are included in the Registration Statement required
to be filed pursuant to the Registration Rights Agreement.
(v) Anti-Takeover Provisions. The Company and its board of
directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
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anti-takeover provision under its Organizational Documents or the laws of the
jurisdiction of its organization which is or could become applicable to any
Purchaser as a result of the transactions contemplated by this Agreement,
including, without limitation, the Company's issuance of the Securities or any
other securities pursuant to the terms of this Agreement and any and all
Purchaser's ownership of the Securities or any such other securities.
(w) Acknowledgment Regarding Each Purchaser's Purchase of the
Securities. The Company acknowledges and agrees that each Purchaser is acting
solely in the capacity of arm's length purchaser with respect to this Agreement
and the other Transaction Documents and the transactions contemplated hereby and
thereby, and that no Purchaser is (i) an officer or director of the Company,
(ii) an "affiliate" of the Company (as defined in Rule 144) or (iii) a
"beneficial owner" of more than 5% of the Common Stock (as defined for purposes
of Rule 13d-3 of the Exchange Act). The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement or the other Transaction
Documents and the transactions contemplated hereby and thereby, and any advice
given by a Purchaser or any of its representatives or agents in connection with
this Agreement or the other Transaction Documents and the transactions
contemplated hereby and thereby is merely incidental to such Purchaser's
purchase of the Securities. The Company further represents to each Purchaser
that the Company's decision to enter into this Agreement and the other
Transaction Documents has been based solely on the independent evaluation by the
Company and its representatives.
(x) No General Solicitation or Integrated Offering. Neither the
Company nor any distributor participating on the Company's behalf in the
transactions contemplated hereby (if any) nor any person acting for the Company,
or any such distributor, has conducted any "general solicitation" (as such term
is defined in Regulation D) with respect to any of the Securities being offered
hereby. Neither the Company nor any of its affiliates, nor any person acting on
its or their behalf, has directly or indirectly made any offers or sales of any
security or solicited any offers to buy any security under circumstances that
would require registration of the Securities being offered hereby under the
Securities Act or cause this offering of Securities to be integrated with any
prior offering of securities of the Company for purposes of the Securities Act,
which result of such integration would require registration under the Securities
Act, or any applicable stockholder approval provisions.
(y) No Brokers. The Company has taken no action that would give
rise to any claim by any person for brokerage commissions, finder's fees or
similar payments by any Purchaser relating to this Agreement or the transactions
contemplated hereby.
(z) Acknowledgment Regarding Securities. The number of Conversion
Shares issuable upon conversion of the Notes and the number of Warrant Shares
issuable upon exercise of the Warrants may increase in certain circumstances.
The Company's directors and executive officers have studied and fully understand
the nature of the Securities being sold hereunder. The Company acknowledges that
its obligation to issue Conversion Shares upon conversion of the Notes in
accordance with the terms thereof and the Warrant Shares upon the exercise of
the Warrants in accordance with the terms thereof is absolute and unconditional,
regardless of the dilution that such issuance may have on the ownership
interests of other stockholders and the availability of remedies provided for in
any of the Transaction Documents relating to a failure or
- 12 -
refusal to issue Conversion Shares or Warrant Shares. Taking the foregoing into
account, the Company's Board of Directors has determined in its good faith
business judgment that the issuance of the Units hereunder and the consummation
of the other transactions contemplated hereby are in the best interests of the
Company and its stockholders.
(aa) Disclosure. All information relating to or concerning the
Company and/or any of its Subsidiaries set forth in this Agreement or provided
to the Purchasers pursuant to Section 2(d) hereof or otherwise in connection
with the transactions contemplated hereby is true and correct in all material
respects and the Company has not omitted to state any material fact necessary in
order to make the statements made herein or therein, in light of the
circumstances under which they were made, not misleading. No event or
circumstance has occurred or exists with respect to the Company or its
Subsidiaries or their respective businesses, properties, prospects, operations
or financial conditions, which has not been publicly disclosed but, under
applicable law, rule or regulation, would be required to be disclosed by the
Company in a registration statement filed on the date hereof by the Company
under the Securities Act with respect to a primary issuance of the Company's
securities.
4. COVENANTS.
(a) Best Efforts. The parties shall use their respective best
efforts timely to satisfy each of the conditions described in Sections 6 and 7
of this Agreement.
(b) Form D; Blue Sky Laws. The Company shall file with the SEC a
Form D with respect to the Securities as required under Regulation D and provide
a copy thereof to each Purchaser promptly after such filing. The Company shall,
on or before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Securities for sale to each Purchaser
pursuant to this Agreement under applicable securities or "blue sky" laws of the
states of the United States or obtain exemption therefrom, and shall provide
evidence of any such action so taken to each Purchaser on or prior to the
Closing Date. Within two days after the Closing Date, the Company shall file a
Form 8-K with the SEC concerning this Agreement and the transactions
contemplated hereby, which Form 8-K shall attach this Agreement and its Exhibits
as exhibits to such Form 0-X (xxx "0-X XXXXXX"). From and after the 8-K Filing,
the Company hereby acknowledges that no Purchaser shall be in possession of any
material nonpublic information received from the Company, any of its
Subsidiaries or any of its respective officers, directors, employees or agents,
that is not disclosed in the 8-K Filing. The Company shall not, and shall cause
each of its Subsidiaries and its and each of their respective officers,
directors, employees and agents not to, provide any Purchaser with any material
nonpublic information regarding the Company or any of its Subsidiaries from and
after the 8-K Filing without the express written consent of such Purchaser;
provided, however, that a Purchaser that exercises its rights under Section 4(m)
hereof shall be deemed to have given such express written consent. In the event
of a breach of the foregoing covenant by the Company, any of its Subsidiaries or
any of its or their respective officers, directors, employees and agents, in
addition to any other remedy provided herein or in the other Transaction
Documents, a Purchaser shall have the right to make a public disclosure, in the
form of a press release, public advertisement or otherwise, of such material
nonpublic information without the prior approval by the Company, its
Subsidiaries or any of its or their respective officers, directors, employees or
agents. No Purchaser shall have any liability to the Company, its Subsidiaries
or any of its or
- 13 -
their respective officers, directors, employees, shareholders or agents for any
such disclosure. Subject to the foregoing, neither the Company nor any Purchaser
shall issue any press releases or any other public statements with respect to
the transactions contemplated hereby; provided, however, that the Company shall
be entitled, without the prior approval of any Purchaser, to make any press
release or other public disclosure with respect to such transactions (i) in
substantial conformity with the 8-K Filing and contemporaneously therewith and
(ii) as is required by applicable law and regulations (provided that in the case
of clause (i) each Purchaser shall be consulted by the Company in connection
with any such press release or other public disclosure prior to its release).
(c) Reporting Status. So long as any Purchasers (or any of their
respective affiliates) beneficially own any of the Securities, the Company shall
timely file all reports required to be filed with the SEC pursuant to the
Exchange Act, and the Company shall not terminate its status as an issuer
required to file reports under the Exchange Act even if the Exchange Act or the
rules and regulations thereunder would permit such termination. In addition, the
Company shall take all actions necessary to meet the "registrant eligibility"
requirements set forth in the general instructions to Form S-3 or any successor
form thereto, to continue to be eligible to register the resale of its Common
Stock on a registration statement on Form S-3 under the Securities Act.
(d) Participation Right. Subject to the terms and conditions
specified in this Section 4(d), until the third anniversary of the date hereof,
the Purchasers shall have a right to participate in any issuance by the Company
of (i) equity or equity-linked securities, or (ii) debt which is convertible
into equity or in which there is an equity component ("ADDITIONAL SECURITIES")
on the same terms and conditions as offered by the Company to the other
purchasers of such Additional Securities. Each time the Company proposes to
offer any Additional Securities, the Company shall make an offering of such
Additional Securities to each Purchaser in accordance with the following
provisions:
(i) The Company shall deliver a notice (the "NOTICE") to
the Purchasers, at least 30 days prior to the date on which it proposes to offer
such Additional Securities, stating (A) its bona fide intention to offer such
Additional Securities, (B) the number of such Additional Securities to be
offered, (C) the price and terms, if any, upon which it proposes to offer such
Additional Securities, and (D) the anticipated closing date of the sale of such
Additional Securities.
(ii) Each Purchaser shall have the right, exercisable by
delivering written notice to such effect to the Company within 20 days after
such Purchaser's receipt of the Notice, to purchase, at the price and on the
terms specified in the Notice, up to that portion of such Additional Securities
which equals the proportion that the number of Conversion Shares and Warrant
Shares that such Purchaser then owns or has the right to acquire (upon
conversion of the Notes and exercise of the Warrants) bears to the total number
of shares of Common Stock then outstanding (assuming full conversion, exercise
or exchange of all convertible, exercisable or exchangeable securities then
outstanding). The Company shall promptly, in writing, inform each Purchaser that
elects to purchase all of the Additional Shares available to it (each, a
"FULLY-EXERCISING PURCHASER") of any other Purchaser's failure to do likewise,
and, during the five-day period commencing after such information is given, each
Fully-Exercising Purchaser shall be entitled to purchase up to that portion of
the Additional Securities for which the Purchasers were
- 14 -
entitled to subscribe but which were not subscribed for by the Purchasers which
is equal to the proportion that the number of shares of Conversion Shares and
Warrant Shares that such Fully-Exercising Purchaser then owns or has the right
to acquire (upon conversion of the Notes and exercise of the Warrants) bears to
the total number of shares of Conversion Shares and Warrant Shares that all
Fully-Exercising Purchasers who wish to purchase some of the unsubscribed shares
then own or have the right to acquire (upon conversion of the Notes and exercise
of the Warrants).
(iii) If all Additional Securities which the Purchasers are
entitled to purchase pursuant to this Section 4(d) are not purchased as provided
herein, the Company may, during the 75-day period following the expiration of
the 20-day period (and, if necessary, such additional 5-day period) provided in
clause (ii), offer the remaining unsubscribed portion of such Additional
Securities to any person at a price not less than, and upon terms no more
favorable to the offeree than, as specified in the Notice. If the Company does
not consummate the sale of such Additional Securities within such period, the
right provided hereunder shall be deemed to be revived and such Additional
Securities shall not be offered or sold unless first reoffered to the Purchasers
in accordance herewith.
(iv) Notwithstanding the foregoing, the participation
rights granted in this Section 4(d) shall not be applicable to: (A) the issuance
of shares of Common Stock upon the exercise or conversion of the Company's
options, warrants or convertible securities outstanding as of the date hereof
and disclosed in Section 3(c) of the Disclosure Schedule in accordance with the
terms of such options, warrants or other securities as in effect on the date
hereof; (B) the grant of options to purchase Common Stock, with exercise prices
not less than the market price of the Common Stock on the date of grant, or the
grant of restricted shares of Common Stock, in each case which are issued to
employees, officers, directors or consultants of the Company for the primary
purpose of soliciting or retaining their employment or service pursuant to an
equity compensation plan approved by the Company's Board of Directors, and the
issuance of shares of Common Stock upon the exercise of any such options; (C)
the issuance of securities pursuant to a bona fide underwritten public offering;
(D) the issuance of the Notes and the Warrants pursuant hereto, the Conversion
Shares upon conversion of the Notes and the Warrant Shares upon exercise of the
Warrants; (E) the issuance of securities in a bona fide business acquisition; or
(F) the issuance of securities in connection with a strategic business
partnership with an oil and gas company, the primary purpose of which, in the
reasonable judgment of the Company's Board of Directors, is not to raise
additional capital.
(e) Use of Proceeds. The Company shall use the proceeds from the
sale and issuance of the Units for general corporate purposes and working
capital. Such proceeds shall not be used to (i) pay dividends; (ii) pay for any
increase in executive compensation or make any loan or other advance to any
officer, employee, shareholder, director or other affiliate of the Company,
without the express approval of the Board of Directors acting in accordance with
past practice; (iii) purchase debt or equity securities of any entity (including
redeeming the Company's own securities), except for (A) evidences of
indebtedness issued or fully guaranteed by the United States of America and
having a maturity of not more than one year from the date of acquisition, (B)
certificates of deposit, notes, acceptances and repurchase agreements having a
maturity of not more than one year from the date of acquisition issued by a bank
organized in the United States having capital, surplus and undivided profits of
at least $500,000,000, (C) the highest-
- 15 -
rated commercial paper having a maturity of not more than one year from the date
of acquisition, and (D) "Money Market" fund shares, or money market accounts
fully insured by the Federal Deposit Insurance Corporation and sponsored by
banks and other financial institutions, provided that the investments consist
principally of the types of investments described in clauses (A), (B), or (C)
above; or (iv) make any investment not directly related to the current business
of the Company.
(f) Financial Information. So long as any Purchasers (or any of
their respective affiliates) beneficially own any Securities, the Company shall
send (via electronic transmission or otherwise) the following reports to such
Purchaser: (i) within ten days after the filing with the SEC, a copy of its
Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, its proxy
statements and any Current Reports on Form 8-K; and (ii) within one day after
release, copies of all press releases issued by the Company or any of its
Subsidiaries.
(g) Reservation of Shares. The Company currently has authorized
and reserved for the purpose of issuance 1,722,222 shares of Common Stock to
provide for the full conversion of the Notes and issuance of the Conversion
Shares in connection therewith, the full exercise of the Warrants and the
issuance of the Warrant Shares in connection therewith and as otherwise required
by the Notes, the Warrants and the Registration Rights Agreement (collectively,
the "ISSUANCE OBLIGATIONS"). In the event such number of shares becomes
insufficient to satisfy the Issuance Obligations, the Company shall take all
necessary action to authorize and reserve such additional shares of Common Stock
necessary to satisfy the Issuance Obligations.
(h) Listing. So long as any Purchasers (or any of their respective
affiliates) beneficially own any Securities, the Company shall maintain the
listing of all Conversion Shares and Warrant Shares from time to time issuable
upon conversion of the Notes and exercise of the Warrants on each national
securities exchange, automated quotation system or electronic bulletin board on
which shares of Common Stock are currently listed. The Company shall use its
best efforts to continue the listing and trading of its Common Stock on the
SmallCap Market or on the Nasdaq National Market (the "NATIONAL MARKET"), the
New York Stock Exchange (the "NYSE") or the American Stock Exchange (the "AMEX")
and shall comply in all respects with the reporting, filing and other
obligations under the bylaws or rules of the National Association of Securities
Dealers, Inc. (the "NASD"), such exchanges, or such electronic system, as
applicable. The Company shall promptly provide to each Purchaser copies of any
notices it receives regarding the continued eligibility of the Common Stock for
trading on any securities exchange or automated quotation system on which
securities of the same class or series issued by the Company are then listed or
quoted, if any.
(i) Corporate Existence. So long as any Purchasers (or any of
their respective affiliates) beneficially owns any Securities, the Company shall
maintain its corporate existence, and in the event of a merger, consolidation or
sale of all or substantially all of the Company's assets, the Company shall
ensure that the surviving or successor entity in such transaction (i) assumes
the Company's obligations under this Agreement and the other Transaction
Documents and the agreements and instruments entered into in connection herewith
and therewith regardless of whether or not the Company would have had a
sufficient number of shares of Common Stock authorized and available for
issuance in order to effect the conversion of all the Notes and exercise in full
of all Warrants outstanding as of the date of such transaction and (ii) except
in the
- 16 -
event of a merger, consolidation of the Company into any other corporation, or
the sale or conveyance of all or substantially all of the assets of the Company
where the consideration consists solely of cash, the surviving or successor
entity is a publicly traded corporation whose common stock is listed for trading
on the SmallCap Market, the National Market, the NYSE or the AMEX.
(j) No Integrated Offerings. The Company shall not make any offers
or sales of any security (other than the Securities) under circumstances that
would require registration of the Securities being offered or sold hereunder
under the Securities Act or cause this offering of the Securities to be
integrated with any other offering of securities by the Company for purposes of
any stockholder approval provision applicable to the Company or its securities.
(k) Legal Compliance. The Company shall conduct its business and
the business of its Subsidiaries in compliance with all laws, ordinances or
regulations of governmental entities applicable to such businesses, except where
the failure to do so would not have a Material Adverse Effect.
(l) Information. So long as any Purchasers (or any of their
respective affiliates) beneficially own any Securities, the Company shall
furnish to each such Purchaser:
(i) concurrently with the filing with the SEC of its
annual reports on Form 10-K, a certificate of the President, a Vice President or
a senior financial officer of the Company stating that, based upon such
examination or investigation and review of this Agreement as in the opinion of
the signer is necessary to enable the signer to express an informed opinion with
respect thereto, neither the Company nor any of its Subsidiaries is or has
during such period been in default in the performance or observance of any of
the terms, covenants or conditions hereof, or, if the Company or any of its
Subsidiaries shall be or shall have been in default, specifying all such
defaults, and the nature and period of existence thereof, and what action the
Company or such Subsidiary has taken, is taking or proposes to take with respect
thereto; and
(ii) the information the Company must deliver to any
holder or to any prospective transferee of Securities in order to permit the
sale or other transfer of such Securities pursuant to Rule 144A of the SEC or
any similar rule then in effect.
The Company shall keep at its principal executive office a true copy of this
Agreement (as at the time in effect), and cause the same to be available for
inspection at such office during normal business hours by any holder of
Securities or any prospective transferee of Securities designated by a holder
thereof.
(m) Inspection of Properties and Books. So long as any Purchasers
(or any of their respective affiliates) beneficially own any Securities, each
such Purchaser and its representatives and agents (collectively, the
"INSPECTORS") shall have the right, at such Purchaser's expense, to visit and
inspect any of the properties of the Company and of its Subsidiaries, to examine
the books of account and records of the Company and of its Subsidiaries, to make
or be provided with copies and extracts therefrom, to discuss the affairs,
finances and accounts of the Company and of its Subsidiaries with, and to be
advised as to the same by, its and their officers, employees and independent
public accountants (and by this provision the Company authorizes such
- 17 -
accountants to discuss such affairs, finances and accounts, whether or not a
representative of the Company is present) all at such reasonable times and
intervals and to such reasonable extent as the Purchasers may desire; provided,
however, that each Inspector shall hold in confidence and shall not make any
disclosure (except to such Purchaser) of any such information which the Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless (i) the disclosure of such information is
necessary to avoid or correct a misstatement or omission in any Registration
Statement filed pursuant to the Registration Rights Agreement, (ii) the release
of such information is ordered pursuant to a subpoena or other order from a
court or government body of competent jurisdiction, or (iii) such information
has been made generally available to the public other than by disclosure in
violation of this or any other agreement. Each Purchaser agrees that it shall,
upon learning that disclosure of such information is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, the information deemed confidential.
(n) Shareholders Rights Plan. No claim shall be made or enforced
by the Company or any other person that any Purchaser is an "Acquiring Person"
under any shareholders rights plan or similar plan or arrangement in effect or
hereafter adopted by the Company, or that any Purchaser could be deemed to
trigger the provisions of any such plan or arrangement, by virtue of receiving
Securities under this Agreement or any other Transaction Documents or under any
other agreement between the Company and the Purchasers.
(o) Pledge of Securities. The Company acknowledges and agrees that
the Securities may be pledged by any Purchaser in connection with a bona fide
margin agreement or other loan or financing arrangement that is secured by the
Securities. The pledge of Securities shall not be deemed to be a transfer, sale
or assignment of the Securities hereunder, and no Purchaser effecting a pledge
of Securities shall be required to provide the Company with any notice thereof
or otherwise make any delivery to the Company pursuant to this Agreement or any
other Transaction Document. The Company shall execute and deliver such
documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by a Purchaser.
(p) Variable Securities. So long as any Purchasers (or any of
their respective affiliates) beneficially own any Securities, the Company shall
not, without first obtaining the written approval of the holders of a majority
of the aggregate principal face amount of the Notes then outstanding (which
approval may be given or withheld by such holders in their sole and absolute
discretion), issue or sell any rights, warrants or options to subscribe for or
purchase Common Stock, or any other securities directly or indirectly
convertible into or exchangeable or exercisable for Common Stock, at an
effective conversion, exchange or exercise price that varies or may vary with
the market price of the Common Stock, including by way of one or more reset(s)
to any fixed price.
(q) Expenses. At the Closing, the Company shall pay to North Sound
Capital LLC ("NORTH SOUND") reimbursement for the out-of-pocket expenses
reasonably incurred by North Sound, its affiliates and its or their advisors in
connection with the negotiation, preparation, execution and delivery of this
Agreement and the other Transaction Documents and the
- 18 -
consummation of the transactions contemplated hereby and thereby, including,
without limitation, North Sound's and its affiliates' and advisors' reasonable
due diligence and attorneys' fees and expenses (the "EXPENSES"); provided,
however, that the aggregate amount of the Expenses payable to North Sound shall
not exceed $50,000 (the "EXPENSE CAP") unless prior approval is obtained from
the Company. North Sound hereby acknowledges receipt by BayStar Capital
Management, LLC, on behalf of North Sound, of $25,000 towards its Expenses prior
to the execution of this Agreement. The balance of its Expenses shall be paid at
the Closing by delivery by the Company of a Company check or wire transfer to
North Sound of immediately available funds or, at the discretion of North Sound,
by deduction by North Sound of such balance of the Expenses from the Purchase
Price payable by North Sound hereunder. In addition, from time to time
thereafter, upon North Sound's written request, the Company shall pay to North
Sound such additional Expenses (not to exceed the Expense Cap), if any, not
covered by such payment, in each case to the extent reasonably incurred by North
Sound, its affiliates or its or their advisors in connection with the
negotiation, preparation, execution and delivery of this Agreement and the other
Transaction Documents and the consummation of the transactions contemplated
hereby and thereby.
5. SECURITIES TRANSFER MATTERS.
(a) Conversion and Exercise. Upon conversion of the Notes or
exercise of the Warrants by any person, (i) if the DTC Transfer Conditions (as
defined below) are satisfied, the Company shall cause its transfer agent to
electronically transmit all Conversion Shares and Warrant Shares by crediting
the account of such person or its nominee with the Depository Trust Company
("DTC") through its Deposit Withdrawal Agent Commission system; or (ii) if the
DTC Transfer Conditions are not satisfied, the Company shall issue and deliver,
or instruct its transfer agent to issue and deliver, certificates (subject to
the legend and other applicable provisions hereof), registered in the name of
such person its nominee, physical certificates representing the Conversion
Shares and Warrant Shares, as applicable. Even if the DTC Transfer Conditions
are satisfied, any person effecting a conversion of Notes or exercising Warrants
may instruct the Company to deliver to such person or its nominee physical
certificates representing the Conversion Shares and Warrant Shares, as
applicable, in lieu of delivering such shares by way of DTC Transfer. For
purposes of this Agreement, "DTC TRANSFER CONDITIONS" means that (A) the
Company's transfer agent is participating in the DTC Fast Automated Securities
Transfer program and (B) the certificates for the Conversion Shares or Warrant
Shares required to be delivered do not bear a legend and the person effecting
such conversion or exercise is not then required to return such certificate for
the placement of a legend thereon.
(b) Transfer or Resale. Each Purchaser understands that (i) except
as provided in the Registration Rights Agreement, the sale or resale of the
Securities have not been and are not being registered under the Securities Act
or any state securities laws, and the Securities may not be transferred unless
(A) the transfer is made pursuant to and as set forth in an effective
registration statement under the Securities Act covering the Securities; or (B)
such Purchaser shall have delivered to the Company an opinion of counsel (which
opinion shall be in form, substance and scope customary for opinions of counsel
in comparable transactions) to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration; or (C) sold under and in compliance with Rule 144; or (D) sold or
transferred to an affiliate of such Purchaser that is an Accredited Investor and
agrees to sell or
- 19 -
otherwise transfer the Securities only in accordance with the provisions of this
Section 5(b); and (ii) neither the Company nor any other person is under any
obligation to register such Securities under the Securities Act or any state
securities laws (other than pursuant to the terms of the Registration Rights
Agreement). Notwithstanding the foregoing or anything else contained herein to
the contrary, the Securities may be pledged as collateral in connection with a
bona fide margin account or other lending arrangement, provided such pledge is
consistent with applicable laws, rules and regulations.
(c) Legends. Each Purchaser understands that the Notes and the
Warrants and, until such time as the Conversion Shares and Warrant Shares have
been registered under the Securities Act (including registration pursuant to
Rule 416 thereunder) as contemplated by the Registration Rights Agreement or
otherwise may be sold by such Purchaser under Rule 144, the certificates for the
Conversion Shares and Warrant Shares may bear a restrictive legend in
substantially the following form:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or
the securities laws of any state of the United States or in
any other jurisdiction. The securities represented hereby may
not be offered, sold or transferred in the absence of an
effective registration statement for the securities under
applicable securities laws unless offered, sold or transferred
pursuant to an available exemption from the registration
requirements of those laws.
The Company shall, immediately prior to a registration statement
covering the Securities (including, without limitation, the Registration
Statement contemplated by the Registration Rights Agreement) being declared
effective, deliver to its transfer agent an opinion letter of counsel, opining
that at any time such registration statement is effective, the transfer agent
shall issue, in connection with the issuance of the Conversion Shares and
Warrant Shares, certificates representing such Conversion Shares and Warrant
Shares without the restrictive legend above, provided such Conversion Shares and
Warrant Shares are to be sold pursuant to the prospectus contained in such
registration statement. Upon receipt of such opinion, the Company shall cause
the transfer agent to confirm, for the benefit of the holders, that no further
opinion of counsel is required at the time of transfer in order to issue such
shares without such restrictive legend.
The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by state securities laws, (i) the sale of
such Security is registered under the Securities Act (including registration
pursuant to Rule 416 thereunder); (ii) such holder provides the Company with an
opinion of counsel, in form, substance and scope customary for opinions of
counsel in comparable transactions, to the effect that a public sale or transfer
of such Security may be made without registration under the Securities Act; or
(iii) such holder provides the Company with reasonable assurances that such
Security can be sold under Rule 144. In the event the above legend is removed
from any Security and thereafter the effectiveness of a registration statement
covering such Security is suspended or the Company determines that a supplement
or amendment thereto is required by applicable securities laws, then upon
reasonable advance written notice to such Purchaser the Company may require that
the above legend be
- 20 -
placed on any such Security that cannot then be sold pursuant to an effective
registration statement or under Rule 144 and such Purchaser shall cooperate in
the replacement of such legend. Such legend shall thereafter be removed when
such Security may again be sold pursuant to an effective registration statement
or under Rule 144.
(d) Transfer Agent Instructions. Upon compliance by any Purchaser
with the provisions of this Section 5 with respect to the transfer of any
Securities, the Company shall permit the transfer of such Securities and, in the
case of the transfer of Conversion Shares or Warrant Shares, promptly instruct
its transfer agent to issue one or more certificates (or effect a DTC Transfer)
in such name and in such denominations as specified by such Purchaser. The
Company shall not give any instructions to its transfer agent with respect to
the Securities, other than any permissible or required instructions provided in
this Section 5, and the Securities shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in this
Agreement.
(e) Certain Transfers Prohibited. Each Purchaser agrees that, from
the date hereof until December 14, 2003, such Purchaser shall not sell or
transfer any of the Notes, Conversion Shares, Warrants, and Warrant Shares
(except, in the case of Conversion Shares or Warrant Shares, open market
transfers of same) purchased hereunder to any of the June Investors. Each
Purchaser shall indemnify the Company from and against any losses incurred by
the Company as a result of any sale or transfer by such Purchaser of Notes or
Warrants in violation of this Section 5(e).
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Units to
each Purchaser hereunder is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions as to such Purchaser, provided
that such conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion:
(a) Execution of Transaction Documents. Each Purchaser shall have
executed such Purchaser's Execution Page to this Agreement and each other
Transaction Document to which such Purchaser is a party and delivered the same
to the Company.
(b) Payment of Purchase Price. Each Purchaser shall have delivered
the full amount of such Purchaser's Purchase Price to the Company by wire
transfer in accordance with the Company's written wiring instructions.
(c) Representations and Warranties True; Covenants Performed. The
representations and warranties of each Purchaser shall be true and correct as of
the date when made and as of the Closing Date as though made at that time
(except for representations and warranties that speak as of a specific date,
which representations and warranties shall be true and correct as of such date),
and such Purchaser shall have performed, satisfied and complied with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by such Purchaser at or prior to the Closing Date.
- 21 -
(d) No Legal Prohibition. No statute, rule, regulation, executive
order, decree, ruling, injunction, action or proceeding shall have been enacted,
entered, promulgated or endorsed by any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which restricts or prohibits the consummation of
any of the transactions contemplated by this Agreement.
7. CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE.
The obligation of each Purchaser hereunder to purchase the Units for
which it is subscribing from the Company hereunder is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that such conditions are for each Purchaser's individual
and sole benefit and may be waived by any Purchaser as to such Purchaser at any
time in such Purchaser's sole discretion:
(a) Execution of Transaction Documents. The Company shall have
executed such Purchaser's Execution Page to this Agreement and each other
Transaction Document to which the Company is a party and delivered executed
originals of the same to such Purchaser.
(b) Delivery of Securities. The Company shall have delivered to
such Purchaser duly executed Notes and Warrants for the number of Units being
purchased by such Purchaser (each in such denominations as such Purchaser shall
request), registered in such Purchaser's name.
(c) Listing. The Common Stock shall be authorized for quotation
and listed on the SmallCap Market and trading in the Common Stock (or on the
SmallCap Market generally) shall not have been suspended by the SEC or the
SmallCap Market.
(d) Representations and Warranties True; Covenants Performed. The
representations and warranties of the Company shall be true and correct as of
the date when made and as of the Closing Date as though made at that time
(except for representations and warranties that speak as of a specific date,
which representations and warranties shall be true and correct as of such date)
and the Company shall have performed, satisfied and complied with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date. Such Purchaser
shall have received a certificate, executed by the Chief Executive Officer of
the Company after reasonable investigation, dated as of the Closing Date to the
foregoing effect and as to such other matters as may reasonably be requested by
such Purchaser.
(e) No Legal Prohibition. No statute, rule, regulation, executive
order, decree, ruling, injunction, action or proceeding shall have been enacted,
entered, promulgated or endorsed by any court or governmental authority of
competent jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which restricts or prohibits the consummation of
any of the transactions contemplated by this Agreement.
(f) Legal Opinion. Such Purchaser shall have received an opinion
of the Company's counsel, dated as of the Closing Date, in the form attached
hereto as Exhibit D.
(g) Corporate Approvals. Such Purchaser shall have received a copy
of resolutions, duly adopted by the Board of Directors of the Company, which
shall be in full force and effect at
- 22 -
the time of the Closing, authorizing the execution, delivery and performance by
the Company of this Agreement and the other Transaction Documents and the
consummation by the Company of the transactions contemplated hereby and thereby,
certified as such by the Secretary or Assistant Secretary of the Company, and
such other documents they reasonably request in connection with the Closing.
8. GOVERNING LAW; MISCELLANEOUS.
(a) Governing Law; Jurisdiction. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware applicable
to contracts made and to be performed in the State of Delaware. The Company and
each Purchaser irrevocably consent to the jurisdiction of the United States
federal courts and the state courts located in the County of New Castle, State
of Delaware, in any suit or proceeding based on or arising under this Agreement
and irrevocably agree that all claims in respect of such suit or proceeding may
be determined in such courts. The Company irrevocably waives the defense of an
inconvenient forum to the maintenance of such suit or proceeding in such forum.
The Company further agrees that service of process upon the Company mailed by
first class mail shall be deemed in every respect effective service of process
upon the Company in any such suit or proceeding. Nothing herein shall affect the
right of any Purchaser to serve process in any other manner permitted by law.
The Company agrees that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
(b) Counterparts. This Agreement may be executed in two or more
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. This Agreement, once executed by a party, may be
delivered to the other parties hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
In the event any signature is delivered by facsimile transmission, the party
using such means of delivery shall cause the manually executed execution page(s)
hereof to be physically delivered to the other party within five days of the
execution hereof, provided that the failure to so deliver any manually executed
execution page shall not affect the validity or enforceability of this
Agreement.
(c) Construction. Whenever the context requires, the gender of any
word used in this Agreement includes the masculine, feminine or neuter, and the
number of any word includes the singular or plural. Unless the context otherwise
requires, all references to articles and sections refer to articles and sections
of this Agreement, and all references to schedules are to schedules attached
hereto, each of which is made a part hereof for all purposes. The descriptive
headings of the several articles and sections of this Agreement are inserted for
purposes of reference only, and shall not affect the meaning or construction of
any of the provisions hereof.
(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 or the validity or enforceability of this Agreement
in any other jurisdiction.
- 23 -
(e) Entire Agreement; Amendments. This Agreement and the other
Transaction Documents (including any schedules and exhibits hereto and thereto)
contain the entire understanding of the Purchasers, the Company, their
affiliates and persons acting on their behalf with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor the Purchasers make any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived other than by an instrument in writing signed by
the party to be charged with enforcement, and no provision of this Agreement may
be amended other than by an instrument in writing signed by the Company and each
Purchaser.
(f) Notices. Any notices required or permitted to be given under
the terms of this Agreement shall be in writing and sent by certified or
registered mail (return receipt requested) or delivered personally, by
nationally recognized overnight carrier or by confirmed facsimile transmission,
and shall be effective five days after being placed in the mail, if mailed, or
upon receipt or refusal of receipt, if delivered personally or by nationally
recognized overnight carrier or confirmed facsimile transmission, in each case
addressed to a party as provided herein. The initial addresses for such
communications shall be as follows, and each party shall provide notice to the
other parties of any change in such party's address:
(i) If to the Company:
Xxxxxxxxx Resources, Inc.
000 Xxxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxxxxxx, President
with a copy simultaneously transmitted by like means
(which transmittal shall not constitute
notice hereunder) to:
Xxxxx & Xxxxxxxxxxx
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxx, Esq.
(ii) If to any Purchaser, to the address set forth under
such Purchaser's name on the Execution Page hereto executed by such Purchaser.
(g) Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and assigns. Except
as provided herein, the Company shall not assign this Agreement or any rights or
obligations hereunder. Any Purchaser may assign or transfer the Securities
pursuant to the terms of this Agreement and of such Securities, or assign such
Purchaser's rights hereunder to any other person or entity.
- 24 -
(h) 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) Survival. The representations and warranties of the Company
and the agreements and covenants set forth in Sections 3, 4, 5 and 8 hereof
shall survive the Closing notwithstanding any due diligence investigation
conducted by or on behalf of any Purchaser. Moreover, none of the
representations and warranties made by the Company herein shall act as a waiver
of any rights or remedies any Purchaser may have under applicable U.S. federal
or state securities laws.
(j) Publicity. The Company and each Purchaser shall have the right
to approve before issuance any press releases, SEC or, to the extent applicable,
NASD filings, or any other public statements with respect to the transactions
contemplated hereby; provided, however, that the Company shall be entitled,
without the prior approval of the Purchasers, to make any press release or SEC
or, to the extent applicable, NASD filings with respect to such transactions as
is required by applicable law and regulations (although the Purchasers shall be
consulted by the Company in connection with any such press release and filing
prior to its release and shall be provided with a copy thereof and must provide
specific consent to the use of their name in connection therewith).
(k) 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.
(l) Indemnification. In consideration of each Purchaser's
execution and delivery of this Agreement and the other Transaction Documents and
purchase of the Securities hereunder, and in addition to all of the Company's
other obligations under this Agreement and the other Transaction Documents, from
and after the Closing, the Company shall defend, protect, indemnify and hold
harmless each Purchaser and each other holder of the Securities and all of their
stockholders, partners, members, officers, directors, employees and direct or
indirect investors and any of the foregoing persons' 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 (i)
any misrepresentation or breach of any representation or warranty made by the
Company in this Agreement, any other Transaction Document or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any
breach of any covenant, agreement or obligation of the Company contained in this
Agreement, any other Transaction Document or any other certificate, instrument
or document contemplated hereby or thereby or (iii) any cause of action, suit or
claim brought or made against such Indemnitee by a third party (including for
these purposes a derivative action brought on behalf of the Company) and arising
out of or resulting from (A) the execution, delivery, performance or enforcement
of
- 25 -
this Agreement, any other Transaction Document or any other certificate,
instrument or document contemplated hereby or thereby, (B) any transaction
financed or to be financed in whole or in part, directly or indirectly, with the
proceeds of the issuance and sale of the Securities, (C) any disclosure made by
such Purchaser pursuant to Section 4(b) or 4(m) hereof, or (D) the status of
such Purchaser or holder of the Securities as an investor in the Company. 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. Except as otherwise set forth herein, the mechanics and
procedures with respect to the rights and obligations under this Section 8(l)
shall be the same as those set forth in Section 6(c) of the Registration Rights
Agreement.
(m) Payment Set Aside. To the extent that the Company makes a
payment or payments to any Purchaser hereunder or pursuant to any of the other
Transaction Documents or any Purchaser enforces or exercises its rights
hereunder or thereunder, and such payment or payments or the proceeds of such
enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company,
a trustee, receiver or any other person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
(n) Joint Participation in Drafting. Each party to this Agreement
has participated in the negotiation and drafting of this Agreement and the other
Transaction Documents. As such, the language used herein and therein shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any party to
this Agreement.
(o) Remedies. No provision of this Agreement or any other
Transaction Document providing for any remedy to a Purchaser shall limit any
other remedy which would otherwise be available to such Purchaser at law, in
equity or otherwise. Nothing in this Agreement or any other Transaction Document
shall limit any rights any Purchaser may have under any applicable federal or
state securities laws with respect to the investment contemplated hereby. The
Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Purchasers by vitiating the intent and purpose of the
transactions contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations hereunder (including, but not
limited to, its obligations pursuant to Section 5 hereof) will be inadequate and
agrees, in the event of a breach or threatened breach by the Company of the
provisions of this Agreement (including, but not limited to, its obligations
pursuant to Section 5 hereof), that each Purchaser shall be entitled, in
addition to all other available remedies, to an injunction restraining any
breach and requiring immediate issuance and transfer of the Securities, without
the necessity of showing economic loss and without any bond or other security
being required.
- 26 -
(p) Knowledge. As used in this Agreement, the term "knowledge" of
any person or entity shall mean and include (i) actual knowledge and (ii) that
knowledge which a reasonably prudent business person could have obtained in the
management of his or her business affairs after making due inquiry and
exercising due diligence which a prudent business person should have made or
exercised, as applicable, with respect thereto.
(q) Exculpation Among Purchasers; No "Group". Each Purchaser
acknowledges that it has independently evaluated the merits of the transactions
contemplated by this Agreement and the other Transaction Documents, that it has
independently determined to enter into the transactions contemplated hereby and
thereby, that it is not relying on any advice from or evaluation by any other
Purchaser, and that it is not acting in concert with any other Purchaser in
making its purchase of securities hereunder or in monitoring its investment in
the Company. The Purchasers and, to its knowledge, the Company agree that the
Purchasers have not taken any actions that would deem such Purchasers to be
members of a "group" for purposes of Section 13(d) of the Exchange Act, and the
Purchasers have not agreed to act together for the purpose of acquiring,
holding, voting or disposing of equity securities of the Company. Each Purchaser
further acknowledges that North Sound has retained Drinker Xxxxxx & Xxxxx LLP
("DB&R") to act as its counsel in connection with the transactions contemplated
by this Agreement and the other Transaction Documents and that DB&R has not
acted as counsel for any of the other Purchasers in connection therewith and
none of the other Purchasers have the status of a client of DB&R for conflict of
interest or other purposes as a result thereof.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
- 27 -
IN WITNESS WHEREOF, the undersigned Purchaser and the Company have
caused this Agreement to be duly executed as of the date first above written.
XXXXXXXXX RESOURCES, INC.
By:__________________________________________________________
Name:
Title:
PURCHASER:
_____________________________________________________________
(Print or Type Name of Purchaser)
By:__________________________________________________________
Name:
Title:
RESIDENCE:_____________________________________________
ADDRESS: _____________________________________________
_____________________________________________
_____________________________________________
Telephone:__________________________________
Facsimile:__________________________________
Attention:__________________________________
AGGREGATE SUBSCRIPTION AMOUNT:
Number of Units:_______________________________________
Purchase Price ($1,000 per Unit):______________________
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT]
