SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated January __, 2015, by
and between MineralRite Corporation, a Nevada corporation, with headquarters located at 00
Xxxxx Xxxxxx Xxxx, Xxxxxx, Xxxx 00000 (the "Company"), and River North Equity, Inc., an
Illinois corporation, with its principal place of business at 000 X. Xxxxxxx Xx., Xxxx 0000,
Xxxxxxx, Xxxxxxxx 00000 (the "Buyer"), (together the "Parties"). Capitalized terms used in this
Agreement and not otherwise defined shall have the meanings ascribed to them in Article 1.
WHEREAS, the Parties desire that, upon the terms and subject to the conditions contained
herein, the Company shall have the right to issue and sell to the Buyer from time to time as
provided herein, and the Buyer shall be obligated to purchase from the Company up to Ten
Million Dollars ($10,000,000) of the Company’s Common Stock with a par value of $0.001 per
share on a private placement basis pursuant to the provisions of regulation D of the Securities
Act, and/or upon such other exemption from the registration requirements of the Securities Act
as may be available with respect to any or all of the investments to be made hereunder; and
WHEREAS, the Buyer shall be entitled to resell shares of Common Stock acquired
hereunder pursuant to a resale registration statement established by the Company pursuant to the
terms of the Registration Rights Agreement between the Company and the Buyer, which shall be
declared effective by the Commission prior to the delivery of the first Draw Down Notice.
NOW, THEREFORE, in consideration of the foregoing premises, and the promises and
covenants herein contained, the receipt and sufficiency of which are hereby acknowledged by the
parties hereto, the parties, intending to be legally bound, hereby agree as follows:
ARTICLE I.
DEFINITIONS
1.1
Definitions. In addition to the terms defined elsewhere in this Agreement, for all
purposes of this Agreement, the following terms have the meanings indicated in this Section 1.1:
“Action” shall have the meaning ascribed to such term in Section 3.1(i).
“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a Person as
such terms are used in and construed under Rule 144 under the Securities Act. With
respect to the Buyer, any investment fund or managed account that is managed on a
discretionary basis by the same investment manager as the Buyer will be deemed to be an
Affiliate of the Buyer.
“Business Day” means any day except Saturday, Sunday, any day which shall be
a federal legal holiday in the United States or any day on which banking institutions in
the State of New York are authorized or required by law or other governmental action to
close.
“Buyer Party” shall have the meaning ascribed to such term in Section 4.7.
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“Closing Price” means on any particular date (a) the last reported closing bid
price per share of Common Stock on such date on the Trading Market (as reported by
Bloomberg L.P. at 4:15 PM (New York time)), or (b) if there is no such price on such
date, then the closing bid price on the Trading Market on the date nearest preceding such
date (as reported by Bloomberg L.P. at 4:15 PM (New York time)), or (c) if the Common
Stock is not then listed or quoted on the Trading Market and if prices for the Common
Stock are then reported over-the-counter and published by OTC Markets Group, Inc. (or
a similar organization or agency succeeding to its functions of reporting prices), the most
recent bid price per share of the Common Stock so reported, or (d) if the shares of
Common Stock are not then publicly traded, the fair market value of a share of Common
Stock as determined by an appraiser selected in good faith by the Buyer.
“Commission” means the Securities and Exchange Commission.
“Commencement Date” shall mean the Trading Day on which the applicable
Draw Down Notice is delivered to the Buyer.
“Commitment Amount” shall have the meaning assigned to such term in Section
2.1 hereof.
“Commitment Period” shall mean the period of 24 consecutive months
commencing immediately after the Effective Date but in no event later than the 30-month
anniversary of the date hereof.
“Common Stock” means the common stock of the Company, par value $0.001 per
share, and any other class of securities into which such securities may hereafter be
reclassified or changed into.
“Common Stock Equivalents” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time Common
Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or
other instrument that is at any time convertible into or exercisable or exchangeable for, or
otherwise entitles the holder thereof to receive, Common Stock.
“Company Counsel” means _________________________, with offices located
at ____________________________________.
“Consolidation Event” shall mean a sale of all or substantially all of the
Company’s assets or a merger pursuant to which the holders of the voting securities of
the Company prior to the merger do not own a majority of the voting securities of the
surviving entity.
“Disclosure Schedules” means the Disclosure Schedules of the Company
delivered concurrently herewith.
“Discussion Time” shall have the meaning assigned to such term in Section 3.2(f)
hereof.
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“Draw Down” shall have the meaning assigned to such term in Section 6.1(a)
hereof.
“Draw Down Cushion” shall mean the mandatory ten (10) Trading Days between
Draw Down Notices.
“Draw Down Notice” shall have the meaning assigned to such term in Section
6.1(c) hereof.
“Draw Down Pricing Period” shall mean the ten (10) Trading Days immediately
preceding the date on which the applicable Draw Down Notice is delivered to the Buyer.
“Draw Down Shares” shall mean the shares of Common Stock issuable pursuant
to a Draw Down.
“DTC” shall have the meaning assigned to such term in Section 6.1(g).
“DWAC” shall have the meaning assigned to such term in Section 6.1(g).
“Effective Date” means the date that the initial Registration Statement filed by the
Company pursuant to the Registration Rights Agreement is first declared effective by the
Commission.
“Equity Conditions” shall mean, during the period in question, (i) all liquidated
damages and other amounts owing to the Buyer pursuant to the Transaction Documents
have been paid, (ii) there is an effective Registration Statement pursuant to which the
Buyer is permitted to utilize the prospectus thereunder to resell all of the Draw Down
Shares (issued and to be issued pursuant to the applicable Draw Down) and the Shares
(and the Company believes, in good faith, that such effectiveness will continue
uninterrupted for the foreseeable future), (iii) the Common Stock is trading on the
Trading Market and all of the shares issuable pursuant to the Transaction Documents are
listed or quoted (if applicable) for trading on a Trading Market (and the Company
believes, in good faith, that trading of the Common Stock on a Trading Market will
continue uninterrupted for the foreseeable future), (iv) there is a sufficient number of
authorized but unissued and otherwise unreserved shares of Common Stock for the
issuance of all of the Draw Down Shares (issued and to be issued pursuant to the
applicable Draw Down) and the Shares, (v) the issuance of the Draw Down Shares
subject to the applicable Draw Down would not violate the limitations set forth in Section
4.12, (vi) the daily trading volume for each Trading Day during such period shall equal or
exceed $5,000 of Common Stock (based on the Closing Price on the applicable day) and
(vii) the Company, directly or indirectly, has not provided the Buyer with any material,
non-public information that has not been made publicly available in a widely
disseminated release.
“Evaluation Date” shall have the meaning ascribed to such term in Section 3.1(q).
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
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“Exempt Issuance” means the issuance of (a) shares of Common Stock or options
to employees, officers or directors of the Company pursuant to any stock or option plan
duly adopted by a majority of the non-employee members of the Board of Directors of
the Company or a majority of the members of a committee of non-employee directors
established for such purpose, (b) securities upon the exercise or exchange of or
conversion of any Securities issued hereunder and/or other securities exercisable or
exchangeable for or convertible into shares of Common Stock issued and outstanding on
the date of this Agreement, provided that such securities have not been amended since the
date of this Agreement to increase the number of such securities or to decrease the
exercise, exchange or conversion price of any such securities, and (c) securities issued
pursuant to acquisitions or strategic transactions approved by a majority of the
disinterested directors, provided any such issuance shall only be to a Person which is,
itself or through its subsidiaries, an operating company in a business synergistic with the
business of the Company and in which the Company receives benefits in addition to the
investment of funds, but shall not include a transaction in which the Company is issuing
securities primarily for the purpose of raising capital or to an entity whose primary
business is investing in securities.
“Formula Price” means the lower of: (i) the Market Price; and (ii) the Closing
Price on the Commencement Date, subject to adjustment for reverse and forward stock
splits, stock dividends, stock combinations and other similar transactions of the Common
Stock that occur after the date of this Agreement.
“GAAP” shall have the meaning ascribed to such term in Section 3.1(h).
“Initial Closing” shall have the meaning assigned to such term in Section 2.2
hereof.
“Initial Closing Date” shall have the meaning assigned to such term in Section 2.2
hereof.
“Intellectual Property Rights” shall have the meaning ascribed to such term in
Section 3.1(n).
“Investment Amount” shall have the meaning assigned to such term in Section
6.1(c) hereof.
“Legend Removal Date” shall have the meaning ascribed to such term in Section
4.1(c).
“Liens” means a lien, charge, security interest, encumbrance, right of first refusal,
preemptive right or other restriction.
“Market Price” means, with respect to a Draw Down, the average closing bid
price of the Common Stock during the Draw Down Pricing Period applicable to such
Draw Down.
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“Material Adverse Effect” shall have the meaning assigned to such term in
Section 3.1(b).
“Material Permits” shall have the meaning ascribed to such term in Section 3.1(l).
“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any kind.
“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as a
deposition), whether commenced or threatened.
"Buyer's Ownership Limitation" shall have the meaning ascribed to such term in
Section 4.12.
“Purchase Price” shall mean, with respect to Draw Down Shares purchased
pursuant to a Draw Down Notice, 70% of the Formula Price. In case a DTC Chill order
is placed on the Common Stock of the Company, and as long as this order is in effect, the
Purchase Price shall mean 60% of the Formula Price.
“Registration Rights Agreement” means the Registration Rights Agreement,
dated the date hereof, between the Company and the Buyer, in the form of Exhibit A
attached hereto.
“Registration Statement” means a registration statement meeting the requirements
set forth in the Registration Rights Agreement and covering the resale by the Buyer of the
Draw Down Shares and the Shares.
“Required Approvals” shall have the meaning ascribed to such term in Section
3.1(e).
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same effect as
such Rule.
“Rule 424” means Rule 424 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same effect as
such Rule.
“SEC Reports” shall have the meaning ascribed to such term in Section 3.1(g).
“Securities” means the Draw Down Shares and the Shares.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
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“Settlement” shall mean the delivery of the Draw Down Shares into the Buyer’s
DTC account via DTC’s DWAC system in exchange for payment therefor.
“Settlement Date” shall have the meaning assigned to such term in Section 6.1(f).
“Shares” shall mean the shares of Common Stock delivered to the Buyer at the
Initial Closing and any additional shares of Common Stock issued pursuant to Section
2.3.
“Subsidiary” shall have the meaning ascribed to such term in Section 3.1(a).
“Short Sales” shall include all “short sales” as defined in Rule 200 of Regulation
SHO under the Exchange Act.
“Subsidiary” means any subsidiary of the Company as set forth on Schedule
3.1(a).
“Trading Day” means a day on which the Common Stock is traded on a Trading
Market.
“Trading Market” means the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the Nasdaq Stock
Market, the New York Stock Exchange, NYSE MKT or the OTC Bulletin Board,
OTCQX, OTCQB and OTC Pink (provided that if the Company is listed on OTC Pink it
must maintain its SEC current reporting status).
“Transaction Documents” means this Agreement, the Registration Rights
Agreement and any other documents or agreements executed in connection with the
transactions contemplated hereunder.
ARTICLE II.
PURCHASE AND SALE
2.1
Purchase and Sale of Draw Down Shares. Upon the terms and subject to the
conditions of this Agreement, the Company may sell and issue to the Buyer and the Buyer shall
be obligated to purchase from the Company, up to an aggregate of ten million Dollars
($10,000,000) worth of Common Stock (the “Commitment Amount”).
2.2
Initial Closing. The execution and delivery of this Agreement and the other
agreements referred to herein (the “Initial Closing”) shall take place at such date as the Buyer
and the Company may agree upon (the “Initial Closing Date”). Each party shall deliver the
following documents, instruments and writings at or prior to the Initial Closing:
(a)
the Company shall deliver or cause to be delivered to the Buyer the
following:
(i)
this Agreement duly executed by the Company;
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(ii)
a legal opinion of Company counsel in the form of Exhibit B
attached hereto;
(iii)
a stock certificate evidencing a number of shares of Company's
Common Stock representing immediately post issuance 9.99% of Company's
outstanding shares of Common Stock.
(iv)
the Registration Rights Agreement duly executed by the Company.
(b)
the Buyer shall deliver or cause to be delivered to the Company the
following:
(i)
this Agreement duly executed by the Buyer; and
(ii)
the Registration Rights Agreement duly executed by the Buyer.
2.3 Additional Shares.
(a) After the Registration Statement to be filed with the SEC pursuant to this
Agreement goes effective, upon reaching a market cap of $800,000 or more (and should by the
time the Registration Statement becomes effective such market cap is reached, then immediately
upon effective notice from the SEC) the Company shall immediately issue to the Buyer shares of
its Common Stock representing 9.99% of its outstanding shares of Common Stock post issuance.
Should the Buyer own any shares of the Company's Common Stock at the time of issuance, the
shares already owned by the Buyer together with the shares to be issued pursuant to this Section
2.3(a) shall represent 9.99% of the Company's outstanding shares of Common Stock post
issuance. The Buyer shall be entitled to have the Company, at Buyer's sole discretion, delay the
issuance of Common Stock pursuant to this Section 2.3(a) for a period not to exceed 90 days.
(b) After the Registration Statement to be filed with the SEC pursuant to this
Agreement goes effective, upon reaching a market cap of $2,000,000 or more (and should by the
time the Registration Statement becomes effective such market cap is reached, then immediately
upon effective notice from the SEC) the Company shall immediately issue to the Buyer shares of
its Common Stock representing 9.99% of its outstanding shares of Common Stock post issuance.
Should the Buyer own any shares of the Company's Common Stock at the time of issuance, the
shares already owned by the Buyer together with the shares to be issued pursuant to this Section
2.3(b) shall represent 9.99% of the Company's outstanding shares of Common Stock post
issuance. The Buyer shall be entitled to have the Company, at Buyer's sole discretion, delay the
issuance of Common Stock pursuant to this Section 2.3(b) for a period not to exceed 90 days.
(c) Should by the time the Registration Statement to be filed with the SEC
pursuant to this Agreement becomes effective, a market cap of $2,000,000 or more is reached
then the Company shall immediately upon effective notice from the SEC issue shares of its
Common Stock to the Buyer in accordance with Section 2.3(b) above. The Company shall issue
additional shares of Common Stock representing $80,000 based on the Formula Price as soon as
the Buyer shall notify the Company that such issuance shall not result in its ownership of more
than 9.99% of the Company's outstanding shares of Common Stock. The Buyer shall be entitled
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to have the Company, at Buyer's sole discretion, delay the issuance of Common Stock pursuant
to this Section 2.3(c) for a period not to exceed 90 days.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1
Representations and Warranties of the Company. Except as set forth under the
corresponding section of the Disclosure Schedules, which Disclosure Schedules shall be deemed
a part hereof and to qualify any representation or warranty otherwise made herein to the extent of
such disclosure, the Company hereby makes the representations and warranties set forth below to
the Buyer:
(a)
Subsidiaries. All of the direct and indirect subsidiaries of the Company
are set forth on Schedule 3.1(a). The Company owns, directly or indirectly, all of the
capital stock or other equity interests of each Subsidiary free and clear of any Liens, and
all the issued and outstanding shares of capital stock of each Subsidiary are validly issued
and are fully paid, non-assessable and free of preemptive and similar rights to subscribe
for or purchase securities. If the Company has no subsidiaries, then all other references
in the Transaction Documents to the Subsidiaries or any of them will be disregarded.
(b)
Organization and Qualification.
The Company and each of the
Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or organization (as
applicable), with the requisite power and authority to own and use its properties and
assets and to carry on its business as currently conducted. Neither the Company nor any
Subsidiary is in violation or default of any of the provisions of its respective certificate or
articles of incorporation, bylaws or other organizational or charter documents. Each of
the Company and the Subsidiaries is duly qualified to conduct business and is in good
standing as a foreign corporation or other entity in each jurisdiction in which the nature
of the business conducted or property owned by it makes such qualification necessary,
except where the failure to be so qualified or in good standing, as the case may be, could
not have or reasonably be expected to result in (i) a material adverse effect on the
legality, validity or enforceability of any Transaction Document, (ii) a material adverse
effect on the results of operations, assets, business, prospects or condition (financial or
otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material
adverse effect on the Company’s ability to perform in any material respect on a timely
basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material
Adverse Effect”) and no Proceeding has been instituted in any such jurisdiction revoking,
limiting or curtailing or seeking to revoke, limit or curtail such power and authority or
qualification.
(c)
Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions contemplated by
each of the Transaction Documents and otherwise to carry out its obligations hereunder
and thereunder. The execution and delivery of each of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary action on the part of the Company
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and no further action is required by the Company, its board of directors or its
stockholders in connection therewith other than in connection with the Required
Approvals. Each Transaction Document has been (or upon delivery will have been) duly
executed by the Company and, when delivered in accordance with the terms hereof and
thereof, will constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms except (i) as limited by general
equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors’ rights generally,
(ii) as limited by laws relating to the availability of specific performance, injunctive relief
or other equitable remedies and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.
(d)
No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company, the issuance and sale of the Draw Down Shares and the
consummation by the Company of the other transactions contemplated hereby and
thereby do not and will not (i) conflict with or violate any provision of the Company’s or
any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or
charter documents, or (ii) conflict with, or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, result in the creation of
any Lien upon any of the properties or assets of the Company or any Subsidiary, or give
to others any rights of termination, amendment, acceleration or cancellation (with or
without notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject
to the Required Approvals, conflict with or result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company or a Subsidiary is subject (including
federal and state securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii)
and (iii), such as could not have or reasonably be expected to result in a Material Adverse
Effect.
(e)
Filings, Consents and Approvals. The Company is not required to obtain
any consent, waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other governmental authority
or other Person in connection with the execution, delivery and performance by the
Company of the Transaction Documents, other than (i) filings required pursuant to
Section 4.4 of this Agreement, (ii) the filing with the Commission of the Registration
Statement and any amendments or supplements thereto, (iii) application(s) to each
applicable Trading Market for the listing of the Securities for trading thereon in the time
and manner required thereby, and (iv) the filing of Form D with the Commission and
such filings as are required to be made under applicable state securities laws (collectively,
the “Required Approvals”).
(f)
Issuance of the Securities. The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents, will be
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duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed
by the Company other than restrictions on transfer provided for in the Transaction
Documents. Capitalization. The capitalization of the Company is as set forth on
Schedule 3.1(f). The Company has not issued any capital stock since its most recently
filed periodic report under the Exchange Act, other than pursuant to the exercise of
employee stock options under the Company’s stock option plans, the issuance of shares
of Common Stock to employees pursuant to the Company’s employee stock purchase
plan and pursuant to the conversion or exercise of Common Stock Equivalents
outstanding as of the date of the most recently filed periodic report under the Exchange
Act. No Person has any right of first refusal, preemptive right, right of participation, or
any similar right to participate in the transactions contemplated by the Transaction
Documents. Except as a result of the purchase and sale of the Securities, there are no
outstanding options, warrants, script rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or obligations convertible into or
exercisable or exchangeable for, or giving any Person any right to subscribe for or
acquire, any shares of Common Stock, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may become bound to issue
additional shares of Common Stock or Common Stock Equivalents. The issuance and
sale of the Securities will not obligate the Company to issue shares of Common Stock or
other securities to any Person (other than the Buyer) and will not result in a right of any
holder of Company securities to adjust the exercise, conversion, exchange or reset price
under any of such securities. All of the outstanding shares of capital stock of the
Company are validly issued, fully paid and nonassessable, have been issued in
compliance with all federal and state securities laws, and none of such outstanding shares
was issued in violation of any preemptive rights or similar rights to subscribe for or
purchase securities. No further approval or authorization of any stockholder, the Board
of Directors of the Company or others is required for the issuance and sale of the
Securities. There are no stockholders agreements, voting agreements or other similar
agreements with respect to the Company’s capital stock to which the Company is a party
or, to the knowledge of the Company, between or among any of the Company’s
stockholders.
(g)
SEC Reports; Financial Statements. The Company has filed all reports,
schedules, forms, statements and other documents required to be filed by it under the
Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d)
thereof, for the two years preceding the date hereof (or such shorter period as the
Company was required by law or regulation to file such material) (the foregoing
materials, including the exhibits thereto and documents incorporated by reference therein,
being collectively referred to herein as the “SEC Reports”) on a timely basis or has
received a valid extension of such time of filing and has filed any such SEC Reports prior
to the expiration of any such extension. As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act and the
Exchange Act, as applicable, and none of the SEC Reports, when filed, 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 the light of the
circumstances under which they were made, not misleading. The financial statements of
the Company included in the SEC Reports comply in all material respects with applicable
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accounting requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements have been prepared in
accordance with United States generally accepted accounting principles applied on a
consistent basis during the periods involved (“GAAP”), except as may be otherwise
specified in such financial statements or the notes thereto and except that unaudited
financial statements may not contain all footnotes required by GAAP, and fairly present
in all material respects the financial position of the Company and its consolidated
subsidiaries as of and for the dates thereof and the results of operations and cash flows for
the periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
(h)
Material Changes; Undisclosed Events, Liabilities or Developments.
Since the date of the latest audited financial statements included within the SEC Reports,
except as specifically disclosed in a subsequent SEC Report, (i) there has been no event,
occurrence or development that has had or that could reasonably be expected to result in
a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or
otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary
course of business consistent with past practice and (B) liabilities not required to be
reflected in the Company’s financial statements pursuant to GAAP or disclosed in filings
made with the Commission, (iii) the Company has not altered its method of accounting,
(iv) the Company has not declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any agreements to purchase
or redeem any shares of its capital stock and (v) the Company has not issued any equity
securities to any officer, director or Affiliate, except pursuant to existing Company stock
option plans. The Company does not have pending before the Commission any request
for confidential treatment of information. Except for the issuance of the Securities
contemplated by this Agreement or as set forth on Schedule 3.1(h), no event, liability or
development has occurred or exists with respect to the Company or its Subsidiaries or
their respective business, properties, operations or financial condition, that would be
required to be disclosed by the Company under applicable securities laws at the time this
representation is made that has not been publicly disclosed at least 1 Trading Day prior to
the date that this representation is made.
(i)
Litigation. There is no action, suit, inquiry, notice of violation, proceeding
or investigation pending or, to the knowledge of the Company, threatened against or
affecting the Company, any Subsidiary or any of their respective properties before or by
any court, arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”) which (i) adversely
affects or challenges the legality, validity or enforceability of any of the Transaction
Documents or the Securities or (ii) could, if there were an unfavorable decision, have or
reasonably be expected to result in a Material Adverse Effect. Neither the Company nor
any Subsidiary, nor any director or officer thereof, is or has been the subject of any
Action involving a claim of violation of or liability under federal or state securities laws
or a claim of breach of fiduciary duty. There has not been, and to the knowledge of the
Company, there is not pending or contemplated, any investigation by the Commission
involving the Company or any current or former director or officer of the Company. The
Commission has not issued any stop order or other order suspending the effectiveness of
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any registration statement filed by the Company or any Subsidiary under the Exchange
Act or the Securities Act.
(j)
Labor Relations. No material labor dispute exists or, to the knowledge of
the Company, is imminent with respect to any of the employees of the Company which
could reasonably be expected to result in a Material Adverse Effect. None of the
Company’s or its Subsidiaries’ employees is a member of a union that relates to such
employee’s relationship with the Company, and neither the Company or any of its
Subsidiaries is a party to a collective bargaining agreement, and the Company and its
Subsidiaries believe that their relationships with their employees are good. No executive
officer, to the knowledge of the Company, is, or is now expected to be, in violation of
any material term of any employment contract, confidentiality, disclosure or proprietary
information agreement or non-competition agreement, or any other contract or agreement
or any restrictive covenant, and the continued employment of each such executive officer
does not subject the Company or any of its Subsidiaries to any liability with respect to
any of the foregoing matters. The Company and its Subsidiaries are in compliance with
all U.S. federal, state, local and foreign laws and regulations relating to employment and
employment practices, terms and conditions of employment and wages and hours, except
where the failure to be in compliance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(k)
Compliance. Neither the Company nor any Subsidiary (i) is in default
under or in violation of (and no event has occurred that has not been waived that, with
notice or lapse of time or both, would result in a default by the Company or any
Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that
it is in default under or that it is in violation of, any indenture, loan or credit agreement or
any other agreement or instrument to which it is a party or by which it or any of its
properties is bound (whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body, or (iii) is or has been
in violation of any statute, rule or regulation of any governmental authority, including
without limitation all foreign, federal, state and local laws applicable to its business and
all such laws that affect the environment, except in each case as could not have or
reasonably be expected to result in a Material Adverse Effect.
(l)
Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal, state, local or
foreign regulatory authorities necessary to conduct their respective businesses as
described in the SEC Reports, except where the failure to possess such permits could not
have or reasonably be expected to result in a Material Adverse Effect (“Material
Permits”), and neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material Permit.
(m)
Title to Assets. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them that is material to the
business of the Company and the Subsidiaries and good and marketable title in all
personal property owned by them that is material to the business of the Company and the
Subsidiaries, in each case free and clear of all Liens, except for Liens as do not materially
12
affect the value of such property and do not materially interfere with the use made and
proposed to be made of such property by the Company and the Subsidiaries and Liens for
the payment of federal, state or other taxes, the payment of which is neither delinquent
nor subject to penalties. Any real property and facilities held under lease by the
Company and the Subsidiaries are held by them under valid, subsisting and enforceable
leases with which the Company and the Subsidiaries are in compliance.
(n)
Patents and Trademarks. The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark applications, service
marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual
property rights and similar rights necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the failure to so have
could have a Material Adverse Effect (collectively, the “Intellectual Property Rights”).
Neither the Company nor any Subsidiary has received a notice (written or otherwise) that
the Intellectual Property Rights used by the Company or any Subsidiary violates or
infringes upon the rights of any Person. To the knowledge of the Company, all such
Intellectual Property Rights are enforceable and there is no existing infringement by
another Person of any of the Intellectual Property Rights. The Company and its
Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties, except where failure to do
so could not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(o)
Insurance. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such amounts as
are prudent and customary in the businesses in which the Company and the Subsidiaries
are engaged, including, but not limited to, directors and officers insurance coverage at
least equal to $5,000,000. Neither the Company nor any Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be necessary
to continue its business without a significant increase in cost.
(p)
Transactions With Affiliates and Employees. Except as set forth in the
SEC Reports, none of the officers or directors of the Company and, to the knowledge of
the Company, none of the employees of the Company is presently a party to any
transaction with the Company or any Subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement providing
for the furnishing of services to or by, providing for rental of real or personal property to
or from, or otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director, trustee or
partner, in each case in excess of $60,000 other than (i) for payment of salary or
consulting fees for services rendered, (ii) reimbursement for expenses incurred on behalf
of the Company and (iii) for other employee benefits, including stock option agreements
under any stock option plan of the Company.
13
(q)
Xxxxxxxx-Xxxxx; Internal Accounting Controls. The Company is in
material compliance with all provisions of the Xxxxxxxx-Xxxxx Act of 2002 which are
applicable to it as of the Closing Date. The Company and the Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken with respect to any
differences. The Company has established disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such
disclosure controls and procedures to ensure that information required to be disclosed by
the Company in the reports it files or submits under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the
Commission’s rules and forms. The Company’s certifying officers have evaluated the
effectiveness of the Company’s disclosure controls and procedures as of the end of the
period covered by the Company’s most recently filed periodic report under the Exchange
Act (such date, the “Evaluation Date”). The Company presented in its most recently filed
periodic report under the Exchange Act the conclusions of the certifying officers about
the effectiveness of the disclosure controls and procedures based on their evaluations as
of the Evaluation Date. Since the Evaluation Date, there have been no changes in the
Company’s internal control over financial reporting (as such term is defined in the
Exchange Act) that has materially affected, or is reasonably likely to materially affect,
the Company’s internal control over financial reporting.
(r)
Certain Fees. Any brokerage or finder’s fees or commissions that are, or
will be, payable by the Company to any broker, financial advisor or consultant, finder,
placement agent, investment banker, bank or other Person with respect to the transactions
contemplated by the Transaction Documents shall be borne solely by the Company. The
Buyer shall have no obligation with respect to any fees or with respect to any claims
made by or on behalf of other Persons for fees of a type contemplated in this Section that
may be due in connection with the transactions contemplated by the Transaction
Documents.
(s)
Private Placement. Assuming the accuracy of the Buyer representations
and warranties set forth in Section 3.2, no registration under the Securities Act is required
for the offer and sale of the Securities by the Company to the Buyer as contemplated
hereby. The issuance and sale of the Securities hereunder does not contravene the rules
and regulations of the Trading Market.
(t)
Investment Company. The Company is not, and is not an Affiliate of, and
immediately after receipt of payment for the Securities, will not be or be an Affiliate of,
an “investment company” within the meaning of the Investment Company Act of 1940,
as amended. The Company shall conduct its business in a manner so that it will not
become subject to the Investment Company Act.
14
(u)
Registration Rights. Other than the Buyer, no Person has any right to
cause the Company to effect the registration under the Securities Act of any securities of
the Company.
(v)
Listing and Maintenance Requirements. The Company’s Common Stock
is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company
has taken no action designed to, or which to its knowledge is likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act nor has the
Company received any notification that the Commission is contemplating terminating
such registration. The Company has not, in the 12 months preceding the date hereof,
received notice from any Trading Market on which the Common Stock is or has been
listed or quoted to the effect that the Company is not in compliance with the listing or
maintenance requirements of such Trading Market. The Company is, and has no reason
to believe that it will not in the foreseeable future continue to be, in compliance with all
such listing and maintenance requirements.
(w)
Application of Takeover Protections. The Company and its Board of
Directors have taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under the Company’s
Certificate of Incorporation (or similar charter documents) or the laws of its state of
incorporation that is or could become applicable to the Buyer as a result of the Buyer and
the Company fulfilling their obligations or exercising their rights under the Transaction
Documents, including without limitation as a result of the Company’s issuance of the
Securities and the Buyer’s ownership of the Securities.
(x)
Disclosure. Except with respect to the material terms and conditions of
the transactions contemplated by the Transaction Documents, the Company confirms
that, neither it nor any other Person acting on its behalf has provided any of the Buyer or
their agents or counsel with any information that it believes constitutes or might
constitute material, non-public information. The Company understands and confirms
that the Buyer will rely on the foregoing representation in effecting transactions in
securities of the Company. All disclosure furnished by or on behalf of the Company to
the Buyer regarding the Company, its business and the transactions contemplated hereby,
including the Disclosure Schedules to this Agreement, with respect to the representations
and warranties made herein are true and correct with respect to such representations and
warranties and do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The press releases
disseminated by the Company during the twelve months preceding the date of this
Agreement taken as a whole do not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in order to make the
statements, in light of the circumstances under which they were made and when made,
not misleading. The Company acknowledges and agrees that the Buyer neither makes
nor has made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section 3.2 hereof.
15
(y)
No Integrated Offering. Assuming the accuracy of the Buyer’s
representations and warranties set forth in Section 3.2, neither the Company, nor any of
its affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made
any offers or sales of any security or solicited any offers to buy any security, under
circumstances that would cause this offering of the Securities to be integrated with prior
offerings by the Company for purposes of the Securities Act or any applicable
shareholder approval provisions of any Trading Market on which any of the securities of
the Company are listed or designated.
(z)
Solvency. Based on the financial condition of the Company as of the
Closing Date after giving effect to the receipt by the Company of the proceeds from the
sale of the Securities hereunder, (i) the fair saleable value of the Company’s 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 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 liabilities when
such amounts are required to be paid. The Company does not intend to incur debts
beyond its ability to pay such debts as they mature (taking into account the timing and
amounts of cash to be payable on or in respect of its debt). The Company has no
knowledge of any facts or circumstances which lead it to believe that it will file for
reorganization or liquidation under the bankruptcy or reorganization laws of any
jurisdiction within one year from the Closing Date. The SEC Reports set forth as of the
dates thereof all outstanding secured and unsecured Indebtedness of the Company or any
Subsidiary, or for which the Company or any Subsidiary has commitments. For the
purposes of this Agreement, “Indebtedness” shall mean (a) any liabilities for borrowed
money or amounts owed in excess of $150,000 (other than trade accounts payable
incurred in the ordinary course of business), (b) all guaranties, endorsements and other
contingent obligations in respect of Indebtedness of others, whether or not the same are
or should be reflected in the Company’s balance sheet (or the notes thereto), except
guaranties by endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (c) the present value of any lease
payments in excess of $150,000 due under leases required to be capitalized in accordance
with GAAP. Neither the Company nor any Subsidiary is in default with respect to any
Indebtedness.
(aa) Tax Status. Except for matters that would not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse Effect, the
Company and each Subsidiary has filed all necessary federal, state and foreign income
and franchise tax returns and has paid or accrued all taxes shown as due thereon, and the
Company has no knowledge of a tax deficiency which has been asserted or threatened
against the Company or any Subsidiary.
16
(bb) No General Solicitation. Neither the Company nor any person acting on
behalf of the Company has offered or sold any of the Securities by any form of general
solicitation or general advertising. The Company has offered the Securities for sale only
to the Buyer.
(cc) Foreign Corrupt Practices. Neither the Company, nor to the knowledge of
the Company, any agent or other person acting on behalf of the Company, has (i) directly
or indirectly, used any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful
payment to foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully
any contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is in violation of law, or (iv) violated in any
material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.
(dd) Accountants. The Company’s accountants are set forth on Schedule
3.1(dd) of the Disclosure Schedule. To the knowledge of the Company, such
accountants, who the Company expects will express their opinion with respect to the
financial statements to be included in the Company’s Annual Report on Form 10-K for
the year ending December 31, 2014, are a registered public accounting firm as required
by the Exchange Act.
(ee) Acknowledgment Regarding Buyer’s Purchase of Securities.
The
Company acknowledges and agrees that the Buyer is acting solely in the capacity of an
arm’s length Buyer with respect to the Transaction Documents and the transactions
contemplated thereby. The Company further acknowledges that the Buyer is not acting
as a financial advisor or fiduciary of the Company (or in any similar capacity) with
respect to the Transaction Documents and the transactions contemplated thereby and any
advice given by the Buyer or any of its respective representatives or agents in connection
with the Transaction Documents and the transactions contemplated thereby is merely
incidental to the Buyer’s purchase of the Securities. The Company further represents to
the Buyer that the Company’s decision to enter into this Agreement and the other
Transaction Documents has been based solely on the independent evaluation of the
transactions contemplated hereby by the Company and its representatives.
(ff)
Manipulation of Price. The Company has not, and to its knowledge no
one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause
or to result in the stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of any of the Securities, (ii) sold, bid for,
purchased, or, paid any compensation for soliciting purchases of, any of the Securities, or
(iii) paid or agreed to pay to any person any compensation for soliciting another to
purchase any other securities of the Company, other than, in the case of clauses (ii) and
(iii), compensation paid to the Company’s placement agent in connection with the
placement of the Securities.
(gg) Acknowledgement Regarding Buyer’s Trading Activity. Anything in this
Agreement or elsewhere herein to the contrary notwithstanding, it is understood and
17
acknowledged by the Company that Buyer has neither been asked to agree, nor has Buyer
agreed, to desist from purchasing or selling long securities of the Company, including,
without limitation, during the periods that the value of the Draw Down Shares deliverable
in connection with a Draw Down are being determined. The Company acknowledges
that such aforementioned activities do not constitute a breach of any of the Transaction
Documents.
3.2
Representations and Warranties of the Buyer. Buyer hereby represents and
warrants as of the date hereof and as of each Closing Date to the Company as follows:
(a)
Organization; Authority. Buyer is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its organization with
full right, corporate or partnership power and authority to enter into and to consummate
the transactions contemplated by the Transaction Documents and otherwise to carry out
its obligations hereunder and thereunder. The execution, delivery and performance by the
Buyer of the transactions contemplated by this Agreement have been duly authorized by
all necessary corporate or similar action on the part of the Buyer. Each Transaction
Document to which it is a party has been duly executed by the Buyer, and when delivered
by the Buyer in accordance with the terms hereof, will constitute the valid and legally
binding obligation of the Buyer, enforceable against it in accordance with its terms,
except (i) as limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable remedies and (iii)
insofar as indemnification and contribution provisions may be limited by applicable law.
(b)
Own Account. Buyer understands that the Shares are “restricted
securities” and have not been registered under the Securities Act or any applicable state
securities law and is acquiring the Shares as principal for its own account and not with a
view to or for distributing or reselling such Shares or any part thereof in violation of the
Securities Act or any applicable state securities law, has no present intention of
distributing any of such Shares in violation of the Securities Act or any applicable state
securities law and has no direct or indirect arrangement or understandings with any other
persons to distribute or regarding the distribution of such Shares in violation of the
Securities Act or any applicable state securities law (this representation and warranty not
limiting the Buyer’s right to sell the Securities pursuant to the Registration Statement or
otherwise in compliance with applicable federal and state securities laws). Buyer is
acquiring the Shares hereunder in the ordinary course of its business.
(c)
Buyer Status. At the time the Buyer was offered the Shares, it was, and at
the date hereof it is, and 90 days following the Initial Closing, it will be either: (i) an
“accredited investor” as defined in Rule 501 under the Securities Act or (ii) a “qualified
institutional buyer” as defined in Rule 144A(a) under the Securities Act
(d)
Experience of Buyer. Buyer, either alone or together with its
representatives, has such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and risks of the prospective
18
investment in the Securities, and has so evaluated the merits and risks of such investment.
Buyer is able to bear the economic risk of an investment in the Securities and, at the
present time, is able to afford a complete loss of such investment.
(e)
General Solicitation. Buyer is not purchasing the Securities as a result of
any advertisement, article, notice or other communication regarding the Securities
published in any newspaper, magazine or similar media or broadcast over television or
radio or presented at any seminar or any other general solicitation or general
advertisement.
(f)
Short Sales and Confidentiality Prior to the Date Hereof. Other than the
transaction contemplated hereunder, the Buyer has not directly or indirectly, nor has any
Person acting on behalf of or pursuant to any understanding with the Buyer, executed any
disposition, including Short Sales, in the securities of the Company during the period
commencing from the time that the Buyer first received a term sheet (written or oral)
from the Company or any other Person setting forth the material terms of the transactions
contemplated hereunder until the date hereof (“Discussion Time”). Notwithstanding the
foregoing, if the Buyer is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of the Buyer's assets and the portfolio managers have
no direct knowledge of the investment decisions made by the portfolio managers
managing other portions of the Buyer's assets, the representation set forth above shall
only apply with respect to the portion of assets managed by the portfolio manager that
made the investment decision to purchase the Securities covered by this Agreement.
Other than to other Persons party to this Agreement, the Buyer has maintained the
confidentiality of all disclosures made to it in connection with this transaction (including
the existence and terms of this transaction).
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1
Transfer Restrictions.
(a)
The Securities may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of Securities other than pursuant
to an effective registration statement or Rule 144, to the Company or to an affiliate of the
Buyer or in connection with a pledge as contemplated in Section 4.1(b), the Company
may require the transferor thereof to provide to the Company an opinion of counsel
selected by the transferor and reasonably acceptable to the Company, the form and
substance of which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration of such transferred Securities under the
Securities Act. As a condition of transfer, any such transferee shall agree in writing to be
bound by the terms of this Agreement and shall have the rights of the Buyer under this
Agreement and the Registration Rights Agreement, as to issued Securities only.
(b)
The Buyer agrees to the imprinting, so long as is required by this Section
4.1, of a legend on any of the Securities in the following form:
19
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION
NOT
SUBJECT
TO,
THE
REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A
LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH
EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. THESE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A
FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS
DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER
LOAN SECURED BY SUCH SECURITIES.
The Company acknowledges and agrees that the Buyer may from time to time
pledge pursuant to a bona fide margin agreement with a registered broker-dealer or grant
a security interest in some or all of the Securities to a financial institution that is an
“accredited investor” as defined in Rule 501(a) under the Securities Act and who agrees
to be bound by the provisions of this Agreement and the Registration Rights Agreement
and, if required under the terms of such arrangement, the Buyer may transfer pledged or
secured Securities to the pledgees or secured parties. Such a pledge or transfer would not
be subject to approval of the Company and no legal opinion of legal counsel of the
pledgee, secured party or pledgor shall be required in connection therewith. Further, no
notice shall be required of such pledge. At the Buyer’s expense, the Company will
execute and deliver such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or transfer of the
Securities, including, if the Securities are subject to registration pursuant to the
Registration Rights Agreement, the preparation and filing of any required prospectus
supplement under Rule 424(b)(3) under the Securities Act or other applicable provision
of the Securities Act to appropriately amend the list of Selling Stockholders thereunder.
(c)
Certificates evidencing the Draw Down Shares and the Shares shall not
contain any legend (including the legend set forth in Section 4.1(b)), (i) while a
registration statement (including the Registration Statement) covering the resale of such
security is effective under the Securities Act, or (ii) following any sale of such Draw
Down Shares or Shares pursuant to Rule 144, or (iii) if such legend is not required under
applicable requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission). The Company shall cause its
counsel to issue a legal opinion to the Company’s transfer agent promptly after the
Effective Date if required by the Company’s transfer agent to effect the removal of the
legend hereunder. The Company agrees that following the Effective Date or at such time
20
as such legend is no longer required under this Section 4.1(c), it will, no later than 3
(three) Trading Days following the delivery by the Buyer to the Company or the
Company’s transfer agent of a certificate representing Draw Down Shares, or Shares, as
the case may be, issued with a restrictive legend (such third Trading Day, the “Legend
Removal Date”), deliver or cause to be delivered to the Buyer a certificate representing
such shares that is free from all restrictive and other legends. All Draw Down Shares
shall be delivered without any restrictive legends. The Company may not make any
notation on its records or give instructions to any transfer agent of the Company that
enlarge the restrictions on transfer set forth in this Section. Certificates for Securities
subject to legend removal hereunder shall be transmitted by the transfer agent of the
Company to the Buyer by crediting the account of the Buyer’s broker (as indicated by
Buyer) with the Depository Trust Company system.
(d)
In addition to the Buyer’s other available remedies, the Company shall pay
to the Buyer, in cash, as partial liquidated damages and not as a penalty, for each $1,000
of Draw Down Shares, or Shares (based on the Closing Price of the Common Stock on
the date such Securities are submitted to the Company’s transfer agent) delivered for
removal of the restrictive legend and subject to Section 4.1(c), $7.50 per Trading Day
(increasing to $15 per Trading Day 5 (five) Trading Days after such damages have begun
to accrue) for each Trading Day after 2nd Trading Day following the Legend Removal
Date until such certificate is delivered without a legend. Nothing herein shall limit the
Buyer’s right to pursue actual damages for the Company’s failure to deliver certificates
representing any Securities as required by the Transaction Documents, and the Buyer
shall have the right to pursue all remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief.
(e)
Buyer agrees that the removal of the restrictive legend from certificates
representing Securities as set forth in this Section 4.1 is predicated upon the Company’s
reliance that the Buyer will sell any Securities pursuant to either the registration
requirements of the Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom.
4.2
Furnishing of Information. As long as Buyer owns any Securities, the Company
covenants to timely file (or obtain extensions in respect thereof and file within the applicable
grace period) all reports required to be filed by the Company after the date hereof pursuant to the
Exchange Act. As long as the Buyer owns any Securities, if the Company is not required to file
reports pursuant to the Exchange Act, it will prepare and furnish to the Buyer and make publicly
available in accordance with Rule 144(c) such information as is required for the Buyer to sell the
Securities under Rule 144. The Company further covenants that it will take such further action as
Buyer may reasonably request, to the extent required from time to time to enable the Buyer to
sell such Securities without registration under the Securities Act within the requirements of the
exemption provided by Rule 144.
4.3
Integration. The Company shall not sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that
would be integrated with the offer or sale of the Securities in a manner that would require the
registration under the Securities Act of the sale of the Securities to the Buyer or that would be
21
integrated with the offer or sale of the Securities for purposes of the rules and regulations of any
Trading Market such that it would require shareholder approval prior to the closing of such other
transaction unless shareholder approval is obtained before the closing of such subsequent
transaction.
4.4
Securities Laws Disclosure; Publicity. The Company shall, by 5:30 p.m. Eastern
time on the fourth Trading Day immediately following the date hereof, issue a Current Report on
Form 8-K, disclosing the material terms of the transactions contemplated hereby, and shall attach
the Transaction Documents thereto. The Company and the Buyer shall consult with each other
in issuing any other press releases with respect to the transactions contemplated hereby, and
neither the Company nor the Buyer shall issue any such press release or otherwise make any
such public statement without the prior consent of the Company, with respect to any press
release of the Buyer, or without the prior consent of the Buyer, with respect to any press release
of the Company, which consent shall not unreasonably be withheld or delayed, except if such
disclosure is required by law, in which case the disclosing party shall promptly provide the other
party with prior notice of such public statement or communication.
4.5
Shareholder Rights Plan. No claim will be made or enforced by the Company or,
with the consent of the Company, any other Person, that the Buyer is an “Acquiring Person”
under any control share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter
adopted by the Company, or that the Buyer could be deemed to trigger the provisions of any such
plan or arrangement, by virtue of receiving Securities under the Transaction Documents or under
any other agreement between the Company and the Buyer.
4.6
Non-Public Information. Except with respect to the material terms and conditions
of the transactions contemplated by the Transaction Documents, the Company covenants and
agrees that neither it nor any other Person acting on its behalf will provide the Buyer or its agents
or counsel with any information that the Company believes constitutes material non-public
information, unless prior thereto the Buyer shall have executed a written agreement regarding the
confidentiality and use of such information. The Company understands and confirms that the
Buyer shall be relying on the foregoing representations in effecting transactions in securities of
the Company.
4.7
Indemnification of Buyer. Subject to the provisions of this Section 4.7, the
Company will indemnify and hold the Buyer and its directors, officers, shareholders, members,
partners, employees and agents (and any other Persons with a functionally equivalent role of a
Person holding such titles notwithstanding a lack of such title or any other title), each Person
who controls the Buyer (within the meaning of Section 15 of the Securities Act and Section 20 of
the Exchange Act), and the directors, officers, shareholders, agents, members, partners or
employees (and any other Persons with a functionally equivalent role of a Person holding such
titles notwithstanding a lack of such title or any other title) of such controlling persons (each, a
“Buyer Party”) harmless from any and all losses, liabilities, obligations, claims, contingencies,
damages, costs and expenses, including all judgments, amounts paid in settlements, court costs
and reasonable attorneys’ fees and costs of investigation that any the Buyer Party may suffer or
incur as a result of or relating to (a) any breach of any of the representations, warranties,
covenants or agreements made by the Company in this Agreement or in the other Transaction
22
Documents or (b) any action instituted against the Buyer, or any of its Affiliates, by any
stockholder of the Company who is not an Affiliate of the Buyer, with respect to any of the
transactions contemplated by the Transaction Documents (unless such action is based upon a
breach of the Buyer’s representations, warranties or covenants under the Transaction Documents
or any agreements or understandings the Buyer may have with any such stockholder or any
violations by the Buyer of state or federal securities laws or any conduct by the Buyer which
constitutes fraud, gross negligence, willful misconduct or malfeasance). If any action shall be
brought against any Buyer Party in respect of which indemnity may be sought pursuant to this
Agreement, the Buyer Party shall promptly notify the Company in writing, and the Company
shall have the right to assume the defense thereof with counsel of its own choosing reasonably
acceptable to the Buyer Party. Any Buyer Party shall have the right to employ separate counsel
in any such action and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of the Buyer Party except to the extent that (i) the employment
thereof has been specifically authorized by the Company in writing, (ii) the Company has failed
after a reasonable period of time to assume such defense and to employ counsel or (iii) in such
action there is, in the reasonable opinion of such separate counsel, a material conflict on any
material issue between the position of the Company and the position of the Buyer Party, in which
case the Company shall be responsible for the reasonable fees and expenses of no more than one
such separate counsel. The Company will not be liable to any Buyer Party under this Agreement
(i) for any settlement by the Buyer Party effected without the Company’s prior written consent,
which shall not be unreasonably withheld or delayed; or (ii) to the extent, but only to the extent
that a loss, claim, damage or liability is attributable to any Buyer Party’s breach of any of the
representations, warranties, covenants or agreements made by the Buyer Party in this Agreement
or in the other Transaction Documents.
4.8
Reservation of Common Stock. As of the date hereof, the Company has reserved
and the Company shall continue to reserve and keep available at all times, free of preemptive
rights, a sufficient number of shares of Common Stock for the purpose of enabling the Company
to issue Draw Down Shares and Shares pursuant to this Agreement.
4.9
Listing of Common Stock. The Company hereby agrees to use best efforts to
maintain the listing of the Common Stock on a Trading Market, and as soon as reasonably
practicable following the Initial Closing (but not later than the Effective Date) to list all of the
Draw Down Shares and the Shares on such Trading Market. The Company further agrees, if the
Company applies to have the Common Stock traded on any other Trading Market, it will include
in such application all of the Draw Down Shares and the Shares and will take such other action
as is necessary to cause all of the Draw Down Shares and the Shares to be listed on such other
Trading Market as promptly as possible. The Company will take all action reasonably necessary
to continue the listing and trading of its Common Stock on a Trading Market and will comply in
all respects with the Company’s reporting, filing and other obligations under the bylaws or rules
of the Trading Market.
4.10 Short Sales and Confidentiality After the Date Hereof. Buyer covenants that
neither it nor any Affiliate acting on its behalf or pursuant to any understanding with it will,
directly or indirectly, execute any Net Short Sales (as defined below) from the time starting upon
receipt of a Draw Down Notice and ending upon receipt of the Draw Down Shares. Buyer
covenants that until such time as the transactions contemplated by this Agreement are publicly
23
disclosed by the Company as described in Section 4.4, the Buyer will maintain the
confidentiality of all disclosures made to it in connection with this transaction (including the
existence and terms of this transaction). For purposes of this Section 4.10, a “Net Short Sale” by
the Buyer shall mean a sale of Common Stock by such Buyer that is marked as a short sale and
that is made at a time when there is no equivalent offsetting long position in Common Stock held
by such Buyer
4.11 Form D; Blue Sky Filings. The Company agrees to timely file a Form D with
respect to the Securities as required under Regulation D and to provide a copy thereof, promptly
upon request of the Buyer. The Company shall take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale to
the Buyer at the Closing under applicable securities or “Blue Sky” laws of the states of the
United States, and shall provide evidence of such actions promptly upon request of Buyer.
4.12 Buyer's Ownership Limitation. Anything in this Agreement to the contrary
notwithstanding, the Company may not make a Draw Down to the extent that such Draw Down
exceeds 4.999% of the then issued and outstanding shares of Common Stock as reported in the
Company’s most recent periodic report filed with the Commission.
4.13 Accuracy of Registration Statement. On each Settlement Date, the Registration
Statement and the prospectus therein (including any prospectus supplement) shall not contain
any untrue statement of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not misleading in light of the
circumstances under which they were made; and on such Settlement Date the Registration
Statement and the prospectus therein will not include any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however, the Company
makes no representations or warranties as to the information contained in or omitted from the
Registration Statement and the prospectus therein in reliance upon and in conformity with the
information furnished in writing to the Company by the Buyer specifically for inclusion in the
Registration Statement and the prospectus therein.
4.14 Notice of Certain Events Affecting Registration; Suspension of Right to Request a
Draw Down. The Company will promptly notify the Buyer in writing upon the occurrence of
any of the events set forth in Section 3(d) of the Registration Rights Agreement. The Company
shall not deliver to the Buyer any Draw Down Notice during the continuation of any of the
foregoing events. The Company shall promptly make available to the Buyer any such
supplements or amendments to the related prospectus, at which time, provided that the
registration statement and any supplements and amendments thereto are then effective, the
Company may recommence the delivery of Draw Down Notices.
4.15 Mandatory Reverse Stock Split. Should at any time during the Commitment
Period there shall be no bid for the Company's Common Stock on the Trading Market where the
Company's shares of Common Stock are listed or traded for 3 consecutive trading days, then the
Company shall immediately have its Common Stock undergo a reverse stock split at a ratio of
100-to-1 (each 100 shares of Common Stock shall be combined to become 1 share of Common
Stock).
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4.16 Subsequent Equity Sales.
(a)
From the date hereof until the Effective Date, neither the Company nor
any Subsidiary shall issue shares of Common Stock or Common Stock Equivalents.
(b)
Until the earlier of (i) the expiration of the Commitment Period and (ii)
the date that the Company has drawn down during the term of this Agreement the entire
Commitment Amount hereunder, the Company shall be prohibited from effecting or
entering into an agreement to effect any subsequent financing involving a “Variable Rate
Transaction”. The term “Variable Rate Transaction” shall mean a transaction in which
the Company issues or sells (i) any debt or equity securities that are convertible into,
exchangeable or exercisable for, or include the right to receive additional shares of
Common Stock either (A) at a conversion, exercise or exchange rate or other price that is
based upon and/or varies with the trading prices of or quotations for the shares of
Common Stock at any time after the initial issuance of such debt or equity securities, or
(B) with a conversion, exercise or exchange price that is subject to being reset at some
future date after the initial issuance of such debt or equity security or upon the occurrence
of specified or contingent events directly or indirectly related to the business of the
Company or the market for the Common Stock or (ii) enters into any agreement,
including, but not limited to, an equity line of credit, whereby the Company may sell
securities at a future determined price. The Buyer shall be entitled to obtain injunctive
relief against the Company to preclude any such issuance, which remedy shall be in
addition to any right to collect damages.
(c)
Notwithstanding the foregoing, this Section 4.16 shall not apply in respect
of an Exempt Issuance, except that no Variable Rate Transaction shall be an Exempt
Issuance.
ARTICLE V.
CONDITIONS TO INITIAL CLOSING AND DRAW DOWNS
5.1
Conditions Precedent to the Obligation of the Company to Sell the Draw Down
Shares. The obligation hereunder of the Company to proceed to close this Agreement and to
issue and sell the Draw Down Shares to the Buyer is subject to the satisfaction or waiver, at or
before the Initial Closing, and as of each Settlement Date of each of the conditions set forth
below. These conditions are for the Company's sole benefit and may be waived by the Company
in writing at any time in its sole discretion.
(a)
Accuracy of Buyer’s Representations and Warranties. The representations
and warranties of the Buyer shall be true and correct in all material respects as of the date
when made and as of the Initial Closing and as of each Settlement Date as though made
at that time (except for representations and warranties that speak as of a particular date,
which shall be true and correct in all material respects as of such dates).
(b)
Performance by the Buyer. The Buyer shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions required
25
by this Agreement to be performed, satisfied or complied with by the Buyer at or prior to
the Initial Closing and as of each Settlement Date.
(c)
No Injunction. No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction which prohibits the consummation of
any of the transactions contemplated by this Agreement.
(d)
No Proceedings or Litigation. No material Action shall have been
commenced against the Buyer or the Company or any subsidiary, or any of the officers,
directors or affiliates of the Company or any subsidiary, seeking to restrain, prevent or
change the transactions contemplated by this Agreement, or seeking damages in
connection with such transactions.
(e)
Initial Closing Deliveries. The delivery by the Buyer of the items set forth
in Section 2.2(b) of this Agreement.
5.2
Conditions Precedent to the Obligation of the Buyer to Close. The obligation
hereunder of the Buyer to perform its obligations under this Agreement and to purchase the
Draw Down Shares is subject to the satisfaction or waiver, at or before the Initial Closing, of
each of the conditions set forth below. These conditions are for the Buyer’s sole benefit and may
be waived by the Buyer in writing at any time in its sole discretion.
(a)
Accuracy of the Company's Representations and Warranties. Each of the
representations and warranties of the Company shall be true and correct in all material
respects as of the date when made and as of the Initial Closing as though made at that
time (except for representations and warranties that speak as of a particular date, which
shall be true and correct in all material respects as of such date).
(b)
Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all material covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied with by
the Company at or prior to the Initial Closing.
(c)
No Injunction. No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction which prohibits the consummation of
any of the transactions contemplated by this Agreement.
(d)
No Proceedings or Litigation. No material Action shall have been
commenced, against the Buyer or the Company or any subsidiary, or any of the officers,
directors or affiliates of the Company or any subsidiary seeking to restrain, prevent or
change the transactions contemplated by this Agreement, or seeking damages in
connection with such transactions.
(e)
Par Value. Par value of Company's Common Stock shall have been set at
$0.00001.
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(f)
Initial Closing Deliveries. The delivery by the Company of the items set
forth in Section 2.2(a) of this Agreement.
5.3
Conditions Precedent to the Obligation of the Buyer to Accept a Draw Down and
Purchase the Draw Down Shares. The obligation hereunder of the Buyer to accept a Draw Down
request and to acquire and pay for the Draw Down Shares is subject to the satisfaction at or
before each Settlement Date, of each of the conditions set forth below.
(a)
Satisfaction of Conditions to Initial Closing. The Company shall have
satisfied at the Initial Closing, or the Buyer shall have waived at the Initial Closing, the
conditions set forth in Section 5.2.
(b)
Issuance of Additional Shares. The Company shall have issued the
Additional Shares in accordance with Section 2.3.
(c)
No Suspension. Trading in the Common Stock shall not have been
suspended by the Commission or the Trading Market (except for any suspension of
trading of limited duration agreed to by the Company, which suspension shall be
terminated prior to the delivery of each Draw Down Notice), and, at any time prior to
such Draw Down Notice, trading in securities generally as reported on the Trading
Market shall not have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported on the Trading Market unless the
general suspension or limitation shall have been terminated prior to the delivery of such
Draw Down Notice.
(d)
Material Adverse Effect.
No Material Adverse Effect and no
Consolidation Event where the successor entity has not agreed to deliver to the Buyer
such shares of stock and/or securities as the Buyer is entitled to receive pursuant to this
Agreement.
(e)
Opinion of Counsel. The Buyer shall have received a “bring-down” letter
from the Company’s counsel, confirming that there is no change from the counsel’s
previously delivered opinion, or else specifying with particularity the reason for any
change.
(f)
Minimum Investment Amount. The Investment Amount for the applicable
Draw Down Notice, as permitted pursuant to Section 6.1(c), shall exceed $25,000. For
purposes of clarification, if the maximum Investment Amount as determined pursuant to
Section 6.1(d) is less than $25,000, then the Company shall be precluded from exercising
a Draw Down at such time.
(g)
Equity Conditions. During the Draw Down Pricing Period through the
Settlement Date, all of the Equity Conditions have been met.
(h)
Prospectus Supplement. On the Trading Day that the Company delivers a
Draw Down Notice, the Company shall have filed with the Commission a prospectus
supplement pursuant to Rule 424 under the Securities Act setting forth the terms of the
Draw Down.
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(i)
Involuntary Suspension During Draw Down Pricing Period. During any
Trading Day during the Draw Down Pricing Period trading of the Common Stock on the
Trading Market shall not be suspended for more than 3 hours, in the aggregate, or if any
Trading Day during the Draw Down Pricing Period is shortened because of a public
holiday.
(j)
Voluntary Suspension During Draw Down Pricing Period. During any
Trading Day during the Draw Down Pricing Period sales of Draw Down Shares pursuant
to the Registration Statement shall not be suspended by the Company for more than 3
hours, in the aggregate.
(k)
Directors and Officers Insurance. The Company shall have obtained
directors and officers insurance from a reputable insurance provider with liability
coverage at least equal to the Commitment Amount.
(l)
Par Value of Common Stock. On the day on which Draw Down Shares
shall be issued pursuant to a Draw Down Notice, the par value of the Common Stock
shall not be higher than the Purchase Price.
(m)
Mandatory Reverse Stock Split. The Company shall have satisfied the
requirement set forth in Section 4.15. For clarity, should the Company be required to
have its Common Stock undergo a reverse stock split in accordance with Section 4.15,
from the moment that requirement becomes effective and until the mandatory reverse
stock split is completed the Company shall be precluded from exercising a Draw Down.
ARTICLE VI.
DRAW DOWN TERMS
6.1
Draw Down Terms. Subject to the satisfaction of the conditions set forth in this
Agreement, the parties agree as follows:
(a)
The Company may, in its sole discretion, issue and exercise draw downs
against the Commitment Amount (each a “Draw Down”) during the Commitment Period,
which Draw Downs the Buyer shall be obligated to accept, subject to the terms and
conditions under this Agreement. Before the Company shall exercise a Draw Down, the
Company shall have caused a sufficient number of shares of Common Stock to be
registered with the Commission to cover the Draw Down Shares to be issued in
connection with such Draw Down (using a good faith estimate based on the recent market
price of the Common Stock), and, on the Trading Day that such request is made, the
Company shall have filed with the Commission a prospectus supplement pursuant to Rule
424 under the Securities Act setting forth the terms of the Draw Down.
(b)
The Company may not exercise a Draw Down until the applicable Draw
Down Cushion has elapsed.
(c)
The Company must inform the Buyer by delivering a Draw Down notice,
in the form of Exhibit C attached hereto (the “Draw Down Notice”), via facsimile
28
transmission, in accordance with Section 8.3, as to the dollar amount of the Draw Down
(the “Investment Amount”) the Company wishes to exercise.
(d)
The maximum Investment Amount as to each Draw Down shall be equal
to the Purchase Price multiplied by the lesser of: (i) 4.99% of the outstanding shares of
Common Stock as of closing of the Trading Day immediately preceding the applicable
Commencement Date and (ii) the average daily trading volume of the Common Stock on
the Trading Market during the Draw Down Pricing Period multiplied by three (3). The
maximum Investment Amount shall not exceed $500,000.
(e)
The number of Draw Down Shares to be issued on a Settlement Date (as
defined in 6.1(f)) shall equal the Investment Amount applicable to such Settlement Date
divided by the lesser of the Purchase Price as calculated during the applicable Draw
Down Pricing Period and, if the applicable Draw Down Shares are not delivered on or
before the applicable Settlement Date, the Purchase Price as calculated during the
applicable Draw Down Pricing Period, but assuming such Draw Down Pricing Period is
extended through the Trading Day immediately prior to the date the applicable Draw
Down Shares are actually delivered to the Buyer.
(f)
On the Trading Day immediately following the last day of the Draw Down
Pricing Period, the Company shall deliver to the Buyer and the Buyer shall acknowledge
to the Company a settlement statement (the “Settlement Statement”) setting forth the
calculation of the Purchase Price and the Investment Amount as to the applicable Draw
Down Pricing Period. The issuance of the Draw Down Shares as to a Draw Down and
the payment of the Investment Amount as to a Draw Down shall occur within one (1)
Trading Day of the end of the applicable Draw Down Pricing Period (the “Settlement
Date”).
(g)
On or before the Settlement Date, the applicable Draw Down Shares shall
be delivered to the Depository Trust Company (“DTC”) account of the Buyer, or its
designees, as designated by the Buyer in the Settlement Statement, via DTC’s Deposit
Withdrawal Agent Commission system (“DWAC”). Upon the Company electronically
delivering such Draw Down Shares to the DTC account of the Buyer, or its designees, via
DWAC by 9:30 a.m. ET, the Buyer shall, on the same day (or the next Business Day if
such day is not a Business Day) wire transfer immediately available funds to the
Company’s bank account, as designated by the Company in the Settlement Statement, for
the amount of the Investment Amount of such Draw Down Shares. Upon the Company
electronically delivering the applicable Draw Down Shares to the Buyer or its designee’s
DTC account via DWAC after 9:30 a.m. ET, the Buyer shall wire transfer next day
available funds to the Company’s designated account on such day (or the next Business
Day if such day is not a Business Day) for the amount of the Investment Amount of such
Draw Down Shares. In case the Company shall not deliver the Draw Down Shares to the
Buyer through DWAC, and instead issue a new stock certificate, such certificate shall be
shipped by over-night courier to an address indicated by the Buyer on the Settlement
Statement. Upon receipt of the stock certificate evidencing the Draw Down Shares by
the Buyer or its designees before 9:30 a.m. ET, the Buyer shall wire transfer same day
available funds to the Company’s designated account on such day (or the next Business
29
Day if such day is not a Business Day) for the amount of the Investment Amount of such
Draw Down Shares. Should receipt of the stock certificate evidencing the Draw Down
Shares occur after 9:30 a.m. ET, the Buyer shall wire transfer next day available funds to
the Company’s designated account on such day (or the next Business Day if such day is
not a Business Day) for the amount of the Investment Amount of such Draw Down
Shares.
(h)
The Company understands that a delay in the delivery of the Draw Down
Shares into the Buyer’s DTC account beyond the Settlement Date could result in
economic loss to the Buyer. In addition to the Buyer’s other available remedies, the
Company shall pay to the Buyer, in cash, as partial liquidated damages and not as a
penalty, for each $1,000 of Draw Down Shares (based on the Closing Price of the
Common Stock on the applicable Settlement Date) required to be delivered on the
Settlement Date, $7.50 per Trading Day (increasing to $15 per Trading Day five (5)
Trading Days after such damages have begun to accrue) for each Trading Day after the
Settlement Date until such Draw Down Shares are delivered pursuant to this Article VI.
Nothing herein shall limit the Buyer’s right to pursue actual damages for the Company’s
failure to deliver certificates representing any Securities as required by the Transaction
Documents, and the Buyer shall have the right to pursue all remedies available to it at law
or in equity including, without limitation, a decree of specific performance and/or
injunctive relief.
ARTICLE VII.
TERMINATION
7.1
Term. The term of this Agreement shall begin on the date hereof and shall end on
the earlier of (i) 24 months from the Effective Date or as otherwise set forth in Section 7.2 and
(ii) 30 months from the date hereof.
7.2
Other Termination. This Agreement shall terminate if (i) the Common Stock is
de-listed from the Trading Market unless such de-listing is in connection with a subsequent
listing on another Trading Market, (ii) there shall occur any stop order or suspension of the
effectiveness of the Registration Statement during the Commitment Period for an aggregate of 30
Trading Days, other than due to the acts of the Buyer, (iii) the Company files for protection from
creditors under any applicable law or (iv) the initial Registration Statement is not declared
effective by the Commission on the 12-month anniversary of the date hereof.
ARTICLE VIII.
MISCELLANEOUS
8.1
Fees and Expenses. Except as expressly set forth in the Transaction Documents
to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants
and other experts, if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this Agreement. The Company
shall pay all transfer agent fees, stamp taxes and other taxes and duties levied in connection with
the delivery of any Securities to the Buyer.
30
8.2
Entire Agreement. The Transaction Documents, together with the exhibits and
schedules thereto, contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral or written, with
respect to such matters, which the parties acknowledge have been merged into such documents,
exhibits and schedules.
8.3
Notices. Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be in writing and shall be deemed given and effective
on the earliest of (a) the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth on the signature pages attached hereto prior to 5:30
p.m. (New York City time) on a Trading Day evidenced by a transmission confirmation, (b) the
next Trading Day after the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is
not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day evidenced
by a transmission confirmation, (c) the 2nd Trading Day following the date of mailing, if sent by
U.S. nationally recognized overnight courier service, or (d) upon actual receipt by the party to
whom such notice is required to be given. The address for such notices and communications
shall be as set forth on the signature pages attached hereto.
8.4
Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by the Company
and the Buyer or, in the case of a waiver, by the party against whom enforcement of any such
waived provision is sought. No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any subsequent default or a waiver of any other provision, condition or requirement
hereof, nor shall any delay or omission of any party to exercise any right hereunder in any
manner impair the exercise of any such right.
8.5
Headings. The headings herein are for convenience only, do not constitute a part
of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.
8.6
Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors. Neither party may assign this Agreement or any rights
or obligations hereunder (other than by merger).
8.7
No Third-Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective successors and permitted assigns and is not for the benefit of,
nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in
Section 4.7.
8.8
Governing Law. All questions concerning the construction, validity, enforcement
and interpretation of the Transaction Documents shall be governed by and construed and
enforced in accordance with the internal laws of the State of Illinois, without regard to the
principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively
31
in the state and federal courts sitting in Xxxx County, Illinois. Each party hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in Xxxx County,
Illinois for the adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to the enforcement
of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any
such court, that such suit, action or proceeding is improper or is an inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any other manner permitted by
law. The parties hereby waive all rights to a trial by jury. If either party shall commence an
action or proceeding to enforce any provisions of the Transaction Documents, then the prevailing
party in such action or proceeding shall be reimbursed by the other party for its reasonable
attorneys’ fees and other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.
8.9
Survival. The representations and warranties contained herein shall survive the
Closing and the delivery of the Draw Down Shares and the Shares.
8.10 Execution. This Agreement may be executed in two or more counterparts, all of
which when taken together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the other party, it
being understood that both parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file,
such signature shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf”
signature page were an original thereof.
8.11 Severability. If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto
shall use their commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or unenforceable.
8.12 Replacement of Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in
exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu
of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction. The applicant for a
new certificate or instrument under such circumstances shall also pay any reasonable third-party
32
costs (including customary indemnity) associated with the issuance of such replacement
Securities.
8.13 Remedies. In addition to being entitled to exercise all rights provided herein or
granted by law, including recovery of damages, each of the Buyer and the Company will be
entitled to specific performance under the Transaction Documents. The parties agree that
monetary damages may not be adequate compensation for any loss incurred by reason of any
breach of obligations contained in the Transaction Documents and hereby agrees to waive and
not to assert in any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
8.14 Liquidated Damages. The Company’s obligations to pay any partial liquidated
damages or other amounts owing under the Transaction Documents is a continuing obligation of
the Company and shall not terminate until all unpaid partial liquidated damages and other
amounts have been paid notwithstanding the fact that the instrument or security pursuant to
which such partial liquidated damages or other amounts are due and payable shall have been
canceled.
8.15 Construction. The parties agree that each of them and/or their respective counsel
has reviewed and had an opportunity to revise the Transaction Documents and, therefore, the
normal rule of construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of the Transaction Documents or any
amendments hereto.
(Signature Pages Follow)
33
IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of the date first
indicated above.
MINERALRITE CORPORATION
Address for Notice:
By:__________________________________________
Fax No.:
E-mail:
Name:
Attn:
Title:
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR BUYER FOLLOWS]
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[BUYER SIGNATURE PAGE TO GEIG SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of the date first
indicated above.
Name of Buyer: River North Equity, Inc.
Signature of Authorized Signatory of Buyer: __________________________________
Name of Authorized Signatory: Xxxxxx X. Xxxxxxx
Title of Authorized Signatory: President
Email Address of Buyer: xxxxxx@xxxxxxxxxxxxxxxx.xxx
Fax Number of Buyer:
Address for Notice of Buyer:
000 X. Xxxxxxx Xx.
Xxxx 0000
Xxxxxxx, XX 00000
Address for Delivery of Securities for Buyer (if not same as above):
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